<PAGE>
[COSTCO WHOLESALE LOGO]
401(k) RETIREMENT PLAN
EIN 33-0572969
PIN 002
FINANCIAL STATEMENTS AND SCHEDULE
AS OF DECEMBER 31, 1999 AND 1998
TOGETHER WITH AUDITORS' REPORT
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COSTCO
401(k) RETIREMENT PLAN
FINANCIAL STATEMENTS AND SCHEDULE
DECEMBER 31, 1999 AND 1998
INDEX
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Statements of Net Assets Available for Plan Benefits as of December 31,
1999 and 1998
Statement of Changes in Net Assets Available for Plan Benefits for the
Year Ended December 31, 1999
NOTES TO FINANCIAL STATEMENTS AND SCHEDULE
SUPPLEMENTAL INFORMATION
Schedule I - Schedule of Assets Held for Investment Purposes
as of December 31, 1999
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Benefits Committee of
the Costco 401(k) Retirement Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Costco 401(k) Retirement Plan as of December 31, 1999 and
1998, and the related statement of changes in net assets available for plan
benefits for the year ended December 31, 1999. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards 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. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan
as of December 31, 1999 and 1998, and the changes in its net assets available
for plan benefits for the year ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets
held for investment purposes is presented for purposes of additional analysis
and is not a required part of the basic financial statements but is
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 supplemental schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Seattle, Washington
April 20, 2000
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COSTCO
401(k) RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
ASSETS:
Investments at fair value--
Shares of registered investment company funds:
Cash and cash equivalents $ 217,840 $ 1,823,970
Equity Income Fund 94,708,446 95,093,047
Spectrum Income Fund 53,948,751 61,028,642
Spectrum Growth Fund 109,518,397 90,026,664
New Horizons Fund 18,667,199 11,453,941
Mid-Cap Growth Fund 41,157,400 23,007,181
Equity Index Fund 20,122,982 --
International Stock Fund 3,104,443 --
Common commingled trust fund:
Stable Value Fund 97,058,613 81,510,109
Costco Wholesale Corporation Common Stock 345,724,304 229,630,607
Participant loans 34,411,486 24,430,556
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Total investments 818,639,861 618,004,717
Contributions receivable--
Employer 51,112,854 44,117,444
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NET ASSETS AVAILABLE FOR PLAN BENEFITS $869,752,715 $662,122,161
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</TABLE>
The accompanying notes and schedule are an integral part of these statements.
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COSTCO
401(k) RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
Net appreciation in fair value of investments--
Shares of registered investment company funds $ 10,087,636
Common stock 65,054,014
Interest 2,865,524
Dividends 34,281,391
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Total net investment income 112,288,565
CONTRIBUTIONS TO THE PLAN:
Employee 61,013,712
Employer 62,817,297
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Total contributions 123,831,009
DISTRIBUTIONS TO PARTICIPANTS:
In-service withdrawals (2,625,984)
Terminations (25,863,036)
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Total distributions (28,489,020)
NET INCREASE IN NET ASSETS AVAILABLE FOR PLAN BENEFITS 207,630,554
NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of year 662,122,161
------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of year $869,752,715
============
</TABLE>
The accompanying notes and schedule are an integral part of this statement.
<PAGE>
COSTCO
401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULE
DECEMBER 31, 1999
1. PLAN DESCRIPTION:
The following description of the Costco 401(k) Retirement Plan (the Plan)
provides only general information. Participants should refer to the plan
document for a more complete description of the Plan's provisions.
The Plan is a defined contribution plan subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
Participants in the Plan are employees of Costco Wholesale Corporation (the
"Company"), including The Price Company, a wholly owned subsidiary.
ELIGIBILITY
The Plan covers certain employees over the age of 18 who have completed one
year of service containing a minimum of 1,000 hours worked. The employees
enter the Plan on the entry date following the fulfillment of these
requirements. The Price Company employees covered by a collective bargaining
agreement in the State of California are not eligible for participation in
this Plan.
CONTRIBUTIONS
Each year, participants may contribute from 1% to 15% of their compensation
before income taxes, subject to certain limitations set by the Internal
Revenue Service (IRS). Participants may also contribute amounts representing
distributions from other qualified benefit or contribution plans (known as
"rollover" contributions).
The Company matches 50% of the employee's contribution, up to a maximum
employer matching contribution of $500 per year. The Company may also, at
its discretion, make a qualified nonelective contribution. In addition, for
each plan year, the Company may contribute a discretionary amount to the
account of each participant who is employed by the Company on the last day of
the plan year. The discretionary contribution may range from 3% to 10% of
compensation based on years of service and was approved for the year ended
December 31, 1999.
PARTICIPANT ACCOUNTS
Each participant's account is credited with his or her contributions,
employer matching and discretionary contributions, and an allocation of plan
earnings based on the daily valuation of investments. Allocations are based
on participant account balances as defined by the Plan. The benefit to which
a participant is entitled is the benefit that can be provided from the
participant's vested account.
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VESTING
Participants are immediately vested in their contributions and any qualified
non-elective contributions, plus actual earnings thereon. Vesting in the
employer matching and discretionary contributions is based on years of
service, according to the following schedule:
Years of Service Percentage Vested
---------------- -----------------
Less than 2 0%
2-3 10
3-4 25
4-5 50
5 or more 100
FORFEITURES
During 1999, forfeitures of $500,000 were used to reduce the employer
contributions to the Plan. Forfeitures can be restored to a participant's
account if the participant is re-employed by the Company prior to the
expiration of five consecutive breaks in service and repays the full dollar
amount distributed because of the termination within five years of the
reemployment date. As of December 31, 1999 and 1998, forfeitures of
approximately $892,000 and $645,000, respectively, had not been used to
reduce employer contributions. These forfeitures will be used to offset
future employer contributions.
INVESTMENT OPTIONS
Upon enrollment in the Plan, a participant may direct contributions into any
of the nine investment options consisting of seven registered investment
company funds, a common commingled trust fund and Company stock, as listed on
the statements of net assets available for plan benefits. T. Rowe Price is
the trustee for all investments, serves as investment manager for all
registered investment company and common commingled trust funds and provides
recordkeeping of all participant accounts. Funds may be temporarily invested
in a cash account.
Participants may change their investment options and transfer amounts between
funds daily.
DISTRIBUTIONS
Upon termination of employment or death, the vested interest in a
participant's account is payable in a lump sum. Participants may apply for a
distribution of all or a portion of the vested interest at any time after
attainment of age 59-1/2. Participants are also eligible to make hardship
withdrawals from their salary deferral contributions in the event of certain
financial hardships. Following a hardship withdrawal, participants are not
allowed to contribute to the Plan for a one-year period.
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PARTICIPANT LOANS
A participant may borrow the lesser of $50,000 or 45% of his or her vested
account balance, calculated using participant pre-tax, rollover, Company
matching and Company discretionary contribution amounts. However, only the
participant pre-tax, rollover and Company matching amounts are eligible to
borrow against, with a minimum loan of $1,000. Loans are payable through
payroll deductions over a period ranging up to 180 months, depending on the
purpose of the loan. The interest rate is determined by the plan
administrator based on Bank of America prime rate on the last day of the
calendar quarter. The rates at December 31, 1999 ranged from 8.75% to
10.50%, depending on the type of loan. The loans have various maturity
dates, through 2014.
PLAN ADMINISTRATOR
The Plan is administered by the Benefits Committee, which is appointed by the
Board of Directors of the Company.
ADMINISTRATIVE EXPENSES
All administrative and custodial fees of the Plan are paid by the Company.
All investment management and transaction fees directly related to the plan
investments are netted against net investment income.
2. SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual method of
accounting.
USE OF ESTIMATES
The preparation of financial statements requires the use of estimates.
Actual results could differ from those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION
Investments are stated at fair value. Registered investment company and
common commingled trust funds and Costco Wholesale Corporation Common Stock
are valued using the closing price of the investments on the last day of
business of the plan year.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on
the ex-dividend date. Net appreciation in fair value of investments includes
the change in the fair value of assets from one period to the next, and
realized gains and losses, and is computed using the moving average method.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
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ADOPTION OF SOP
The Accounting Standards Executive Committee issued Statement of Position
99-3, "Accounting for and Reporting of Certain Defined Contribution Plan
Investments and Other Disclosure Matters" (SOP), which eliminates the
requirement for a defined contribution plan to disclose participant-directed
investment programs. The 1998 financial statement has been reclassified to
eliminate the participant-directed fund investment program disclosures.
3. 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
the Plan subject to the provisions of ERISA. In the event of plan
termination, participants will become 100% vested in their accounts.
4. TAX STATUS:
The IRS has informed the Company, by a letter dated November 30, 1998, that
the Plan is designed in accordance with applicable sections of the Internal
Revenue Code. The Plan has been amended subsequent to receiving a
determination letter. The plan administrator and the Plan's counsel believe
that the Plan is currently designed and is being operated in compliance with
the applicable requirements of the IRS.
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SCHEDULE I
COSTCO
401(k) RETIREMENT PLAN
EIN: 33-0572969
PIN: 002
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
Identity of Party Involved/
Description of Investments Current Value
------------------------------------------------------------- --------------------
<S> <C>
*T. Rowe Price:
Cash and cash equivalents $ 217,840
Equity Income Fund 94,708,446
Spectrum Income Fund 53,948,751
Spectrum Growth Fund 109,518,397
New Horizons Fund 18,667,199
Mid-Cap Growth Fund 41,157,400
Equity Index Fund 20,122,982
International Stock Fund 3,104,443
Stable Value Fund 97,058,613
*Costco Wholesale Corporation Common Stock 345,724,304
*Participant loans, with interest rates of 8.75% to 10.50%
maturing through 2014 34,411,486
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$818,639,861
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</TABLE>
*Represents a party in interest.
The accompanying notes are an integral part of this schedule.
