- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
__X__ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
_____ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXHANGE
ACT OF 1934
For the transition period from ______ to ______.
Commission file number: 1-9026
A. Full title of the plan and the address of the plan, if different from that of
the issuer below:
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
COMPAQ COMPUTER CORPORATION
20555 SH 249, Houston, Texas 77070
----------------------------------
(281) 370-0670
- --------------------------------------------------------------------------------
<PAGE>
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
INDEX TO FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . . . 1
Financial Statements:
Statement Net Assets Available for Benefits
As of December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Changes in Net Assets Available for Benefits, with Fund Information
For the Year Ended December 31, 1997 . . . . . . . . . . . . . . . . . . . . . 3
Statement of Changes in Net Assets Available for Benefits, with Fund Information
For the Year Ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Additional Information:
Item 27a - Schedule of Assets Held for Investment Purposes . . . . . . . . . . . 11
Item 27d - Schedule of Reportable Transactions . . . . . . . . . . . . . . . . . 12
<FN>
Note: Other schedules required by Section 2520.103-10 of the Department of Labor Rules
and Regulations for Reporting and Disclosures under the Employee Retirement Security Act
of 1974 have been omitted because they are not applicable.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of the
Tandem Computers Incorporated
401(k) Investment Plan
In our opinion, the accompanying statement of net assets available for
benefits, and the related statement of changes in net assets available for
benefits present fairly, in all material respects, the net assets available for
benefits of the Tandem Computers Incorporated 401(k) Investment Plan at December
31, 1997, and the changes in net assets available for benefits for the year then
ended, 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 audit. We conducted our audit 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 audit provides a reasonable basis for the opinion expressed
above. The financial statements of the Tandem Computers Incorporated 401(k)
Investment Plan for the year ended December 31, 1996 were audited by other
independent accountants, whose report dated May 8, 1997, expressed an
unqualified opinion on those statements.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
the Schedule of Assets Held for Investment Purposes and the Schedule of
Reportable Transactions 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 statement of changes
in net assets available for benefits is presented for purposes of additional
analysis rather than to present the changes in net assets available for benefits
of each fund. The schedules and the Fund Information have been subjected to the
auditing procedures applied in the audit 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.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Jose, California
June 8, 1998
<PAGE>
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Assets
Investments, at fair value:
Units of registered investment companies:
Merill Lynch Ready Asset Trust Fund . . . $ 24,804 $ 25,787
Merill Lynch Federal Securities Fund. . . 14,090 13,712
Merill Lynch Basic Value Fund . . . . . . 135,755 101,552
Merill Lynch Equity Index Trust . . . . . 35,917 16,067
Merill Lynch Global Holdings Fund . . . . 19,843 19,844
Merill Lynch Capital Fund . . . . . . . . 39,603 31,608
Merill Lynch Pacific Fund . . . . . . . . 18,621 24,104
AIM Constellation Fund. . . . . . . . . . 45,158 38,228
Fidelity Advisors High Yield Fund . . . . 12,146 8,117
Templeton Foreign Fund. . . . . . . . . . 13,121 7,463
Common/Collective Trust:
AMEX Income Fund. . . . . . . . . . . . . 71,449 76,795
Compaq Computer Corporation Common Stock. . 23,558 -
Tandem Computers Incorporated Common Stock. - 13,349
Participant loans receivable. . . . . . . . 14,201 14,023
-------- --------
Net assets available for benefits . . . . . . . $468,266 $390,649
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands)
READY
ASSET FEDERAL BASIC EQUITY GLOBAL
TRUST SECURITIES VALUE INDEX HOLDINGS CAPITAL PACIFIC
FUND FUND FUND TRUST FUND FUND FUND
-------- ------------ --------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest and dividend income . . . . . $ 1,314 $ 892 $ 10,332 $ - $ 2,347 $ 3,274 $ 2,972
Net realized and unrealized
appreciation (depreciation) in
fair value of investments. . . . . . - 234 20,076 6,968 (1,077) 3,560 (4,202)
-------- ------------ --------- -------- ---------- --------- ---------
1,314 1,126 30,408 6,968 1,270 6,834 (1,230)
-------- ------------ --------- -------- ---------- --------- ---------
Contributions:
Participants . . . . . . . . . . . . . 2,022 1,160 6,803 3,770 1,692 3,016 1,816
Company. . . . . . . . . . . . . . . . 524 315 1,815 842 463 788 507
-------- ------------ --------- -------- ---------- --------- ---------
2,546 1,475 8,618 4,612 2,155 3,804 2,323
-------- ------------ --------- -------- ---------- --------- ---------
Total additions. . . . . . . . . . . . . 3,860 2,601 39,026 11,580 3,425 10,638 1,093
Deductions from net assets attributed to:
Benefits to terminated participants
and participant withdrawals. . . . . . (3,461) (1,884) (9,141) (1,752) (1,266) (3,452) (1,872)
-------- ------------ --------- -------- ---------- --------- ---------
Net increase (decrease) before
interfund transfers. . . . . . . . . . . 399 717 29,885 9,828 2,159 7,186 (779)
Interfund transfers. . . . . . . . . . . . (1,382) (339) 4,318 10,022 (2,160) 809 (4,704)
-------- ------------ --------- -------- ---------- --------- ---------
Net increase (decrease). . . . . . . . . . (983) 378 34,203 19,850 (1) 7,995 (5,483)
Net assets available for benefits:
Beginning of year. . . . . . . . . . . . 25,787 13,712 101,552 16,067 19,844 31,608 24,104
-------- ------------ --------- -------- ---------- --------- ---------
End of year. . . . . . . . . . . . . . . $24,804 $ 14,090 $135,755 $35,917 $ 19,843 $ 39,603 $ 18,621
-------- ------------ --------- -------- ---------- --------- ---------
FIDELITY
ADVISORS
AMEX AIM HIGH TEMPLETON PARTICIPANT
INCOME CONSTELLATION YIELD FOREIGN STOCK LOAN
FUND FUND FUND FUND FUND FUND TOTAL
-------- --------------- ---------- ----------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest and dividend income . . . . . $ - $ 3,244 $ 1,189 $ 1,406 $ - $ 1,263 $ 28,233
Net realized and unrealized
appreciation (depreciation) in
fair value of investments. . . . . . 4,474 1,445 261 (842) 13,758 - 44,655
-------- --------------- ---------- ----------- -------- ------------- ---------
4,474 4,689 1,450 564 13,758 1,263 72,888
-------- --------------- ---------- ----------- -------- ------------- ---------
Contributions:
Participants . . . . . . . . . . . . . 4,419 4,965 1,603 1,789 - - 33,055
Company. . . . . . . . . . . . . . . . 1,251 1,236 355 392 - - 8,488
-------- --------------- ---------- ----------- -------- ------------- ---------
5,670 6,201 1,958 2,181 - - 41,543
-------- --------------- ---------- ----------- -------- ------------- ---------
Total additions. . . . . . . . . . . . . 10,144 10,890 3,408 2,745 13,758 1,263 114,431
Deductions from net assets attributed to:
Benefits to terminated participants
and participant withdrawals. . . . . . (6,674) (3,080) (916) (770) (1,654) (892) (36,814)
-------- --------------- ---------- ----------- -------- ------------- ---------
Net increase (decrease) before
interfund transfers. . . . . . . . . . . 3,470 7,810 2,492 1,975 12,104 371 77,617
Interfund transfers. . . . . . . . . . . . (8,816) (880) 1,537 3,683 (1,895) (193) -
-------- --------------- ---------- ----------- -------- ------------- ---------
Net increase (decrease). . . . . . . . . . (5,346) 6,930 4,029 5,658 10,209 178 77,617
Net assets available for benefits:
Beginning of year. . . . . . . . . . . . 76,795 38,228 8,117 7,463 13,349 14,023 390,649
-------- --------------- ---------- ----------- -------- ------------- ---------
End of year. . . . . . . . . . . . . . . $71,449 $ 45,158 $ 12,146 $ 13,121 $23,558 $ 14,201 $468,266
-------- --------------- ---------- ----------- -------- ------------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
(in thousands)
READY
ASSET FEDERAL BASIC EQUITY GLOBAL AMEX
TRUST SECURITIES VALUE INDEX HOLDINGS CAPITAL PACIFIC INCOME
FUND FUND FUND TRUST FUND FUND FUND FUND
-------- ---------- --------- -------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest and dividend income . . . . . $ 1,156 $ 922 $ 6,938 $ - $ 1,208 $ 3,018 $ 1,966 $ -
Net realized and unrealized
appreciation (depreciation) in
fair value of investments. . . . . . - (305) 8,624 2,509 1,050 534 (523) 4,633
-------- ---------- --------- -------- ---------- --------- --------- --------
1,156 617 15,562 2,509 2,258 3,552 1,443 4,633
-------- ---------- --------- -------- ---------- --------- --------- --------
Contributions:
Participants . . . . . . . . . . . . . 1,758 1,220 6,472 2,115 1,680 2,763 2,124 4,901
Company. . . . . . . . . . . . . . . . 533 350 1,775 464 472 774 593 1,483
-------- ---------- --------- -------- ---------- --------- --------- --------
2,291 1,570 8,247 2,579 2,152 3,537 2,717 6,384
-------- ---------- --------- -------- ---------- --------- --------- --------
Total additions. . . . . . . . . . . . . 3,447 2,187 23,809 5,088 4,410 7,089 4,160 11,017
Deductions from net assets attributed to:
Benefits to terminated participants
and participant withdrawals. . . . . . (3,212) (1,329) (8,563) (1,199) (2,483) (2,544) (2,915) (6,813)
-------- ---------- --------- -------- ---------- --------- --------- --------
Net increase before
interfund transfers. . . . . . . . . . . 235 858 15,246 3,889 1,927 4,545 1,245 4,204
Interfund transfers. . . . . . . . . . . . 1,900 (1,674) (3,051) 3,422 (240) (1,672) (968) (6,254)
-------- ---------- --------- -------- ---------- --------- --------- --------
Net increase (decrease). . . . . . . . . . 2,135 (816) 12,195 7,311 1,687 2,873 277 (2,050)
Net assets available for benefits:
Beginning of year. . . . . . . . . . . . 23,652 14,528 89,357 8,756 18,157 28,735 23,827 78,845
-------- ---------- --------- -------- ---------- --------- --------- --------
End of year. . . . . . . . . . . . . . . $25,787 $ 13,712 $101,552 $16,067 $ 19,844 $ 31,608 $ 24,104 $76,795
-------- ---------- --------- -------- ---------- --------- --------- --------
FIDELITY
AIM ADVISORS TEMPLETON PARTICIPANT
CONSTELLATION HIGH YIELD FOREIGN STOCK LOAN
FUND FUND FUND FUND FUND TOTAL
--------------- ------------ ----------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest and dividend income . . . . . $ 1,283 $ 693 $ 292 $ - $ 1,205 $ 18,681
Net realized and unrealized
appreciation (depreciation) in
fair value of investments. . . . . . 3,156 142 688 3,341 - 23,849
--------------- ------------ ----------- -------- ------------- ---------
4,439 835 980 3,341 1,205 42,530
--------------- ------------ ----------- -------- ------------- ---------
Contributions:
Participants . . . . . . . . . . . . . 4,640 1,012 1,027 - - 29,712
Company. . . . . . . . . . . . . . . . 1,121 231 228 - - 8,024
--------------- ------------ ----------- -------- ------------- ---------
5,761 1,243 1,255 - - 37,736
--------------- ------------ ----------- -------- ------------- ---------
Total additions. . . . . . . . . . . . . 10,200 2,078 2,235 3,341 1,205 80,266
Deductions from net assets attributed to:
Benefits to terminated participants
and participant withdrawals. . . . . . (2,386) (735) (716) (1,313) (703) (34,911)
--------------- ------------ ----------- -------- ------------- ---------
Net increase before
interfund transfers. . . . . . . . . . . 7,814 1,343 1,519 2,028 502 45,355
Interfund transfers. . . . . . . . . . . . 6,923 2,318 1,792 (2,179) (317) -
--------------- ------------ ----------- -------- ------------- ---------
Net increase (decrease). . . . . . . . . . 14,737 3,661 3,311 (151) 185 45,355
Net assets available for benefits:
Beginning of year. . . . . . . . . . . . 23,491 4,456 4,152 13,500 13,838 345,294
--------------- ------------ ----------- -------- ------------- ---------
End of year. . . . . . . . . . . . . . . $ 38,228 $ 8,117 $ 7,463 $13,349 $ 14,023 $390,649
--------------- ------------ ----------- -------- ------------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN:
The following description of the Tandem Computers Incorporated 401(k)
Investment Plan (the "Plan") provides only general information. Participants
should refer to the plan document for a more complete description of the Plan's
provisions.
GENERAL
The Plan is a defined contribution plan covering substantially all United
States employees of Tandem Computers Incorporated (the "Company"). Employees of
the Company become eligible to participate in the Plan on their date of hire.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended (ERISA).
MERGER OF PLAN SPONSOR
Effective August 29, 1997, the Company merged with Compaq Computer
Corporation ("Compaq"). As a result of this merger, each share of the Company's
Common Stock owned by the Plan was exchanged for .525 shares of Compaq Common
Stock.
CONTRIBUTIONS
Employees - Employees of the Company can contribute from 1% to 18% of their
eligible pretax compensation up to a maximum of $9,500 in 1997 and 1996.
Company - In 1997 and 1996, the Company matched participants' contributions
as a percentage of eligible pretax compensation based on the following
schedule:
<TABLE>
<CAPTION>
EMPLOYEE COMPANY
CONTRIBUTION MATCH
- ------------- --------
<S> <C>
1.0%. . . . . 1.0%
2.0%. . . . . 1.5%
3.0%. . . . . 2.0%
4% or more. . 2.5%
</TABLE>
Plan provisions also allow the Company, in its discretion, to make
additional matching contributions on behalf of each participant.
Non-Matching Contributions - Plan provisions allow for Profit Sharing
contributions to be made to the Plan at the discretion of the Board of Directors
of the Company. The Company has made no such contribution since the Plan's
inception.
PARTICIPANT ACCOUNTS
Separate accounts are maintained for each participant. Participant
accounts are adjusted for Company matching contributions, participant
contributions, interest income, dividends, changes in the market value of
underlying assets and participant withdrawals. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's account.
VESTING
All participant and Company matching contributions and the related earned
income are immediately vested.
<PAGE>
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
PARTICIPANT LOANS
Each participant may borrow up to 50% of their account balance, subject to
certain limitations. The minimum loan is $500 and is secured by the individual
participant's accounts in the Plan. The interest rate to be charged is fixed at
the time of the loan and is based on a survey of the most secured loan rates of
area banks, savings and loans and credit unions. Maximum loan terms range from
five years up to twenty-five years for the purchase of a primary residence.
Loan accounts are maintained by Merrill Lynch Trust Company (the "Plan
Trustee"). Principal and interest payments, representing repayments of loans
taken by participants, are typically made through payroll deductions for
employees of the Company and serviced, at least every 90 days, for those who are
no longer employees of the Company. Interest income earned on participant loans
and repayment of principal is used to acquire additional units of the various
funds within the Plan based on the borrowers' investment elections. Loans
outstanding at December 31, 1997 carry interest rates which range from 6.2% to
12.5%.
ADMINISTRATIVE COSTS
Administrative costs of the Plan may be paid by the Company or out of the
Plan assets.
PAYMENT OF BENEFITS
Upon termination of service, retirement and/or disability, a participant
may elect to receive vested benefits in a lump-sum payment or in installments
over a fixed period of years not to exceed the participant's life expectancy.
In addition, participants who have reached age 59 1/2 or incurred a financial
hardship are entitled to withdraw some or all of their account balance while
employed by the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared using the accrual basis
of accounting.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
INVESTMENT VALUATION
The shares of registered investment companies are valued at quoted market
prices. Investments in the AMEX Income Fund are stated at the Plan's
proportionate share (in units) of participation in the AMEX Income Fund held and
invested by the AMEX Trust Company. The value of participation units owned by
the Plan is based on quoted redemption values on the last business day of the
Plan year. The shares of Common Stock included in the Stock Fund are valued at
the closing market share price as of December 31. Participant loans are valued
at cost, which approximates fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the administrator and Plan Trustee to
make estimates that affect the amounts of assets and liabilities in the
financial statements. Actual results could differ from those estimates.
<PAGE>
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3 - INVESTMENTS:
All contributions made under the Plan are paid to and invested by the Plan
Trustee, in accordance with a participant's directives, in one or more of eleven
investment options. The eleven investment funds are:
Ready Asset Trust Fund - This fund invests in the Ready Asset Trust Fund which
- ------------------------
is a mutual fund maintained by Merrill Lynch and consists of short-term
obligations of the U.S. government, bank certificates of deposit, commercial
paper, bankers' acceptances, and shares of money market mutual funds.
Federal Securities Fund - This fund invests in the Merrill Lynch Federal
- -------------------------
Securities Fund which is a mutual fund consisting of U.S. government and
government agency securities, including mortgage-backed certificates and U.S.
Treasury bills, notes, and bonds.
Basic Value Fund - This fund invests in the Merrill Lynch Basic Value Fund which
- ----------------
is a mutual fund which invests primarily in common and preferred stock.
Equity Index Trust - This fund invests in the Merrill Lynch Equity Index Trust
- --------------------
which is a mutual fund which invests primarily in equity securities with a
portfolio composition similar to the Standard & Poor's 500 composite price
index.
Global Holdings Fund - This fund invests in the Merrill Lynch Global Holdings
- ----------------------
Fund which is a mutual fund which invests primarily in common and preferred
stock, convertible securities, and corporate debt obligations of companies
located in the U.S., Japan, and Western Europe.
Capital Fund - This fund invests in the Merrill Lynch Capital Fund which is a
- -------------
mutual fund which invests primarily in equity securities (stock), corporate
bonds, or money market securities.
Pacific Fund - This fund invests in the Merrill Lynch Pacific Fund which is a
- -------------
mutual fund which invests primarily in common and preferred stock of
corporations based in the Far East or Western Pacific, including Japan,
Australia, Hong Kong, and Singapore.
AMEX Income Fund - This fund invests in the American Express ("AMEX") Income
- ------------------
Fund which is a common/collective trust account that invests in both money
market investments and guaranteed investment contracts ("GICs"). Withdrawals
from the AMEX Income Fund may be recorded without penalty prior to the maturity
of the GICs within the fund. The GICs represent deposits made with insurance
companies and financial institutions with guaranteed rates of return ranging
from 5.00% to 8.27%. They mature on various dates through December 31, 2002.
AIM Constellation Fund - This fund invests in the AIM Constellation Fund which
- ------------------------
is a mutual fund which invests in small- to medium-sized emerging growth
companies seeking capital appreciation. Interest and dividend income are
incidental.
Fidelity Advisor High Yield Fund - This fund invests in the Fidelity Advisor
- ------------------------------------
High Yield Fund which is a mutual fund which is aggressively managed and seeks
higher yield and appreciation through investments in lower-rated bonds.
Templeton Foreign Fund - This fund invests in the Templeton Foreign Fund which
- ------------------------
is a mutual fund which seeks long-term capital growth through a flexible policy
of investing in stocks and debt obligations of companies and governments outside
of the United States.
<PAGE>
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
In addition to the eleven investment options, the Plan also has an
investment in a Stock Fund. The assets of the former Employees Stock Ownership
Plan ("ESOP") of the Company were transferred into the Plan in December 1995.
The ESOP was a tax qualified retirement plan closed by the Company in 1993. The
assets remained in the form of shares of Tandem Stock until August 1997, at
which time the shares of Tandem stock were exchanged for shares of Compaq Stock
as described in Note 1. The Plan did not allow contributions or transfers into
the Stock Fund; however, when participants became eligible for Plan
distributions, they were able to elect to receive their account balance by
distribution of the underlying stock (cash for any fractional shares) or have
the stock sold by the Plan Trustee and receive the cash equivalent.
Effective May 1, 1998, the Stock Fund was added to the funds eligible for
participant direction for allocation of contributions or transfers to or from
other funds.
NOTE 4 - INCOME TAX STATUS:
The Internal Revenue Service has determined and informed the Company by a
letter, dated April 1, 1994, that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code. 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, no provision for Federal or State income taxes has been made in the
financial statements of the Plan.
NOTE 5 - PLAN TERMINATION:
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate or partially terminate the Plan at any time. In the event of Plan
termination, participants are entitled to receive the value of their accounts.
NOTE 6 - RELATED PARTY TRANSACTIONS:
Certain plan investments are shares of mutual funds managed by Merrill
Lynch, the Plan Trustee, and therefore, these transactions qualify as
party-in-interest. Any purchases and sales of these funds are open market
transactions at fair market value. Consequently, such transactions are
permitted under the provisions of the Plan and are exempt from the prohibition
of party-in-interest transactions under the Internal Revenue Code and ERISA.
NOTE 7 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500:
The following is a reconciliation of net assets available for benefits from
the financial statements to the Form 5500:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Net assets available for benefits
from the financial statements. . . . . . . . . . $468,266 $390,649
Amounts allocated to withdrawing participants. . . (923) (1,296)
--------- ---------
Net assets available for benefits in the Form 5500 $467,343 $389,353
--------- ---------
</TABLE>
<PAGE>
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
-------- -------
<S> <C> <C>
Benefits paid to participants
from the financial statements. . . . . . . . . $36,814 $34,911
Add amounts allocated to withdrawing
participants at December 31, 1997 and 1996 . . 923 1,296
Less amounts allocated to withdrawing
participants at December 31, 1996 and 1995 . . (1,296) -
-------- -------
Benefits paid to participants in the Form 5500 $36,441 $36,207
-------- -------
</TABLE>
Amounts allocated to withdrawing participants are recorded on Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31 but have not yet been paid as of that date.
<PAGE>
ADDITIONAL INFORMATION
<PAGE>
<TABLE>
<CAPTION>
TANDEM COMPUTERS INCORPORATED
401(K) INVESTMENT PLAN
ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
CURRENT
IDENTITY OF ISSUER, BORROWER, LESSOR OR SIMILAR PARTY DESCRIPTION OF INVESTMENTS COST VALUE
- ------------------------------------------------------ ---------------------------------- ------- --------
(in thousands)
<S> <C> <C> <C>
The Merrill Lynch Trust Companies:* Mutual Funds:
Ready Asset Trust Fund 24,804 units $24,804 $ 24,804
Federal Securities Fund 1,435 units 13,878 14,090
Basic Value Fund 3,661 units 96,376 135,755
Equity Index Trust 549 units 26,983 35,917
Global Holdings Fund 1,504 units 19,624 19,843
Capital Fund 1,148 units 34,527 39,603
Pacific Fund 1,097 units 22,315 18,621
AIM Constellation Fund 1,712 units 41,863 45,158
Fidelity Advisors High Yield Fund 966 units 11,822 12,146
Templeton Foreign Fund 1,319 units 13,536 13,121
AMEX Trust Company: Common/Collective Trust Account:
AMEX Income Fund 1,598 units 61,519 71,449
Compaq Computer Corporation
Common Stock* 416,892 shares 10,426 23,558
Participant loans receivable* (1) - 14,201
--------
Total investments $468,266
--------
<FN>
*Party-in-interest to the Plan.
(1) Consist of general purpose and home purchase loans made to participants
from their account balances, which have repayment periods not to exceed five and
twenty-five years, respectively. The interest rate charged for both types of
loans is based on prevailing rates for secured personal loans and is fixed for
the term of the loan. The interest rates for loans outstanding at December 31,
1997 range from 6.2% to 12.5%.
</TABLE>
<PAGE>
Series of transactions in excess of 5% of plan assets as of December 31, 1996
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
PURCHASES SALES AND
AND FAIR VALUE FAIR VALUE COST OF NET NUMBER OF
AT DATE OF AT DATE OF INVESTMENTS GAIN TRANSACTIONS
-------------------
IDENTITY OF PARTY INVOLVED DESCRIPTION OF SECURITY TRANSACTION TRANSACTION SOLD (LOSS) SALES PURCHASES
- -------------------------- ----------------------- --------------- ------------ ------------ ----------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch Basic Value Fund $ 34,499,160 $ 20,246,979 $ 15,463,890 $ 4,783,089 427 720
Merrill Lynch Equity Index Trust 24,190,744 11,309,105 10,057,730 1,251,375 308 656
Merrill Lynch Pacific Fund 10,033,739 11,215,781 10,876,416 339,365 354 552
AIM Advisors, Inc. AIM Constellation Fund 25,113,106 19,627,779 18,136,782 1,490,997 389 686
Merrill Lynch Ready Assets Fund 19,008,764 19,991,216 19,991,216 - 380 753
AMEX Trust Co. American Express Trust
Income Fund 18,862,770 28,650,048 25,613,778 3,036,270 433 595
</TABLE>
<PAGE>
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.
TANDEM COMPUTERS INCORPORATED
401(k) INVESTMENT PLAN
Date: June 24, 1998 By: /S/ Linda Auwers
---------------------------------
Linda Auwers
Vice President and Associate General Counsel,
Corporate Compliance
Compaq Computer Corporation
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-43595) of Tandem Computers Incorporated of our
report dated June 8, 1998 appearing on page 1 of this Form 11-K.
/S/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Jose, California
June 30, 1998
