Item

 

Report of Ernst & Young LLP, Independent Auditors

Statements of Net Assets Available for Benefits at December 31, 2001 and 2000

Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2001

Notes to Financial Statements

Signature

Exhibit 23 - Consent of Ernst & Young LLP, Independent Auditors

 

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Intel Corporation 401(k) Savings Plan

Financial Statements

As of December 31, 2001 and 2000
and for the year ended December 31, 2001

 

 

 

Contents

Report of Independent Auditors	1
Audited Financial Statements
Statements of Net Assets Available for Benefits	2
Statement of Changes in Net Assets Available for Benefits	3
Notes to Financial Statements	4

 

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Report of Independent Auditors

The Plan Administrative Committee
Intel Corporation 401(k) Savings Plan

We have audited the accompanying statements of net assets available for benefits of the Intel Corporation 401(k) Savings Plan as of December 31, 2001 and 2000, and the related statement of changes in net assets available for benefits for the year ended December 31, 2001. 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 in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Intel Corporation 401(k) Savings Plan at December 31, 2001 and 2000, and the changes in its net assets available for benefits for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

 

/s/ERNST & YOUNG LLP

May 17, 2002

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Intel Corporation 401(k) Savings Plan

Statements of Net Assets Available for Benefits

 

	December 31,
	2001			2000
	(In Thousands)
Assets
Value of interest in the Master Trust	$	2,041,332		$	1,877,058
Employee contributions receivable		5,624			5,985
Total assets		2,046,956			1,883,043
Liabilities
Accrued administrative fees		84			120
Net assets available for benefits	$	2,046,872		$	1,882,923

 

See accompanying notes.

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Intel Corporation 401(k) Savings Plan

Statement of Changes in Net Assets Available for Benefits

Year Ended December 31, 2001

(In Thousands)

Additions
Employee contributions	$	296,918
Deductions
Benefits paid to participants and participant withdrawals		83,177
Administrative fees		927
Total deductions		84,104
Net investment loss from participation in the Master Trust		(78,368)
Net transfers from other plans		29,503
Net increase		163,949
Net assets available for benefits:
Beginning of year		1,882,923
End of year	$	2,046,872

 

See accompanying notes.

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Intel Corporation 401(k) Savings Plan

Notes to Financial Statements

December 31, 2001

1. Description of the Plan

The following description of the Intel Corporation 401(k) Savings Plan (the Plan) provides only general information. Participants should refer to the plan document and the plan prospectus for a more complete description of the Plan's provisions.

General

The Plan is a defined contribution plan covering all eligible U.S. employees of Intel Corporation (the company). Employees are eligible to participate in the Plan any time on or after their date of hire.

The Plan is intended to be qualified under Section 401(a) of the U.S. Internal Revenue Code of 1986 (the Code), as amended, and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.

Trustee

Mellon Bank, N.A. is the Plan's trustee.

Administration of the Plan

The company has delegated to the Plan Administrative Committee responsibility for the general operation and administration of the Plan, and for carrying out and interpreting the Plan's provisions. The company is the named fiduciary and administrator of the Plan, as well as the Plan sponsor, as defined by ERISA. The company has contracted with Fidelity Investments Institutional Operations Company to provide recordkeeping services with respect to the Plan.

Plan Mergers

During 2001, the Dialogic Corporation Employee Benefits Plan and the Parity Software Developmental Corporation 401(k) Plan were merged into the Plan resulting in transfers into the Plan of approximately $29,785,000 in net assets.

 

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Intel Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

 

1. Description of the Plan (continued)

Contributions and Participant Accounts

Participant Contributions

Participants may contribute up to 12% (limited to certain percentages for highly compensated individuals) of their annual compensation on a before-tax basis. Such contributions are withheld by the company from each participant's compensation and deposited in the appropriate fund in accordance with the participant's directives. Participants may elect to invest in sixteen different investment options. Scudder Kemper Investments has discretionary authority for the purchase and sale of investments in the Scudder Fixed Income Fund, subject to the general investment policies of the Investment Policy Committee of the company. Participants may change their investment elections daily.

Participant Accounts

Separate accounts are maintained for each participant. The account balances are generally adjusted as follows:

	*	Biweekly or semi-monthly for participant contributions.
	*	Daily for a pro rata share of gains or losses on the Plan's investments based on the ratio that each participant's account bears to the total of all such accounts.

Vesting

Participants are immediately 100% vested with respect to contributions to all accounts in the Plan as well as the related earnings from such contributions.

 

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Intel Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

 

1. Description of the Plan (continued)

Payment of Benefits

Participants are eligible for a distribution of Plan benefits upon termination of service, whether by disability, retirement, death or leaving the company. In the event of financial hardship (as defined by the Plan), participants may withdraw money from their Plan accounts while they are still employed. Upon termination of service, a participant, or applicable beneficiary, may elect to have benefits paid in a single lump sum distribution or in a specified number of monthly, quarterly, semiannual or annual installments, or may request that the company make a direct transfer to another eligible retirement plan. Spousal consent may be required based on the value of the account balance or type of distribution.

Upon retirement, participants may elect to transfer the balance of their accounts to the Intel Corporation Defined Benefit Pension Plan. A single annuity is paid to those participants based on the combined benefit under the terms of the two plans. There were transfers under this option of approximately $282,000 for the year ended December 31, 2001.

Participant Loans

All participants are permitted to obtain loans of up to 50% of their vested account balances in the Plan up to a maximum of $50,000 when combined with all other loans from this Plan and the Intel Corporation Profit Sharing Plan. The participants' account balances secure their loans. The interest rate is based on the prime rate plus 1% as reported in The Wall Street Journal on the last business day of each month. The loan provisions are established and administered by the recordkeeper.

Participants may choose to obtain loans from either this Plan or the Intel Corporation Profit Sharing Plan. Repayments of loans are transferred to the participants' Plan and Intel Corporation Profit Sharing Plan accounts in the ratio in which such accounts provided funding for the loan.

Administrative Expenses

The company pays a portion of the expenses for administration of the Plan. All other administrative expenses are paid directly by the Plan.

 

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Intel Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

 

2. Summary of Significant Accounting Policies

Basis of Accounting

The accompanying financial statements are prepared on the accrual basis of accounting.

Accounting Change

Effective as of the beginning of 2001, the Plan adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, which requires the Plan to recognize all derivative instruments as either assets or liabilities on the statement of net assets available for benefits at fair value. Because the Plan accounts for all financial instruments at fair value (or amounts that approximate fair value), the adoption of the new statement did not have a material impact on the recognized investment income or the net assets available for benefits of the Plan. Under SFAS No. 133 Implementation Issue No. C19, fully benefit-responsive investment contracts that follow Statement of Position 94-4, "Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and Defined Contribution Benefit Plans," are not subject to SFAS No. 133 reporting. The Intel Corporation Master Trust (the Master Trust) holds these types of investment contracts, known as wrapper contracts. The wrapper contracts alter the investment characteristics of the underlying securities to match certain fund objectives (see Note 5). Accordingly, the wrapper contracts held in the Master Trust are included with the fair value of the related underlying securities at year end.

Investment Valuation and Income Recognition

Investments in the Master Trust (see Note 3) are stated at each plan’s proportionate share of participation in the Master Trust, based upon the fair value of Master Trust investments held at year end.

Investments in interest bearing cash, money market funds, mutual funds, debt securities, equity securities, and participant loans are stated at fair value as of the last day of the year. The fair value for securities traded on a national securities exchange or over-the-counter market is the last reported sales price as of the valuation date. Mutual funds are valued at quoted market prices that represent the net asset values of shares held at year end. Interest bearing cash and money market funds are stated at cost plus accrued interest, which approximate fair value. Participant loans are valued at their outstanding balances, which approximate fair value. Investments not traded in active markets are stated at the estimated fair value, computed using pricing models at current rates.

 

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Intel Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

 

2. Summary of Significant Accounting Policies (continued)

Investment Valuation and Income Recognition (continued)

Investment income includes the gain (loss) realized on the sale of securities and unrealized appreciation (depreciation) in the fair value of investments, which is the difference between the fair value of investments at the beginning and the end of the year.

The Master Trust may hold derivative financial instruments (see Note 5) in order to manage market risks and to alter the return characteristics of underlying securities to replicate the performance of the S&P 500 Index. The Master Trust utilizes derivatives to replicate financial market performance in situations where derivatives are more economical or practical than purchasing the underlying securities themselves. Interest rate swap contracts, wrapper contracts with insurance companies, and Standard & Poor's 500 Index (S&P 500 Index) options are stated at fair value as of the last day of the year. As noted above (see "Accounting Change"), the wrapper contracts held in the Master Trust are not subject to SFAS No. 133 and therefore are included with the fair value of the related underlying debt securities at year end. Realized and unrealized appreciation (depreciation) in the fair value of all derivative financial instruments are currently recognized in income.

Investment transactions are recognized as of their trade dates, and collateral has been obtained and secured against investments whenever deemed necessary. Interest is accrued monthly; dividends are accrued when declared.

Guaranteed investment contracts are entered into with insurance companies. The contracts are unallocated in nature and are valued at contract value because they are fully benefit responsive. Contract value, as reported by the respective insurance companies, approximates fair value. Contract value represents contributions made under the contracts plus interest at the contract rates less withdrawals and administrative expenses. If the funds in the guaranteed investment contracts are needed for benefit payments prior to contract maturity, they may be withdrawn without penalty.

 

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Intel Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

 

2. Summary of Significant Accounting Policies (continued)

Payment of Benefits

Benefits are recorded when paid.

Contributions

Participant contributions are accrued when the participants' salary deferrals are made.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from management's estimates.

3. Interest in the Master Trust

All of the investments of the Plan are held in the Master Trust, which consists of the assets of the Plan, the Intel Corporation Profit Sharing Retirement Plan, the Intel Corporation Defined Benefit Pension Plan, the Intel Puerto Rico Profit Sharing Retirement Plan, the Intel Puerto Rico Retirement Savings Plan, and the Intel Puerto Rico Defined Benefit Pension Plan. Each plan shares in the assets and earnings of the Master Trust based on its respective interests in the Master Trust. The company's Treasury Department manages all assets of the Master Trust that pertain to company contributions and has discretionary authority for the related purchases and sales of investments, subject to the general investment policies of the Investment Policy Committee of the company.

The value of the Plan's interest in the Master Trust included in the statements of net assets available for benefits represents 40.72% of the net assets of the Master Trust at December 31, 2001 and 37.05% at December 31, 2000. Interest, dividends, net appreciation (depreciation) in the fair value of investments, and expenses are allocated to the Plan based upon its allocable share in the net assets of the Master Trust.

 

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Intel Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

 

3. Interest in the Master Trust (continued)

The Master Trust's net assets available for benefits consisted of the following at:

	December 31,
	2001			2000
	(In Thousands)
Assets:
Investments, at fair value:
Interest bearing cash and money market funds	$	15,526		$	89,262
Mutual funds		1,242,731			1,178,027
Debt securities and debt swaps		46,989			956,521
Guaranteed investment contracts		5,726			5,462
Intel common stock		762,271			673,796
Other equity securities and equity derivatives		2,834,155			2,068,386
Participant loans receivable		101,541			97,442
Total investments		5,008,939			5,068,896
Receivables:
Interest and dividends receivable		4,144			9,942
Receivable from brokers for securities sold		873			240
Total assets		5,013,956			5,079,078
Liabilities:
Payable to brokers for securities purchased		1,150			12,685
Net assets available for benefits	$	5,012,806		$	5,066,393

 

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Intel Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

 

3. Interest in the Master Trust (continued)

The following is a summary of the investment loss in the Master Trust:

	Year Ended December 31,
	2001
	(In Thousands)
Net appreciation (depreciation) in fair value of investments   determined by quoted market price:
Other equity securities and equity derivatives	$	(467,638)
Mutual funds		(150,322)
Intel common stock		13,149
		(604,811)
Net appreciation in fair value of investments   estimated by the trustee:
Debt securities		1,527
Interest and dividends		110,803
Net investment loss	$	(492,481)

The Master Trust held investments in interest bearing cash and money market funds, mutual funds, equity securities, debt securities, participant loans, wrapper contracts, and guaranteed investment contracts that are specifically allocated to the Plan at December 31, 2001 and 2000.

Certain Master Trust investments are shares of the company's common stock specifically allocated to the Plan. Transactions in shares of the company's common stock qualify as party-in-interest transactions under the provisions of ERISA. During 2001, the Master Trust made purchases of the company's common stock of approximately $163,028,000 and sales of approximately $30,624,000. The Plan had a 91.94% interest in the company's common stock held by the Master Trust at December 31, 2001 and a 94.37% interest at December 31, 2000.

 

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Intel Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

 

4. Guaranteed Investment Contracts

The Master Trust held guaranteed investment contracts with insurance companies specifically allocated to the Plan in order to provide participants with a stable, fixed-rate return of investment and protection of principal from changes in market interest rates. As of December 31, 2001, the Master Trust held guaranteed investment contracts in the amount of $5,726,000 ($5,462,000 at December 31, 2000) with insurance companies that have S&P ratings of AA or better at the time of purchase. No more than approximately $3,420,000 ($3,255,000 in 2000) of the guaranteed investment contracts is with any one insurance company.

5. Derivative Financial Instruments

The Master Trust holds wrapper contracts specifically allocated to the Plan in order to manage market risks and to alter the return characteristics of underlying securities to match certain fixed income fund objectives. Wrapper contracts generally change the investment characteristics of underlying securities (such as corporate debt or U.S. government securities) to those of guaranteed investment contracts. The wrapper contracts provide that benefit-responsive distributions for specific underlying securities may be withdrawn at contract or face value. Benefit-responsive distributions are generally defined as a withdrawal on account of a participant's retirement, disability, death, or participant-directed transfers, in accordance with the terms of the Plan. As of December 31, 2001, the Master Trust held wrapper contracts with a fair value of approximately $581,000 ($48,000 as of December 31, 2000).

6. Concentration of Credit Risk

The Plan's exposure to a concentration of credit risk is limited by the diversification of investments across sixteen participant-directed fund elections. Additionally, the investments within each participant-directed fund election are further diversified into varied financial instruments, with the exception of the Intel Stock Fund, which invests in a single security. The Plan's exposure to credit risk on the wrapper contracts is limited to the fair value of the contracts with each counterparty.

 

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Intel Corporation 401(k) Savings Plan

Notes to Financial Statements (continued)

 

 

7. Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated April 16, 2002, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan administrator and its internal tax counsel believe that the Plan is operated in compliance with the applicable requirements of the Code and, therefore believe that the Plan is qualified and the related trust is tax-exempt.

8. Plan Termination

The company has the right under the Plan to amend and terminate the Plan at any time for any reason. The Board of Directors of the company has delegated to the Plan Administrative Committee the authority to amend the Plan. No amendment of the Plan shall reduce the benefit of any participant, which accrued under the Plan to the date when such amendment is adopted. In the event of a plan termination, participants will remain 100% vested in their accounts.

 

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SIGNATURE

  

The Plan. Pursuant to the requirements of the Securities and Exchange Act of 1934 the Plan Administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

    

	INTEL CORPORATION 401(k) SAVINGS PLAN
	(Full Title of the Plan)

  

Date: June 12, 2002	By:	/s/Andy D. Bryant
		Andy D. Bryant Executive Vice President, Chief Financial and Enterprise Services Officer of Intel Corporation, Plan Administrator

 

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