SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-2360
A. Full title of the plan and address of the plan, if different from
that of the issuer named below:
IBM TDSP 401(k) PLAN
DIRECTOR OF COMPENSATION & BENEFITS
CAPITAL ACCUMULATION PROGRAMS
IBM CORPORATION
NORTH CASTLE DRIVE
ARMONK, NEW YORK 10504
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
INTERNATIONAL BUSINESS MACHINES CORPORATION
NEW ORCHARD ROAD
ARMONK, NEW YORK 10504
REQUIRED INFORMATION
Page
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REPORT OF INDEPENDENT ACCOUNTANTS 3
FINANCIAL STATEMENTS AND SCHEDULE
FINANCIAL STATEMENTS:
Statement of Net Assets Available for Benefits
at December 31, 2001 and 2000 4
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2001 5
Notes to Financial Statements 6
SUPPLEMENTAL SCHEDULE:
Schedule I - Schedule of Assets (Held at End of Year)
At December 31, 2001 19
EXHIBIT
EXHIBIT 23 - Consent of Independent Accountants
SIGNATURE
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed by the undersigned hereunto duly
authorized.
IBM TDSP 401(k) PLAN
--------------------
Date: June 28, 2002 By: /s/ Robert F. Woods
------------------- -----------------------------------
Robert F. Woods
Vice President and Controller
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of the International Business Machines Corporation (IBM)
Retirement Plans Committee and the Participants of the IBM TDSP 401(k) PLAN:
In our opinion, the financial statements as referenced in the Required
Information Section on page 2, present fairly, in all material respects, the net
assets available for benefits of the IBM TDSP 401(k) Plan (the "Plan") at
December 31, 2001 and December 31, 2000, and the changes in net assets available
for benefits for the year ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America, 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 our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose 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 is the responsibility of the Plan's management.
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/ PricewaterhouseCoopers LLP
New York, NY
June 28, 2002
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IBM TDSP 401(k) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2001
(Dollars in thousands) 2001 2000
---- ----
ASSETS:
Investments, at fair value (Note 7) $ 20,370,312 $ 19,610,722
Receivables:
Income and sales proceeds receivable 2,259 6,189
Loans receivable 315,954 325,408
------------ ------------
Total assets 20,688,525 19,942,319
LIABILITIES:
Expenses payable 516 4,972
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 20,688,009 $ 19,937,347
============ ============
The accompanying notes are an integral part of these financial statements.
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IBM TDSP 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2001
(Dollars in thousands) 2001
------------
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Contributions
Participant contributions $ 1,002,379
Employer contributions 305,646
-----------
Total contributions 1,308,025
Transfers from other benefits plans, net 26,484
Interest and dividend income from investments 363,892
-----------
Total additions 1,698,401
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Net depreciation in fair value of investments (Note 7) 82,040
Distributions to participants 844,824
Administrative expenses 20,875
-----------
Total deductions 947,739
NET INCREASE IN NET ASSETS DURING THE YEAR 750,662
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 19,937,347
-----------
End of year $20,688,009
===========
The accompanying notes are an integral part of these financial statements.
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IBM TDSP 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN
The following description of the IBM TDSP 401(k) PLAN (the "Plan") provides only
general information. Participants should refer to the Plan prospectus for a
complete description of the Plan's provisions.
GENERAL
The Plan was established by resolution of IBM's Retirement Plans Committee (the
"Committee") effective July 1, 1983 and is held in trust for the benefit of its
participants. The Plan offers all qualifying active, regular full-time and
part-time employees of IBM and certain of its domestic related companies and
partnerships an opportunity to defer from one-to-fifteen percent of their
eligible compensation for contribution to any of twenty-one investment funds
(effective 2002, the fifteen percent maximum increases to eighty percent). The
contribution is subject to the legal limit allowed by Internal Revenue Service
(IRS) regulations. The investment objectives of these funds are described in
Note 3, Description of Investment Funds.
At December 31, 2001 and 2000, the number of participants in the Plan were
225,679 and 224,160, respectively.
The Plan qualifies under Section 401(a) of the Internal Revenue Code of 1986, as
amended, and is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA), as amended.
ADMINISTRATION
The Plan is administered by the Committee which appointed officials of IBM to
assist in administering the Plan. The Committee appointed State Street Bank
and Trust Corporation as of November 1, 1999 as Trustee to safeguard the
assets of the funds and State Street Global Advisors (the institutional
investment management affiliate of State Street Bank and Trust Corporation),
The Vanguard Group and other investment managers to direct investments in the
various funds. Metropolitan Life Insurance Company ("MetLife") provides
recordkeeping, participant services and communications services, and operates
the TDSP Service Center in Franklin, Tennessee. In October 2001, METLIFE
indicated the intent to discontinue 401(k) recordkeeping services to their
large clients over the next year. As of June 28, 2002, a new services
provider has not been announced.
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CONTRIBUTIONS
IBM contributes to the Plan an amount equal to fifty percent of the first six
percent of annual eligible compensation the employee defers (maximum is three
percent). Eligible compensation includes regular salary, commissions,
overtime, shift premium and similar additional compensation payments for
nonscheduled workdays, recurring payments under any form of variable
compensation plan, regular Sickness and Accident Income Plan payments,
holiday pay, and vacation pay. In 2001, forfeited nonvested accounts totaling
$9.3 million were used to reduce employer contributions.
Participants may choose to have their contributions invested entirely in one of,
or in any combination of, the following funds in multiples of five percent.
These funds and their investment objectives are more fully described in Note 3,
Description of Investment Funds.
LIFE STRATEGY FUNDS (4)
Income Plus Life Strategy Fund
Conservative Life Strategy Fund
Moderate Life Strategy Fund
Aggressive Life Strategy Fund
CORE FUNDS (5)
Stable Value Fund
Inflation-Protected Bond Fund
Total Bond Market Fund
Total Stock Market Index Fund (formerly Vanguard Total Stock Market Index Fund)
Total International Stock Market Index Fund
EXTENDED CHOICE FUNDS (12)
Money Market Fund
Long-Term Corporate Bond Index Fund (formerly Vanguard Long-Term Corporate Fund)
Equity Income Fund
Vanguard European Stock Index Fund
Large Company Index Fund
Vanguard Growth Index Fund
Vanguard Value Index Fund
Vanguard Small-Cap Value Index Fund
Small/Mid-Cap Stock Index Fund
Vanguard Pacific Stock Index Fund
Vanguard Small-Cap Growth Index Fund
IBM Stock Fund
Participants may change their deferral percentage and investment selection for
future contributions at any time. The changes will take effect for the next
eligible pay cycle so long as the request is completed before the respective
cutoff dates. Also, the participant may transfer part or all of existing account
balances among funds in the Plan once daily, but will incur a service fee for
each transfer in excess of eight in a calendar year. However, participant
balances in the Stable Value Fund may not be transferred directly into the
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Money Market Fund, and if such balances are transferred into another fund,
they may not subsequently be transferred to the Money Market Fund for three
months.
PARTICIPANT ACCOUNTS
The Plan recordkeeper (MetLife) maintains an account in the name of each
participant to which each participant's contributions and share of the net
earnings, losses and expenses, if any, of the various investment funds are
recorded. The earnings on the assets held in each of the funds and all proceeds
from the sale of such assets are held and reinvested in the respective funds.
Participants may transfer rollover contributions of pre-tax dollars from other
qualified savings plans or conduit Individual Retirement Accounts (IRAs that
exclusively hold a previously taxable distribution from a qualified plan) into
their Plan accounts. Rollovers must be made in cash within the time limits
specified by the IRS; stock or in-kind rollovers cannot be accepted. These
rollovers are limited to active employees on the payroll of IBM (or affiliated
companies) who have existing accounts in the Plan. Retirees or employees on
leave or bridge leave of absence are not eligible for such rollovers, except
that a retiree or separated employee who has an existing account in the Plan may
rollover a lump-sum distribution from an IBM-sponsored qualified retirement
plan, including the IBM Personal Pension Plan and the IBM Retirement Plan.
The interest of each participant in each of the funds is represented by
units/shares credited to the participant's account.
On each valuation date, the unit value of each fund is determined by dividing
the current market value of the assets in that fund on that date by the
number of units in the fund. In determining the unit value, new contributions
that are to be allocated as of the valuation date are excluded from the
calculation. The number of additional units to be credited to a participant's
account for each fund, due to new contributions, is equal to the amount of
the participant's new contributions to the fund divided by the unit value for
the applicable fund as determined on the valuation date.
Contributions made to the Plan as well as interest, dividends or other
earnings of the Plan are generally not included in the taxable income of the
participant until withdrawal, at which time all earnings and contributions
withdrawn generally are taxed as ordinary income to the participant.
Additionally, withdrawals by the participant before attaining age 59 1/2
generally are subject to a penalty tax of 10%.
Consistent with provisions established by the IRS, the Plan's 2001 limit on
employee salary deferrals was $10,500 (the limit increases to $11,000 for 2002).
The 2001 maximum annual deferral amount for employees residing in Puerto Rico
was limited by local government regulations to the lesser of $8,000 or ten
percent of eligible compensation.
VESTING
Participants in the Plan are at all times fully vested in their account balance,
including deferred compensation, matching contributions and earnings thereon.
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DISTRIBUTIONS
An employee who has attained age 59 1/2 may request a cash distribution of all
or part of the value in the account. Up to four distributions are allowed each
year and the minimum amount of any such distribution shall be the lesser of the
participant's account balance or $500.
In addition, participants who (1) retire under the prior IBM Retirement Plan
(which was incorporated into the current IBM Personal Pension Plan effective
July 1, 1999), or (2) become eligible for benefits under the IBM Long-Term
Disability Plan or the IBM Medical Disability Income Plan, or (3) separate
and have attained age 55, may also elect to receive the balance of their
account either in annual cash installments over a period not to exceed ten
years or over the participant's life expectancy, recalculated annually, or to
defer distribution until age 70 1/2.
Withdrawals for financial hardship are permitted provided they are for a severe
and immediate financial need and the distribution is necessary to satisfy that
need. Employees are required to fully use the Plan loan program, described
below, before requesting a hardship withdrawal. Only an employee's deferred
compensation is eligible for hardship withdrawal; earnings and IBM matching
contributions are not eligible for withdrawal. Employees must submit evidence of
hardship to MetLife, who will determine whether the situation qualifies for a
hardship withdrawal. A hardship withdrawal is taxed as regular income to the
employee and may be subject to the 10% additional tax on early distributions.
Upon the death of a participant, the value of the participant's account will be
distributed to the participant's beneficiary in a lump-sum cash payment. If the
participant is married, the beneficiary must be the participant's spouse, unless
the participant's spouse has previously given written, notarized consent to
designate another person as beneficiary. If the participant marries or
remarries, any prior beneficiary designation is canceled and the spouse
automatically becomes the beneficiary. If the participant is single, the
beneficiary may be anyone previously designated by the participant under the
Plan. In the absence of an effective designation under the Plan at the time of
death, the proceeds normally will be paid in the following order: the
participant's spouse, the participant's children in equal shares, or to
surviving parents equally. If no spouse, child, or parent is living, payments
will be made to the executors or administrators of the participant's estate.
PARTICIPANT LOANS
Participants may borrow up to one-half of the value of the account balance,
not to exceed $50,000 within a twelve month period. Loans will be granted in
$50 increments subject to a minimum loan amount of $500. Participants are
limited to two simultaneous outstanding Plan loans. Repayment of a loan shall
be made through semi-monthly payroll deductions over a term of one to four
years. The loan shall bear a fixed rate of interest, set quarterly, for the
term of the loan, determined by the plan administrator to be 1.25% above the
prime rate. The interest shall be credited to the participant's account as
the semi-monthly repayments of principal and interest are made. Interest
rates on outstanding loans at December 31, 2001 ranged from 6.00% to 10.75%.
Participants may prepay the entire remaining loan principal after payments have
been made for three full months. Employees on an approved leave of absence may
elect to make scheduled loan payments directly to the Plan. Participants may
continue to contribute to the Plan while having an outstanding loan, provided
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that the loan is not in default.
Participants who retire or separate from IBM and have outstanding Plan loans may
choose automated loan repayments or coupon payment options to continue monthly
loan repayments according to their original amortization schedule.
TERMINATION OF SERVICE
The value of the participant's account that is $5,000 or less will be
distributed to the participant in a lump-sum cash payment as soon as practical
following the termination of the participant's employment with IBM for any
reason other than retirement, medical disability or death. If the account
balance is greater than $5,000 at the time of separation, the participant may
elect to defer distribution of the account until age 70 1/2.
TERMINATION OF THE PLAN
IBM reserves the right to terminate this Plan at any time by action of the
Committee. In that event, each participant or beneficiary receiving or entitled
to receive payments under the Plan would receive the balance of the account at
such time and in such manner as the Committee shall determine at its discretion.
In the event of a full or partial termination of the Plan, or upon complete
discontinuance of contributions under the Plan, the rights of all affected
participants in the value of their accounts would be nonforfeitable.
RISKS AND UNCERTAINTIES
The Plan provides for various investment options which invest in any combination
of equities, fixed income securities, guaranteed investment contracts (GICs),
and derivative contracts. Investment securities are exposed to various risks,
such as interest rates, credit and overall market volatility. Due to the level
of risk associated with certain investment securities and the level of
uncertainty related to changes in the value of investment securities, it is
reasonably possible that changes in risks in the near term could materially
affect participants' account balances and the amounts reported.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements are prepared under the accrual basis of
accounting.
VALUATION OF INVESTMENTS
The fair value of the net assets of the Plan is based on the estimated fair
values of the underlying assets and liabilities. Investments in registered
investment companies and pooled funds are valued at the net asset values per
share as quoted by such companies or funds as of the valuation date. IBM
common stock is valued daily at the New York Stock Exchange closing price.
Interest accrued on investments is recorded separately as interest receivable
until paid and reinvested. Participant loans are valued at cost which
approximates fair value.
Investments in fully benefit-responsive bank and insurance company investment
contracts are stated at contract value which is equal to cost plus reinvested
interest. The market value of the contracts are approximately $4,752 million.
The crediting interest rates at December 31, 2001 for the contracts range
from 5.26% to 7.01%.
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PAYMENT OF BENEFITS
Benefit payments to participants are recorded upon distribution.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets, liabilities and changes therein, and disclosures of contingent
assets and liabilities at the date of the financial statements. Actual
results could differ from those estimates.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are recorded on a trade-date basis. Dividend income is
recorded on the ex-dividend date, and interest income is recorded on the accrual
basis.
ADMINISTRATIVE EXPENSES AND INVESTMENT MANAGEMENT FEES
All administrative costs of the Plan are deducted from participants' account
balances. These costs include (a) brokerage fees and commissions which are
included in the cost of investments and in determining net proceeds on sales of
investments, (b) investment management fees which are paid from the assets of
the respective funds; those fees comprise fixed annual charges and charges based
on a percentage of net asset value, and (c) operational expenses required for
administration of the Plan including trustee, recordkeeping, participant reports
and communications, and service center expenses, which are charged against the
fund's assets on a pro rata basis throughout the year.
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NOTE 3 - DESCRIPTION OF INVESTMENT FUNDS
The objectives of the twenty-one investment funds to which employees may
contribute monies are described below:
LIFE STRATEGY FUNDS - four blended funds that build a portfolio of
diversified investments - - U.S. Stocks, international stocks, and
fixed-income investments -- from the existing core funds noted below. The
funds are managed by the IBM Retirement Fund and the managers of the
underlying funds.
o INCOME PLUS LIFE STRATEGY FUND - target allocation 20% stocks, 80% bonds;
seeks returns that modestly outpace inflation on a fairly consistent basis.
o CONSERVATIVE LIFE STRATEGY FUND - target allocation 40% stocks, 60% bonds;
seeks returns that moderately outpace inflation over the long term.
o MODERATE LIFE STRATEGY FUND - target allocation 60% stocks, 40% bonds; seeks
relatively high returns at a moderate risk level.
o AGGRESSIVE LIFE STRATEGY FUND - target allocation 80% stocks, 20% bonds;
seeks high returns over the long term. Returns may be volatile from year to
year.
CORE FUNDS - five funds that provide an opportunity to custom-build a portfolio
from a selection of broadly diversified U.S. and international stock funds and
from funds tracking the fixed-income markets.
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o STABLE VALUE FUND - seeks to preserve principal and provide income at a
stable rate of interest that is competitive with intermediate-term rates of
return. The fund is managed by multiple money managers.
o INFLATION-PROTECTED BOND FUND - seeks over the long term to provide a real
rate of return over and above the rate of inflation, thereby preserving the
long-term spending power of the money invested. The fund is managed by State
Street Global Advisors.
o TOTAL BOND MARKET FUND - seeks to modestly exceed the return of its benchmark
index (Lehman Brothers Aggregate Bond Index), which consists of more than
5,000 U.S. Treasury and federal agency, mortgage-backed, and corporate
securities. The fund is managed by State Street Global Advisors.
o TOTAL STOCK MARKET INDEX FUND - seeks long-term growth of capital and income.
It attempts to match the performance of the Wilshire 5000 Total Market Index.
The fund is managed by The Vanguard Group.
o TOTAL INTERNATIONAL STOCK MARKET INDEX FUND - seeks long-term capital growth
with a market rate of return for a diversified group of non-U.S. equities in
such major markets as Europe and Asia plus the emerging markets of the world.
It attempts to match the performance of the Morgan Stanley Capital
International All Country World Ex-U.S. Free Index. The fund is managed by
State Street Global Advisors.
EXTENDED CHOICE FUNDS - twelve funds that provide an opportunity to fine tune an
investment portfolio with funds that are less broadly diversified, focusing
instead on discrete sectors of the stock and bond markets.
o MONEY MARKET FUND - seeks liquidity and preservation of capital while
providing a variable rate of income based on current short-term market
interest rates. The fund is managed by State Street Global Advisors.
o LONG-TERM CORPORATE BOND INDEX FUND - seeks a high and sustainable level of
interest income by investing in a widely diversified group of long-term bonds
issued by corporations with strong credit ratings. The fund is managed by
State Street Global Advisors.
o EQUITY INCOME FUND - seeks both long-term capital appreciation and dividend
income by investing in large- and mid-cap U.S. stocks. The fund is managed by
State Street Global Advisors.
o VANGUARD EUROPEAN STOCK INDEX FUND - seeks long-term growth of capital that
corresponds to an index of European stocks. It attempts to match the
investment results of the Morgan Stanley Capital International Europe Index.
The fund is managed by The Vanguard Group.
o LARGE COMPANY INDEX FUND - seeks long-term growth of capital and income from
dividends by holding all the stocks that make up the Standard & Poor's 500
Index. The fund is managed by The Vanguard Group.
o VANGUARD GROWTH INDEX FUND - seeks long-term growth of capital by holding all
the stocks in the Standard and Poor's 500/BARRA Growth Index in approximately
the same proportion as those stocks represented in the index. The fund is
managed by The Vanguard Group.
o VANGUARD VALUE INDEX FUND - seeks long-term growth of capital and income from
dividends. The fund holds all the stocks in the Standard and Poor's 500/BARRA
Value Index in approximately the same proportion as those stocks represented
in the index. The fund is managed by The Vanguard Group.
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o VANGUARD SMALL-CAP VALUE INDEX FUND - seeks long-term growth of capital by
attempting to replicate the performance of the Standard and Poor's SmallCap
600/BARRA Value Index. The fund is managed by The Vanguard Group.
o SMALL/MID-CAP STOCK INDEX FUND - seeks long-term growth of capital with a
market rate of return from a diversified group of medium- and small-company
stocks. The fund holds stocks in the Russell 3000 index that are not part of
the Standard and Poor's 500 index and attempts to match the performance of
the Russell SmallCap Completeness Index. The fund is managed by State Street
Global Advisors.
o VANGUARD PACIFIC STOCK INDEX FUND - seeks long-term growth of capital by
attempting to match the performance of the Morgan Stanley Capital
International Pacific Free Index. The fund is managed by The Vanguard Group.
o VANGUARD SMALL-CAP GROWTH INDEX FUND - seeks long-term growth of capital by
attempting to match the performance of the Standard and Poor's SmallCap
600/BARRA Growth Index. The fund is managed by The Vanguard Group.
o IBM STOCK FUND - invests in IBM common stock and holds a small
interest-bearing cash balance of approximately 0.25 percent for liquidity
purposes. The fund is managed by State Street Global Advisors.
Within the investment funds, stock loan transactions are permitted as a means
to add return to the portfolio. Certain funds may lend securities held in
that fund to unaffiliated broker-dealers registered under the Securities
Exchange Act of 1934, or banks organized in the United States of America. At
all times, the borrower must maintain cash or equivalent collateral equal in
value to at least 102% of the value of the securities loaned and 105% of the
value of international securities loaned. The cash collateral is reinvested
to generate income which is credited to the portfolio return. The primary
risk in lending securities is a borrower may default during a sharp rise in
the price of the security that was borrowed, resulting in a deficiency in the
collateral posted by the borrower. The funds seek to minimize this risk by
requiring that the value of the securities that are loaned is computed each
day and that additional collateral is furnished each day, if necessary. The
addition of the securities lending provision does not change the investment
objectives for the funds. The value of loaned securities amounted to $1,074
million and $883 million at December 31, 2001 and 2000, respectively.
NOTE 4 - PLAN TRANSFERS
The transfers below represent participant account balances attributable to
employees transferred to IBM in 2001 primarily as a result of IBM
acquisitions or outsourcing agreements:
Transfers related to outsourcing agreements:
o Square D Company - net transfer totaling $2,201,378 (63 participants).
o Xcel Energy, Inc. - net transfer totaling $5,611,359 (121 participants).
o Cable and Wireless - net transfer totaling $2,370,605 (60 participants).
o Franklin Templeton - net transfer totaling $2,871,597 (94 participants).
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Transfers related to acquisitions:
o Catapult - net transfer totaling $4,033,483 (192 participants).
o Unison - net transfer totaling $4,853,438 (79 participants).
o Mainspring, Inc. - net transfer totaling $2,666,037 (225 participants).
In 2001, there were also transfers into the Plan totaling $1,876,325 from
approximately 154 employees related to participant account balances from other
companies.
NOTE 5 - TAX STATUS
The Trust established under the Plan is qualified under Section 401 (a) of the
Internal Revenue Code and the Trustees intend to continue it as a qualified
trust. The Plan received a favorable determination letter from the IRS on June
14, 1993. The Plan has been amended since receiving the determination letter.
The Plan administrator continues to believe the Plan is designed and is being
operated in compliance with the applicable requirements of the Internal Revenue
Code. Accordingly, a provision for federal income taxes has not been made.
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NOTE 6 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500 as of:
(Dollars in thousands) DECEMBER 31,
2001 2000
----------- -----------
Net assets available for benefits per the
Financial statements $20,688,009 $19,937,347
Benefit obligations currently payable 6,416 6,800
----------- -----------
Net assets available for benefits per the
Form 5500 $20,681,593 $19,930,547
=========== ===========
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
YEAR ENDED
DECEMBER 31,
(Dollars in thousands) 2001
------------
Benefits paid to participants per the financial statements $ 844,824
Less:
Amounts payable at December 31, 2000 6,800
Plus:
Amounts payable at December 31, 2001 6,416
------------
Benefits paid to participants per the Form 5500 $ 844,440
============
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NOTE 7 - INVESTMENT VALUATIONS
The following schedules summarize the value of investments, and the related net
depreciation in fair value of investments by type of investment:
(Dollars in thousands) VALUE DETERMINED BY
------------------------------------------
QUOTED
MARKET CONTRACT
PRICES VALUE TOTAL
AT DECEMBER 31, 2001
INVESTMENTS AT FAIR VALUE
Interest in equity-oriented funds $10,276,048 -- $10,276,048
Interest in short-term investment-oriented funds 1,199,437 -- 1,199,437
Interest in fixed income-oriented funds 965,121 -- 965,121
IBM common stock 3,336,587 -- 3,336,587
----------- ----------- -----------
Total $15,777,193 -- $15,777,193
=========== =========== ===========
INVESTMENTS AT CONTRACT VALUE
Investment contracts -- $4,593,119 4,593,119
----------- ----------- -----------
Total $15,777,193 $4,593,119 $20,370,312
=========== =========== ===========
AT DECEMBER 31, 2000:
INVESTMENTS AT FAIR VALUE
Interest in equity-oriented funds $11,256,083 -- $11,256,083
Interest in short-term investment-oriented funds 708,955 -- 708,955
Interest in fixed income-oriented funds 581,118 -- 581,118
IBM common stock 3,050,272 -- 3,050,272
----------- ----------- -----------
Total $15,596,428 -- $15,596,428
=========== =========== ===========
INVESTMENTS AT CONTRACT VALUE
Investment contracts -- $4,014,294 4,014,294
----------- ----------- -----------
Total $15,596,428 $4,014,294 $19,610,722
=========== =========== ===========
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NOTE 7 - INVESTMENT VALUATIONS (CONTINUED)
NET DEPRECIATION IN FAIR VALUE OF INVESTMENTS (INCLUDING GAINS AND LOSSES ON
INVESTMENTS BOUGHT AND SOLD, AS WELL AS HELD DURING THE YEAR):
(Dollars in thousands) 2001
-----
INVESTMENTS AT FAIR VALUE DETERMINED BY QUOTED
MARKET PRICE:
Interests in funds $(1,338,889)
IBM common stock 1,256,849
-----------
Total $ (82,040)
===========
INVESTMENTS
The investments that represent 5% or more of the Plan's net assets available for
benefits at December 31, 2001 and 2000 are as follows:
(Dollars in thousands) 2001 2000
---- ----
Large Company Index Fund $5,148,416 $6,229,689
Stable Value Fund 4,573,448 3,527,235
IBM Stock Fund 3,339,703 3,053,362
Small / Mid-Cap Stock Index Fund 2,264,639 2,642,913
Moderate Life Strategy Fund 1,177,481 1,282,997
NOTE 8 - RELATED-PARTY TRANSACTIONS
At December 31, 2001, a significant portion of the Plan's assets were invested
in State Street Global Advisors funds. State Street Global Advisors' parent
company, State Street Bank and Trust Corporation also acts as the trustee for
the Plan and, therefore, these transactions qualify as party-in-interest.
Additionally, the Plan held $20,260,585 and $158,966,394 in investment contracts
with Metropolitan Life Insurance Company, the Plan recordkeeper, at December 31,
2001 and 2000, respectively.
At December 31, 2001, the Plan held 27,584,218 shares of IBM common stock valued
at $3,336,587,009. At December 31, 2000, the Plan held 35,885,558 shares of IBM
common stock valued at $3,050,272,430.
NOTE 9 - SUBSEQUENT EVENT
2002 PLAN AMENDMENT - CATCH-UP CONTRIBUTIONS
Under a plan amendment effective January 1, 2002, participants who are at
least age 50 in the current year, and have reached the applicable dollar
limitation for annual 401(k) contributions, can elect to continue their
contribution at the rate in effect, up to the dollar limitation for this
election of $1,000 in 2002. This contribution limitation subsequently
increases $1,000 each year until a cap of $5,000 is reached in 2006.
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SCHEDULE I
IBM TDSP 401(k) PLAN
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AT DECEMBER 31, 2001
(Dollars in thousands) COST CURRENT VALUE
------------ -------------
INTEREST IN STATE STREET GLOBAL ADVISORS* AND
VANGUARD GROUP FUNDS:
Discretionary Cash Funds $ 1,199,437 $ 1,199,437
============ ===========
Equity Index Funds 11,600,159 10,276,048
============ ===========
Bond Index Funds 900,132 965,121
============ ===========
COMMON STOCK
IBM Common Stock* 2,762,399 3,336,587
============ ===========
LOANS TO PARTICIPANTS 315,954
(interest rates range: 6.00% - 10.75%, ===========
Terms: one to four years)
INVESTMENT CONTRACTS RATE CONTRACT
OF MATURITY VALUE
INTEREST DATE ($/000's)
-------- -------- ----------
CDC Bric
BR 30301 7.01% 12/25/02 $312
CNA
BR 13078-036 6.80% 04/01/03 108,542
John Hancock Life Insurance Co.
GAC #8663 6.85% 01/02/02 33,047
John Hancock Life Insurance Co.
GAC #14406 6.38% 06/30/09 129,002
Metropolitan Life Insurance Co.*
GAC #24977 5.27% 01/02/02 20,261
Nw York Life Insurance Company
GA-30721 6.88% 01/02/03 28,454
New York Life Insurance Company
GA-30898 5.26% 01/02/02 40,520
Principal Mutual
#4-23271-4 6.93% 03/31/03 72,405
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INVESTMENT CONTRACTS (CONTINUED)
RATE CONTRACT
OF MATURITY VALUE
INTEREST DATE ($/000's)
-------- -------- ----------
Prudential Asset Management Co.
GA-10034 211 6.07% 12/31/02 136,187
Sun America
#4785 6.35% 04/01/03 94,258
--------
Total 662,988
Non-
Synthetic GIC Global Wrapper 6.41% Maturing 3,930,131
==========
Total Investment Contracts $4,593,119
==========
* Party-in-interest
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