Performance Supplement. The IBM 401(k) Plus Plan Investment Results

Transcription

1 Performance Supplement The IBM 401(k) Plus Plan Investment Results Listed below is the annualized performance of the Primary investment options available through the IBM 401(k) Plus Plan for the period ending 09/30/2017 All-in-One Life Cycle Funds 1 month 3 months 6 months YTD 1 year 3 years 5 years 10 years Inception Inception 8/31/2017 6/30/2017 3/31/ /31/2016 9/30/2016 9/30/2014 9/30/2012 9/30/2007 To Date To 9/30/2017 9/30/2017 9/30/2017 9/30/2017 9/30/2017 9/30/2017 9/30/2017 9/30/2017 Return Date OJTarget Retirement 2010 Fund 0.20% 2.09% 3.54% 6.04% 4.49% 4.01% 4.88% N/A 4.05% 1/2/2008 OJTarget Retirement 2015 Fund 0.40% 2.50% 4.23% 7.19% 6.02% 4.62% 5.86% N/A 4.26% 1/2/2008 OJTarget Retirement 2020 Fund 0.67% 2.95% 5.02% 8.56% 7.94% 5.29% 6.94% N/A 4.50% 1/2/2008 OJTarget Retirement 2025 Fund 0.99% 3.42% 5.87% 10.00% 9.99% 5.98% 8.05% N/A 4.83% 1/2/2008 OJTarget Retirement 2030 Fund 1.30% 3.87% 6.71% 11.46% 12.08% 6.63% 8.94% N/A 5.21% 1/2/2008 OJTarget Retirement 2035 Fund 1.49% 4.16% 7.16% 12.23% 13.14% 6.91% 9.22% N/A 5.34% 1/2/2008 OJTarget Retirement 2040 Fund 1.53% 4.21% 7.24% 12.37% 13.34% 6.98% 9.26% N/A 5.37% 1/2/2008 OJTarget Retirement 2045 Fund 1.53% 4.22% 7.24% 12.38% 13.35% 6.99% 9.27% N/A 5.37% 1/2/2008 OJTarget Retirement 2050 Fund 1.53% 4.22% 7.24% 12.37% 13.32% 7.00% 9.27% N/A 5.37% 1/2/2008 OOTarget Retirement 2055 Fund 1.53% 4.23% 7.25% 12.39% 13.34% N/A N/A N/A 7.74% 7/2/2015 OJIncome Plus Fund 0.20% 1.83% 2.95% 5.09% 4.02% 3.61% 3.74% 4.18% 6.11% 8/1/1996 OJConservative Fund 0.54% 2.65% 4.41% 7.52% 6.80% 4.79% 5.57% 4.54% 6.73% 8/1/1996 OJModerate Fund 0.88% 3.24% 5.48% 9.30% 8.99% 5.56% 6.89% 4.70% 7.53% 4/1/1993 OJAggressive Fund 1.53% 4.22% 7.23% 12.37% 13.36% 6.98% 9.27% 4.88% 7.51% 8/1/1996 Core Building Block Funds OJInterest Income Fund 0.24% 0.75% 1.51% 2.24% 3.04% 3.03% 2.95% 3.41% 6.00% 7/1/1985 OJInflation Protected Bond Fund -0.62% 0.90% 0.50% 1.76% -0.76% 1.59% -0.02% 3.88% 5.43% 7/1/2000 OJTotal Bond Market Fund -0.48% 0.83% 2.28% 3.11% -0.08% 2.65% 1.97% 2.64% 4.47% 5/1/1996 OJHigh Yield & Emerging Markets Bond Fund 0.19% 2.97% 5.88% 10.24% 7.20% 3.60% 2.64% 5.57% 6.53% 7/1/2004 OJTotal Stock Market Index Fund 2.44% 4.57% 7.71% 13.94% 18.68% 10.72% 14.18% 7.74% 5.82% 7/1/2000 OJTotal Intl Stock Market Index Fund 1.86% 6.25% 12.68% 22.24% 19.78% 5.55% 7.68% 1.98% 6.44% 4/1/1993 OZGlobal Real Estate Stock Index Fund -0.22% 1.60% 4.07% 5.88% 0.80% N/A N/A N/A 3.86% 4/1/ Balanced Exposure (Life Cycle)* -0.20% 3.63% 4.43% 7.57% 5.99% 3.88% N/A N/A 3.31% 4/5/ Commodities Fund (Life Cycle)* 2.79% 5.37% -0.08% -4.70% 1.44% % % N/A % 1/1/2008 Expanded Choice - Institutional Funds OJLong Term Credit Composite 0.03% 2.46% 6.97% 8.77% 2.53% 5.64% 4.68% 8.06% 7.97% 7/1/2000 OJLarge Company Index Fund 2.07% 4.48% 7.71% 14.23% 18.59% 10.81% 14.22% 7.48% 11.87% 5/1/1982 OJLarge-Cap Value Index Fund 2.96% 3.12% 4.51% 7.92% 15.11% 8.54% 13.19% 5.93% 6.29% 7/1/2000 OJLarge-Cap Growth Index Fund 1.31% 5.91% 10.84% 20.70% 21.93% 12.68% 15.24% 9.08% 4.32% 7/1/2000 OJSmall/Mid-Cap Stock Index Fund 4.28% 4.96% 7.91% 12.61% 19.21% 10.46% 14.23% 8.08% 10.40% 4/1/1990 OJSmall-Cap Value Index Fund 7.09% 5.16% 5.86% 5.77% 20.66% 12.19% 13.35% 7.27% 9.44% 7/1/2000 OJSmall-Cap Growth Index Fund 5.46% 6.28% 10.98% 16.97% 21.21% 12.41% 14.54% 8.75% 7.48% 7/1/2000 OJEuropean Stock Index Fund 3.10% 6.25% 14.82% 24.00% 22.98% 4.84% 8.75% 1.48% 4.10% 7/1/2000 OJPacific Stock Index Fund 1.02% 3.96% 7.99% 16.38% 13.88% 6.85% 8.85% 2.26% 2.91% 7/1/2000 OXEmerging Markets Stock Index Fund -0.79% 7.77% 11.53% 23.64% 18.90% 4.07% 3.64% N/A 2.27% 3/1/2012 OJReal Estate Investment Trust Index Fund -0.12% 0.90% 2.52% 3.51% 0.44% 9.53% 9.44% 5.57% 10.17% 6/1/2003 OJInternational Real Estate Index Fund -0.46% 3.24% 7.63% 11.41% 1.35% 5.13% 6.33% N/A 2.34% 1/1/2008 OJIBM Stock Fund 1.44% -4.70% % % -5.31% -5.43% -4.24% 4.42% 8.23% 4/1/1990 The three-month, six-month, year-to-date and one-year columns represent the total investment results of the funds over those time periods. The three-year, five-year, ten-year and inception-to-date columns represent annualized investment results. Fund investments results include market performance as well as reinvestment of interest income and dividends and the impact of annual operating expenses and investment management fees. *Note: All-in-One Life Cycle Funds are composed of Core Building Block Funds plus the Balanced Exposure and Commodities funds that cannot be invested in directly.

2 401(k) Plus Plan Index to the Fund Flyers First Half 2017 We are pleased to present the IBM 401(k) Plus Plan Fund Flyers for First Half ending June 30, The flyers in this packet are organized by tier and then by their asset class they are also numbered from 1 to 38. To assist you in finding funds of particular interest to you, the second page of the index to the fund flyers, provides the fund offerings sorted in two ways: sorted alphabetically and sorted in risk order, from least to most risky. FUNDS SORTED BY TIERS AVERAGE ANNUAL TOTAL 5-YEAR FUND NAME FLYER TYPE OF RETURN AS OF 6/30/17 EXPENSE STANDARD NO. OPTION 1 YR 5 YR 10 YR RATIO DEVIATION MANAGER ALL-IN-ONE LIFE CYCLE FUNDS Life Cycle Funds Overview & Supplement 1 & 1a Target Retirement Balanced Fund 4.21% 5.25% 0.10% 4.49 Multiple Managers (1,2) Target Retirement Balanced Fund 5.69% 6.25% 0.12% 5.19 Multiple Managers (1,2) Target Retirement Balanced Fund 7.55% 7.34% 0.12% 6.00 Multiple Managers (1,2) Target Retirement Balanced Fund 9.55% 8.46% 0.12% 6.88 Multiple Managers (1,2) Target Retirement Balanced Fund 11.59% 9.32% 0.11% 7.72 Multiple Managers (1,2) Target Retirement Balanced Fund 12.55% 9.56% 0.11% 8.06 Multiple Managers (1,2) Target Retirement Balanced Fund 12.70% 9.60% 0.11% 8.07 Multiple Managers (1,2) Target Retirement Balanced Fund 12.70% 9.60% 0.11% 8.07 Multiple Managers (1,2) Target Retirement Balanced Fund 12.68% 9.61% 0.11% 8.07 Multiple Managers (1) Target Retirement Balanced Fund 12.68% 0.11% (7) 8.07 (7) Multiple Managers (1,2) Income Plus 12 Balanced Fund 3.79% 3.95% 4.28% 0.14% 3.49 Multiple Managers (1,2) Conservative 13 Balanced Fund 6.41% 5.82% 4.55% 0.14% 4.97 Multiple Managers (1,2) Moderate 14 Balanced Fund 8.45% 7.17% 4.62% 0.12% 6.06 Multiple Managers (1,2) Aggressive 15 Balanced Fund 12.70% 9.60% 4.67% 0.11% 8.07 Multiple Managers (1,2) CORE BUILDING BLOCK FUNDS Interest Income 16 Other 3.06% 2.97% 3.48% 0.36% 0.06 Multiple Managers (2) Inflation Protected Bond 17 Bond Fund -0.68% 0.23% 4.25% 0.02% 4.52 State Street Global Advisors Total Bond Market 18 Bond Fund -0.49% 2.13% 2.70% 0.05% 2.90 Neuberger Berman High Yield & Emerging Markets Bond 19 Bond Fund 8.30% 3.12% 5.48% 0.38% 7.21 Multiple Managers (3) Total Stock Market Index 20 Stock Fund 18.54% 14.53% 7.41% 0.03% 9.81 The Vanguard Group Total International Stock Market Index 21 Stock Fund 20.27% 7.86% 1.83% 0.09% State Street Global Advisors Global Real Estate Stock Index 22 Stock Fund -1.17% 0.11% (7) (7) BlackRock Balanced Exposure (4) 23 Other 5.14% 0.37% (7) Multiple Managers (5) Commodities (4) 24 Stock Fund -6.60% % 0.38% PIMCO EXPANDED CHOICE INSTITUTIONAL FUNDS Long-Term Corporate Bond 25 Bond Fund 2.29% 5.26% 8.06% 0.05% 8.09 Multiple Managers (6) Large Company Index 26 Stock Fund 17.88% 14.62% 7.23% 0.03% 9.56 The Vanguard Group Large-Cap Value Index 27 Stock Fund 15.52% 13.93% 5.58% 0.04% 9.89 The Vanguard Group Large-Cap Growth Index 28 Stock Fund 20.39% 15.28% 8.90% 0.03% The Vanguard Group Small/Mid-Cap Stock Index 29 Stock Fund 21.71% 14.35% 7.51% 0.04% State Street Global Advisors Small-Cap Value Index 30 Stock Fund 24.95% 13.46% 6.05% 0.04% The Vanguard Group Small-Cap Growth Index 31 Stock Fund 24.63% 14.25% 8.10% 0.05% The Vanguard Group European Stock Index 32 Stock Fund 21.34% 9.25% 1.09% 0.07% The Vanguard Group Pacific Stock Index 33 Stock Fund 18.97% 8.54% 2.16% 0.08% The Vanguard Group Emerging Markets Stock Index 34 Stock Fund 18.93% 3.40% 0.11% (7) The Vanguard Group Real Estate Investment Trust Index 35 Stock Fund -1.90% 9.25% 5.72% 0.08% BlackRock International Real Estate Index 36 Stock Fund 0.22% 7.27% 0.16% BlackRock IBM Stock 37 Company Stock 4.90% -2.09% 6.15% 0.02% State Street Bank & Trust Co. EXPANDED CHOICE MUTUAL FUNDS Mutual Funds Overview 38 see fund flyer for details (1) All-in-One Life Cycle Funds are funds of funds. See fund flyer for allocation to underlying funds. (2) IBM Retirement Funds and underlying managers. (3) JPMorgan Investment Management, PIMCO, and Prudential. (4) The Commodities and Balanced Exposure funds are available only as components of the All-in-One Life Cycle Funds. (5) Bridgewater Associates & AQR Capital Management. (6) Loomis Sayles and WAMCO (7) Fund does not have 5 years of performance data. Performance returns, expense ratio, and 5 year standard deviation has been provided using actual and proxy data. See reverse for A Guide to the Style Boxes

3 FUNDS SORTED ALPHABETICALLY FUNDS SORTED IN PURE RISK ORDER FUND FLYER FLYER NAME FUND FLYER FLYER NAME 5 YEAR STANDARD DEVIATION 15 Aggressive 23 Balanced Exposure 24 Commodities 13 Conservative 34 Emerging Markets Stock Index 32 European Stock Index 22 Global Real Estate Stock Index 19 High Yield & Emerging Markets Bond 37 IBM Stock 12 Income Plus 17 Inflation Protected Bond 16 Interest Income 36 International Real Estate Index 26 Large Company Index 28 Large-Cap Growth Index 27 Large-Cap Value Index 25 Long-Term Corporate Bond 14 Moderate 33 Pacific Stock Index 35 Real Estate Investment Trust Index 29 Small / Mid-Cap Stock Index 31 Small-Cap Growth Index 30 Small-Cap Value Index 2 Target Retirement Target Retirement Target Retirement Target Retirement Target Retirement Target Retirement Target Retirement Target Retirement Target Retirement Target Retirement Total Bond Market 21 Total International Stock Market Index 20 Total Stock Market Index 16 Interest Income Total Bond Market Income Plus Target Retirement Inflation Protected Bond Conservative Target Retirement Target Retirement Moderate Target Retirement High Yield & Emerging Markets Bond Target Retirement Target Retirement Target Retirement Target Retirement Target Retirement Target Retirement 2055** Aggressive Long-Term Corporate Bond Large Company Index Total Stock Market Index Large-Cap Value Index Balanced Exposure* Large-Cap Growth Index Total International Stock Market Index International Real Estate Index Pacific Stock Index Small/Mid-Cap Stock Index European Stock Index Global Real Estate Stock Index** Small-Cap Value Index Real Estate Investment Trust Index Emerging Markets Stock Index** Small-Cap Growth Index Commodities IBM Stock A Guide to the Style Boxes In the top right corner of each fund flyer, you will find a grid (or, in some cases, two grids) comprised of nine boxes. These boxes reflect the composition of the funds in terms of equity style versus market capitalization (for stock funds) or average weighted maturity versus credit quality (for bond funds). Shadings (dark, medium, and light) correspond to the relative weightings of the stocks and/or bonds held in the fund s portfolio. Below are two examples of style boxes and how they might be read. ** Fund does not have 5 years of performance data. Estimate of 5 year standard deviation is based on the fund s long term volatility target. ** Fund does not have 5 years of performance data. Estimate of 5 year standard deviation has been provided using actual and/or proxy data. IBM is a registered trademark of International Business Machines Corporation. All rights reserved International Business Machines Corporation. All rights reserved. STOCK FUNDS The shading in this box indicates the fund has a large proportion of large-cap growth stocks. The shading in this box indicates the fund has a medium-sized proportion of mid-cap growth stocks. The shading in this box indicates the fund has a small proportion of small-cap growth stocks. BOND FUNDS The shading in this box indicates the fund has a small proportion of investment-grade corporate bonds with short-term maturities. The shading in this box indicates the fund has a large proportion of investment-grade corporate bonds with intermediate-term maturities. LEGEND Relatively light weighting Medium weighting Relatively heavy weighting Equity Style Value Blend Growth Avg. Weighted Maturity Short Intermediate Long Treasury & Agency Corporate Below Market Cap Large Medium Small Credit Quality

4 401(k) Plus Plan All-in-One Life Cycle Funds About the Target Risk and Target Retirement Funds The Target Risk Funds and Target Retirement Funds offer a simple, one stop approach to retirement investing. These funds are balanced funds that invest in a diversified mix of stocks, bonds, and commodities geared to a particular investment style or life stage. All 14 funds invest in the Plan s Core Building Block Funds plus the Balanced Exposure and Commodities funds to attain their given asset allocation. These blended funds can make it easier for you to diversify your holdings and are designed to be the primary investment in your portfolio. These funds could serve as a sole or core investment for participants who prefer to have a professional asset allocation. The most important characteristic of the funds in this tier is that they provide diversification over broad asset classes. Diversification is one of the most important safeguards in investing because you avoid putting all of your eggs in one basket. As a result of the professional diversification of these funds, they seek to provide the highest expected long term return possible at any given risk level. They also offer the convenience of periodic rebalancing in order to ensure that each fund retains its targeted investment mix. This tier also provides the flexibility to choose a Target Risk Fund, which is a portfolio that maintains a fixed allocation, or a Target Retirement Fund which gradually and automatically shifts to a more conservative asset allocation over time. If you invest in an All-in-One Life Cycle fund,, consider making it your primary investment. If you own other Plan funds in addition to one of these investments, you may impact the overall asset allocation of your portfolio, possibly hindering your savings ability to grow efficiently. Target Risk Funds Each of the four Target Risk Funds Income Plus, Conservative, Moderate, and Aggressive has a preset mix of stock and fixed income investments to give you broad diversification to the financial markets, both in the U.S. and abroad. All you have to do is select which of the four Target Risk asset allocations suits you best, by considering your life situation, time to retirement, investment objectives, and risk tolerance. Keep in mind, though, that over time you may want to shift on your own from more aggressive target risk funds to more conservative ones. The preset mix of each Target Risk fund is not expected to change over time. These funds will rebalance periodically in order to maintain their stated asset allocation. Target Risk Funds Target Asset Allocation (as of June 30, 2017) Flyer 1 of 38 Total Bond High Yield Total Total Int l Investment Inflation Market & & Emerging Global Stock Stock Allocation Protected Interest Markets Real Estate Balanced Market Market Percentage Bond Income** Bond Stock Commodities* Exposure* Index Index Stock/Bond Income Plus 35% 35% 5% 5% 2% 0% 13% 5% Conservative 20% 26% 4% 7% 2% 10% 22% 9% Moderate 12% 20% 3% 8% 3% 10% 31% 13% Aggressive 0% 8% 2% 10% 4% 10% 46% 20% * Exposure to the Balanced Exposure and Commodities funds are considered part of the allocation to stocks. ** The Target Risk Funds allocations to the Interest Income Fund is transitioning to the Total Bond Market Fund over time. Target Retirement Funds The Target Retirement Funds offer portfolios with targeted retirement dates for the years 2010, 2015, 2020, 2025, 2030, 2035, 2040, 2045, 2050, and As with Target Risk Funds, these funds offer a convenient low-cost way to achieve a sophisticated diversification strategy, professional money management, and periodic rebalancing. In addition, Target Retirement Funds offer another great advantage: Investment experts stress that the mix of stocks, bonds, and short-term reserves in your portfolio should be adjusted regularly to keep your asset allocation on track for retirement. Target Retirement Funds make this adjustment automatically by shifting semi-annually toward a more conservative allocation. All you have to do is select the fund that most closely matches the year you ll retire, or the year you expect to start drawing on your retirement assets. If your risk tolerance is higher or lower than the fund s allocation, adjust your selection accordingly.

5 Target Retirement Funds Glide Path Based on your age, the following chart provides a pictorial view of the allocation to stocks for each Target Retirement fund. For those beginning a career, the Target Retirement funds provide a relatively high allocation to stocks. As you draw closer to retirement, your associated Target Retirement fund will gradually become more conservative by reducing its allocation to stocks. Each fund s reduction to stocks continues through its target retirement date for another 10 years, until the fund s allocation and risk profile matches that of the Income Plus Fund and will subsequently be merged into the Income Plus Fund. The Target Retirement funds assume a retirement age of 60. Target Retirement Funds Glide Path Target Retirement Funds Target Asset Allocation (as of June 30, 2017) and Selection Guidelines Total Bond High Yield Total Total Int l Investment Inflation Market & & Emerging Global Stock Stock Allocation Your Year Potential Protected Interest Markets Real Estate Balanced Market Market Percentage of Birth Fund Choice Bond Income** Bond Stock Commodities* Exposure* Index Index Stock/Bond After 1992 Target Retirement % 8.0% 2.0% 10.0% 4.0% 10.0% 46.0% 20.0% 1988 to Target Retirement % 8.0% 2.0% 10.0% 4.0% 10.0% 46.0% 20.0% to Target Retirement % 8.0% 2.0% 10.0% 4.0% 10.0% 46.0% 20.0% to Target Retirement % 8.0% 2.0% 10.0% 4.0% 10.0% 46.0% 20.0% to Target Retirement % 9.6% 2.2% 9.7% 3.8% 10.0% 45.2% 19.5% to Target Retirement % 13.9% 2.7% 9.0% 3.3% 10.0% 41.0% 17.4% to Target Retirement % 18.6% 3.2% 8.2% 2.8% 10.0% 33.8% 14.1% to Target Retirement % 23.2% 3.7% 7.5% 2.3% 10.0% 26.4% 10.9% to Target Retirement % 27.8% 4.2% 6.6% 2.0% 8.0% 20.2% 8.2% to Target Retirement % 32.3% 4.7% 5.6% 2.0% 3.0% 15.7% 6.2% 1952 Prior to Income Plus 35.0% 35.0% 5.0% 5.0% 2.0% 0.0% 13.0% 5.0% 1948 * Exposure to the Balanced Exposure and Commodities funds are considered part of the allocation to stocks. ** The Target Retirement Funds allocations to the Interest Income Fund is transitioning to the Total Bond Market Fund over time.

6 401(k) Plus Plan Supplement to the All-in-One Life Cycle Funds Overview Flyer 1a of 38 Changes commencing December 29, 2017 The Plan s All-in-One Life Cycle Funds, which include the ten Target Retirement Funds and four Target Risk Funds, will transition to new target asset allocations starting in December and through the first quarter of The changes, described below, may help even out the up-and-down performance swings of these funds. Each All-in-One Life Cycle Fund invests in the Plan s Core Building Block Funds to create a broadly diversified portfolio. The Target Retirement Funds follow an investment glide path, gradually and automatically shifting to a more conservative asset allocation over time. The year in a Target Date Fund s name is the approximate year the investor plans to retire or start drawing on the assets. The Plan s Target Date Funds assume a retirement age of 60. The Target Risk Funds maintain a constant mix of stocks and bonds. The following changes will be made: Increasing exposure to international stocks Within each Target Retirement and Target Risk funds stock allocations, international stock holdings will increase by 10 percentage points from 70% U.S./30% international to 60% U.S./40% international. This change will allow the stock portion of the funds to better reflect the global stock market performance. In a parallel move, the Global Real Estate Stock Index Fund s international real estate allocations will also increase by 10 percentage points, from 70% U.S./30% international to 60% U.S./40% international. The Global Real Estate Stock Index Fund is one of your Plan s Core Building Block Fund offerings, and it is also a component of the All-in-One Life Cycle Funds. Increasing allocation to the Balanced Exposure Fund Each All-in-One Life Cycle Fund s allocation to the Balanced Exposure Fund will increase by 5 percentage points, other than the Conservative Fund. For all Target Retirement, Moderate and Aggressive funds, allocation increasing from 10% to 15%. The Income Plus Fund s allocation is increasing from 0% to 5%. Conservative Fund s allocation remains 10%. The Balanced Exposure Fund invests in a variety of assets including stocks, bonds, and commodities. While traditional balanced funds allocate capital to different asset classes in fixed weights, the Balanced Exposure Fund allocates capital with the objective of balancing risks across different economic environments or risk factors. The fund may use leverage and derivatives to achieve this balance. For the Target Retirement Funds, the Balanced Exposure Fund s allocation increase will be sourced from bonds, global real estate stocks and commodities. For the Target Risk Funds, the increased allocation to the Balanced Exposure Fund will be sourced by a reduction in U.S. stocks, international stocks and commodities. Target Retirement Funds new glide path and asset allocations The Target Retirement Funds offer portfolios with targeted retirement dates for the years 2010, 2015, 2020, 2025, 2030, 2035, 2040, 2045, 2050, and As with Target Risk Funds, these funds offer a convenient low-cost way to achieve a sophisticated diversification strategy, professional money management, and periodic rebalancing. In addition, Target Retirement Funds offer another great advantage: Investment experts stress that the mix of stocks, bonds, and short-term reserves in your portfolio should be adjusted regularly to keep your asset allocation on track for retirement. Target Retirement Funds make this adjustment automatically by shifting periodically toward a more conservative allocation. For those beginning a career, the Target Retirement funds provide a relatively high allocation to stocks. As you draw closer to retirement, your associated Target Retirement fund will gradually become more conservative by reducing its allocation to stocks. Each fund s reduction to stocks continues through the year in its name, the target date, for another 10 years, until the fund s allocation and risk profile matches that of the Income Plus Fund. The Target Retirement Funds assume a retirement age of 60. Commencing in December 2017, the Target Retirement Funds will transition to their new glide path and target allocations listed below. The transition is expected to be completed by March 31, Thereafter, the allocation of each Target Retirement fund will automatically shift periodically toward a more conservative allocation. Target Retirement Funds Glide Path (transition commencing December 2017)

7 Target Retirement Funds Target Asset Allocation (as of December 29, 2017) and Selection Guidelines Total Bond High Yield Total Total Int l Investment Inflation Market & & Emerging Global Stock Stock Allocation Your Year Potential Protected Interest Markets Real Estate Balanced Market Market Percentage of Birth Fund Choice Bond Income** Bond Stock Commodities* Exposure* Index Index Stock/Bond After 1992 Target Retirement % 5.0% 2.0% 10.0% 2.0% 15.0% 40.0% 26.0% 7% Bonds 93% Stocks 1988 to Target Retirement % 5.0% 2.0% 10.0% 2.0% 15.0% 40.0% 26.0% to Target Retirement % 5.0% 2.0% 10.0% 2.0% 15.0% 40.0% 26.0% to Target Retirement % 5.0% 2.0% 10.0% 2.0% 15.0% 40.0% 26.0% to Target Retirement % 7.1% 2.2% 9.4% 2.0% 15.0% 38.6% 25.7% % Bonds 93% Stocks 7% Bonds 93% Stocks 7% Bonds 93% Stocks 9% Bonds 91% Stocks 1968 to Target Retirement % 11.7% 2.7% 8.2% 2.0% 15.0% 34.3% 22.9% to Target Retirement % 16.6% 3.2% 6.9% 2.0% 15.0% 28.1% 18.7% to Target Retirement % 21.5% 3.7% 5.6% 2.0% 15.0% 21.8% 14.6% to Target Retirement % 26.8% 4.3% 4.5% 2.0% 12.5% 16.6% 11.0% to Target Retirement % 32.3% 4.8% 3.5% 2.0% 7.5% 12.7% 8.4% 1952 Prior to Income Plus 32.0% 35.0% 5.0% 3.0% 2.0% 5.0% 11.0% 7.0% 1948 * Exposure to the Balanced Exposure and Commodities funds are considered part of the allocation to stocks. ** The Target Retirement Funds allocations to the Interest Income Fund is transitioning to the Total Bond Market Fund over time. Target Risk Funds new asset allocations Each of the Target Risk Funds Income Plus, Conservative, Moderate, and Aggressive has a preset mix of stock and fixed income investments to give you broad diversification to the financial markets, both in the U.S. and abroad. Commencing in December 2017, the Target Risk Funds will begin a transition to their new allocations noted below. The transition is expected to be completed by March 31, These funds will rebalance periodically in order to maintain their stated allocation. Target Risk Funds Target Asset Allocation (transition commencing December 29, 2017) Total Bond High Yield Total Total Int l Investment Inflation Market & & Emerging Global Stock Stock Allocation Protected Interest Markets Real Estate Balanced Market Market Percentage Bond Income** Bond Stock Commodities* Exposure* Index Index Stock/Bond Income Plus 32% 35% 5% 3% 2% 5% 11% 7% Conservative 20% 26% 4% 7% 2% 10% 19% 12% Moderate 12% 20% 3% 8% 2% 15% 24% 16% Aggressive 0% 8% 2% 10% 2% 15% 38% 25% * Exposure to the Balanced Exposure and Commodities funds are considered part of the allocation to stocks. ** The Target Risk Funds allocations to the Interest Income Fund is transitioning to the Total Bond Market Fund over time.

8 401(k) Plus Plan Target Retirement 2010 Fund (as of 6/30/17) This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of Objective & Strategy Risk/Return Profile Equity Style Value Blend Growth Market Cap Large Medium Small Avg. Weighted Maturity Short Intermediate Long Weightings Lighter Medium Heavier Flyer 2 of 38 Treasury & Agency Corporate Below Credit Quality The Target Retirement 2010 Fund, a unitized fund, is one of ten target retirement funds that seeks to provide a convenient low-cost way to achieve a sophisticated diversification strategy, professional money management, and automatic rebalancing. Consistent with its current allocation, the fund seeks returns that outpace inflation over the long term. Over time, the fund will automatically shift semi-annually toward a more conservative asset allocation. By 2020, the fund s asset allocation should resemble that of the Income Plus Fund and will subsequently be merged into the Income Plus Fund. Unit price and return will vary. Annualized Expense Ratio: Average Target Date Fund Expense Ratio (1) : Turnover Ratio (estimate): Average Target Date Fund Turnover Ratio (2) : The Target Retirement 2010 Fund is designed for investors who have retired or started to draw on their retirement assets on or around the year 2010 and are seeking low cost participation in the stock, bond, and commodities markets through a broadly diversified portfolio. Currently, it may also be for investors who have a low tolerance for short-term price fluctuations and are seeking an investment with a high level of income plus modest capital appreciation. Target retirement funds are generally designed for investors expecting to retire around the year 0.10% or $1.05 per $1,000 invested in the fund 0.48% or $4.79 per $1,000 invested in the fund 22% of the fund 17% of the fund indicated in each fund s name. The funds are managed to gradually become more conservative over time. The investment risks of each target retirement fund changes over time as its asset allocation changes. They are subject to the volatility of the financial markets, including equity and fixed income investments in the U.S. and abroad and may be subject to risks associated with investing in high yield bonds, small-cap securities, foreign securities and commodities. Principal invested is not guaranteed at any time, including at or after their target date. Overall Risk Level (3) Qualitative Low Moderate High Very High Fund Score Quantitative Trailing Time Period Performance (4) % Total Return as of 6/30/17 3 Mos YTD 1 Yr 3 Yr 5 Yr 10 Yr Since Inception of Fund Target Retirement 2010 Fund Benchmark: Target Retirement 2010 Composite Index (5)(6) Inception Date: 1/2/08 $40,000 $30,000 $20,000 $10,000 Growth of $10,000: Target Retirement 2010 Fund vs. Benchmarks Commencing in December 2017, the Target Retirement Funds will transition to a new glide path and target allocations. The transition is expected to be completed by March 31, Thereafter, the allocation of each Target Retirement fund will automatically shift periodically toward a more conservative allocation. For additional information on the Target Retirement Fund changes, please read the All-in-One Life Cycle Funds Overview Supplement. $21,397 $15,663 $14,420 $14,297 0 Calendar Year Performance % Return Target Retirement 2010 Fund Target Retirement 2010 Composite Index (5)(6) Standard & Poor s 500 Index (6)(7) Barclays US Aggregate Bond Index (6)(8) YTD (9) (9) (1) Asset-weighted average expense ratio for similar mutual funds as reported by Morningstar Inc. (2) Turnover Ratio, for similar mutual funds as reported by Morningstar Inc., is an indication of the fund s activity and refers to the percent of a fund s assets that are replaced during a fiscal year. (3) Overall Risk Level is historical, based on an estimate of the fund s current composite benchmark 5 year standard deviation. The composite benchmark returns are based on the returns of the underlying funds benchmarks or proxies. Market volatility is at historical lows; actual standard deviation in the future may be higher than current standard deviation. (4) The data presented represents past performance, which cannot be used to predict future returns that may be achieved. The investment return and principal value of an investment will fluctuate so that an investor s units, when redeemed, may be worth more or less than their original cost. (5) The Target Retirement 2010 Composite Index is a hypothetical combination of unmanaged indices reflecting the fund s target asset allocation. The index weightings are adjusted twice a year to reflect the fund s changing asset allocations. (6) Benchmark returns do not include operating costs. (7) Standard & Poor s 500 Index is an unmanaged market capitalization-weighted index generally considered representative of the stock market as a whole. The Index focuses on the large-cap segment of the U.S. equities market. (8) Barclays U.S. Aggregate Bond Index is an unmanaged market value-weighted index of investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage backed securities, with maturities of one year or more. (9) Returns are since fund inception, January 2, 2008.

9 Target Retirement 2010 Fund (as of 6/30/17) Target Allocation (by fund) Total International Stock Market Index Fund 6.2% Inflation Protected Bond Fund 30.5% Total Stock Market Index Fund 15.7% Balanced Exposure Fund 3.0% Commodities Fund 2.0% Total Bond Market Fund 32.3% Global Real Estate Stock Index Fund 5.6% High Yield & Emerging Markets Bond Fund 4.7% Holdings The fund does not buy securities directly; instead, it invests in eight 401(k) Plus Plan funds: the Inflation Protected Bond Fund, the Total Bond Market Fund, the High Yield & Emerging Markets Bond Fund, the Global Real Estate Stock Index Fund, the Total Stock Market Index Fund, the Total International Stock Market Index Fund, the Balanced Exposure Fund and the Commodities Fund This gives the fund exposure to a broadly diversified group of U.S. and foreign stocks and various types of bonds. As of June 30, 2017, the fund s target asset allocation between stocks and bonds is 32.5% stocks*, 67.5% bonds. The current target allocations by fund are provided in the Target Allocations chart above. The allocations to each fund are maintained close to the target allocations and target allocations are adjusted semi-annually, based on an asset allocation strategy that becomes increasingly conservative over time. For detailed information on the underlying funds that comprise the Target Retirement 2010 Fund, please read the corresponding fund flyers. Fund Net Assets: $156 million Total # Holdings: 8 funds Fund Manager: IBM Retirement Funds and underlying fund managers * Exposure to the Balanced Exposure and Commodities funds are considered part of the allocation to stocks. Advanced Analytics Standard: Benchmark: Target Retirement 3 YR 5 YR Standard & Poor s 500 Index 2010 Composite Index Sharpe Ratio R-Squared* Standard Deviation 4.54% 4.49% Beta* Alpha* -0.53% 0.08% *Based on trailing 36 months returns; alphas are annualized. For detailed equity and fixed-income characteristics, please see underlying funds. The underlying funds may lend their holdings to qualified institutional investors to seek to enhance returns through fees earned related to the securities lent. Although all loans of securities are fully collateralized, there is some risk of loss if a borrower defaults on its obligation or losses occur related to the collateral received. Securities lending is performed in accordance with applicable law and regulations. The IBM 401(k) Plus Plan Trust (Trust) has claimed an exclusion from the definition of the term commodity pool operator under the Commodity Exchange Act (Act) and, therefore, the Trust is not subject to registration or regulation as a pool operator under the Act. IBM is a registered trademark of International Business Machines Corporation. All rights reserved. Standard & Poors, S&P, S&P 500, Standard & Poor s 500, and 500 are trademarks of The McGraw-Hill Companies, Inc International Business Machines Corporation. All rights reserved.

10 401(k) Plus Plan Target Retirement 2015 Fund (as of 6/30/17) This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of Objective & Strategy Risk/Return Profile Equity Style Value Blend Growth Market Cap Large Medium Small Avg. Weighted Maturity Short Intermediate Long Weightings Lighter Medium Heavier Flyer 3 of 38 Treasury & Agency Corporate Below Credit Quality The Target Retirement 2015 Fund, a unitized fund, is one of ten target retirement funds that seeks to provide a convenient low-cost way to achieve a sophisticated diversification strategy, professional money management, and automatic rebalancing. Consistent with its current allocation, the fund seeks returns that outpace inflation over the long term. Over time, the fund will automatically shift semi-annually toward a more conservative asset allocation. By 2025, the fund s asset allocation should resemble that of the Income Plus Fund and will subsequently be merged into the Income Plus Fund. Unit price and return will vary. The Target Retirement 2015 Fund is designed for investors planning to retire or plan to start drawing on their retirement assets on or around the year 2015 and are seeking low cost participation in the stock, bond, and commodities markets through a broadly diversified portfolio. Currently, it may also be for investors who have a moderate tolerance for short-term price fluctuations and are seeking both a reasonable level of income and longer-term growth of capital and income. Target retirement funds are generally designed for investors expecting to retire around the year indicated in each fund s name. The funds are managed to gradually become more conservative over time. The investment risks of each target retirement fund changes over time as its asset allocation changes. They are subject to the volatility of the financial markets, including equity and fixed income investments in the U.S. and abroad and may be subject to risks associated with investing in high yield bonds, small-cap securities, foreign securities and commodities. Principal invested is not guaranteed at any time, including at or after their target date. Annualized Expense Ratio: Average Target Date 2015 Fund Expense Ratio (1) : Turnover Ratio (estimate): Average Target Date 2015 Fund Turnover Ratio (2) : 0.12% or $1.17 per $1,000 invested in the fund 0.41% or $4.14 per $1,000 invested in the fund 21% of the fund 15% of the fund Overall Risk Level (3) Qualitative Low Moderate High Very High Fund Score Quantitative Trailing Time Period Performance (4) % Total Return as of 6/30/17 3 Mos YTD 1 Yr 3 Yr 5 Yr 10 Yr Since Inception of Fund Target Retirement 2015 Fund Benchmark: Target Retirement 2015 Composite Index (5)(6) Inception Date: 1/2/08 $40,000 Growth of $10,000: Target Retirement 2015 Fund vs. Benchmarks $30,000 $20,000 $10,000 Commencing in December 2017, the Target Retirement Funds will transition to a new glide path and target allocations. The transition is expected to be completed by March 31, Thereafter, the allocation of each Target Retirement fund will automatically shift periodically toward a more conservative allocation. For additional information on the Target Retirement Fund changes, please read the All-in-One Life Cycle Funds Overview Supplement. $21,397 $15,663 $14,643 $14,607 0 Calendar Year Performance % Return YTD Target Retirement 2015 Fund Target Retirement 2015 Composite Index (5)(6) Standard & Poor s 500 Index (6)(7) Barclays US Aggregate Bond Index (6)(8) (9) (9) (1) Asset-weighted average expense ratio for similar mutual funds as reported by Morningstar Inc. (2) Turnover Ratio, for similar mutual funds as reported by Morningstar Inc., is an indication of the fund s activity and refers to the percent of a fund s assets that are replaced during a fiscal year. (3) Overall Risk Level is historical, based on an estimate of the fund s current composite benchmark 5 year standard deviation. The composite benchmark returns are based on the returns of the underlying funds benchmarks or proxies. Market volatility is at historical lows; actual standard deviation in the future may be higher than current standard deviation. (4) The data presented represents past performance, which cannot be used to predict future returns that may be achieved. The investment return and principal value of an investment will fluctuate so that an investor s units, when redeemed, may be worth more or less than their original cost. (5) The Target Retirement 2015 Composite Index is a hypothetical combination of unmanaged indices reflecting the fund s target asset allocation. The index weightings are adjusted twice a year to reflect the fund s changing asset allocations. (6) Benchmark returns do not include operating costs. (7) Standard & Poor s 500 Index is an unmanaged market capitalization-weighted index generally considered representative of the stock market as a whole. The Index focuses on the large-cap segment of the U.S. equities market. (8) Barclays U.S. Aggregate Bond Index is an unmanaged market value-weighted index of investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of one year or more. (9) Returns are since fund inception, January 2, 2008.

11 Target Retirement 2015 Fund (as of 6/30/17) Target Allocation (by fund) Total International Stock Market Index Fund 8.2% Inflation Protected Bond Fund 23.0% Total Stock Market Index Fund 20.2% Total Bond Market Fund 27.8% Balanced Exposure Fund 8.0% Commodities Fund 2.0% Global Real Estate Stock Index Fund 6.6% High Yield & Emerging Markets Bond Fund 4.2% Holdings The fund does not buy securities directly; instead, it invests in eight 401(k) Plus Plan funds: the Inflation Protected Bond Fund, the Total Bond Market Fund, the High Yield & Emerging Markets Bond Fund, the Global Real Estate Stock Index Fund, the Total Stock Market Index Fund, the Total International Stock Market Index Fund, the Balanced Exposure Fund and the Commodities Fund. This gives the fund exposure to a broadly diversified group of U.S. and foreign stocks and various types of bonds. As of June 30, 2017, the fund s target asset allocation between stocks and bonds is 45% stocks*, 55% bonds. The current target allocations by fund are provided in the Target Allocations chart above. The allocations to each fund are maintained close to the target allocations and the target allocations are adjusted semi-annually, based on an asset allocation strategy that becomes increasingly conservative over time. For detailed information on the underlying funds that comprise the Target Retirement 2015 Fund, please read the corresponding fund flyers. Fund Net Assets: $446 million Total # Holdings: 8 funds Fund Manager: IBM Retirement Funds and underlying fund managers * Exposure to the Balanced Exposure and Commodities funds are considered part of the allocation to stocks. Advanced Analytics Standard: Benchmark: Target Retirement 3 YR 5 YR Standard & Poor s 500 Index 2015 Composite Index Sharpe Ratio R-Squared* Standard Deviation 5.30% 5.19% Beta* Alpha* -0.95% 0.08% *Based on trailing 36 months returns; alphas are annualized. For detailed equity and fixed-income characteristics, please see underlying funds. The underlying funds may lend their holdings to qualified institutional investors to seek to enhance returns through fees earned related to the securities lent. Although all loans of securities are fully collateralized, there is some risk of loss if a borrower defaults on its obligation or losses occur related to the collateral received. Securities lending is performed in accordance with applicable law and regulations. The IBM 401(k) Plus Plan Trust (Trust) has claimed an exclusion from the definition of the term commodity pool operator under the Commodity Exchange Act (Act) and, therefore, the Trust is not subject to registration or regulation as a pool operator under the Act. IBM is a registered trademark of International Business Machines Corporation. All rights reserved. Standard & Poors, S&P, S&P 500, Standard & Poor s 500, and 500 are trademarks of The McGraw-Hill Companies, Inc International Business Machines Corporation. All rights reserved.

12 401(k) Plus Plan Target Retirement 2020 Fund (as of 6/30/17) This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of Objective & Strategy Risk/Return Profile Equity Style Value Blend Growth Market Cap Large Medium Small Avg. Weighted Maturity Short Intermediate Long Weightings Lighter Medium Heavier Flyer 4 of 38 Treasury & Agency Corporate Below Credit Quality The Target Retirement 2020 Fund, a unitized fund, is one of ten target retirement funds that seeks to provide a convenient low-cost way to achieve a sophisticated diversification strategy, professional money management, and automatic rebalancing. Consistent with its current allocation, the fund seeks relatively high returns at a moderate risk level. Over time, the fund will automatically shift semi-annually toward a more conservative asset allocation. By 2030, the fund s asset allocation should resemble that of the Income Plus Fund and will subsequently be merged into the Income Plus Fund. Unit price and return will vary. The Target Retirement 2020 Fund is designed for investors planning to retire or plan to start drawing on their retirement assets on or around the year 2020 and are seeking low cost participation in the stock, bond, and commodities markets through a broadly diversified portfolio. Currently, it may also be for investors who have a moderate tolerance for short-term price fluctuations and are seeking both a reasonable level of income and longer-term growth of capital and income. Current income produced by this fund is low. Target retirement funds are generally designed for investors expecting to retire around the year indicated in each fund s name. The funds are managed to gradually become more conservative over time. The investment risks of each target retirement fund changes over time as its asset allocation changes. They are subject to the volatility of the financial markets, including equity and fixed income investments in the U.S. and abroad and may be subject to risks associated with investing in high yield bonds, small-cap securities, foreign securities and commodities. Principal invested is not guaranteed at any time, including at or after their target date. Annualized Expense Ratio: Average Target Date 2020 Fund Expense Ratio (1) : Turnover Ratio (estimate): Average Target Date 2020 Fund Turnover Ratio (2) : 0.12% or $1.16 per $1,000 invested in the fund 0.49% or $4.86 per $1,000 invested in the fund 28% of the fund 15% of the fund Overall Risk Level (3) Qualitative Low Moderate High Very High Fund Score Quantitative Trailing Time Period Performance (4) % Total Return as of 6/30/17 3 Mos YTD 1 Yr 3 Yr 5 Yr 10 Yr Since Inception of Fund Target Retirement 2020 Fund Benchmark: Target Retirement 2020 Composite Index (5)(6) Inception Date: 1/2/08 $40,000 Growth of $10,000: Target Retirement 2020 Fund vs. Benchmarks $30,000 $20,000 $10,000 Commencing in December 2017, the Target Retirement Funds will transition to a new glide path and target allocations. The transition is expected to be completed by March 31, Thereafter, the allocation of each Target Retirement fund will automatically shift periodically toward a more conservative allocation. For additional information on the Target Retirement Fund changes, please read the All-in-One Life Cycle Funds Overview Supplement. $21,397 $15,663 $14,919 $14,911 0 Calendar Year Performance % Return Target Retirement 2020 Fund Target Retirement 2020 Composite Index (5)(6) Standard & Poor s 500 Index (6)(7) Barclays US Aggregate Bond Index (6)(8) YTD (9) (9) (1) Asset-weighted average expense ratio for similar mutual funds as reported by Morningstar Inc. (2) Turnover Ratio, for similar mutual funds as reported by Morningstar Inc., is an indication of the fund s activity and refers to the percent of a fund s assets that are replaced during a fiscal year. (3) Overall Risk Level is historical, based on an estimate of the fund s current composite benchmark 5 year standard deviation. The composite benchmark returns are based on the returns of the underlying funds benchmarks or proxies. Market volatility is at historical lows; actual standard deviation in the future may be higher than current standard deviation. (4) The data presented represents past performance, which cannot be used to predict future returns that may be achieved. The investment return and principal value of an investment will fluctuate so that an investor s units, when redeemed, may be worth more or less than their original cost. (5) The Target Retirement 2020 Composite Index is a hypothetical combination of unmanaged indices reflecting the fund s target asset allocation. The index weightings are adjusted twice a year to reflect the fund s changing asset allocations. (6) Benchmark returns do not include operating costs. (7) Standard & Poor s 500 Index is an unmanaged market capitalization-weighted index generally considered representative of the stock market as a whole. The Index focuses on the large-cap segment of the U.S. equities market. (8) Barclays U.S. Aggregate Bond Index is an unmanaged market value-weighted index of investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of one year or more. (9) Returns are since fund inception, January 2, 2008.