- --------------------------------------------------------------------------------
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:
COMPAQ COMPUTER CORPORATION
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>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
INDEX TO FINANCIAL STATEMENTS, ADDITIONAL INFORMATION AND EXHIBITS
- -------------------------------------------------------------------------
The following plan financial statements, schedules and reports have been
prepared in accordance with the financial reporting requirements of ERISA.
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants. . . . . . . . . . . . 3
Financial Statements:
Statement of Net Assets Available for Benefits at
December 31, 1998 and 1997 . . . . . . . . . . . . . 4
Statement of Changes in Net Assets Available for
Benefits for the Year Ended December 31, 1998. . . . 5
Notes to Financial Statements. . . . . . . . . . . . . 6 - 13
Additional Information:*
Item 27a - Schedule of Plan Assets Held for Investment
Purposes at December 31, 1998. . . . . . . . . . . . 14
Item 27d - Schedule of Reportable Transactions for the
Year Ended December 31, 1998 . . . . . . . . . . . . 15
Exhibits:
(1) Consent of Independent Accountants. . . . . . . . 17
<FN>
* Other schedules required by Section 2520.103-10 of the Department of Labor
Rules and Regulations for reporting and disclosure under ERISA have been omitted
because they are not applicable.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrative Committee of the
Compaq Computer Corporation Investment Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Compaq Computer Corporation Investment Plan (the Plan) at December 31,
1998 and 1997, and the changes in net assets available for 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 plan
assets held for investment purposes at December 31, 1998 and reportable
transactions for the year ended December 31, 1998 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. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules 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
- -------------------------------
PRICEWATERHOUSE COOPERS LLP
Houston, Texas
June 21, 1999
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Investments, at fair value (Notes 2 and 7) $1,777,377,335 $863,571,747
Loans to participants. . . . . . . . . . . 53,743,624 34,431,947
Receivables:
Employer contribution. . . . . . . . . . 33,828 -
Participant contribution . . . . . . . . 51,189 -
-------------- ------------
Net assets available for plan benefits . . $1,831,205,976 $898,003,694
============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Additions to net assets attributed to:
Employee contributions. . . . . . . . . . . . . . . . . $ 56,263,461
Employer contributions, less forfeitures of $2,810,007. 35,250,844
Rollover contributions. . . . . . . . . . . . . . . . . 11,897,985
Interest on participant loans . . . . . . . . . . . . . 3,413,568
Investment income . . . . . . . . . . . . . . . . . . . 12,357,184
Net appreciation in fair market value of investments. . 335,810,640
Asset transfers in (Note 1) . . . . . . . . . . . . . . 534,042,210
--------------
989,035,892
--------------
Deductions from net assets attributed to:
Benefits paid to participants . . . . . . . . . . . . . 55,154,440
Administrative expenses . . . . . . . . . . . . . . . . 679,170
--------------
55,833,610
--------------
Net increase. . . . . . . . . . . . . . . . . . . . . . . 933,202,282
Net assets available for plan benefits:
Beginning of year . . . . . . . . . . . . . . . . . . . 898,003,694
--------------
End of year . . . . . . . . . . . . . . . . . . . . . . $1,831,205,976
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN AND SIGNIFICANT ACCOUNTING POLICIES
Compaq Computer Corporation (the Company) initially adopted the Compaq Computer
Corporation Savings Plan effective April 1, 1985, to establish a savings and
investment plan for the benefit of the Company's employees and their
beneficiaries. The Compaq Computer Corporation Savings Plan was renamed the
Compaq Computer Corporation Investment Plan (the Plan) effective January 1,
1986, pursuant to a Plan amendment on October 28, 1986. Effective December 31,
1998, the Tandem Computers Incorporated 401(k) Investment Plan and the Microcom,
Inc. Employees' 401(k) Plan were merged with and into the Plan and their assets
transferred to the trust accompanying the Plan. There were no other material
changes in the Plan as a result of amendments in 1998.
The following description of the Plan provides only general information.
Eligible employees may refer to the official Investment Plan document, as
amended, for a more complete description of the Plan's provisions. Capitalized
terms used and not otherwise defined herein are as defined in the Plan document.
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual method of
accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. Shares of registered
investment companies are valued at quoted market prices which represent the net
asset value of shares held by the Plan at year end. The Company stock is valued
at its quoted market price. Loans to participants are valued at cost which
approximates fair value. Purchases and sales of securities are recorded on a
trade-date basis. Interest income is recorded on the accrual basis.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
PARTICIPATION
The Plan is a voluntary defined contribution plan. Employees are eligible to
participate at the beginning of any month after completing six months of service
with the Company. Participants may contribute to the Plan, through salary
reduction, an amount between 1% and 14% of Base Compensation. Participants may
change their (i) contribution percentage at the beginning of any month, (ii)
allocation of contributions to the funds (in 1% increments) on a daily basis,
and (iii) allocation of investment balances in the Company's Common Stock Fund
and the mutual funds on a daily basis. All participating employees of the
Company are required to adhere to the Company's policy regarding insider
trading, and executive officers are required to adhere to rules issued by the
Securities and Exchange Commission under Section 16 of the Securities Exchange
Act of 1934, as amended. Each Participant's annual salary reduction
contribution is limited to the maximum amount permitted by the Secretary of the
Treasury ($10,000 in 1998).
CONTRIBUTIONS
The Company is required to make monthly matching contributions to the Plan in an
amount equal to the respective Participant's salary reduction contribution,
subject to a maximum of 6% of the Participant's Base Compensation up to a
maximum of $160,000. The Company may also make, at its discretion, additional
matching contributions at the end of the plan year out of current or accumulated
earnings. At its discretion, the Company may make additional company
contributions to the accounts of certain participants to the extent necessary to
meet tests imposed by the Internal Revenue Code (Code).
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
INVESTMENT OPTIONS
Participants are permitted to direct the investment of all company matching
contribution and participant salary reduction contributions into any of the
following eight funds:
- - Warburg Pincus Institutional International Equity Fund, a fund that seeks
long-term capital appreciation by investing in a broadly diversified
portfolio of equity securities of companies that have their principal
business activities and interests outside the United States.
- - Vanguard Explorer Fund, a fund that seeks to provide long-term capital
appreciation by investing in the common stocks of relatively small,
unseasoned or embryonic companies.
- - Vanguard Money Market Prime Portfolio Fund, a money market fund, seeks
maximum current income consistent with the preservation of capital and
liquidity.
- - Vanguard Short-Term Corporate Bond Fund seeks to provide the highest level
of current income consistent with the conservation of capital and the
investment policy of the fund.
- - Vanguard Index 500 Portfolio Fund, a stock market index fund that attempts
to replicate the investments and returns of the U.S. equity market, as
represented by the Standard & Poor's 500 Index.
- - Vanguard Primecap Fund, a fund that invests primarily in dividend-paying
common stocks selected on the basis of greater-than-average earnings
growth potential, consistency of earnings growth, and quality of
management.
- - Vanguard Equity Income Funds seeks to provide a stable, high level of
dividend income and long-term growth of income and capital.
- - The Compaq Stock Fund, a fund that is comprised of common stock of the
Company.
Participants from the Tandem Computers Incorporated 401(k) Investment Plan or
the Microcom, Inc. Employees' 401(k) Plan may also have contributions in one of
the following two funds, both of which are closed to new investments:
- - Tandem Income Fund, a fund that 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 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 5.56% to 8.27%. They mature on various dates
through May 6, 2003.
- - Microcom Stable Value Fund, a fund that invests in the Bankers Trust
Pyramid Guaranteed Investment Contracts (GIC) Fund, a collective
investment fund, which invests in guaranteed investment contracts issued
by banks, insurance companies and other financial institutions, domestic
and foreign. Investments in this fund earn interest at a rate determined
by Bankers Trust.
PARTICIPANTS' ACCOUNTS
Each participant's account is credited with his or her elective deferral
contribution, the Company's matching contribution, any rollover contribution and
an allocation of plan earnings or losses. Allocations of plan earnings or
losses are based upon the earnings or losses of the fund or funds in which a
participant has directed the investments of his or her account balances, on a
pro rata basis. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's vested account balances net of any
outstanding loans against those vested amounts.
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
VESTING
Participants are immediately vested in their elective deferral contributions and
rollover contribution, and any net earnings thereon. Within the participant's
first five years of service with the Company, each year's matching contributions
vest one-third on December 31 of the year of contribution, one-third on December
31 of the first succeeding year and one-third on December 31 of the second
succeeding year. All company matching contributions become 100% vested after a
participant has attained five years of service with the Company. The Plan
provides for full vesting in the respective company matching contributions for
participants who attain the age of 65, die while employed by the Company,
terminate employment on or after age 55 or terminate employment due to total and
permanent disability.
LOANS
Participants may borrow up to 50% of the current value of their vested account
balances, including any earnings or losses. The minimum amount that may be
borrowed is $1,000 ($100 for a loan for certain hardship purposes) and the
maximum is $50,000 less the highest outstanding principal balance of any loan
outstanding within the past twelve months. Loan terms range up to five years
for a general purpose loan or up to 30 years for the purchase of a primary
residence. The loans are secured by the balance in the participant's account
and bear interest at a fixed rate of one percent above the prime rate for the
term of the loan. A participant may originate three loans within a calendar
year and can have no more than three loans outstanding at any given time. The
carrying value of participant loans approximates fair value.
FORFEITURES
Forfeitures of terminated participants' nonvested accounts serve to reduce
subsequent company contributions and to pay reasonable administrative expenses.
Forfeitures aggregated $3,378,694 (exclusive of subsequent earnings) of which
$2,810,007 was utilized to reduce company contributions for the year ended
December 31, 1998. An additional $644,873 was utilized to pay administrative
expenses.
ADMINISTRATION
Vanguard Fiduciary Trust Company (VFTC) is trustee for the administration of the
Plan assets. Expenses incidental to the administration of the Plan and Trust
are paid by the trust, unless paid by the Company. Administration expenses
totaled $679,170 during 1998, of which $644,873 were paid by the Trust out of
forfeitures and $34,297 were charged against earnings in the Warburg Pincus
Institutional International Equity Fund.
PAYMENT OF BENEFITS
Participants or their designated beneficiaries are entitled to receive a
lump-sum distribution of all vested amounts net of any outstanding loans against
those vested amounts in the event of termination of service or death. In
addition, a participant who has reached the age of 59 1/2 may make withdrawals
of his vested amounts while employed by the Company.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and judgments that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Management believes the
estimates are reasonable.
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
2. INVESTMENTS
The number of shares and net asset values or quoted market price for each fund
are as follows:
<TABLE>
<CAPTION>
NET ASSET
VALUE/
NUMBER OF MARKET
SHARES PRICE
<S> <C> <C>
Warburg Pincus Institutional International Equity Fund 3,784,541 $ 15.25
Vanguard Explorer Fund . . . . . . . . . . . . . . . . 413,135 56.71
Vanguard Money Market Prime Portfolio Fund . . . . . . 106,675,174 1.00
Vanguard Short-Term Corporate Bond Fund. . . . . . . . 4,692,245 10.84
Vanguard Index 500 Portfolio Fund. . . . . . . . . . . 2,120,923 113.95
Vanguard Primecap Fund . . . . . . . . . . . . . . . . 3,271,332 47.66
Vanguard Equity Income Fund. . . . . . . . . . . . . . 7,382,940 24.73
Compaq Stock Fund. . . . . . . . . . . . . . . . . . . 21,251,965 41.94
Microcom Stable Value Fund . . . . . . . . . . . . . . 1,646,715 1.00
Tandem Income Fund . . . . . . . . . . . . . . . . . . 65,623,149 1.00
</TABLE>
The Plan presents in the statement of changes in net assets available for
benefits the net appreciation in the fair value of its investments which consist
of the realized gains and losses and the unrealized appreciation on such
investments. Net realized gains determined based on the current value method
related to sales of the Company's stock and related to the sales of mutual fund
investments for year ended December 31, 1998 are $19,549,672 and $2,543,067
respectively. Proceeds and costs related to sales of the Company's stock and
related to the sales of mutual fund investments for the year ended December 31,
1998 are $212,125,892 and $192,576,220 and $200,464,579 and $197,921,512
respectively.
The Compaq share price reflects a two-for-one stock split in January 1998 and a
five-for-two stock split in July 1997.
3. PLAN TERMINATION
Although the Company has not expressed any intent to do so, it has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of plan termination,
participants will be credited with a 100% vested interest in their respective
company matching contributions and net earnings thereon.
4. FEDERAL INCOME TAX STATUS
Management believes that the Plan is designed and is currently being operated in
compliance with the applicable requirements of the Code and therefore the
related trust is exempt from taxation under Code Section 501(a). In connection
with certain amendments to the Plan, the Internal Revenue Service granted a
favorable letter of determination to the Plan in January 1995.
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
5. RELATED PARTY TRANSACTIONS
The Plan invests in shares of mutual funds managed by Vanguard Group, Inc., an
affiliate of VFTC. VFTC acts as trustee for only those investments as defined
by the Plan. Transactions in such investments qualify as party-in-interest
transactions which are exempt from the prohibited transaction rules.
6. SUBSEQUENT EVENTS
The following plan design changes were approved by the Investment Plan
Administrative Committee and became effective as of January 1, 1999:
- - Employees are eligible to participate in the plan (and receive the
employer match) at their date of hire.
- - The maximum deferred rate for participants increased from 14% to 19%.
- - Compensation level utilized in calculating matching contributions includes
base pay, scheduled overtime, and commissions earned by the employees.
- - Participants will vest in employer contributions at a rate of 20% a year
with 100% vesting after five years.
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
7. NET ASSETS AVAILABLE FOR BENEFITS BY INVESTMENT FUND
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
WARBURG
PINCUS VANGUARD VANGUARD
INSTITUTIONAL VANGUARD MONEY MARKET SHORT-TERM VANGUARD VANGUARD VANGUARD
INTERNATIONAL EXPLORER PRIME CORPORATE INDEX 500 PRIMECAP EQUITY
EQUITY FUND FUND PORTFOLIO FUND* BOND FUND PORTFOLIO FUND* FUND* INCOME FUND*
<S> <C> <C> <C> <C> <C> <C> <C>
Investments, at
fair value . . $ 57,714,251 $23,428,891 $ 106,675,174 $50,863,930 $ 241,679,193 $155,911,663 $ 182,580,102
Loans to
participants
Receivables:
Employer
contribution 3,018 2,836 59 13,483 60 14,372
Participant
contribution 4,728 5,033 225 19,615 145 21,443
-------------- ----------- ---------------- ----------- ---------------- ------------ -------------
Net assets
available for
plan benefits. $ 57,721,997 $23,428,891 $ 106,683,043 $50,864,214 $ 241,712,291 $155,911,868 $ 182,615,917
-------------- ----------- ---------------- ----------- ---------------- ------------ -------------
MICROCOM
COMPANY STABLE TANDEM PARTICIPANT
STOCK FUND* VALUE FUND INCOME FUND LOANS TOTAL
<S> <C> <C> <C> <C> <C>
Investments, at
fair value . . $891,254,267 $ 1,646,715 $ 65,623,149 $1,777,377,335
Loans to
participants $ 53,743,624 53,743,624
Receivables:
Employer
contribution 33,828
Participant
contribution 51,189
------------ ----------- ------------ ------------ --------------
Net assets
available for
plan benefits. $891,254,267 $ 1,646,715 $ 65,623,149 $ 53,743,624 $1,831,205,976
------------ ----------- ------------ ------------ --------------
<FN>
* Fund balance represents more than 5% of total net assets available for plan benefits.
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
WARBURG
PINCUS VANGUARD VANGUARD
INSTITUTIONAL VANGUARD MONEY MARKET SHORT-TERM VANGUARD VANGUARD VANGUARD
INTERNATIONAL EXPLORER PRIME CORPORATE INDEX 500 PRIMECAP EQUITY
EQUITY FUND FUND PORTFOLIO FUND* BOND FUND PORTFOLIO FUND* FUND* INCOME FUND
<S> <C> <C> <C> <C> <C> <C> <C>
Investments, at $ 17,166,491 $22,547,035 $ 48,859,864 $11,180,891 $ 112,834,490 $85,451,349 $ 1,302,801
fair value . .
Loans to
participants
Net assets
available for
plan benefits. $ 17,166,491 $22,547,035 $ 48,859,864 $11,180,891 $ 112,834,490 $85,451,349 $ 1,302,801
-------------- ----------- ---------------- ----------- ---------------- ----------- -------------
MICROCOM
COMPANY STABLE TANDEM PARTICIPANT
STOCK FUND* VALUE FUND INCOME FUND LOANS TOTAL
<S> <C> <C> <C> <C> <C>
Investments, at fair value $564,228,826 $863,571,747
Loans to participants $ 34,431,947 34,431,947
------------ ---------- ----------- ------------ ------------
Net assets available for
plan benefits. . . . . . $564,228,826 $ 34,431,947 $898,003,694
------------ ---------- ----------- ------------ ------------
<FN>
* Fund balance represents more than 5% of total net assets available for plan benefits.
</TABLE>
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
8. CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY INVESTMENT FUND
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
WARBURG
PINCUS VANGUARD VANGUARD
INSTITUTIONAL VANGUARD MONEY MARKET SHORT-TERM VANGUARD VANGUARD VANGUARD
INTERNATIONAL EXPLORER PRIME CORPORATE INDEX 500 PRIMECAP EQUITY
EQUITY FUND FUND PORTFOLIO FUND* BOND FUND PORTFOLIO FUND* FUND* INCOME FUND*
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to
net assets
attributed to:
Employee
contributions. . $ 1,534,775 $2,292,033 $ 3,888,543 $ 1,405,749 $ 9,700,629 $ 7,669,949 $ 853,287
Employer
contributions,
less forfeitures 1,036,124 1,401,493 2,692,169 975,426 6,088,336 4,746,666 758,905
Rollover
contributions. . 276,203 496,010 1,039,091 779,627 2,357,908 1,810,577 959,605
Interest on
participant
loans. . . . . . 56,292 76,878 425,104 55,796 417,005 327,767 17,406
Investment
income . . . . . 154,258 202,668 2,919,269 818,590 2,376,261 4,278,457 374,469
Net apprecia-
tion in fair
market value
of investments . 965,380 562,277 27,811 31,646,577 17,838,961 227,475
Assets trans-
ferred in. . . . . 41,316,874 32,200,292 33,103,997 80,459,890 42,680,647 175,275,122
-------------- ---------- ---------------- ----------- ---------------- ----------- -------------
45,339,906 5,031,359 43,164,468 37,166,996 133,046,606 79,353,024 178,466,269
MICROCOM
COMPANY STABLE TANDEM PARTICIPANT
STOCK FUND* VALUE FUND INCOME FUND LOANS TOTAL
<S> <C> <C> <C> <C> <C>
Additions to
net assets
attributed to:
Employee
contributions. . $ 28,918,496 $ 56,263,461
Employer
contributions,
less forfeitures 17,552,831 $ (1,106) 35,250,844
Rollover
contributions. . 4,178,964 11,897,985
Interest on
participant
loans. . . . . . 2,037,320 3,413,568
Investment
income . . . . . 1,220,370 $ 12,842 12,357,184
Net apprecia-
tion in fair
market value
of investments . 284,542,159 335,810,640
Assets trans-
ferred in. . . . . 47,273,523 $ 1,646,715 65,610,307 14,474,843 534,042,210
------------ ----------- ------------ ------------- ------------
385,723,663 1,646,715 65,623,149 14,473,737 989,035,892
</TABLE>
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
8. CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY INVESTMENT FUND
(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
WARBURG
PINCUS VANGUARD VANGUARD
INSTITUTIONAL VANGUARD MONEY MARKET SHORT-TERM VANGUARD VANGUARD
INTERNATIONAL EXPLORER PRIME CORPORATE INDEX 500 PRIMECAP
EQUITY FUND FUND PORTFOLIO FUND* BOND FUND PORTFOLIO FUND* FUND*
<S> <C> <C> <C> <C> <C> <C>
Deductions from
net assets
attributed to:
Benefits paid
to participants . $ (980,122) $(1,388,504) $ (8,412,578) $(1,621,997) $ (7,312,879) $ (5,287,840)
Administrative
expenses. . . . . (34,297) (644,873)
Interfund transfers (3,769,981) (2,760,999) 23,716,162 4,138,324 3,144,074 (3,604,665)
--------------- ------------ ----------------- ------------ ----------------- -------------
Net increase. . . . . 40,555,506 881,856 57,823,179 39,683,323 128,877,801 70,460,519
Net assets available:
Beginning of
period. . . . . . 17,166,491 22,547,035 48,859,864 11,180,891 112,834,490 85,451,349
--------------- ------------ ----------------- ------------ ----------------- -------------
End of period . . . $ 57,721,997 $23,428,891 $ 106,683,043 $50,864,214 $ 241,712,291 $155,911,868
--------------- ------------ ----------------- ------------ ----------------- -------------
VANGUARD MICROCOM
EQUITY COMPANY STABLE TANDEM PARTICIPANT
INCOME FUND* STOCK FUND* VALUE FUND INCOME FUND LOANS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Deductions from
net assets
attributed to:
Benefits paid
to participants . $ (398,508) $(27,742,822) $ (2,009,190) $ (55,154,440)
Administrative
expenses (679,170)
Interfund transfers 3,245,355 (30,955,400) 6,847,130
-------------- ------------- ----------- ------------ ------------- ---------------
Net increase. . . . . 181,313,116 327,025,441 $ 1,646,715 $ 65,623,149 19,311,677 933,202,282
Net assets available:
Beginning of
period. . . . . . 1,302,801 564,228,826 34,431,947 898,003,694
-------------- ------------- ----------- ------------ ------------- ---------------
End of period . . . $ 182,615,917 $891,254,267 $ 1,646,715 $ 65,623,149 $ 53,743,624 $1,831,205,976
-------------- ------------- ----------- ------------ ------------- ---------------
</TABLE>
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
LINE 27A - SCHEDULE OF PLAN ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(C)
(B) DESCRIPTION OF (D) (E)
(A) IDENTITY OF ISSUE INVESTMENT COST CURRENT VALUE
<C> <S> <C> <C> <C>
* Warburg Pincus Institutional Mutual fund
International Equity Fund $ 57,772,167 $ 57,714,251
* Vanguard Explorer Fund Mutual fund 22,050,742 23,428,891
* Vanguard Money Market
Prime Portfolio Fund Mutual fund 106,675,174 106,675,174
* Vanguard Short-Term
Corporate Bond Fund Mutual fund 50,825,712 50,863,930
* Vanguard Index 500 Portfolio
Fund Mutual fund 185,971,205 241,679,193
* Vanguard Primecap Fund Mutual fund 123,785,690 155,911,663
* Vanguard Equity Income Fund Mutual fund 182,327,325 182,580,102
* Compaq Stock Fund Common
stock, $.01
par value 308,555,199 891,254,267
* Tandem Income Fund Collective
investment
fund 65,623,149 65,623,149
* Microcom Stable Value Fund Collective
investment
fund 1,646,715 1,646,715
* Participant loans ** 53,743,624 53,743,624
--------------- ---------------
$ 1,158,976,702 $ 1,831,120,959
--------------- ---------------
<FN>
* Represents an investment associated with a party-in-interest.
** Participant loans consists of general purpose and home purchase loans
made to participants from their account balances, which have repayment periods
not to exceed five and thirty years, respectively. Participants pay interest on
their outstanding loan balance at a rate of prime plus one percent. The prime
rate for the years ended December 31, 1998 and 1997 was 7.75% and 8.50%,
respectively.
</TABLE>
<PAGE>
COMPAQ COMPUTER CORPORATION INVESTMENT PLAN
LINE 27D - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PURCHASE PRICE SELLING PRICE LEASE RENTAL
<S> <C> <C> <C> <C>
Compaq Stock Fund Common stock $ 226,513,158
Compaq Stock Fund Common stock $ 212,105,202
Vanguard Index 500 Portfolio Fund Mutual fund 133,149,354
Vanguard Index 500 Portfolio Fund Mutual fund 35,683,167
Vanguard Money Market Reserves - Prime Portfolio Mutual fund 159,141,938
Vanguard Money Market Reserves - Prime Portfolio Mutual fund 102,729,242
Vanguard Primecap Fund Mutual fund 80,173,655
Vanguard Primecap Fund Mutual fund 27,460,350
Vanguard Equity Income Fund Mutual fund 188,049,654
Vanguard Equity Income Fund Mutual fund 6,999,828
Vanguard Short-Term Corporate Fund Mutual fund 49,305,993
Vanguard Short-Term Corporate Fund Mutual fund 9,645,755
Tandem Income Fund Collective investment fund 65,623,149
Warburg Pincus Int'l Equity Fund Mutual fund 48,037,519
Warburg Pincus Int'l Equity Fund Mutual fund 8,441,588
(H)
CURRENT
(E) VALUE ON (I)
(A) EXPENSE (F) TRANSACTION NET
IDENTITY OF PARTY INVOLVED INCURRED COST OF ASSET DATE GAIN (LOSS)
<S> <C> <C> <C> <C>
Compaq Stock Fund $ 226,513,158
Compaq Stock Fund $ 154,308,262 212,105,202 $57,796,940
Vanguard Index 500 Portfolio Fund 133,149,354
Vanguard Index 500 Portfolio Fund 30,186,163 35,683,167 5,497,004
Vanguard Money Market Reserves - Prime Portfolio 159,141,938
Vanguard Money Market Reserves - Prime Portfolio 102,729,242 102,729,242
Vanguard Primecap Fund 60,173,655
Vanguard Primecap Fund 23,687,872 27,460,350 3,772,478
Vanguard Equity Income Fund 188,049,654
Vanguard Equity Income Fund 7,052,870 6,999,828 (53,042)
Vanguard Short-Term Corporate Fund 49,305,993
Vanguard Short-Term Corporate Fund 9,615,143 9,645,755 30,612
Tandem Income Fund 65,623,149
Warburg Pincus Int'l Equity Fund 48,037,519
Warburg Pincus Int'l Equity Fund 8,403,010 8,441,588 38,578
</TABLE>
<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.
COMPAQ COMPUTER CORPORATION
INVESTMENT PLAN
Date: June 29, 1999 By: /s/ Linda S. Auwers
-------------------
Linda S. Auwers
Vice President, Associate General
Counsel and Secretary
Compaq Computer Corporation
<PAGE>
EXHIBIT 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 33-10106 and 333-64989) of Compaq Computer
Corporation of our report dated June 21, 1999, relating to the financial
statements of the Compaq Computer Corporation Investment Plan, which appears in
this Form 11-K.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
June 29, 1999
