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
For the Fiscal Year Ended December 31, 1998
A. Full title of the plan and the address of the plan, if different from
that of the Issuer below:
DIGITAL EQUIPMENT CORPORATION SAVINGS
AND INVESTMENT PLAN
B. Name of 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>
<TABLE>
<CAPTION>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
PAGE(S)
-------
<S> <C>
Report of Independent Accountants 2
Financial Statements:
Statement of Net Assets Available for Plan Benefits (with Fund Information) at
December 31, 1998 3
Statement of Net Assets Available for Plan Benefits (with Fund Information) at
December 31, 1997 4
Statement of Changes in Net Assets Available for Plan Benefits (with Fund
Information) for the year ended December 31, 1998 5
Notes to Financial Statements 6-16
Supplemental Schedules to Form 5500*:
Line 27(a) - Assets Held for Investment Purposes at December 31, 1998 17-18
Line 27(b) - Loans or Fixed Income Obligations in Default at December 31, 1998 19
Line 27(d) - Reportable Transactions for the year ended
December 31, 1998 20
</TABLE>
[FN]
*Other schedules required by Section 2520.103-10 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under ERISA have been omitted
because they are not applicable.
1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of
Digital Equipment Corporation Savings and Investment Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statement of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
plan benefits of Digital Equipment Corporation Savings and Investment Plan (the
"Plan") at December 31, 1998 and December 31, 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 supplemental schedules of Assets
Held for Investment Purposes, Loans or Fixed Income Obligations in Default and
Reportable Transactions are presented for the purpose of additional analysis and
are not a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The fund information in the statements of net assets available for plan
benefits and the statement of changes in net assets available for plan benefits
is provided for additional analysis rather than to present the net assets
available for plan benefits and changes in net assets available for plan
benefits of each fund. These supplemental schedules and fund information are
the responsibility of the Plan's management. The supplemental schedules and
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.
/s/ PricewaterhouseCoopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
Boston, MA
July 12, 1999
2
<PAGE>
<TABLE>
<CAPTION>
DIGITAL EQUIPMENT COROPORATION
SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS (WITH FUND INFORMATION)
December 31, 1998
INVESTMENTS
---------------------------------------
INVESTMENT CONTRACTS WITH EMPLOYEE EMPLOYER PARTICIPANT
INVESTMENTS INSURANCE COMPANIES AND CONTRIBUTIONS CONTRIBUTIONS LOANS
FUND INFORMATION AT FAIR VALUE BANKS AT CONTRACT VALUE RECEIVABLE RECEIVABLE RECEIVABLE TOTAL
- -------------------------- -------------- ------------------------- ------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Stable Value Fund. . . . . $ 26,187,830 $ 264,694,444 $ - $ - $ - $ 290,882,274
Vanguard Growth & 341,330,127 - - - - 341,330,127
Income Fund
Putnam Voyager Fund. . . . 251,972,616 - - - - 251,972,616
Barclays Global Investor
("BGI") Equity Index Fund. 242,585,538 - - - - 242,585,538
Templeton Foreign Fund . . 66,843,634 - - - - 66,843,634
PIMCO Total Return Fund. . 58,367,892 - - - - 58,367,892
Franklin Small Cap Fund. . 29,648,968 - - - - 29,648,968
Portfolio 1. . . . . . . . 10,551,704 18,586,146 - - - 29,137,850
Portfolio 2. . . . . . . . 63,223,523 32,356,043 - - - 95,579,566
Portfolio 3. . . . . . . . 96,516,690 4,809,995 - - - 101,326,685
BGI Foreign Index Fund . . 5,239,594 - - - - 5,239,594
BGI US Debt Fund . . . . . 9,368,858 - - - - 9,368,858
BGI Extended Market Fund . 7,643,059 - - - - 7,643,059
Compaq Computer
Corporation Stock Fund. . 37,404,282 - - - - 37,404,282
Participant Loans. . . . . - - - - 21,263,696 21,263,696
Other Receivables. . . . . - - 1,888,726 2,816,136 - 4,704,862
-------------- ------------------------- ------------- ------------- ------------ --------------
TOTAL. . . . . . . . . . . $1,246,884,315 $ 320,446,628 $ 1,888,726 $ 2,816,136 $ 21,263,696 $1,593,299,501
============== ========================= ============= ============= ============ ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
DIGITAL EQUIPMENT COROPORATION
SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS (WITH FUND INFORMATION)
December 31,1997
INVESTMENTS
------------------------------------------
INVESTMENT CONTRACTS WITH EMPLOYEE EMPLOYER PARTICIPANT
INVESTMENTS INSURANCE COMPANIES AND CONTRIBUTIONS CONTRIBUTIONS LOANS
FUND INFORMATION AT FAIR VALUE BANKS AT CONTRACT VALUE RECEIVABLE RECEIVABLE RECEIVABLE TOTAL
- ------------------------- -------------- -------------------------- ------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Stable Value Fund . . . . $ 10,203,505 $ 261,586,706 $ - $ - $ - $ 271,790,211
Neuberger & Berman
Guardian Trust. . . . . . 271,422,878 - - - - 271,422,878
Putnam Voyager Fund . . . 212,003,185 - - - - 212,003,185
Barclays Global Investor. 191,033,512 - - - - 191,033,512
("BGI") Equity Index Fund
Templeton Foreign Fund. . 95,928,673 - - - - 95,928,673
PIMCO Total Return Fund . 36,652,664 - - - - 36,652,664
Franklin Small Cap Fund . 33,127,324 - - - - 33,127,324
Portfolio 1 . . . . . . . 10,877,657 17,928,576 - - - 28,806,233
Portfolio 2 . . . . . . . 68,794,314 34,403,034 - - - 103,197,348
Portfolio 3 . . . . . . . 100,707,339 5,001,892 - - - 105,709,231
Participant Loans . . . . - - - - 22,771,778 22,771,778
Other Receivables . . . . - - 1,268,357 543,305 - 1,811,662
-------------- -------------------------- ------------- ------------- ----------- --------------
TOTAL . . . . . . . . . . $1,030,751,051 $ 318,920,208 $ 1,268,357 $ 543,305 $22,771,778 $1,374,254,699
============== ========================== ============= ============= =========== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS (WITH FUND INFORMATION)
December 31, 1998
NET APPRECIATION/ NET
DIVIDEND & (DEPRECIATION) DISTRIBUTIONS INCREASE/(DECREASE)
EMPLOYEE EMPLOYER INTEREST IN FAIR VALUE TO PRIOR TO INTERFUND
FUND INFORMATION CONTRIBUTIONS CONTRIBUTIONS INCOME OF INVESTMENTS PARTICIPANTS TRANSFERS
- -------------------------- ------------- ------------- ----------- ------------------- --------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Stable Value Fund. . . . . $ 21,423,153 $ 3,211,292 $17,490,226 - $ (42,498,174) $ (373,503)
Neuberger & Berman . . . . 6,744,618 1,091,491 - 17,765,622 (8,836,637) 16,765,094
Guardian Trust
Vanguard Growth & 20,233,855 3,274,474 - 53,624,868 (26,509,910) 50,623,287
Income Fund
Putnam Voyager Fund. . . . 23,794,009 3,823,207 - 47,392,431 (29,694,233) 45,315,414
Barclays Global Investor . 27,176,249 4,193,457 - 53,264,834 (29,155,453) 55,479,087
"BGI" Equity Index Fund
Templeton Foreign Fund . . 10,387,167 1,820,451 - (4,133,701) (10,117,501) (2,043,584)
PIMCO Total Return Fund. . 6,319,527 904,560 - 4,441,759 (7,305,875) 4,359,971
Franklin Small Cap Fund. . 6,948,596 1,096,137 - (802,330) (4,786,658) 2,455,745
Portfolio 1. . . . . . . . 3,410,819 662,996 - 2,445,477 (3,082,587) 3,436,705
Portfolio 2. . . . . . . . 13,341,778 2,428,467 - 8,564,611 (11,858,065) 12,476,791
Portfolio 3. . . . . . . . 15,434,398 2,658,078 - 10,453,486 (12,401,142) 16,144,820
BGI Foreign Index Fund . . 611,272 75,041 - 205,314 (357,529) 534,098
BGI US Debt Fund . . . . . 1,119,462 137,226 - 466,763 (825,345) 898,106
BGI Extended Market Fund . 1,266,250 184,397 - 313,436 (436,870) 1,327,213
Compaq Stock Fund. . . . . 869,993 130,211 36,706 10,162,756 (939,226) 10,260,440
Participant Loans. . . . . 14,777,789 - 1,755,981 - (18,041,852) (1,508,082)
Other Receivables. . . . . 620,369 2,272,831 - - - 2,893,200
------------- ------------- ----------- ------------------- --------------- --------------------
TOTAL. . . . . . . . . . . $ 174,479,304 $ 27,964,316 $19,282,913 $ 204,165,326 $ (206,847,057) $ 219,044,802
============= ============= =========== =================== =============== ====================
NET ASSETS NET ASSETS
NET AVAILABLE FOR AVAILABLE FOR
INTERFUND INCREASE/ PLAN BENEFITS, PLAN BENEFITS,
FUND INFORMATION TRANSFERS (DECREASE) BEGINNING OF YEAR END OF YEAR
- -------------------------- -------------- -------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Stable Value Fund. . . . . $ 19,465,566 $ 19,092,063 $ 271,790,211 $ 290,882,274
Neuberger & Berman . . . . (288,187,972) (271,422,878) 271,422,878 -
Guardian Trust
Vanguard Growth & 290,706,840 341,330,127 - 341,330,127
Income Fund
Putnam Voyager Fund. . . . (5,345,983) 39,969,431 212,003,185 251,972,616
Barclays Global Investor . (3,927,061) 51,552,026 191,033,512 242,585,538
"BGI" Equity Index Fund
Templeton Foreign Fund . . (27,041,455) (29,085,039) 95,928,673 66,843,634
PIMCO Total Return Fund. . 17,355,257 21,715,228 36,652,664 58,367,892
Franklin Small Cap Fund. . (5,934,101) (3,478,356) 33,127,324 29,648,968
Portfolio 1. . . . . . . . (3,105,088) 331,617 28,806,233 29,137,850
Portfolio 2. . . . . . . . (20,094,573) (7,617,782) 103,197,348 95,579,566
Portfolio 3. . . . . . . . (20,527,366) (4,382,546) 105,709,231 101,326,685
BGI Foreign Index Fund . . 4,705,496 5,239,594 - 5,239,594
BGI US Debt Fund . . . . . 8,470,752 9,368,858 - 9,368,858
BGI Extended Market Fund . 6,315,846 7,643,059 - 7,643,059
Compaq Stock Fund. . . . . 27,143,842 37,404,282 - 37,404,282
Participant Loans. . . . . - (1,508,082) 22,771,778 21,263,696
Other Receivables. . . . . - 2,893,200 1,811,662 4,704,862
-------------- -------------- ------------------ ---------------
TOTAL. . . . . . . . . . . $ - $ 219,044,802 $ 1,374,254,699 $ 1,593,299,501
============== ============== ================== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
1. PLAN DESCRIPTION:
-----------------
GENERAL
The following description of the Digital Equipment Corporation Savings
and Investment Plan (the "Plan") is provided for general information purposes
only. Participants should refer to the Plan document for more information. The
Plan is a defined contribution plan providing immediate eligibility to all
regular U.S. employees of the Digital Equipment Corporation, a wholly-owned
subsidiary of Compaq Computer Corporation effective June 12, 1998. Digital
Equipment Corporation and its parent Company, Compaq Computer Corporation, are
collectively referred to as the "Company" and plan sponsor. The Plan was
established on January 1, 1985 to create an opportunity for Company employees to
provide for their retirement through tax-deferred savings. The Plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA").
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution, the Company's matching contribution and allocations of plan
earnings (including net realized and unrealized investment gains and losses).
Participants are immediately vested in their own and the Company's matching
contributions plus actual earnings thereon.
PAYMENT OF BENEFITS
Upon attainment of age 59 1/2, or upon death, termination of
employment with the Company, or demonstration of disability, a participant may
elect to receive a benefit from the Plan. A person with a demonstrated hardship
may withdraw from the Plan the amount needed to cover the hardship.
Participants who retire from the Company may elect to receive an amount equal to
the value of the participant's vested interest in his or her account as a lump
sum or in installments. All other participants will receive the value of the
vested balances in their accounts as a lump-sum distribution.
Distributions from the Loan Fund due to defaulted loans are recorded
as benefit payments.
CONTRIBUTIONS
Participants can contribute a portion of their pretax annual
compensation, in one percent increments, as defined in the Plan, up to a maximum
of 13% or 18% depending on the employee's pay. Participants may also rollover
distributions from other qualified defined benefit or defined contribution
plans. The Company contributes a matching amount equal to one-third of the
first 6% of compensation that a participant contributes to the Plan. The
maximum an employee can contribute is subject to certain Internal Revenue
Service limitations. For 1998, this limit was $10,000. Participants elect to
allocate their contributions among investment funds, each with different
investment objectives.
Continued
6
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The investment funds from which the participants can elect are as
follows:
<TABLE>
<CAPTION>
Fund Options Objective
- -------------------------------------------------- -------------------------------------------------------
<S> <C>
Stable Value Fund Seeks to ensure safety of principal and to deliver
stable investment returns in excess of rate of
inflation through investment contracts with
insurance companies and banks.
Vanguard Growth & Income Fund Seeks capital appreciation with current income as a
secondary objective. (New investment option as of
January 1998).
Putnam Voyager Fund Seeks capital appreciation, while current income is
not a consideration.
Barclays Global Investor ("BGI") Equity Index Fund Seeks to replicate the Standard & Poor's Composite
Stock Price Index.
Neuberger & Berman Guardian Trust Seeks capital appreciation with current income as
an investment option (no longer offered as an
investment option as of December 31,1998)
Templeton Foreign Fund Seeks long-term capital growth by investing in
stocks and debt obligations of companies and
governments outside the U.S.
PIMCO Total Return Fund Seeks to maximize total return consistent with
preservation of capital and prudent investment
management.
Franklin Small Cap Fund Seeks long-term capital growth by investing
primarily in equity securities of companies that
have market capitalization of less than one billion
dollars.
Portfolio 1, 2 and 3 Seeks to provide a predetermined mix of the
actively managed funds under the Plan, described
above. Each portfolio differs in the balance of fixed
income and equity holdings. Portfolio 1 holds the
highest percentage of fixed income to equity funds,
while Portfolio 3 is the opposite.
Continued
7
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
BGI Extended Market Fund Seeks to invests in stocks of small and medium-
sized companies which offer the potential to grow
faster than larger, more established companies.
(New investment option as of January 1998).
BGI Foreign Index Fund Seeks to invest in the stocks of established
companies based in Europe, Australia and the Far
East. Its goal is to match the performance of the
Morgan Stanley Capital International Europe,
Australia and Far East (EAFE) Index. (New
investment option as of January 1998).
BGI US Debt Fund Seeks to match the performance of the Lehman
Brothers Aggregate Bond Index. It invests in a
diversified portfolio of high quality US
government, corporate, mortgage-backed and asset-
backed securities. The fund seeks to earn moderate
returns with a moderate level of risk by diversifying
among a broad range of issuers and maturities.
(New investment option as of January 1998).
Compaq Computer Corporation Stock Fund Invests in common stock of Compaq Computer
Corporation. (New investment option as of
October 1998).
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
----------------------------------------------
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual
method of accounting.
INVESTMENTS
The Plan's investments are stated at fair value except for its
investment contracts with insurance companies and banks, which are carried at
contract value, which approximates fair value. Common stock is valued based on
quoted market prices. Investments in registered investment companies and bank
collective investment funds are valued based on the net asset value per share
and the number of shares held by the Plan. While not registered investment
companies, Portfolios 1, 2 and 3 are each valued as the sum of the registered
investment company investments underlying the Portfolio. Participant loans are
valued at outstanding principal plus interest, which approximates fair value.
Purchases and sales of investments are recorded on the trade date.
Continued
8
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
INVESTMENT INCOME
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
The Plan presents in the statement of changes in net assets available
for plan benefits, the net appreciation (depreciation) in the fair value of
investments which consists of the realized gains or losses and the unrealized
appreciation (depreciation) on these investments.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make estimates
and assumptions that affect the reported amounts of net assets available for
plan benefits at the date of the financial statements and changes in net assets
available for plan benefits during the reporting period and, when applicable,
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
RISKS AND UNCERTAINTIES
The Plan provides for various investment options in combinations of
mutual funds, which invest in stocks, bonds, fixed income securities and other
investment securities, and insurance company and bank investment contracts.
Investment securities are exposed to various risks, such as interest rate,
market and credit risk. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that changes in the
values of investment securities will occur in the near term and that such
changes could materially affect participants' account balances and the amounts
reported in the statement of net assets available for plan benefits.
RECLASSIFICATIONS
Certain reclassifications were made to the prior year financial
statements to conform to the current year presentation.
Continued
9
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. INVESTMENTS:
-----------
Investments at December 31, 1998 consisted of the following:
<TABLE>
<CAPTION>
DESCRIPTION FAIR VALUE
- -------------------------------------------------------------------------------- --------------
<S> <C>
Stable Value Fund* - 230,196,398 units in the Stable Value Fund, which consist
as of Investment Contracts with Insurance Companies and Banks, and a short-term
investment fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 290,882,274
Vanguard Growth & Income Fund - 11,078,002 shares . . . . . . . . . . . . . . . . 341,330,127
Putnam Voyager Fund - 11,475,879 shares. . . . . . . . . . . . . . . . . . . . . 251,972,616
Barclays Global Investor ("BGI") Equity Index Fund - 7,207,733 shares. . . . . . 242,585,538
Templeton Foreign Fund - 7,953,727 shares. . . . . . . . . . . . . . . . . . . . 66,843,634
PIMCO Total Return Fund - 5,499,628 shares . . . . . . . . . . . . . . . . . . . 58,367,892
Franklin Small Cap Fund - 1,331,448 shares . . . . . . . . . . . . . . . . . . . 29,648,968
BGI US Debt Fund - 742,957 shares. . . . . . . . . . . . . . . . . . . . . . . . 9,368,858
BGI Foreign Index Fund - 283,819 shares. . . . . . . . . . . . . . . . . . . . . 5,239,594
BGI Extended Market Fund - 597,086 shares. . . . . . . . . . . . . . . . . . . . 7,643,059
Portfolio 1 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,137,850
Portfolio 2 (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,579,566
Portfolio 3 (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,326,685
Compaq Computer Corporation Stock Fund - 882,776 shares. . . . . . . . . . . . . 37,404,282
Participant loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 21,263,696
--------------
Total investments. . . . . . . . . . . . . . . . . . . . . . . . . . $1,588,594,639
==============
<FN>
*At contract value, which approximates fair value
</TABLE>
Continued
10
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
SHARES DESCRIPTION FAIR VALUE
- ---------------- ---------------------------------------------- ------------
<C> <S> <C>
(a) Portfolio 1 is comprised of the following:
14,734,012 Stable Value Fund* $ 18,586,146
98,152 Vanguard Growth & Income Fund 3,098,744
72,404 Putnam Voyager Fund 1,587,099
1,175,408 Templeton Foreign Fund 1,471,675
269,649 PIMCO Total Return Fund 2,842,098
68,768 Franklin Small Cap Fund 1,552,088
------------
$ 29,137,850
============
(b) Portfolio 2 is comprised of the following:
25,649,983 Stable Value Fund* $ 32,356,043
475,929 Vanguard Growth & Income Fund 14,874,697
468,062 Putnam Voyager Fund 10,259,928
1,701,143 Templeton Foreign Fund 14,272,591
1,307,641 PIMCO Total Return Fund 13,782,533
444,562 Franklin Small Cap Fund 10,033,774
------------
$ 95,579,566
============
(c) Portfolio 3 is comprised of the following:
3,813,083 Stable Value Fund* $ 4,809,995
660,263 Vanguard Growth & Income Fund 20,411,312
973,964 Putnam Voyager Fund 21,518,731
2,360,151 Templeton Foreign Fund 19,801,664
1,814,506 PIMCO Total Return Fund 19,124,888
693,846 Franklin Small Cap Fund 15,660,095
------------
$101,326,685
============
<FN>
*At contract value, which approximates fair value
</TABLE>
Continued
11
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Investments at December 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
DESCRIPTION FAIR VALUE
- ------------------------------------------------------------------------- --------------
<S> <C>
Stable Value Fund*
- -------------------------------------------------------------------------
228,984,955 units in the Stable Value Fund, which consists of Investment
Contracts with Insurance Companies and Banks, and cash. . . . . . . . . . $ 271,790,211
Neuberger & Berman Guardian Trust - 15,689,183 shares . . . . . . . . . . 271,422,878
- -------------------------------------------------------------------------
Putnam Voyager Fund - 10,440,508 shares . . . . . . . . . . . . . . . . . 212,003,185
- -------------------------------------------------------------------------
Barclays Global Investors Equity Index Fund - 7,310,888 shares. . . . . . 191,033,512
- -------------------------------------------------------------------------
Templeton Foreign Fund - 9,641,073 shares . . . . . . . . . . . . . . . . 95,928,673
- -------------------------------------------------------------------------
PIMCO Total Return Fund - 3,441,678 shares. . . . . . . . . . . . . . . . 36,552,664
- -------------------------------------------------------------------------
Franklin Small Cap Fund - 1,444,716 shares. . . . . . . . . . . . . . . . 33,127,324
- -------------------------------------------------------------------------
Portfolio 1 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,806,233
- -------------------------------------------------------------------------
Portfolio 2 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,197,348
- -------------------------------------------------------------------------
Portfolio 3 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,709,231
- -------------------------------------------------------------------------
Participant loans receivable. . . . . . . . . . . . . . . . . . . . . . . 22,771,778
- ------------------------------------------------------------------------- --------------
Total investments . . . . . . . . . . . . . . . . . . . . . . $1,372,443,037
==============
<FN>
*At contract value, which approximates fair value
</TABLE>
Continued
12
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
SHARES DESCRIPTION FAIR VALUE
- ------------- ----------------------------------------------- ------------
<C> <S> <C>
(a) Portfolio 1 is comprised of the following:
15,692,007 Stable Value Fund* $ 18,644,979
166,381 Neuberger & Berman Guardian Trust 2,878,396
73,158 Putnam Voyager Fund 1,480,300
142,409 Templeton Foreign Fund 1,450,705
269,068 PIMCO Total Return Fund 2,869,396
62,139 Franklin Small Cap Fund 1,482,457
------------
$ 28,806,233
============
(b) Portfolio 2 is comprised of the following:
30,111,296 Stable Value Fund* $ 35,840,812
889,198 Neuberger & Berman Guardian Trust 15,383,122
520,814 Putnam Voyager Fund 10,553,151
1,521,774 Templeton Foreign Fund 15,512,323
1,438,433 PIMCO Total Return Fund 15,338,827
442,537 Franklin Small Cap Fund 10,569,113
------------
$103,197,348
============
(c) Portfolio 3 is comprised of the following:
4,377,911 Stable Value Fund* $ 5,355,075
1,206,697 Neuberger & Berman Guardian Trust 20,875,861
1,060,402 Putnam Voyager Fund 21,479,620
2,064,715 Templeton Foreign Fund 21,049,149
1,953,722 PIMCO Total Return Fund 20,815,046
675,435 Franklin Small Cap Fund 16,134,480
------------
$105,709,231
============
<FN>
*At contract value, which approximates fair value
</TABLE>
Continued
13
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The fair value of individual investments including amounts held in
Portfolios 1, 2 and 3 that represent five percent or more of the Plan's net
assets available for plan benefits are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Vanguard Growth & Income Fund . . $379,714,880 $ -
Neuberger & Berman Guardian Trust - 310,560,257
Putnam Voyager Fund . . . . . . . 285,338,374 245,516,256
BGI Equity Index Fund . . . . . . 242,585,538 191,033,512
Templeton Foreign Fund. . . . . . 102,389,564 133,940,850
PIMCO Total Return Fund . . . . . 94,117,411 75,675,933
</TABLE>
4. GUARANTEED INVESTMENT CONTRACTS:
---------------------------------
The Plan's investments include a portfolio of investment contracts with
insurance companies and banks ("Stable Value Portfolio"). The investment
manager maintains the investment contracts in a pooled account, which is
credited with earnings on the underlying investments and charged for Plan
withdrawals and administrative expenses charged by the investment manager. The
contracts are included in the financial statements at contract value, which
approximates fair value, and which represents contributions made under the
contracts, plus earnings, less withdrawals and administrative expenses, because
they are fully benefit responsive. For example, participants may ordinarily
direct the withdrawal or transfer of all or a portion of their investment at
contract value. There are no reserves against contract value for credit risk of
the contract issuers or otherwise. The fair value of the investment contracts
at December 31, 1998 and 1997 was $320,446,628 and $321,677,000, respectively.
The majority of the Plan's investment contracts have crediting interest rates
which are fixed for the life of the contract. Both the average yield and
crediting interest rates for the plan years ended December 31, 1998 and 1997
were 6.31% and 6.40%, respectively.
Continued
14
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. ADMINISTRATIVE EXPENSES:
------------------------
Hewitt Associates LLC and The Northern Trust Company provide administrative
services for the Plan. Such administrative services include the administration
of the investments, the maintenance of participant's records and the
distribution of benefits. All fees for administrative services for the Plan are
paid for by the Company.
6. TAX STATUS:
-----------
The Internal Revenue Service has determined and informed the Company by a
letter dated December 9, 1997 that the Plan and related Trust are designed in
accordance with applicable sections of the Internal Revenue Code (IRC). The
Plan has since been amended. A new determination letter has not been requested.
The plan administrator and the Plan's tax counsel believe that the Plan, as
amended, is designed and is currently being operated in compliance with the
applicable provisions of the IRC.
7. TERMINATION PRIORITIES:
-----------------------
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 the Plan subject to the provisions of ERISA.
8. LOANS TO PARTICIPANTS:
-----------------------
A participant may borrow from the Plan an amount not to exceed the lesser
of (a) fifty percent of the participant's vested account balance or (b) $50,000
less the highest outstanding loan balance the participant has had in the
previous 12 months. Interest rates charged on loans are determined at the time
a loan is requested by averaging the prime rates of three New York banks. A $75
processing fee is assessed on each new participant loan. The entire amount of
the participant's account serves as collateral for the loan.
Continued
15
<PAGE>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. EMPLOYEE AND EMPLOYER CONTRIBUTIONS RECEIVABLE:
--------------------------------------------------
Employee and employer contributions receivable at December 31, 1998 and
1997, represent amounts withheld from employees, and the Company's matching
contributions that were not yet remitted to the Plan.
10. SUBSEQUENT EVENT:
-----------------
Effective May 10, 1999, the Investment Plan Administrative Committee voted
to merge the Plan into the Compaq Computer Corporation 401(k) Investment Plan
on December 31, 1999.
16
<PAGE>
<TABLE>
<CAPTION>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE
LINE 27(A) - ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1998
CURRENT
DESCRIPTION COST VALUE
- ----------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Registered Investment Companies:
PIMCO Total Return Fund*. . . . . . . . . . . . . . . . . . . . . $ 94,118,966 $ 94,117,411
Barclays Global Investors ("BGI") Equity Index Fund . . . . . . . 184,119,769 242,585,538
Vanguard Growth and Income Fund* . . . . . . . . . . . . . . . . . 360,379,897 379,714,880
Templeton Foreign Fund* . . . . . . . . . . . . . . . . . . . . . 117,047,409 102,389,564
Franklin Small Cap Fund*. . . . . . . . . . . . . . . . . . . . . 57,325,700 56,894,925
Putnam Voyager Fund*. . . . . . . . . . . . . . . . . . . . . . . 206,468,216 285,338,374
BGI Foreign Index Fund. . . . . . . . . . . . . . . . . . . . . . 4,915,187 5,239,594
BGI US Debt Fund. . . . . . . . . . . . . . . . . . . . . . . . . 8,988,272 9,368,858
BGI Extended Market Fund. . . . . . . . . . . . . . . . . . . . . 7,205,750 7,643,059
-------------- --------------
Total Registered Investment Companies . . . . . . . . . . . . . . 1,040,569,166 1,183,292,203
-------------- --------------
Investment contracts with insurance companies*:
The Canada Life Assurance Company, 7.13%, maturing 2/2/02 . . . . 15,259,790 15,259,790
The Canada Life Assurance Company, 6.57%, maturing 1/01/01. . . . 19,182,600 19,182,600
Continental Assurance, 6.80%, maturing 4/1/00 . . . . . . . . . . 28,291,800 28,291,800
Confederation Life Insurance Company 10%, final payout date 4/1/95 469,055 469,055
Jackson National Life, 6.14%, maturing 4/1/02 . . . . . . . . . . 10,491,137 10,491,137
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE
LINE 27(A) - ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1998
CURRENT
DESCRIPTION COST VALUE
- ------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
John Hancock Mutual Life Insurance Company, 7.02%, maturing 1/1/02. $ 15,258,718 $ 15,258,718
John Hancock Mutual Life Insurance Company, 6.18%, maturing 7/1/03. 13,396,779 13,396,779
John Hancock Mutual Life Insurance Company, 6.51%, maturing 7/1/99. 1,548,457 1,548,457
John Hancock Mutual Life Insurance Company, 6.09%, maturing 10/1/02 10,001,674 10,001,674
MetLife, 6.63%, maturing 7/1/01 . . . . . . . . . . . . . . . . . . 32,019,605 32,019,605
MetLife, 6.24%, maturing. . . . . . . . . . . . . . . . . . . . . . 10,153,740 10,153,740
New York Life Insurance Company, 5.64%, maturing 4/1/01 . . . . . . 50,517,057 50,517,057
New York Life Insurance Company, 6.26%, maturing 1/1/03 . . . . . . 13,000,000 13,000,000
New York Life Insurance Company, 6.81%, maturing 7/1/99 . . . . . . 366,462 366,462
Peoples Security, 6.57%, maturing 1/1/01. . . . . . . . . . . . . . 12,790,630 12,790,630
Principal Mutual, 6.35%, maturing 4/1/02. . . . . . . . . . . . . . 15,949,809 15,949,809
Principal Mutual, 7.23%, maturing 1/1/01. . . . . . . . . . . . . . 20,355,012 20,355,012
Principal Mutual, 6.05%, maturing 3/31/00 . . . . . . . . . . . . . 6,882,215 6,882,215
The Prudential Asset Management Company, 6.34%, maturing 10/1/99. . 10,154,437 10,154,437
Sun America, 6.98%, maturing 7/1/01 . . . . . . . . . . . . . . . . 16,044,034 16,044,034
-------------- --------------
Total investment contracts with insurance companies and banks . . . 302,133,011 302,133,011
-------------- --------------
Investment contracts with banks*:
Citibank, N.A., 5.65%, maturing 4/1/99 . . . . . . . . . . . . . 7,340,826 7,340,826
Citibank, N.A., 6.02%, maturing, 4/1/99 . . . . . . . . . . . . . 10,972,791 10,972,791
-------------- --------------
Total investment contracts with banks . . . . . . . . . . . . . . . 18,313,617 18,313,617
-------------- --------------
Compaq Corporation Stock Fund**:
Compaq Corporation common stock, 882,776 shares . . . . . . . . 27,675,265 37,021,418
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382,864 382,864
-------------- --------------
28,058,129 37,404,282
-------------- --------------
The Northern Trust Short Term Collective Investment Fund*** . . . . 26,187,830 26,187,830
-------------- --------------
Participant loans receivable*** . . . . . . . . . . . . . . . . . . 21,263,696 21,263,696
-------------- --------------
Total assets held for investment purposes . . . . . . . . . . . . . $1,436,525,449 $1,588,594,639
============== ==============
<FN>
* Includes amounts held in Portfolios 1, 2 and 3
** Variable rate, rate shown is as of December 31, 1998. Management expects the final payout to
take place beginning in 1999.
*** This investment is issued by a party in interest to the Plan, as defined by
ERISA Section 3(14)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE
LINE 27(B) - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS IN DEFAULT
at December 31, 1998
PRINCIPAL INTEREST
ORIGINAL REDUCED REDUCED UNPAID
LOAN DURING DURING BALANCE MATURITY INTEREST TYPE OF VALUE OF
NAME AMOUNT YEAR YEAR YEAR-END LOAN DATE DATE RATE COLLATERAL COLLATERAL
- ---------------------------- --------- --------- --------- --------- --------- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Anderson, Darryl S . . . . . $ 2,575 $ 222 $ 85 $ 2,353 3/31/98 4/4/02 8.50% Investments $ 2,575
50 Harbor Point Blvd
Dorchester, MA, 02125
1099-R to be issued for
2,353 in 1999
Pendak, Sandra C.. . . . . . 1,875 586 66 583 9/24/96 9/30/99 8.25% Investments 1,875
37 Coburnb Woods
Nashua, NH 03062
1099-R to be issued for
563 in 1999
Pendak, Sandra C.. . . . . . 1,325 604 62 484 7/29/97 8/5/99 8.25% Investments 1,325
37 Coburnb Woods
Nashua, NH 03062
1099-R to be issued for
484 in 1999
Slee, Paul . . . . . . . . . 2,275 391 111 1,590 5/20/97 5/24/01 8.25% Investments 2,275
2328 West Nichols Rd
Arlington Height, IL 60004
1099-R to be issued for
1,590 in 1999
Slee, Paul . . . . . . . . . 1,167 195 64 900 9/9/97 9/13/01 8.25% Investments 1,167
2328 West Nichols Rd
Arlington Height, IL 60004
1099-R to be issued for
900 in 1999
PRINCIPAL INTEREST
NAME OVERDUE OVERDUE
- ---------------------------- ---------- ---------
<S> <C> <C>
Anderson, Darryl S . . . . . $ 43 $ 15
50 Harbor Point Blvd
Dorchester, MA, 02125
1099-R to be issued for
2,353 in 1999
Pendak, Sandra C.. . . . . . 89 6
37 Coburnb Woods
Nashua, NH 03062
1099-R to be issued for
563 in 1999
Pendak, Sandra C.. . . . . . 92 5
37 Coburnb Woods
Nashua, NH 03062
1099-R to be issued for
484 in 1999
Slee, Paul . . . . . . . . . 136 31
2328 West Nichols Rd
Arlington Height, IL 60004
1099-R to be issued for
1,590 in 1999
Slee, Paul . . . . . . . . . 68 18
2328 West Nichols Rd
Arlington Height, IL 60004
1099-R to be issued for
900 in 1999
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
DIGITAL EQUIPMENT CORPORATION
SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE
LINE 27(D) - SCHEDULE OF REPORTABLE TRANSACTIONS
for the year ended December 31, 1998
CURRENT
IDENTITY OF TOTAL TOTAL DOLLAR TOTAL DOLLAR VALUE ON
PARTY INVOLVED AND NUMBER OF VALUE OF VALUE OF COST OF TRANSACTION NET GAIN
DESCRIPTION OF ASSET TRANSACTIONS PURCHASES SALES ASSET DATE OR (LOSS)
- ------------------------------------------- ------------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Barclays Global Investors Equity Index Fund 140 purchases $ 46,738,325 $ - $ - $ 46,738,325 $ -
Open End Fund . . . . . . . . . . . . . . . 116 sales - 49,120,257 33,526,179 49,120,257 15,594,078
Neuberger & Berman Guardian Trust . . . . . 108 purchases 49,075,084 - - 49,075,084 -
Open End Fund . . . . . . . . . . . . . . . 179 sales - 379,128,089 248,543,970 379,128,089 130,584,119
Templeton Foreign Fund. . . . . . . . . . . 412 purchases 61,377,187 - - 61,377,187 -
Open End Fund . . . . . . . . . . . . . . . 702 sales - 59,486,345 49,035,067 59,486,345 10,451,278
Putnam Voyager Fund . . . . . . . . . . . . 437 purchases 77,428,877 - - 77,428,877 -
Open End Fund . . . . . . . . . . . . . . . 646 sales - 72,776,495 45,073,589 72,776,495 27,702,906
Franklin Small Cap Fund . . . . . . . . . . 467 purchases 38,996,756 - - 38,996,756 -
Open End Fund . . . . . . . . . . . . . . . 657 sales - 34,274,634 34,195,935 34,274,634 78,699
Pimco Total Return Fund . . . . . . . . . . 513 purchases 55,143,339 - - 55,143,339 -
Open End Fund . . . . . . . . . . . . . . . 620 sales - 37,581,040 31,190,808 37,581,040 6,390,232
Vanguard Growth & Income Fund . . . . . . . 366 purchases 414,602,828 - - 414,602,828 -
Open End Fund . . . . . . . . . . . . . . . 461 sales - 56,896,334 50,828,357 56,896,334 6,067,977
The Northern Trust Short-Term
Collective Investment Fund . . . . . . . . 210 purchases 824,935,723 - - 824,935,723 -
STIF. . . . . . . . . . . . . . . . . . . . 181 sales - 822,763,160 822,763,160 822,763,160 -
</TABLE>
20
<PAGE>
SIGNATURES
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.
Digital Equipment Corporation Savings
and Investment Plan
Date: July 14, 1999 By: /s/ Linda S. Auwers
-------------------
Linda S. Auwers
Vice President, Associate General
Counsel and Secretary
Compaq Computer Corporation
21
<PAGE>
EXHIBIT 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-64989) of Compaq Computer Corporation of our
report dated July 12, 1999, relating to the financial statements of the Digital
Equipment Corporation Savings and Investment Plan, which appears in this Form
11-K.
/s/ PricewaterhouseCoopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
Boston, MA
July 14, 1999
22
<PAGE>
