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UNITED STATES

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, 2008

 

 

 

OR

 

 

 

o

 

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 401(k) Plus Plan

 

Director of Compensation and Benefits

IBM

North Castle Drive, M/D 147

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

 

 

 



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IBM 401(k) PLUS PLAN

 

Table of Contents

 

 

 

Page

 

 

 

Financial Statements and Schedule:

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

4

 

 

 

Financial Statements:

 

 

 

 

 

Statements of Net Assets Available for Benefits at December 31, 2008 and 2007

 

5

 

 

 

Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2008

 

6

 

 

 

Notes to Financial Statements

 

7

 

 

 

Supplemental Schedule*:

 

 

 

 

 

Schedule H, Line 4i - Schedule of Assets (Held at End of Year)

 

29

 

 

 

Exhibit:

 

 

 

 

 

Exhibit 23 - Consent of Independent Registered Public Accounting Firm

 

 

 


*   Other schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosures under the Employee Retirement Income Security Act of 1974 are omitted because they are not applicable.

 

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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 on its behalf by the undersigned thereunto duly authorized.

 

 

 

IBM 401(k) Plus Plan

 

 

 

Date: June 29, 2009

 

By:

/s/ James J. Kavanaugh

 

 

James J. Kavanaugh

 

 

Vice President and Controller

 

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Report of Independent Registered Public Accounting Firm

 

To the Members of the International Business Machines Corporation (“IBM”) Retirement Plans Committee and the Participants of the IBM 401(k) Plus Plan:

 

In our opinion, the accompanying statements of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the IBM 401(k) Plus Plan (the “Plan”) at December 31, 2008 and 2007, and the changes in net assets available for benefits for the year ended December 31, 2008 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 the standards of the Public Company Accounting Oversight Board (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, 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.  This 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 29, 2009

 

 

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IBM 401(k) PLUS PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

AT DECEMBER 31,

 

 

 

2008

 

2007

 

 

 

(Dollars in thousands)

 

Assets:

 

 

 

 

 

Investments:

 

 

 

 

 

Investments, at fair value (Note 3)

 

$

26,024,927

 

$

36,078,252

 

Participant loans

 

293,132

 

281,775

 

Total investments

 

26,318,059

 

36,360,027

 

 

 

 

 

 

 

Receivables:

 

 

 

 

 

Participant contributions

 

32,850

 

 

Employer contributions

 

35,084

 

 

Income, sales proceeds and other receivables

 

30,805

 

95,223

 

Total receivables

 

98,739

 

95,223

 

 

 

 

 

 

 

Total assets

 

26,416,798

 

36,455,250

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Payable for collateral deposits

 

1,520,607

 

3,592,169

 

Accrued expenses and other liabilities

 

33,939

 

10,353

 

Total liabilities

 

1,554,546

 

3,602,522

 

 

 

 

 

 

 

Net assets available for benefits

 

24,862,252

 

32,852,728

 

 

 

 

 

 

 

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

 

499,119

 

(134,577

)

 

 

 

 

 

 

Net assets available for benefits

 

$

25,361,371

 

$

32,718,151

 

 

The accompanying notes are an integral part of these financial statements.

 

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IBM 401(k) PLUS PLAN

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

FOR THE YEAR ENDED DECEMBER 31,

 

 

 

2008

 

 

 

(Dollars in thousands)

 

Additions to net assets attributed to:

 

 

 

 

 

 

 

Investment income:

 

 

 

Net change in fair value of investments (Note 3)

 

$

(8,991,749

)

Interest income from investments

 

658,801

 

Dividends

 

213,741

 

 

 

(8,119,207

)

 

 

 

 

Contributions:

 

 

 

Participants

 

1,313,337

 

Employer

 

1,033,990

 

 

 

2,347,327

 

 

 

 

 

Transfers from other benefit plans, net

 

112,437

 

 

 

 

 

Total additions/(reductions)

 

(5,659,443

)

 

 

 

 

Deductions from net assets attributed to:

 

 

 

 

 

 

 

Distributions to participants

 

1,672,199

 

 

 

 

 

Administrative expenses

 

25,138

 

 

 

 

 

Total deductions

 

1,697,337

 

 

 

 

 

Net decrease in net assets during the year

 

(7,356,780

)

 

 

 

 

Net assets available for benefits:

 

 

 

 

 

 

 

Beginning of year

 

32,718,151

 

 

 

 

 

End of year

 

$

25,361,371

 

 

The accompanying notes are an integral part of these financial statements.

 

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IBM 401(k) PLUS PLAN

NOTES TO FINANCIAL STATEMENTS

 

NOTE 1 - DESCRIPTION OF THE PLAN

 

The following description of the International Business Machines Corporation (“IBM”) 401(k) Plus Plan (formerly called the IBM Savings Plan and herein the “Plan”) provides only general information.  Participants should refer to the Plan prospectus (Summary Plan Description) 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 Plan assets are held in trust for the benefit of its participants.  The Plan offers all eligible active, full-time and part-time regular and long-term supplemental United States (U.S.) employees of IBM and certain of its domestic related companies and partnerships an opportunity to defer from one to eighty percent of their eligible compensation for before-tax 401(k) and/or Roth 401(k) contributions to any of thirty-two primary investment funds and approximately 200 mutual funds in a “mutual fund window.”  The investment objectives of the primary funds are described in Note 6, Description of Investment Funds.  In addition, participants are able to contribute up to ten percent of their eligible compensation on an after-tax basis.   (Roth 401(k) and after-tax contributions are not available for employees working in Puerto Rico.)  Annual contributions are subject to the legal limits permitted by Internal Revenue Service (“IRS”) regulations.

 

Participants are provided the choice to enroll in a “disability protection program” under which a portion of the participant’s account is used to pay premiums to purchase term insurance (underwritten by Metropolitan Life Insurance Company), which will pay the amount of their before-tax 401(k) contributions, matching contributions, automatic contributions and/or Special Savings Awards into their accounts in the event the participant becomes disabled while insured.

 

At December 31, 2008 and 2007, the number of participants with an account balance in the Plan was 214,594 and 218,701, 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 certain officials of IBM to assist in administering the Plan.  The Committee appointed State Street Bank and Trust Company (“SSBT”), as Trustee, to safeguard the assets of the funds and State Street Global Advisors (“SSGA”), the institutional investment management affiliate of SSBT,

 

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The Vanguard Group and other investment managers to direct investments in the various funds.  Starting January 1, 2008, Fidelity Investments Institutional Operations Company, Inc. (“Fidelity”) is the provider of record keeping and participant services, operator of the IBM Employee Services Center for the Plan in Raleigh, North Carolina and the provider of administrative services related to the mutual fund window.  In anticipation of the record keeping responsibilities, Fidelity had access to participant records starting December 29, 2007 with data as of December 28, 2007.  Communications services were provided by Fidelity as well as The Vanguard Group.

 

Contributions

 

On January 1, 2008, IBM introduced an enhanced plan design called the IBM 401(k) Plus Plan, which provides employer contributions for eligible participants as follows, based upon which, if any, IBM pension formula the employee was eligible for on December 31, 2007:

 

IBM Pension Plan
Eligibility at 12/31/2007

 

2008 Automatic
Contribution

 

2008 IBM Matching
Contribution

 

Pension Credit Formula

 

4%

 

100% on 6% of eligible compensation

 

Personal Pension Account

 

2%

 

100% on 6% of eligible compensation

 

New Hires on or after 1/1/2005

 

1%

 

100% on 5% of eligible compensation

 

 

Under the IBM 401(k) Plus Plan design, some participants who were eligible to participate in the Personal Pension Account may also receive transition credits contributed to the IBM 401(k) Plus Plan, if they had been eligible for transition credits under the IBM Personal Pension Account formula.  In addition, a contribution equal to five percent of eligible compensation (referred to as a “Special Savings Award”) will be added to the accounts of participants who are non-exempt employees at year-end and who participated in the Pension Credit Formula as of December 31, 2007.

 

Effective January 1, 2008, newly hired employees are automatically enrolled at 5 percent of eligible salary after approximately thirty days of employment with IBM, unless they elect otherwise.  After completing one year of service with IBM, they are eligible for the IBM automatic contribution and the IBM matching contribution.  The match maximizer feature, which automatically adjusts IBM matching contributions for a participant’s aggregate eligible 401(k) deferrals for the year, will be calculated on a semi-monthly basis and all participants will be eligible for the feature.

 

Eligible compensation under the Plan includes regular salary, commissions, overtime, shift premium and similar additional compensation payments for nonscheduled workdays, recurring payments under an employee variable compensation plan, regular IBM Short-Term Disability Income Plan payments, holiday pay and vacation pay, but excludes payments made under any executive incentive compensation plan.  Effective

 

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April 1, 2008, executive incentive compensation is included in eligible compensation and non-recurring compensation, such as awards, deal team payments and significant signing bonuses are not eligible compensation and cannot be deferred under the IBM 401(k) Plus Plan.

 

In 2008, participants could choose to have their contributions invested entirely in one of, or in any combination of, the following funds or in the mutual fund window funds, in multiples of one percent.  These funds and their investment objectives are more fully described in Note 5, Description of Investment Funds.

 

Life Cycle Funds (14)

Income Plus Life Strategy Fund
Conservative Life Strategy Fund
Moderate Life Strategy Fund
Aggressive Life Strategy Fund

Target Date 2005 Fund

Target Date 2010 Fund

Target Date 2015 Fund

Target Date 2020 Fund

Target Date 2025 Fund

Target Date 2030 Fund

Target Date 2035 Fund

Target Date 2040 Fund

Target Date 2045 Fund

Target Date 2050 Fund

 

Core Funds (7)

Stable Value Fund
Inflation Protected Bond Fund
Total Bond Market Fund
Total International Stock Market Index Fund
Total Stock Market Index Fund
Real Estate Investment Trust (REIT) Index Fund

International Real Estate Index Fund

 

Expanded Choice Funds (11)
Long-Term Corporate Bond Fund
High Yield and Emerging Markets Bond Fund
European Stock Index Fund

Pacific Stock Index Fund
Large Company Index Fund
Large-Cap Value Index Fund

Large-Cap Growth Index Fund
Small/Mid-Cap Stock Index Fund

Small-Cap Value Index Fund

Small-Cap Growth Index Fund
IBM Stock Fund

 

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The Plan participants also have access to the “mutual fund window” investment options as described above.

 

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 if the request is completed before the applicable cutoff date.  Also, participants may transfer part or all of existing account balances among funds in the Plan once daily, subject to the Plan restrictions on trading.

 

IBM is committed to preserving the integrity of the Plan as a long-term savings vehicle for its employees.  Frequent, short-term trading that is intended to take advantage of pricing lags in funds can harm long-term investors, or increase trading expense in general.  Therefore, the Plan reserves the right to take appropriate action to curb short-term round trip transactions (buying/selling) into the same fund.  The Plan restrictions on trading were changed effective January 1, 2008.

 

Participant Accounts

 

The Plan record keeper 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 before-tax and Roth 401(k) amounts from other qualified savings plans or Individual Retirement Accounts into their Plan account.  Rollovers must be made in cash within the time limits specified by the IRS; stock or in-kind rollovers are not accepted.  These rollovers are limited to active employees on the payroll of IBM (or affiliated companies) who have existing accounts in the Plan.  Retirees 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.  After-tax amounts may also be directly rolled over into the Plan from another qualified savings plan.

 

On each valuation date, the unit/share value of each fund is determined by dividing the current investment value of the assets in that fund on that date by the number of units/shares in the fund.  The participant’s investment value of assets equals the market value of assets for all funds except the Stable Value Fund for which the participant’s investment value of assets equals the contract value of assets.  In determining the unit/share value, new contributions that are to be allocated as of the valuation date are excluded from the calculation.  On the next day, the cash related to new contributions is transferred into the fund and 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 prior night’s unit value.

 

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Contributions (with the exception of after-tax contributions which were introduced in 2004 and Roth 401(k) contributions which were introduced January 1, 2008) 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 percent.  After-tax contributions made to the Plan are not tax deferred, but are taxable income prior to the participant making the contribution.  Any interest, dividends or other earnings on the after-tax contributions are generally not included in the taxable income of the participant until withdrawal, at which time all earnings withdrawn are generally taxed as ordinary income to the participant.  Any distribution of earnings on after-tax contributions that are withdrawn by the participant before attaining age 59 1/2 generally are subject to a penalty tax of 10 percent.  Roth 401(k) contributions are not deferred, but are taxable income prior to the participant making the contribution.  Interest, dividends or other earnings on Roth 401(k) contributions may not be taxable at withdrawal provided the participant has met the applicable rules.

 

Consistent with provisions established by the IRS, the Plan’s 2008 limit on employee salary deferrals was $15,500.  (The limit for 2009 is $16,500.)  Participants who were age 50 or older during 2008 could take advantage of a higher 401(k) contribution limit of $20,500 ($22,000 for 2009).  The 2008 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.  The Puerto Rico limit for 2009 has increased to $9,000 with no cap on the percent of eligible compensation.  Puerto Rico participants who are age 50 or older in 2009 may take advantage of a higher contribution limit of $10,000.

 

Vesting

 

Participants in the Plan are at all times fully vested in their account balance, including employee contributions, employer contributions and earnings thereon, if any.

 

Distributions

 

Participants who have attained age 59 1/2 may request a distribution of all or part of the value in their account.  A maximum of 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 provisions of the IBM Personal Pension Plan, or (2) become eligible for benefits under the IBM Long-Term Disability Plan or the IBM Medical Disability Income Plan, or (3) separate from IBM and have attained age 55, may also elect to receive the balance of their account in annual installments over a period not to exceed twenty years.  Beginning in 2008, new life expectancy installments may not be elected.

 

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Withdrawals for financial hardship are permitted provided they are for an immediate and significant 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 contributions are eligible for hardship withdrawal; earnings on before-tax 401(k) and Roth 401(k), and IBM contributions (match, automatic, transition credits and Special Savings Award) are not eligible for withdrawal.  Employees must submit evidence of hardship to the record keeper who will determine whether the situation qualifies for a hardship withdrawal based on guidance from IBM.  A hardship withdrawal is taxed as ordinary income to the employee and may be subject to the 10 percent additional tax on early distributions.

 

If the participant dies and is married at the time of death, the participant’s spouse must be the beneficiary of the participant’s Plan account, 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.

 

Upon the death of a participant, an account will be established for the participant’s beneficiary.  If the beneficiary is a spouse or domestic partner, the beneficiary’s account may be maintained in the Plan, subject to the Minimum Required Distribution rules.  If the beneficiary is neither a spouse nor a domestic partner, the account will be paid to the beneficiary in a lump sum.  Beneficiaries may rollover distributions from the Plan.

 

Participant Loans

 

Participants may borrow up to one-half of the value of their account balance, not to exceed $50,000, within a twelve month period.  Loans will be granted in $1 increments subject to a minimum loan amount of $500.  Participants are limited to two simultaneous outstanding Plan loans.  Repayment of a loan is made through semi-monthly payroll deductions over a term of one to four years for a general purpose loan or one to ten years for a primary residence loan.  The loan bears a fixed rate of interest, set quarterly, for the term of the loan, determined by the plan administrator to be 1.25 points above the prime rate.  The interest is 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, 2008 and 2007 ranged from 4.25 percent to 11.00 percent and 4.25 percent to 10.75 percent, respectively.

 

Participants may prepay the entire remaining loan principal at any time.  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.  A loan default is a taxable event to the participant and will be reported as such in the year of the loan default.

 

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Participants who retire or separate from IBM and have outstanding Plan loans may make coupon payments to continue monthly loan repayments according to their original amortization schedule.

 

Termination of Service

 

If the value of a participant’s account is $1,000 or less, it will be distributed to the participant in a lump-sum payment following the termination of the participant’s employment with IBM.  If the account balance is greater than $1,000 at the time of separation, the participant may defer distribution of the account until age 70 ½.

 

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 accordance with applicable law and regulations.  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 that include a combination of mutual funds, commingled funds, separately-managed funds, life-cycle funds, equities, fixed income securities, synthetic 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 in the statement of net assets available for benefits.

 

The Plan is potentially exposed to credit loss in the event of non-performance by the companies with whom the investment contracts are placed.  However, the Committee does not anticipate non-performance by these companies at this time.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting

 

The accompanying financial statements are prepared under the accrual basis of accounting, except distributions, which are recorded when paid.

 

The Plan is subject to the provision of Financial Accounting Standards Board (FASB) Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (FSP AAG INV-1 and SOP 94-4-1).  FSP AAG INV-1 and SOP 94-4-1 require

 

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investment contracts held by a defined-contribution plan to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan.  Contract value represents the cost plus contributions made under the contracts plus interest at the contract rates less withdrawals and administrative expenses.  In particular, FSP AAG INV-1 and SOP 94-4-1 affected the presentation of the amounts related to the Plan’s participation in the Stable Value Fund.  The statements of net assets available for benefits present the fair value of the investment in the Stable Value Fund as well as the adjustment from fair value to contract value for the fully benefit responsive investment contracts within the Stable Value Fund.  The statement of changes in net assets available for benefits is prepared on a contract value basis.

 

Valuation of Investments

 

The Plan’s investments are stated at fair value, which is generally the quoted market price on the last business day of the Plan year.  Investments in mutual funds, commingled funds and separately-managed funds are valued at the net asset values per share using available inputs to measure fair value by such companies or funds as of the valuation date.  IBM common stock is valued daily at the New York Stock Exchange closing price.  Fixed income securities traded in the over-the-counter market are valued at the bid prices.  Securities in cash portfolios are valued at amortized cost, which includes cost and accrued interest, which approximates fair value.  Participant loans are valued at cost plus accrued interest, which approximates fair value.

 

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.

 

The Plan presents in the Statement of Changes in Net Assets Available for Benefits the net change in the fair value of its investments, which consists of realized gains and losses and the unrealized appreciation and depreciation on those investments.

 

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, and

 

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(b) 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 and are included as part of administrative expenses.  Investment management fees, which are paid from the assets of the respective funds, are fees that comprise charges based on a percentage of net asset value and are included as part of administrative expenses.

 

New Standard to be Implemented

 

In March 2008, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133.”  SFAS No. 161 expands the current disclosure requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” such that entities must now provide enhanced disclosures regarding how and why the entity uses derivatives; how derivatives and related hedged items are accounted for under SFAS No. 133 and how derivatives and related hedged items affect the entity’s financial position, financial results and cash flow.  Pursuant to the transition provisions of the Statement, the Plan will adopt SFAS No. 161 in fiscal year 2009 and will present the required disclosures in the prescribed format on a prospective basis.  SFAS No. 161 does not impact the Plan’s financial results as it is disclosure-only in nature.

 

NOTE 3 — INVESTMENTS

 

The following schedules summarize the fair value of investments, levels within the fair value hierarchy, investments 5 percent or more of the Plan’s net assets and the related net change in the fair value of investments by type of investment.

 

Fair Value Investments

 

 

 

2008

 

2007

 

 

 

(Dollars in thousands)

 

At December 31, 2008

 

 

 

 

 

 

 

 

 

 

 

Investments at Fair Value

 

 

 

 

 

 

 

 

 

 

 

Investment Contracts

 

$

7,636,011

 

$

7,470,887

 

Commingled Trust Funds

 

6,901,355

 

11,947,595

 

Separately-Managed Funds — IBM

 

6,460,609

 

10,028,893

 

Short-Term Investments

 

2,212,698

 

4,163,175

 

Mutual Funds

 

1,472,615

 

886,484

 

IBM Common Stock

 

1,341,639

 

1,581,218

 

Participants Loans Receivable

 

293,132

 

281,775

 

 

 

 

 

 

 

Total

 

$

26,318,059

 

$

36,360,027

 

 

Fair Value Measurements

 

Effective January 1, 2008, the Plan adopted SFAS No. 157, “Fair Value Measurements” for all financial instruments accounted for at fair value in the financial statements on a recurring basis.  SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The standard describes three levels of inputs that may be used to measure fair value:

 

· Level 1 — Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

 

· Level 2 — Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and

 

· Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

 

The asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs.

 

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The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value, as of December 31, 2008:

 

(Dollars in Thousands)

 

Description

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

 

 

 

 

 

 

 

 

Short-Term Investments

 

 

 

$

2,212,698

 

 

 

$

2,212,698

 

Mutual Funds

 

$

1,472,615

 

 

 

 

 

1,472,615

 

Commingled Trust Funds

 

 

 

6,901,355

 

 

 

6,901,355

 

Separately Managed Funds – IBM

 

3,595,357

 

2,865,252

 

 

 

6,460,609

 

Investment Contracts

 

487,138

 

7,148,873

 

 

 

7,636,011

 

IBM Common Stock

 

1,341,639

 

 

 

 

 

1,341,639

 

Participant Loans Receivable

 

 

 

 

 

293,132

 

293,132

 

Total Investments – Fair Value

 

$

6,896,749

 

$

19,128,178

 

$

293,132

 

$

26,318,059

 

 

The following table presents the change in Level 3 investment for the year ended at December 31, 2008:

 

(Dollars in Thousands)

 

Participant Loans
Receivable

 

 

 

 

 

Balance, beginning of year

 

$

281,775

 

Purchases, issuances and settlements (net)

 

11,357

 

Balance, end of year

 

$

293,132

 

 

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

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Investments — Five Percent or More of Plan Assets

 

The investments that represent 5 percent or more of the Plan’s net assets available for benefits at December 31, 2008 and 2007 are as follows:

 

Investments

 

2008

 

2007

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

Large Company Index Fund (Vanguard)

 

$

2,783,028

 

$

4,749,351

 

Total Stock Market Index Fund (Vanguard)

 

1,982,789

 

3,331,412

 

Total International Stock Market Index Fund (State Street Global Advisors)

 

1,915,709

 

3,594,879

 

Investment Contract - Royal Bank of Canada, 4.08% (5.40% - 2007)

 

1,908,998

 

1,867,722

 

Investment Contract - JPMorgan Chase, 4.08% (5.40% - 2007)

 

1,908,998

 

1,867,722

 

Investment Contract - Bank of America, 4.08% (5.40% - 2007)

 

1,908,998

 

1,494,177

 

Investment Contract - State Street Bank and Trust, 4.08% (5.40% - 2007)

 

1,908,998

 

737,170

 

Small/Mid-Cap Stock Index Fund (State Street Global Advisors)

 

1,717,133

 

3,116,838

 

IBM Common Stock (State Street Global Advisors)

 

1,341,639

 

1,581,218

 

Inflation Protected Bond Fund (State Street Global Advisors)

 

1,320,160

 

1,357,969

 

 

Net Change in Fair Value of Investments

 

The following table represents the Net Change in Fair Value of Investments (including gains and losses on investments bought and sold, as well as held during the year):

 

 

 

2008

 

 

 

(Dollars in thousands)

 

Investments at fair value:

 

 

 

Commingled Funds

 

$

(2,960,988

)

IBM Common Stock

 

(359,086

)

Mutual Funds

 

(753,559

)

Common Stock—non-employer

 

(5,179,298

)

Fixed Income Securities

 

261,182

 

Total

 

$

(8,991,749

)

 

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Derivatives

 

In accordance with the investment strategy of the separately-managed funds and the Stable Value Fund, investment managers execute transactions in various derivative instruments.  The use of derivatives is permitted principally to gain or reduce exposure or execute an investment strategy more efficiently.  The objective of these derivative instruments is primarily to manage duration and interest rate volatility and credit exposure to achieve a certain performance result, although derivative instruments are also in place to manage currency and cash exposure.  These derivative instruments include swaptions, interest rate swaps, options, bond and equity futures and forward contracts.  Derivatives may be executed on exchange traded investment instruments or via over the counter (OTC) transactions.  When an OTC contract is executed, there is exposure to credit loss in the event of non-performance by the counterparties to these transactions. Therefore, IBM manages this exposure through stringent credit approval guidelines and regularly monitors and reports market and counterparty credit risks associated with these instruments.

 

Futures are valued based upon their quoted daily price.  The primary risks associated with futures are the accuracy of the correlation between the value of bonds or equities and the price of the futures contracts.

 

Within the fixed income funds, the fund has either sold or purchased credit protection through credit default swaps.  The fund has also entered into interest rate swap transactions where a fixed vs a floating rate amount is exchanged.   A primary risk for all swap transactions is that the counterparty will default on their net amount due for the transaction.

 

Market risk arises from the potential for changes in value of financial instruments resulting from fluctuations in interest and foreign exchange rates and in prices of debt and equity securities.  The notional (or contractual) amounts used to express the volume of these transactions do not necessarily represent the amounts potentially subject to market risk.

 

All derivative financial instruments are carried at fair value.  The net fair value of derivative financial instruments was a liability of $63 million as of December 31, 2008 and an asset of $13 million as of December 31, 2007.

 

NOTE 4 — INVESTMENT CONTRACTS

 

The Plan entered into benefit-responsive investment contracts, such as synthetic investment contracts (“GICs”), (through the Stable Value Fund — “the Fund”) with various third parties, i.e., insurance companies and banks.  Fair value generally equals the market price on the last business day of the Plan year.  Contract value represents contributions made to investment contracts, plus earnings, less participant withdrawals and administrative expenses.  The fair value of the wrap contract for the synthetic GIC is determined using a discounted cash flow model which considers recent rebids as

 

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determined by recognized dealers, discount rate and the duration of the underlying portfolio.

 

A synthetic GIC provides for a fixed return on principal over a specified period of time, e.g., monthly crediting rate, through fully benefit-responsive wrapper contracts issued by third parties, which are backed by underlying assets owned by the Plan.  The contract value of the synthetic GIC held by the Stable Value Fund was $8,151 million and $7,372 million at December 31, 2008 and 2007, respectively.  The fair value of the synthetic GIC wrapper contract was $16 million and $17 million at December 31, 2008 and 2007, respectively.  The adjustment from the sum of the fair value of the underlying assets and the fair value of the synthetic GIC to the contract value of the synthetic GIC was $499 million and ($135) million at December 31, 2008 and 2007, respectively.

 

Wrap contracts accrue interest using a formula called the “crediting rate.”  Wrap contracts use the crediting rate formula to convert market value changes in the covered assets into income distributions in order to minimize the difference between the market and contract value of the covered assets over time.  Using the crediting rate formula, an estimated future market value is calculated by compounding the Fund’s current market value at the Fund’s benchmark yield to maturity for a period equal to the Fund’s benchmark duration.  The crediting rate is the discount rate that equates estimated future market value with the Fund’s current contract value.  The crediting rate is most impacted by the change in the annual effective yield to maturity of the underlying securities, but is also affected by differential between the contract value and the market value of the covered investments.  The difference is amortized over the duration of the investments. Depending on the change in duration from reset period to reset period, the magnitude of the impact to the crediting rate of the contract “contract to market” difference is heightened or lessened.  Crediting rates are reset quarterly or more often if deemed appropriate.  The wrap contracts provide a guarantee that the crediting rate will not fall below 0 percent.

 

If the Fund experiences significant redemptions when the market value is below the contract value, the Fund’s yield may be reduced significantly, to a level that is not competitive with other investment options.  This may result in additional redemptions, which would tend to lower the crediting rate further.  If redemptions continued, the Fund’s yield could be reduced to zero.  If redemptions continued thereafter, the Fund might have insufficient assets to meet redemption requests, at which point the Fund would require payments from the wrap issuer to pay further participant redemptions.

 

The crediting rate, and hence the Fund’s return, may be affected by many factors, including purchases and redemptions by participants.  The precise impact on the Fund depends on whether the market value of the covered assets is higher or lower than the contract value of those assets.  If the market value of the covered assets is higher than their contract value, the crediting rate will ordinarily be higher than the yield of the covered assets.  Under these circumstances, cash from new investors will tend to lower the crediting rate and the Fund’s return, and redemptions by existing participants will tend to increase the crediting rate and the Fund’s return.

 

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The Fund and the wrap contracts purchased by the Fund are designed to pay all participant-initiated transactions at contract value.  Participant-initiated transactions are those transactions allowed by the provisions of the Plan (typically this would include withdrawals for benefits, loans, or transfers to non-competing funds within the Plan).  However, the wrap contracts limit the ability of the Fund to transact at contract value upon the occurrence of certain events.  At this time, the occurrence of any of these events is not probable.  These events include:

 

·                  The Plan’s failure to qualify under Section 401(a) or Section 401(k) of the Internal Revenue Code.

 

·                  The establishment of a defined contribution plan that competes with the Plan for employee contributions.

 

·                  Any substantive modification of the Plan or the administration of the Plan that is not consented to by the wrap issuer.

 

·                  Complete or partial termination of the Plan.

 

·                  Any change in law, regulation or administrative ruling applicable to the Plan that could have a material adverse effect on the Fund’s cash flow.

 

·                  Merger or consolidation of the Plan with another plan, the transfer of plan assets to another plan, or the sale, spin-off or merger of a subsidiary or division of the plan sponsor.

 

·                  Any communication given to participants by the Plan sponsor or any other plan fiduciary that is designed to induce or influence participants not to invest in the Fund or to transfer assets out of the Fund.

 

·                  Exclusion of a group of previously eligible employees from eligibility in the Plan.

 

·                  Any significant retirement program, group termination, group layoff, facility closing or similar program.

 

·                  Any transfer of assets from the Fund directly to a competing option.

 

·                  Bankruptcy of the plan sponsor or other plan sponsor events which cause a significant withdrawal from the Plan.

 

A wrap issuer may terminate a wrap contract at any time.  In the event that the market value of the Fund’s covered assets is below their contract value at the time of such termination, the trustee may elect to keep the wrap contract in place until such time as the market value of the Fund’s covered assets is equal to their contract value.  A wrap issuer may also terminate a wrap contract if the trustee’s investment management authority over the Fund is limited or terminated as well as if all of the terms of the wrap contract fail to be met.

 

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Synthetic investment contracts generally impose conditions on both the Plan and the issuer.  If an event of default occurs and is not cured, the non-defaulting party may terminate the contract.  The following may cause the Plan to be in default: a breach of material obligation under the contract; a material misrepresentation; or a material amendment to the Plan agreement.  The issuer may be in default if it breaches a material obligation under the investment contract; makes a material misrepresentation; is acquired or reorganized.  If, in the event of default of an issuer, the Plan were unable to obtain a replacement investment contract, the Plan may experience losses if the value of the Plan’s assets no longer covered by the contract is below contract value.  The Plan may seek to add additional issuers over time to diversify the Plan’s exposure to such risk, but there is no assurance the Plan may be able to do so.  The combination of the default of an issuer and an inability to obtain a replacement agreement could render the Plan unable to achieve its objective of maintaining a stable contract value.  The terms of an investment contract generally provide for settlement of payments only upon termination of the contract or total liquidation of the covered investments.  Generally, payments will be made pro-rata, based on the percentage of investments covered by each issuer.  Contract termination occurs whenever the contract value or market value of the covered investments reaches zero or upon certain events of default.  If the contract terminates due to issuer default, the issuer will generally be required to pay to the Plan the excess, if any, of contract value over market value on the date of termination.  If the contract terminates when the market value equals zero, the issuer will pay the excess of contract value over market value to the Plan to the extent necessary for the Plan to satisfy outstanding contract value withdrawal requests.  Contract termination also may occur by either party upon election and notice.

 

The investment contracts owned by the Stable Value Fund produced the following returns:

 

 

 

Year Ended
December 31,

 

 

 

2008

 

2007

 

Earned by the Plan

 

-3.18

%

5.88

%

Credited to participants

 

4.89

%

5.54

%

 

NOTE 5 - DESCRIPTION OF INVESTMENT FUNDS

 

The objectives of the thirty-two investment funds to which participants could contribute funds in 2008 are described below:

 

Life Cycle Funds —

 

The fourteen life cycle funds reflect a portfolio of diversified investments — U.S. stocks, international stocks, real estate equity stocks, and fixed-income investments — from the existing core funds noted below, plus a commodities fund (not available to participants as a standalone offering).  These funds offer a convenient low-cost way to achieve diversification, professional money management and periodic rebalancing.  The funds are

 

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structured by the IBM Retirement Fund organization and managed by the underlying funds’ managers.

 

Four Life Cycle Funds are Life Strategy Funds that have a preset mix of stock and fixed income investments in order to provide broad diversification at a given risk level.  The preset mix of each Life Strategy Fund is not expected to change over time.

 

x          Income Plus Life Strategy Fund - target allocation: 30% stocks*, 70% bonds; seeks returns that modestly outpace inflation on a fairly consistent basis.

 

x          Conservative Life Strategy Fund - target allocation: 50% stocks*, 50% bonds; seeks returns that moderately outpace inflation over the long term.

 

x          Moderate Life Strategy Fund - target allocation: 65% stocks*, 35% bonds; seeks relatively high returns at a moderate risk level.

 

x          Aggressive Life Strategy Fund - target allocation: 85% stocks*, 15% bonds; seeks high returns over the long term.

 


* Exposure to commodities is considered part of the allocation to stocks.

 

Ten Life Cycle Funds are Target Date Funds that offer portfolios with levels of risk designed for varying retirement dates or the year in which one expects to start drawing on their retirement assets.  The portfolios are offered in five year increments from 2005 to 2050, with the 2030 through 2050 funds providing a significantly higher allocation to stocks.  As a fund draws closer to its associated target date, the fund will automatically shift toward a more conservative risk level by reducing its allocation to stocks.  Each fund’s reduction to stocks continues through its “target date” for another 15 years, until the fund’s allocation and risk profile matches that of the Income Plus Fund.  Target Date funds assume a retirement age of 60.

 

x          Target Date 2005 Fund - designed for investors who have retired or started to draw on their retirement assets on or around the year 2005; seeks returns that moderately outpace inflation over the long term.  Target asset allocation between stocks and bonds is 48% stocks, 52% bonds.

 

x          Target Date 2010 Fund - seeks relatively high returns at a moderate risk level.  Target asset allocation between stocks and bonds is 58% stocks, 42% bonds.

 

x          Target Date 2015 Fund - seeks relatively high returns at a moderate risk level.  Target asset allocation between stocks and bonds is 68% stocks, 32% bonds.

 

x          Target Date 2020 Fund - seeks high returns over the long term.  Target asset allocation between stocks and bonds is 78% stocks, 22% bonds.

 

x          Target Date 2025 Fund - seeks high returns over the long term.  Target asset allocation between stocks and bonds is 87% stocks, 13% bonds.

 

x          Target Date 2030 Fund - seeks high returns over the long term.  Target asset allocation between stocks and bonds is 90% stocks, 10% bonds.

 

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x          Target Date 2035 Fund - seeks high returns over the long term.  Target asset allocation between stocks and bonds is 90% stocks, 10% bonds.

 

x          Target Date 2040 Fund - seeks high returns over the long term.  Target asset allocation between stocks and bonds is 90% stocks, 10% bonds.

 

x          Target Date 2045 Fund - seeks high returns over the long term.  Target asset allocation between stocks and bonds is 90% stocks, 10% bonds.

 

x          Target Date 2050 Fund - seeks high returns over the long term.  Target asset allocation between stocks and bonds is 90% stocks, 10% bonds.

 

Core Funds - seven funds that provide an opportunity to build a portfolio from a selection of broadly diversified U.S. and international stock funds and from funds that track the fixed-income markets.

 

x          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.

 

x          Inflation Protected Bond Fund - seeks over the long term to provide a rate of return similar to the Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index.  The fund is managed by State Street Global Advisors.

 

x          Total Bond Market Fund - seeks to modestly exceed the return of its benchmark index (Barclays Capital Aggregate Bond Index), which consists of more than 5,000 U.S. Treasury, federal agency, mortgage-backed, and corporate securities.   The fund is managed by Lehman Brothers Asset Management.

 

x          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 MSCI All Country World Ex-USA Investable Market Index.  The fund is managed by State Street Global Advisors.

 

x          Total Stock Market Index Fund - seeks long-term growth of capital and income.  It attempts to match the performance of the Dow Jones Wilshire 5000 Total Market Index. The fund is managed by The Vanguard Group.

 

x          Real Estate Investment Trust (REIT) Index Fund - seeks a total rate of return approximating the returns of the MSCI U.S. REIT index.  Investment consists of U.S. publicly traded real estate equity securities.  The fund is managed by Barclays Global Investors.

 

x          International Real Estate Index Fund. - seeks to replicate the returns of the FTSE EPRA/NAREIT Global Rental ex US Index.  Investment consists of the international market for securities of companies principally engaged in the real estate industry that derive greater than or equal to 70% of their total revenue from rental revenue of investment properties.  The fund is managed by Barclays Global Investors.

 

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Table of Contents

 

Extended Choice Funds — eleven funds that provide an opportunity to build an investment portfolio with funds that are less broadly diversified, focusing instead on discrete sectors of the stock and bond markets.

 

x          Long-Term Corporate Bond 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 Lehman Brothers Asset Management.

 

x          High Yield and Emerging Markets Bond Fund - seeks to modestly exceed the returns of the Barclays Capital U.S. High Yield/Emerging Markets Bond Index.  The fund invests in “below investment grade” U.S. corporate and emerging market dollar bonds and is managed by Pacific Investment Management Company, LLC (PIMCo).

 

x          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 MSCI Europe Index.  The fund is managed by The Vanguard Group.

 

x          Pacific Stock Index Fund - seeks long-term growth of capital by attempting to match the performance of the MSCI Pacific Index.  The fund is managed by The Vanguard Group.

 

x          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.

 

x          Large-Cap Value Index Fund - seeks long-term growth of capital and income from dividends.  The fund holds all the stocks in the Russell 1000 Value Index in approximately the same proportion as those stocks represented in the index.   The fund is managed by The Vanguard Group.

 

x          Large-Cap Growth Index Fund - seeks long-term growth of capital by holding all the stocks in the Russell 1000 Growth Index in approximately the same proportion as those stocks represented in the index.  The fund is managed by The Vanguard Group.

 

x          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.

 

x          Small-Cap Value Index Fund - seeks long-term growth of capital by attempting to match the performance of the Russell 2000 Value Index.  The fund is managed by The Vanguard Group.

 

x          Small-Cap Growth Index Fund - seeks long-term growth of capital by attempting to match the performance of the Russell 2000 Growth Index.  The fund is managed by The Vanguard Group.

 

x          IBM Stock Fund - invests in IBM common stock and holds a small interest-bearing cash balance of approximately 0.35% for liquidity purposes.  The fund is managed by State Street Bank and Trust Company.

 

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Table of Contents

 

IBM 401(k) participants also have access to the “mutual fund window” investments — which expands the Plan’s investment options to include approximately 200 mutual funds, most of which are actively managed.  This feature gives more options to participants who are interested in investing in brand-name funds, or in simply having a broader range of investment options from which to choose.

 

Securities Lending

 

Security loan transactions are permitted with the objective to add investment 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 percent of the value of the domestic securities loaned and 105 percent of the value of international securities loaned. The cash collateral is reinvested to generate income that is credited to the portfolio return. A risk in lending securities is associated with the reinvestment of this cash.  When securities are posted as collateral, the funds seek to minimize risk by requiring a daily valuation of the loaned securities, with additional collateral posted each day, if necessary.  An additional risk in lending securities is that 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.  To mitigate this risk, the loaned securities in the State Street Bank agency program are indemnified against broker default.

 

The addition of the securities lending provision does not change the investment objectives for the funds.  The value of loaned securities in the State Street Bank agency program amounted to $1,478 million and $3,502 million at December 31, 2008 and 2007, respectively.   The value of cash collateral obtained and reinvested in short-term investments of $1,521 million ($1,501 million at fair value) and $3,592 million (same at fair value) for December 31, 2008 and 2007, respectively, is reflected as a liability in the Plan’s financial statements.  Securities lending is also permitted in the commingled funds and in funds within the IBM Mutual Fund Window.  The prospectus for each fund will disclose if lending is permitted.

 

NOTE 6 - PLAN TRANSFERS

 

The transfers listed below represent participant investment account balances attributable to employees transferred to IBM in 2008 primarily as a result of IBM acquisitions:

 

Significant transfers were:

 

 

 

(Dollars in Thousands)

 

Cognos, Inc,

 

$

77,027

 

Telelogic, AB

 

20,089

 

Princeton Softech, Inc.

 

7,864

 

Novus Consulting Group

 

2,509

 

Arsenal Digital Solutions

 

1,305

 

 

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Table of Contents

 

In 2008, there were also transfers into the Plan totaling $3,643 thousand related to participant account balances from other companies.  Total plan transfers were $112,437 thousand.

 

NOTE 7 - TAX STATUS

 

The Trust established under the Plan is qualified under Section 401(a) of the Internal Revenue Code of 1986 and the Trustee intends to continue it as a qualified trust.  The Plan received a favorable determination letter from the IRS on September 10, 2004.  Subsequent to this determination letter by the IRS, the Plan was amended.  The Plan administrator and Counsel continue 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.

 

NOTE 8 - 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:

 

 

 

12/31
2008

 

12/31
2007

 

 

 

(Dollars in thousands)

 

Net assets available for benefits per the financial statements

 

$

25,361,371

 

$

32,718,151

 

Plus:

 

 

 

 

 

Adjustment from contract value to fair value for fully benefit-responsive investment contracts held by the Stable Value Fund

 

(499,119

)

134,577

 

Less:

 

 

 

 

 

Benefit obligations currently payable

 

 

 

Net assets available for benefits per the Form 5500

 

$

24,862,252

 

$

32,852,728

 

 

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The following is a reconciliation of investment income per the financial statements to the Form 5500:

 

 

 

Year Ended
December 31,
2008

 

 

 

(Dollars in thousands)

 

Total investment income per the financial statements

 

$

(8,119,207

)

Less:

 

 

 

Adjustment from fair value to contract value for fully benefit-responsive investment contracts at December 31, 2007

 

134,577

 

Plus:

 

 

 

Adjustment from fair value to contract value for fully benefit-responsive investment contracts at December 31, 2008

 

(499,119

)

Total investment income per the Form 5500

 

$

(8,752,903

)

 

The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500:

 

 

 

Year Ended
December 31,
2008

 

 

 

(Dollars in thousands)

 

Benefits paid to participants per the financial statements

 

$

1,672,199

 

Less:

 

 

 

Amounts payable at December 31, 2007

 

 

Plus:

 

 

 

Amounts payable at December 31, 2008

 

 

Benefits paid to participants per the Form 5500

 

$

1,672,199

 

 

NOTE 9 - RELATED-PARTY TRANSACTIONS

 

At December 31, 2008, 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 investments qualify as party-in-interest transactions.  The Plan also pays a fee to the trustee and the trustee also is a security lending agent.  These transactions qualify as party-in-interest transactions as well.

 

In addition, Fidelity Investments Institutional Operations Company, Inc is the provider of administrative services related to the mutual fund window as well as the investment manager of Fidelity funds within the mutual fund window.  Starting January 1, 2008, as

 

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disclosed in Note 1, Fidelity also became the provider of record keeping and participant services, and the operator of the IBM Employee Services Center for the IBM 401(k) Plus Plan.

 

At December 31, 2008 the Plan held 15,941,533 shares of IBM common stock valued at $1,341,639,417.  At December 31, 2007, the Plan held 14,627,366 shares of IBM common stock valued at $1,581,218,265.

 

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IBM 401(k) PLUS PLAN

Schedule H, line 4i - Schedule of Assets (Held at End of Year)

 

AT DECEMBER 31, 2008

 

(a)

 

(b) Identity of issue, borrower,
lessor, or similar
party

 

(c) Description of
investment
including maturity
date, rate
of interest, collateral,
par, or
maturity value

 

(d) Cost

 

(e) Fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

IBM Stock Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

 

Managed by State Street Global Advisors

 

IBM Common Stock 15,941,533 shares

 

 

 

$

1,341,639,417

 

*

 

Managed by State Street Global Advisors

 

Short-Term Investments

 

 

 

3,867,341

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

 

Administered by Fidelity Investments

 

Mutual Fund Window

 

 

 

1,472,614,627

 

 

 

 

 

 

 

 

 

 

 

 

 

Commingled Trust Funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Managed by The Vanguard Group

 

Large Company Index

 

 

 

2,783,027,732

 

 

 

Managed by The Vanguard Group

 

Total Stock Market Index

 

 

 

1,982,788,656

 

 

 

Managed by The Vanguard Group

 

Large Cap Value Index

 

 

 

437,140,203

 

 

 

Managed by The Vanguard Group

 

Small Cap Value Index

 

 

 

390,784,258

 

 

 

Managed by The Vanguard Group

 

European Stock Index

 

 

 

342,305,009

 

 


*             Party-In-Interest

 

29



Table of Contents

 

(a)

 

(b) Identity of issue, borrower,
lessor, or similar party

 

(c) Description of
investment
including maturity
date, rate
of interest, collateral,
par, or
maturity value

 

(d) Cost

 

(e) Fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

Commingled Trust Funds - continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Managed by The Vanguard Group

 

Large Cap Growth Index

 

 

 

$

329,683,146

 

 

 

Managed by The Vanguard Group

 

Pacific Stock Index

 

 

 

264,960,085

 

 

 

Managed by The Vanguard Group

 

Small Cap Growth Index

 

 

 

234,009,760

 

 

 

Managed by Pacific Investment Management Company (PIMCo)

 

Commodity

 

 

 

136,656,128

 

 

 

 

 

 

 

 

 

 

 

 

 

Separately-Managed Funds—IBM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

 

Managed by State Street Global Advisors

 

Total International Stock Market Index (refer to Exhibit A - investments)

 

 

 

1,915,709,399

 

*

 

Managed by State Street Global Advisors

 

Small/Mid Cap Stock Index (refer to Exhibit B - investments)

 

 

 

1,717,133,495

 

*

 

Managed by State Street Global Advisors

 

Inflation Protected Bond (refer to Exhibit C - investments)

 

 

 

1,320,159,746

 

 

 

 

 

 

 

 

 

 

 

 

 

Managed by Lehman Brothers Asset Management

 

Total Bond Market (refer to Exhibit D - investments)

 

 

 

656,903,849

 

 

 

 

 

 

 

 

 

 

 

 

 

Managed by Barclays Global Investors

 

Real Estate Investment Trust (refer to Exhibit E - investments)

 

 

 

486,400,940

 

 


*      Party-In-Interest

 

30



Table of Contents

 

(a)

 

(b) Identity of issue, borrower,
lessor, or similar party

 

(c) Description of
investment
including maturity
date, rate
of interest, collateral,
par, or
maturity value

 

(d) Cost

 

(e) Fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

Managed by Lehman Brothers Asset Management

 

Long-Term Corporate Bond (refer to Exhibit F - investments)

 

 

 

153,186,877

 

 

 

Managed by Pacific Investment Management Company (PIMCo)

 

High Yield and Emerging Markets Bond (refer to Exhibit G— investments)

 

 

 

109,978,678

 

 

 

Managed by Barclays Global Investors

 

International Real Estate Index (refer to Exhibit H —investments)

 

 

 

101,136,000

 

 

31



Table of Contents

 

(a)

 

(b) Identity of issue, borrower,
lessor, or similar party

 

(c) Description of
investment including
maturity date, rate of
interest, collateral,
par, or maturity value

 

(d) Cost

 

(e) Fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-Term Investments

 

 

 

 

 

 

 

*

 

Managed by State Street Global Advisors

 

Short-Term Investments purchased with cash collateral from securities lending (refer to Exhibit I - investments)

 

 

 

$

1,501,175,683

 

 

 

 

 

 

 

 

 

 

 

 

 

Stable Value Fund—Investment Contracts†

 

 

 

 

 

 

 

 

 

Underlying assets managed by various investment companies

 

Synthetic GIC Global Wrapper (the fair value of wrap contract is $16 million, Rate of Interest 4.08%, refer to Exhibit J - investments)

 

 

 

7,636,011,341

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-Term Investments

 

 

 

 

 

 

 

*

 

Managed by State Street Global Advisors

 

SSGA/Other Short Term Investments

 

 

 

707,654,220

 

 

 

 

 

 

 

 

 

 

 

*

 

Loans to Participants

 

Interest rates range: 4.25% - 11.00%, Terms: one to four years

 

 

 

293,132,445

 

 

 

 

 

 

 

 

 

 

 

*

 

Party-In-Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royal Bank of Canada

 

 

 

 

 

$

1,908,997,590

 

 

 

 

 

 

 

 

 

 

 

 

JPMorgan Chase

 

 

 

 

 

1,908,997,590

 

 

 

 

 

 

 

 

 

 

 

 

Bank of America

 

 

 

 

 

1,908,997,590

 

 

 

 

 

 

 

 

 

 

 

 

State Street Bank and Trust

 

 

 

 

 

1,908,997,590

 

 

32



 

EXHIBIT A - Total International Stock Market Index Fund

(Managed by State Street Global Advisors)

 

IBM 401(K) PLUS PLAN AT DECEMBER 31, 2008

 

Schedule H, line 4i-Schedule of Assets  (Held At End of Year)

 

(a)

 

(b) Identity of issue, borrower,
lessor, or similar party

 

(c) Description of investment including maturity date,
rate of interest, collateral, par, or maturity value

 

(d) Cost

 

(e) Fair
value

 

 

 

 

 

 

 

 

 

 

 

(n/a)

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARGENTINE PESO

 

 

 

ARGENTINA

 

844

 

 

 

$

244

 

 

 

BBVA BANCO FRANCES S A

 

SPONSORED ADR

 

ARGENTINA

 

5,288

 

 

 

15,970

 

 

 

CRESUD

 

ARS1

 

ARGENTINA

 

4

 

 

 

4

 

 

 

GPO FIN GALICIA

 

B ARSI

 

ARGENTINA

 

8

 

 

 

2

 

 

 

PETROBRAS ENER

 

B ARS1

 

ARGENTINA

 

7

 

 

 

4

 

 

 

TELEC ARGENTINA SA

 

CL B ARS1

 

ARGENTINA

 

6

 

 

 

10

 

 

 

TELECOM ARGENTINA S.A.

 

SPONSORED ADR REPSTG CL B SHS

 

ARGENTINA

 

39,817

 

 

 

302,609

 

 

 

TRANSPORT GAS SUR

 

CLASS B ARS1

 

ARGENTINA

 

3

 

 

 

1

 

 

 

AED OIL LIMITED

 

NPV

 

AUSTRALIA

 

22,279

 

 

 

15,844

 

 

 

AGL ENERGY

 

NPV

 

AUSTRALIA

 

82,605

 

 

 

878,857

 

 

 

ALUMINA LIMITED

 

NPV

 

AUSTRALIA

 

278,299

 

 

 

269,702

 

 

 

AMCOR LIMITED

 

NPV

 

AUSTRALIA

 

160,749

 

 

 

650,030

 

 

 

AMP LIMITED

 

NPV

 

AUSTRALIA

 

366,396

 

 

 

1,384,546

 

 

 

ANSELL LTD

 

NPV

 

AUSTRALIA

 

14,880

 

 

 

129,990

 

 

 

ARISTOCRAT LEISURE

 

NPV(POST RECONSTRUCTION)

 

AUSTRALIA

 

59,849

 

 

 

161,900

 

 

 

ARROW ENERGY

 

NPV

 

AUSTRALIA

 

57,567

 

 

 

107,564

 

 

 

ASCIANO GROUP

 

NPV(STAPLED)

 

AUSTRALIA

 

102,899

 

 

 

108,329

 

 

 

ASPEN GROUP

 

NPV (POST RECON)

 

AUSTRALIA

 

142,833

 

 

 

43,817

 

 

 

ASX LIMITED

 

NPV

 

AUSTRALIA

 

31,866

 

 

 

739,825

 

 

 

ASX SPI 200 INDEX FUTURES

 

MAR09 XSFE

 

AUSTRALIA

 

250

 

 

 

 

 

 

AUSENCO

 

NPV

 

AUSTRALIA

 

22,929

 

 

 

35,010

 

 

 

AUST + NZ BANK GRP

 

NPV

 

AUSTRALIA

 

359,041

 

 

 

3,827,444

 

 

 

AUSTAL LIMITED

 

NPV

 

AUSTRALIA

 

3,151

 

 

 

4,284

 

 

 

AUSTEREO GROUP

 

NPV

 

AUSTRALIA

 

51,952

 

 

 

45,276

 

 

 

AUSTRALAND PROPERTY GROUP

 

NPV STAPLED UNITS

 

AUSTRALIA

 

555,977

 

 

 

98,845

 

 

 

AUSTRALIAN DOLLAR

 

 

 

AUSTRALIA

 

2,535,312

 

 

 

1,767,619

 

 

 

AUSTRALIAN WEALTH

 

NPV

 

AUSTRALIA

 

183,138

 

 

 

140,452

 

 

 

AWB

 

NPV (B)

 

AUSTRALIA

 

6,450

 

 

 

11,422

 

 

 

AXA ASIA PAC HLDGS

 

NPV

 

AUSTRALIA

 

157,242

 

 

 

541,568

 

 

 

BABCOCK + BROWN JA

 

NPV(UNITS)

 

AUSTRALIA

 

43,156

 

 

 

10,230

 

 

 

BABCOCK + BROWN LTD

 

NPV

 

AUSTRALIA

 

43,682

 

 

 

4,721

 

 

 

BABCOCK + BROWN PO COM STK

 

NPV

 

AUSTRALIA

 

990,939

 

 

 

75,997

 

 

 

BENDIGO AND ADELAIDE BANK LTD

 

NPV

 

AUSTRALIA

 

51,964

 

 

 

398,522

 

 

 

BHP BILLITON LTD

 

NPV

 

AUSTRALIA

 

545,789

 

 

 

11,583,151

 

 

 

BILLABONG INTERNATL

 

NPV RESTRICTED

 

AUSTRALIA

 

31,995

 

 

 

175,109

 

 

 

BLUESCOPE STEEL LTD

 

NPV

 

AUSTRALIA

 

146,482

 

 

 

357,445

 

 

 

BOART LONGYEAR GR

 

NPV

 

AUSTRALIA

 

276,292

 

 

 

38,526

 

 

 

BORAL LIMITED NEW

 

NPV

 

AUSTRALIA

 

108,215

 

 

 

348,567

 

 

 

BRAMBLES LTD

 

NPV

 

AUSTRALIA

 

258,466

 

 

 

1,337,102

 

 

 

CALTEX AUSTRALIA

 

NPV

 

AUSTRALIA

 

25,391

 

 

 

127,282

 

 

 

CENTRO PROPS GP

 

UNITS NPV(STAPLED)

 

AUSTRALIA

 

1,437,514

 

 

 

76,170

 

 

 

CENTRO RETAIL GRP

 

NPV (STAPLED SEC)

 

AUSTRALIA

 

1,557,058

 

 

 

72,734

 

 

 

CFS RETAIL PROP

 

NPV

 

AUSTRALIA

 

277,675

 

 

 

362,023

 

 

 

CHALLENGER DIVERS

 

NPV

 

AUSTRALIA

 

27,694

 

 

 

11,488

 

 

 

CHARTER HALL GROUP

 

NPV (STAPLED)

 

AUSTRALIA

 

1,083,768

 

 

 

211,569

 

 

 

CMNWLTH BK OF AUST

 

NPV

 

AUSTRALIA

 

252,016

 

 

 

5,077,889

 

 

 

COCA COLA AMATIL

 

NPV(POST RECONSTRUCTION)

 

AUSTRALIA

 

103,315

 

 

 

661,967

 

 

 

COCHLEAR LTD

 

NPV

 

AUSTRALIA

 

10,322

 

 

 

398,686

 

 

 

COMPUTERSHARE REG

 

NPV(POST REC)

 

AUSTRALIA

 

88,124

 

 

 

479,232

 

 

 

COUNT FINANCIAL

 

NPV

 

AUSTRALIA

 

20,250

 

 

 

14,118

 

 

 

CROWN LTD

 

NPV

 

AUSTRALIA

 

83,131

 

 

 

346,015

 

 

 

CSL

 

NPV

 

AUSTRALIA

 

111,684

 

 

 

2,624,086

 

 

 

CSR LIMITED

 

NPV

 

AUSTRALIA

 

187,103

 

 

 

229,589

 

 

 

DEXUS PROPERTY GP

 

NPV (STAPLED)

 

AUSTRALIA

 

545,128

 

 

 

311,652

 

 

 

ELDERS LTD

 

NPV

 

AUSTRALIA

 

12

 

 

 

5

 

 

 

FAIRFAX MEDIA LTD

 

NPV

 

AUSTRALIA

 

261,067

 

 

 

297,596

 

 

 

FELIX RESOURCES

 

NPV

 

AUSTRALIA

 

6,329

 

 

 

38,831

 

 

 

FKP

 

NPV

 

AUSTRALIA

 

137,007

 

 

 

48,238

 

 

 

FLEETWOOD CORP LTD

 

NPV

 

AUSTRALIA

 

39,051

 

 

 

99,648

 

 

 

FORTESCUE METAL GROUP

 

NPV

 

AUSTRALIA

 

235,068

 

 

 

316,306

 

 

 

FOSTERS GROUP

 

NPV

 

AUSTRALIA

 

360,937

 

 

 

1,384,049

 

 

 

GLOUCESTER COAL LTD

 

NPV

 

AUSTRALIA

 

29,818

 

 

 

80,662

 

 

 

GOODMAN FIELDER

 

NPV

 

AUSTRALIA

 

256,543

 

 

 

237,886

 

 

 

GOODMAN GROUP

 

NPV(SAPLED UNITS)

 

AUSTRALIA

 

283,084

 

 

 

146,051

 

 

 

GPT GROUP

 

NPV (UNITS)

 

AUSTRALIA

 

409,374

 

 

 

262,582

 

 

 

GUD HLDGS

 

NPV

 

AUSTRALIA

 

33,409

 

 

 

139,524

 

 

 

HARVEY NORMAN HLDG NPV

 

COM

 

AUSTRALIA

 

102,041

 

 

 

188,529

 

 



 

 

 

HASTIE GROUP LIMIT

 

NPV

 

AUSTRALIA

 

44,929

 

 

 

40,722

 

 

 

HFA HOLDING

 

NPV

 

AUSTRALIA

 

1,082,498

 

 

 

40,755

 

 

 

INCITEC PIVOT

 

NPV

 

AUSTRALIA

 

225,353

 

 

 

391,219

 

 

 

INSURANCE AUST GRP

 

NPV

 

AUSTRALIA

 

358,484

 

 

 

972,247

 

 

 

ISOFT GROUP LTD

 

NPV

 

AUSTRALIA

 

96,997

 

 

 

41,590

 

 

 

LEIGHTON HOLDINGS

 

NPV

 

AUSTRALIA

 

26,967

 

 

 

519,858

 

 

 

LEND LEASE CORP

 

NPV

 

AUSTRALIA

 

69,585

 

 

 

349,305

 

 

 

LION NATHAN LTD

 

NPV(AUST LIST)

 

AUSTRALIA

 

56,647

 

 

 

324,643

 

 

 

MACARTHUR COAL LTD

 

NPV

 

AUSTRALIA

 

7,193

 

 

 

15,195

 

 

 

MACQUARIE AIRPORTS

 

NPV STAPLED FULLY PAID

 

AUSTRALIA

 

126,574

 

 

 

211,794

 

 

 

MACQUARIE GP LTD

 

NPV

 

AUSTRALIA

 

51,425

 

 

 

1,032,939

 

 

 

MACQUARIE INFRASTRUCTURE GRP

 

NPV (STAPLED)

 

AUSTRALIA

 

445,578

 

 

 

531,223

 

 

 

MACQUARIE OFFICE

 

UNITS NPV

 

AUSTRALIA

 

394,299

 

 

 

65,977

 

 

 

MACQUARIE OFFICE TRUST

 

RTS EXP 12JAN09

 

AUSTRALIA

 

394,299

 

 

 

10,996

 

 

 

METCASH LIMITED

 

NPV

 

AUSTRALIA

 

139,584

 

 

 

426,253

 

 

 

MINERAL RESS LTD

 

NPV

 

AUSTRALIA

 

19,577

 

 

 

30,028

 

 

 

MIRVAC GROUP

 

STAPLED SECS

 

AUSTRALIA

 

210,870

 

 

 

188,184

 

 

 

MYOB LIMITED

 

NPV (POST REC)

 

AUSTRALIA

 

36,597

 

 

 

28,322

 

 

 

NATL AUSTRALIA BK

 

NPV

 

AUSTRALIA

 

320,540

 

 

 

4,664,037

 

 

 

NEWCREST MINING

 

NPV

 

AUSTRALIA

 

85,638

 

 

 

2,023,463

 

 

 

NEXUS ENERGY

 

NPV

 

AUSTRALIA

 

134,192

 

 

 

49,586

 

 

 

NRW HOLDINGS LTD

 

NPV

 

AUSTRALIA

 

11,661

 

 

 

1,748

 

 

 

ONESTEEL

 

NPV

 

AUSTRALIA

 

163,504

 

 

 

280,428

 

 

 

ORICA LTD

 

NPV

 

AUSTRALIA

 

68,486

 

 

 

667,523

 

 

 

ORIGIN ENERGY

 

NPV

 

AUSTRALIA

 

165,437

 

 

 

1,859,324

 

 

 

OZ MINERALS LTD

 

NPV

 

AUSTRALIA

 

583,751

 

 

 

223,845

 

 

 

PACIFIC BRANDS

 

NPV

 

AUSTRALIA

 

2,047

 

 

 

614

 

 

 

PALADIN ENERGY LTD

 

NPV

 

AUSTRALIA

 

104,376

 

 

 

180,472

 

 

 

PAPERLINX

 

NPV

 

AUSTRALIA

 

5

 

 

 

2

 

 

 

PERILYA LIMITED

 

NPV

 

AUSTRALIA

 

616,713

 

 

 

73,095

 

 

 

PERPETUAL LIMITED

 

NPV

 

AUSTRALIA

 

7,299

 

 

 

188,746

 

 

 

PHARMAXIS NPV

 

NPV

 

AUSTRALIA

 

50,684

 

 

 

42,758

 

 

 

PMP LTD

 

NPV

 

AUSTRALIA

 

18,043

 

 

 

6,290

 

 

 

QANTAS AIRWAYS

 

NPV

 

AUSTRALIA

 

184,112

 

 

 

337,594

 

 

 

QBE INS GROUP

 

NPV

 

AUSTRALIA

 

161,607

 

 

 

2,908,074

 

 

 

RIO TINTO LIMITED

 

NPV

 

AUSTRALIA

 

53,399

 

 

 

1,414,731

 

 

 

RIVERSDALE MINING

 

NPV

 

AUSTRALIA

 

804

 

 

 

1,351

 

 

 

ROC OIL CO LTD

 

NPV

 

AUSTRALIA

 

59,308

 

 

 

20,675

 

 

 

SAI GLOBAL LTD

 

NPV

 

AUSTRALIA

 

46,669

 

 

 

76,463

 

 

 

SALMAT LTD

 

NPV

 

AUSTRALIA

 

14,308

 

 

 

31,922

 

 

 

SANTOS LTD

 

NPV

 

AUSTRALIA

 

111,188

 

 

 

1,152,726

 

 

 

SILEX

 

NPV

 

AUSTRALIA

 

19,175

 

 

 

39,037

 

 

 

SIMS METAL MANAGEMENT LTD

 

NPV

 

AUSTRALIA

 

29,637

 

 

 

358,295

 

 

 

SONIC HEALTHCARE LTD

 

NPV

 

AUSTRALIA

 

61,122

 

 

 

620,463

 

 

 

STOCKLAND

 

NPV

 

AUSTRALIA

 

289,899

 

 

 

816,555

 

 

 

STW COMMUNICATIONS

 

NPV

 

AUSTRALIA

 

6,343

 

 

 

3,007

 

 

 

SUNCORP METWAY

 

NPV

 

AUSTRALIA

 

176,177

 

 

 

1,031,777

 

 

 

SUNLAND GROUP LTD

 

NPV(POST RECONSTRUCTION)

 

AUSTRALIA

 

210,868

 

 

 

109,528

 

 

 

TABCORP HLDGS LTD

 

NPV

 

AUSTRALIA

 

100,810

 

 

 

491,290

 

 

 

TATTS GROUP LTD

 

NPV

 

AUSTRALIA

 

205,233

 

 

 

399,217

 

 

 

TELSTRA CORP

 

NPV

 

AUSTRALIA

 

813,515

 

 

 

2,172,309

 

 

 

THE MAC SERVICES GROUP

 

NPV

 

AUSTRALIA

 

15,215

 

 

 

8,805

 

 

 

TOLL HLDGS LIMITED

 

NPV

 

AUSTRALIA

 

120,004

 

 

 

516,224

 

 

 

TRANSURBAN GROUP

 

STAPLED UNITS NPV

 

AUSTRALIA

 

211,866

 

 

 

797,650

 

 

 

VALAD PROPERTY GP

 

NPV(STAPLED)

 

AUSTRALIA

 

537,743

 

 

 

19,870

 

 

 

VIRGIN BLUE HLDGS

 

NPV

 

AUSTRALIA

 

176,483

 

 

 

36,913

 

 

 

WESFARMERS

 

NPV

 

AUSTRALIA

 

122,703

 

 

 

1,539,873

 

 

 

WESFARMERS LTD

 

NPV PPS

 

AUSTRALIA

 

26,895

 

 

 

337,521

 

 

 

WESTFIELD GROUP

 

NPV STAPLED UNITS

 

AUSTRALIA

 

327,669

 

 

 

2,958,438

 

 

 

WESTPAC BKG CORP

 

NPV

 

AUSTRALIA

 

501,454

 

 

 

5,932,944

 

 

 

WOODSIDE PETROLEUM

 

NPV

 

AUSTRALIA

 

90,919

 

 

 

2,326,366

 

 

 

WOOLWORTHS LTD

 

NPV

 

AUSTRALIA

 

227,878

 

 

 

4,237,236

 

 

 

WORLEYPARSONS LIMITED

 

NPV

 

AUSTRALIA

 

28,037

 

 

 

276,205

 

 

 

WOTIF COM HOLDINGS

 

NPV

 

AUSTRALIA

 

17,667

 

 

 

45,328

 

 

 

A TECH INDUSTRIES

 

NPV (BR)

 

AUSTRIA

 

4,993

 

 

 

46,016

 

 

 

ANDRITZ AG

 

NPV BR (POST SPLIT)

 

AUSTRIA

 

7,635

 

 

 

192,733

 

 

 

AUSTRIAN AIRLINES

 

NPV

 

AUSTRIA

 

27,573

 

 

 

153,311

 

 

 

BWIN INTERACTIVE ENTERTAINMENT

 

NPV

 

AUSTRIA

 

4,685