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 [FEE REQUIRED]
for the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission File Number: 1-4423
A. Full title of the plan and address of the plan, if different from
that of the issuer named below:
HEWLETT-PACKARD COMPANY
TAX SAVING CAPITAL ACCUMULATION PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
HEWLETT-PACKARD COMPANY
3000 HANOVER STREET
PALO ALTO, CALIFORNIA 94304
REQUIRED INFORMATION
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Index to Financial Statements
Page
Report of Independent Accountants 1
Financial Statements
Statement of Net Assets Available for Benefits
at December 31, 1996 and 1995 2
Statement of Changes in Net Assets Available for Benefits,
with Fund Information for the Years Ended December 31,
1996 and 1995 3-4
Notes to Financial Statements 5-9
Additional Information
Schedule I - Assets Held for Investment Purposes at
December 31, 1996 10
Schedule II - Transactions Occurring During the Year Ended
December 31, 1996 Which Were in Excess of 5%
of the Current Value of Plan Assets at
December 31, 1995 11
Note: Other schedules required by Section 2520.103-10 of the Department
of Labor's Rules and Regulations for Reporting Disclosure under
the Employee Retirement Income Security Act of 1974 have been
omitted because they are not applicable.
Report of Independent Accountants
May 9, 1997
To the Participants and Administrator of
the Hewlett-Packard Company Tax Saving
Capital Accumulation Plan
In our opinion, the accompanying statement 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 Hewlett-Packard Company Tax Saving Capital Accumulation
Plan at December 31, 1996 and 1995, and the changes in net assets available
for benefits for the years then ended, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion
expressed above.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The additional information
included in Schedules I and II is presented for purposes of additional
analysis and is not a required part of the basic financial statements
but is additional information required by ERISA. The Fund Information
in the statement of changes in net assets available for benefits is
presented for purposes of additional analysis rather than to present
the changes in net assets available for benefits of each fund. Schedules
I and II and the Fund Information have been subjected to the auditing
procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
Price Waterhouse LLP
San Jose, California
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities and
Exchange Act of 1934, the trustees (or other persons who administer the
employee benefit plan) have duly caused this annual report to be signed by
the undersigned thereunto duly authorized.
HEWLETT-PACKARD COMPANY
TAX SAVING CAPITAL ACCUMULATION PLAN
/s/Ann O. Baskins
Assistant Secretary
and Managing Counsel
<PAGE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Net Assets Available for Benefits
(In thousands)
December 31,
1996 1995
Assets:
Investments, at fair value:
Hewlett-Packard Company Common Stock $ 902,070 $ 751,269
Templeton Foreign Fund Class I 56,940 -
PBHG Growth Fund 171,788 -
Fidelity Contrafund 268,702 168,554
Fidelity Magellan Fund 780,799 862,726
Fidelity Growth & Income Portfolio 180,466 95,367
Fidelity U.S. Equity Index Portfolio 136,145 89,258
Fidelity Intermediate Bond Fund 79,614 69,065
Fidelity Retirement Money Market
Portfolio 241,247 180,884
Fidelity Institutional Cash Portfolio
Money Market Class I 9,670 7,151
Loans receivable from participants 89,506 75,137
---------- ----------
Total assets held for investment 2,916,947 2,299,411
Receivables:
Receivable from Hewlett-Packard
Company 28,625 24,333
Investment income receivable 2,191 1,831
Miscellaneous receivables 1,038 22
---------- ----------
Total assets 2,948,801 2,325,597
Liabilities:
Administrative expenses payable - 126
---------- ----------
Total liabilities - 126
---------- ----------
Net assets available for benefits $2,948,801 $2,325,471
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits,
with Fund Information
For the Year Ended December 31, 1996
(In thousands)
Fund Information
<CAPTION> PBHG Contra- Growth &
Stock Templeton Growth fund Magellan Income
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employees $ 10,511 $ 4,666 $ 14,461 $ 26,704 $ 71,217 $ 18,965
Company 667 2,091 6,914 12,034 34,771 7,991
Noncash 52,754
Investment income:
Net realized and
unrealized
appreciation in
fair value of
investments:
Hewlett-Packard
Company Common
Stock 159,599
Net investment gain/
(loss) from registered
investment companies:
Templeton Foreign
Fund Class 1 5,167
PBHG Growth Fund (1,895)
Fidelity Contrafund 42,465
Fidelity Magellan
Fund 86,420
Fidelity Growth &
Income Portfolio 24,837
Fidelity U.S. Equity
Index Portfolio
Fidelity Intermediate
Bond Fund
Interest income 532
Dividend income 8,240
</TABLE>
<TABLE>
Hewlett-Packard Company
Tax Saving Accumulation Plan
Statement of Changes in Net Assets Available for Benefits
With Fund Information
For the Year Ended December 31, 1996 (Continued)
(in thousands)
Fund Information
<CAPTION> Equity Intermediate Money
Index Bond Market Loan Total
<S> <C> <C> <C> <C> <C>
Contributions:
Employees $ 12,449 $ 8,242 $ 20,296 $ $ 187,511
Company 5,612 3,822 9,027 82,929
Noncash 52,754
Investment income:
Net realized and
unrealized
appreciation in
fair value of
investments:
Hewlett-Packard
Company Common
Stock 159,599
Net investment gain/
(loss)from registered
investment companies:
Templeton Foreign
Fund Class 1 5,167
PBHG Growth Fund ( 1,895)
Fidelity Contrafund 42,465
Fidelity Magellan
Fund 86,420
Fidelity Growth &
Income Portfolio 24,837
Fidelity U.S. Equity
Index Portfolio 22,252 22,252
Fidelity Intermediate
Bond Fund 2,576 2,576
Interest income 10,635 7,092 18,259
Dividend income 8,240
</TABLE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits,
With Fund Information
For the Year Ended December 31, 1996 (Continued)
(in thousands)
Fund Information
<CAPTION>
PBHG Growth &
Stock Templeton Growth Contrafund Magellan Income
<S> <C> <C> <C> <C> <C> <C>
Transfer in from Convex
Computer Corporation
401(k) Thrift and
Savings Plan 1,342 2,299 11,005 4,044
-------- ------- -------- -------- -------- --------
Total additions 232,303 13,266 19,480 83,502 203,413 55,837
-------- ------- -------- -------- -------- --------
Benefits paid to
participants 26,559 780 2,948 6,996 28,606 5,145
Loans deemed repaid
due to termination
Administrative exp. 94 1 7 17 210 67
-------- ------- -------- -------- -------- --------
Total deductions 26,653 781 2,955 7,013 28,816 5,212
-------- ------- -------- -------- -------- --------
Net increase
before interfund
transfers 205,650 12,485 16,525 76,489 174,597 50,625
Interfund transfers (49,716) 45,250 157,929 24,247 (258,814) 35,304
-------- ------- -------- -------- -------- --------
Net increase/(decrease) 155,934 57,735 174,454 100,736 (84,217) 85,929
Net assets available
for benefits:
Beginning of year 765,051 - - 171,524 873,087 97,012
-------- ------- -------- -------- -------- --------
End of year $920,985 $57,735 $174,454 $272,260 $788,870 $182,941
======== ======= ======== ======== ======== ========
</TABLE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits,
With Fund Information
For the Year Ended December 31, 1996 (Continued)
(in thousands)
Fund Information
<CAPTION>
Equity Intermediate Money
Index Bond Market Loan Total
<S> <C> <C> <C> <C> <C>
Transfer in from Convex
Computer Corporation
401(k) Thrift and
Savings Plan 1,753 1,062 2,763 492 24,760
--------- ------- -------- ------- ----------
Total additions 42,066 15,702 42,721 7,584 715,874
--------- ------- -------- ------- ----------
Benefits paid to
participants 3,743 3,327 11,802 89,906
Loans deemed repaid
due to termination 1,917 1,917
Administrative expense 59 65 201 721
--------- ------- -------- ------- ----------
Total deductions 3,802 3,392 12,003 1,917 92,544
--------- ------- -------- ------- ----------
Net increase before
interfund transfers 38,264 12,310 30,718 5,667 623,330
Interfund transfers 9,021 (1,722) 29,799 8,702 -
-------- ------- -------- ------- ----------
Net increase/(decrease) 47,285 10,588 60,517 14,369 623,330
Net assets available
for benefits:
Beginning of year 90,533 70,033 183,094 75,137 2,325,471
-------- ------- -------- ------- ----------
End of year $137,818 $80,621 $243,611 $89,506 $2,948,801
======== ======= ======== ======= ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits, with Fund Information
For the Year Ended December 31, 1995
(In thousands)
Fund Information
<CAPTION>
Inter-
Contra- Growth & Equity mediate Money
Stock fund Magellan Income Index Bond Market Loan Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Employees $ 4,553 $ 22,643 $ 78,499 $ 12,977 $ 10,219 $ 7,714 $ 18,682 $ 155,287
Company 581 10,761 39,913 5,936 4,839 3,846 9,097 74,973
Noncash 43,792 43,792
Investment income:
Net realized and
unrealized
appreciation in
fair value of
investments:
Hewlett-Packard
Company Common
Stock 273,261 273,261
Net investment
gain from
registered
investment
companies:
Fidelity
Contrafund 40,432 40,432
Fidelity Magellan
Fund 228,997 228,997
Fidelity Growth &
Income Portfolio 21,804 21,804
Fidelity U. S. Equity
Index Portfolio 22,619 22,619
Fidelity Intermediate
Bond Fund 7,505 7,505
Interest income 478 10,660 5,402 16,540
Dividend income 6,203 6,203
-------- ------- -------- -------- ------- ------- -------- ------- ----------
Total additions 328,868 73,836 347,409 40,717 37,677 19,065 38,439 5,402 891,413
-------- ------- -------- -------- ------- ------- -------- ------- ----------
Benefits paid to
participants 24,769 5,516 36,017 3,652 4,176 3,381 16,447 93,958
Loans deemed repaid
due to termination 2,484 2,484
Administrative
expenses 113 11 276 63 61 79 255 858
-------- ------- -------- -------- ------- ------- -------- ------- ----------
Total
deductions 24,882 5,527 36,293 3,715 4,237 3,460 16,702 2,484 97,300
-------- ------- -------- -------- ------- ------- -------- ------- ----------
Net increase
before
interfund
transfers 303,986 68,309 311,116 37,002 33,440 15,605 21,737 2,918 794,113
Interfund
transfers 75,715 2,273 (72,047) 8,872 (651) (102) (20,722) 6,662 -
-------- ------- -------- -------- ------- ------- -------- ------- ----------
Net increase 379,701 70,582 239,069 45,874 32,789 15,503 1,015 9,580 794,113
Net assets
available
for benefits:
Beginning of
year 385,350 100,942 634,018 51,138 57,744 54,530 182,079 65,557 1,531,358
-------- -------- -------- ------- ------- ------- -------- ------- ----------
End of year $765,051 $171,524 $873,087 $97,012 $90,533 $70,033 $183,094 $75,137 $2,325,471
======== ======== ======== ======= ======= ======= ======== ======= ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Notes to Financial Statements
1. Plan Description:
---------------------
Purpose and Plan Benefits
The purpose of the Hewlett-Packard Company (the Company) Tax
Saving Capital Accumulation Plan (the Plan) is to provide
eligible employees an opportunity for regular savings of
tax-deferred dollars for their retirement to supplement
benefits provided under the Company's Retirement Program and
the Federal Social Security Act. The following brief
description of the Plan is provided for general information
purposes only. Participants should refer to the Plan
agreement for a more complete description of the Plan's
provisions.
The Plan is designed to qualify as a stock bonus plan under
Section 401(a) of the Internal Revenue Code of 1986, as
amended (the Code), and to meet the requirements set forth in
Section 401(k) of the Code. The Plan is also intended to
qualify as an individual account plan which permits each
participant to exercise control over certain assets of the
Plan pursuant to Section 404(c) of the Employee Retirement
Income Security Act (ERISA).
Fidelity Investments provides investment management,
recordkeeping and trustee services for the Plan. The Company
determines questions of eligibility for participation,
interprets the Plan, communicates with participants and their
beneficiaries and is otherwise generally responsible for Plan
operations.
Eligibility
Employees who are eligible to participate in the 40l(k)
program include those employees of the Company and designated
domestic subsidiaries who are on the U.S. payroll and who are
employed as regular full-time or regular part-time employees
by the Company one year after their original hire date.
Participation in the 40l(k) program is at the election of the
employee.
Employee Contributions
Participating employees may have their salary deferred by the
Company through payroll deductions and contributions made
directly to their 401(k) account. Employee contributions are
deposited into the trust account after the end of each
semi-monthly pay period.
Company Contributions
The Company contributes to the employee's account a percentage
of the amount which has been deferred and contributed by the
employee. The Company contributes an amount equal to the
employee's deferral for the first 3% deferred and an amount
equal to half of the employee's deferral for the next 2%
deferred. The Company matching contribution is deposited into
the individual employee's account after the end of each fiscal
quarter, which are January 31, April 30, July 31 and October 31.
Vesting
Participants are one hundred percent vested in the Plan at all
times.
Participant Accounts
Participants can invest their account balance and/or future
contributions in any combination of nine investment options.
Participating employees can transfer their invested funds
among the investment options and/or change the investment of
their future contributions daily as desired. These transfers
and changes must be made in whole percent increments.
All contributions made under the Plan are paid to and invested
by the trustee in one or more of the available investment
options. Six of the nine investment options are mutual funds
of Fidelity Investments, managed by the Fidelity Management
and Research Company. One of the investment options is the
PBHG Growth Fund, managed by Pilgrim Baxter and Associates.
Another of the investment options is the Templeton Foreign
Fund, managed by Templeton Global Advisors, Ltd. The nine
investment funds are:
Stock - A fund comprised primarily of Hewlett-Packard
Company Common Stock purchased on the open
market or contributed by the Company. The
fund also includes a minor investment in the
Fidelity Institutional Cash Portfolio Money
Market Class I.
Templeton - A fund comprised of investments in the
Templeton Foreign Fund Class I. The
investment is a growth mutual fund that
invests internationally. It seeks to increase
the value of the investments over the long
term through capital growth. The mutual fund
is invested primarily in common stocks, and
can invest in any foreign country, developed
or developing.
PBHG Growth - A fund comprised of investments in the Pilgrim
Baxter PBHG Growth Fund. This investment is
a growth mutual fund seeking long term growth
through capital appreciation. It invests
primarily in common stock of small and medium
sized companies believed to have strong
earnings and significant capital appreciation
potential. The mutual fund will invest in
many different kinds of companies and
industries, but at times may be heavily
concentrated in a relatively few number of
industries.
Contrafund - A fund comprised of investments in the
Fidelity Contrafund. The investment manager
invests mainly in U.S. and foreign common
stocks believed to be undervalued or out of
favor.
Magellan - A fund comprised of investments in the
Fidelity Magellan Fund. The fund manager
makes investments primarily in common stock
and securities convertible into common stock,
with the objective of seeking to increase the
value of the investment over the long term
through capital appreciation.
Growth &
Income - A fund comprised of investments in the
Fidelity Growth & Income Portfolio. The
investment manager invests in a broad
combination of stocks, convertibles, and
fixed-income securities, that currently pay
dividends, or that carry the potential for
increased earnings.
Equity
Index - A fund comprised of investments in the
Fidelity U.S. Equity Index Portfolio. The
fund manager makes investments in equity
securities and attempts to duplicate the
composition and total returns of the Standard
& Poor's Daily Stock Price Index of 500 Common
Stocks.
Intermediate
Bond Fund - A fund comprised of investments in Fidelity
Intermediate Bond Fund. Investments are made
primarily in bonds rated BBB or better with a
dollar-weighted average maturity of between
three and ten years.
Money
Market - A fund comprised of investments in Fidelity
Retirement Money Market Portfolio. Investments
are made in high quality, U.S. dollar-dominated
money market instruments of U.S. and foreign
issuers, including short-term obligations of
banks, governments and their agencies and
corporations.
Loans and Distributions
Participants are permitted to borrow portions of their account
balance. The loan amount and term are limited by the Code and
ERISA. Funds for the loans are obtained by liquidating the
investments in the participant's account. Principal and
interest payments, representing repayments of loans taken by
participants, are typically made through payroll deductions
and are paid directly into the participant's account after the
end of each semi-monthly payroll period. Loans may be repaid
in full at any time following the issuance of the loan.
The Plan also provides for hardship withdrawals subject to
certain restrictions and in-service withdrawals at age 59-1/2.
Benefits are payable in a lump sum. Certain participants from
certain companies acquired by the Company may elect to take
their benefits as an annuity or in installments.
Plan Termination
Although the Company has no present intention to terminate
the Plan, the Plan provides that in the event of Plan
termination, participants' interests accrued to the date of
termination shall be nonforfeitable. Benefits shall continue
to be distributed in accordance with the Plan. The trustee
shall continue in its capacity until all assets of the Plan
have been distributed to the participants.
2. Summary of Significant Accounting Policies:
-----------------------------------------------
The financial statements are prepared on the accrual basis of
accounting with investments being carried at current market
value, as quoted on the active market. Loans to participants
are valued at their outstanding principal amount.
All dividends and capital distributions received from the PBHG
Growth Fund, the Templeton Foreign Fund, the Fidelity
Contrafund, the Fidelity Magellan Fund, the Fidelity Growth &
Income Portfolio, the Fidelity U.S. Equity Index Portfolio
and the Fidelity Intermediate Bond Fund are recognized as part
of the net investment gains from registered investment
companies.
All direct administrative expenses were borne by the Plan
participants through October 31, 1996. Effective November 1,
1996, all direct administrative expenses are borne by the
Company.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the
administrator and trustee to make estimates and assumptions
that affect the reported amounts of assets and liabilities in
the financial statements. Actual results may differ from
those estimates.
3. Contributions:
------------------
Employee and Company contributions are made in cash for all
Funds except the Stock Fund. Contributions to the Stock Fund
may be made in either cash or Hewlett-Packard Company common
stock. Stock contributions attributable to employee deferrals
totaled $31,839,000 in 1996 and $27,340,000 in 1995. Stock
contributions attributable to Company contributions totaled
$20,915,000 in 1996 and $16,452,000 in 1995. Contributions of
Hewlett-Packard Company common stock are valued at their fair
market value at the closing price, as quoted on the New York
Stock Exchange, on the date of contribution.
4. Investments:
----------------
The number of shares of Hewlett-Packard Company common stock
in the Stock fund was 17,951,642 at the end of 1996 and
17,940,742 at the end of 1995, restated to reflect the effect
of the June 1996 two-for-one stock split. The Stock fund
assigns units of participation to those participants with
account balances in this fund. The total number of units in
the fund at December 31, 1996 was 24,556,337 and the net asset
value was $37.26 at that date. The net asset value on the
participant statement dates was $33.50, $39.26, $32.77 and
$33.59 at February 6, 1996, May 6, 1996, August 6, 1996 and
November 6, 1996 respectively.
5. Taxes:
----------
The Company has received a favorable determination letter from
the Internal Revenue Service dated December 1995 for
amendments to the Plan through March 1995. The Plan has been
subsequently amended. The Company's management is of the
opinion that the Plan and the trust which forms a part of the
Plan have been maintained in accordance with Section 401(a) of
the Internal Revenue Code, and therefore, it is believed that
the Plan continues to be qualified. Accordingly, there has
been no provision for federal or state income tax.
Deferrals made on behalf of the employee and the Company's
matching contribution are not subject to federal income taxes
until such time as the employee's funds are withdrawn from the
Plan. At withdrawal, the employee's funds may qualify for
special tax treatment. Pursuant to the Unemployment
Compensation Amendments of 1992, all "eligible rollover
distributions" which are not paid out in the form of a direct
rollover are subject to a mandatory 20% federal income tax
withholding. Loans taken by employees against their 401(k)
account are not subject to federal income taxes if they are
repaid within five years.
6. Transfer of Plan Assets:
----------------------------
The Company acquired the Convex Computer Corporation (Convex)
on December 21, 1995 via a stock acquisition. At the time of
purchase, Convex maintained the Convex Computer Corporation
401(k) Thrift and Savings Plan (Convex Plan), a defined
contribution plan that provided for employee deferrals and
employer matching contributions. The participants in the
Convex Plan who became employees of the Company became
eligible to participate in the Plan subsequent to the
acquisition by the Company. The Convex Plan assets were
transferred to the Plan on May 31, 1996.
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan (Plan 004) Schedule I
Employer Identification Number 94-1081436 Form 5500
Assets Held for Investment Purposes at December 31, 1996 (Item 27a - Schedule of Assets
(In thousands except number of shares) Held for Investment Purposes)
<CAPTION>
Number of Historical Current
Issuer Description Shares Cost Value
<S> <C> <C> <C> <C>
Pilgrim Baxter &
Associates
PBHG Growth Fund Equity Mutual Fund
no par value 6,539,327 $173,730 $171,788
Franklin Templeton
Templeton Foreign
Fund Class I Equity Mutual Fund,
no par value 5,496,166 54,106 56,940
Hewlett-Packard Company Common Stock,
$1.00 par value 17,951,642 516,008 902,070
Fidelity Investments
Fidelity Contrafund Equity Mutual Fund,
no par value 6,374,911 232,166 268,702
Fidelity Investments
Fidelity Magellan Fund Equity Mutual Fund,
no par value 9,681,320 704,679 780,799
Fidelity Investments
Fidelity Growth &
Income Portfolio Equity Mutual Fund,
no par value 5,872,626 154,270 180,466
Fidelity Investments
Fidelity U.S. Equity
Index Portfolio Equity Mutual Fund,
no par value 5,051,774 103,120 136,145
Fidelity Investments
Fidelity Intermediate
Bond Fund Fixed Income Mutual
Fund, no par value 7,898,225 80,911 79,614
Fidelity Investments
Fidelity Retirement
Money Market
Portfolio Money Market Fund,
$1.00 par value 241,246,906 241,247 241,247
Fidelity Investments
Fidelity Institutional
Cash Portfolio
Money Market Class I Money Market Fund,
$1.00 par value 9,670,054 9,670 9,670
Participant Loans Loans issued for terms
of 1 - 4 years, with
6.5% to 10.5% interest 89,506
----------
Total assets held for investment $2,916,947
==========
</TABLE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan (Plan 004)
Employer Identification Number 94-1081436
Transactions Occurring During the Year Ended December 31, 1996, Schedule II
Which Were in Excess of 5% of the Current Value of Form 5500
Plan Assets at December 31, 1995 (Item 27d - Schedule of
(In thousands except number of transactions) Reportable Transactions)
<CAPTION>
Identity of Party Involved Proceeds Cost of Net
Description of Asset Number of from Assets Realized
Transactions Purchases Sales Disposed Gain/(Loss)
<S> <C> <C> <C> <C> <C>
Pilgrim Baxter & Associates
PBHG Growth Fund
Equity Mutual Fund 234 $250,626 $ 76,943 $ 76,896 ($163)
Fidelity Retirement Money
Market Portfolio
Money Market Fund 258 412,150 351,787 351,787 -
Fidelity Magellan Fund
Equity Mutual Fund 254 331,361 364,402 342,664 (34,128)
Fidelity Contrafund
Equity Mutual Fund 254 152,278 74,467 68,545 2,565
Fidelity Growth & Income
Portfolio
Equity Mutual Fund 254 118,846 50,770 46,399 3,361
Hewlett-Packard Company
Common Stock 99 300,562 293,195 148,597 144,414
Fidelity Institutional Cash
Portfolio Money Market Class I
Money Market Fund 116 256,595 254,075 254,075 -
Note: Cost of Assets Disposed is stated at historical cost. Net Realized Gain/(Loss)
is calculated at revalued cost basis. The normal expenses associated with asset
purchases and sales are built into the cost records and therefore are not shown
separately here. Additionally, the number of transactions for the mutual funds
represent recordkeeping transaction activity, not the gross numbers of purchases
and sales.
</TABLE>
HEWLETT-PACKARD COMPANY
TAX SAVING CAPITAL ACCUMULATION PLAN
This section is a "Summary Plan Description" as required by the Employee
Retirement Income Security Act of 1974 (ERISA). This section provides
the highlights of the Plan, but it is far shorter and less technical
than the official Plan documents. The official Plan documents are
always used to determine when and what benefits will be provided under
the Plan.
You will Find Information About: On Page:
What TAXCAP Offers You 171
TAXCAP: A Participant-Directed Investment Plan 172
Who Can Join The Plan 174
When You May Join The Plan 174
How Much You May Defer 174
How Your Deferrals Can Reduce Your Current Taxes 175
How Much HP Contributes 175
How Your TAXCAP Account Is Invested 176
When Payouts Are Made 178
How You Can Borrow From Your Account 179
Special Rules For Acquisition Employees 181
How To Make Changes Or Receive Your Money 182
How To Claim Benefits 183
If A Claim Is Denied 183
How You Can Make Rollover Contributions 183
What Circumstances Can Affect Your Benefits 184
How The Plan Is Funded 186
How The Stock Purchase Plan Compares To TAXCAP 187
What TAXCAP Offers You
Your retirement income comes from three sources: HP retirement
benefits, Social Security benefits and your personal savings. The
Company offers the Hewlett-Packard Company Tax Saving Capital
Accumulation Plan (TAXCAP), as an integral part of the Hewlett-Packard
Retirement Program to help you accumulate personal savings for
retirement.
TAXCAP provides you an incentive to save regularly for retirement on a
pretax basis and gain additional contributions from HP.
The Plan in Brief
HP administers and sponsors TAXCAP. HP determines eligibility for
participation and benefits, interprets the Plan and authorizes certain
transactions.
Fidelity Investments (Fidelity), a group of affiliated financial
service companies, is the full-service provider for TAXCAP. Full
service is a package which offers recordkeeping, trustee and
investment management services. Headquartered in Boston, with 78
branches nationwide, Fidelity is one of the largest and best known
investment management organizations in the country. The firm currently
manages more than $290 billion for more than 10 million individual and
institutional accounts. As a leader in the mutual fund industry,
Fidelity has developed both investment products and services that are
now standard for the industry.
If you are a regular full-time or regular part-time employee, you
become eligible to join TAXCAP on the first February 1, May 1, August
1, or November 1 which is one year after your original hire date.
After you have satisfied the eligibility requirements, you may join
TAXCAP in any subsequent pay period.
Under TAXCAP, you can elect to have HP defer from 1 to either 10 or 12
percent of your pay into your TAXCAP account through payroll deductions.
The maximum percent of your pay that you can contribute to TAXCAP each
plan year is based on what you earned during the previous 12 months. The
TAXCAP plan year changed to a calendar year starting January 1, 1995.
Prior to that, the TAXCAP plan year ran from August 1 through July 31.
If your annual HP compensation is less than an amount defined by federal
tax laws ($80,000 for 1996), you can defer up to 12 percent of your pay
to TAXCAP during 1997. You will be informed on your last earnings statement
in December of each year whether your TAXCAP deferral limit is 10 percent
or 12 percent for the following year.
You may participate in both TAXCAP and the Stock Purchase Plan. If you
contribute to the Stock Purchase Plan at 5 percent or less, you may
contribute to TAXCAP as described above. If you contribute to the
Stock Purchase Plan at 6 percent or more, your combined TAXCAP and
Stock Purchase Plan contributions cannot exceed 10 percent.
HP contributes $1 for every $1 you contribute of the first 1 percent,
2 percent or 3 percent of your pay. HP contributes $.50 for every $1
you contribute on the next 2 percent of your pay. Contributions above
5 percent of your pay are not matched by HP.
You choose how you want to invest your TAXCAP account among nine
options: six mutual funds from the Fidelity family of funds, two
mutual funds outside the fidelity family of funds plus the HP Stock
Fund. These options reflect risk versus investment return
opportunities ranging from conservative to aggressive.
Saving in TAXCAP reduces your current income taxes. This is because
deferrals to your TAXCAP account are made before federal and most
state income taxes are calculated. In addition, you do not pay any
taxes on amounts in your account as long as they remain in TAXCAP.
TAXCAP is offered to help you meet your long range retirement goals.
Your full account value is paid when you leave HP or die. Because of
the tax advantages the Plan offers you, the government limits
withdrawals of your account before these events. While you are an
active employee, you can make in-service withdrawals either after you
reach age 59 1/2 or for reasons of hardship. You can also borrow money
from your account while you are an active employee.
The following pages describe the main provisions of TAXCAP. The ERISA
Information section of this book contains administrative details and
other information about the Plan.
The following special terms used to describe the provisions of the
Plan are more fully defined in the Glossary:
defer or deferrals
fiscal quarter
fiscal year
pay
Pension Benefit Guaranty Corporation (PBGC)
TAXCAP
valuation date
vested
years of service
TAXCAP: A Participant-Directed Investment Plan
TAXCAP requires that you decide how the assets in your account are
invested. TAXCAP is intended to be a "404(c) plan" which means it is
described in Section 404(c) of ERISA and Section 2550.404(c)-1 of
Title 29 of the Code of Federal Regulations. Plan fiduciaries of a
404(c) plan like TAXCAP are not liable for plan losses that are the
direct and necessary result of your investment instructions. The
following information is given to you so that TAXCAP will comply with
Section 404(c) and applicable regulations under ERISA.
Required Information Description of Information or Source
-------------------- -------------------------------------
Investment Alternatives See page 176 of this HP
Benefits Summary. Also see
the TAXCAP Quarterly
Participant Statement
supplement mailed to your home
every three months. Also see
mutual fund prospectuses
mailed to your home on request
from Fidelity at 800-457-4015
and when you first invest in a
mutual fund.
Investment Managers Fidelity Management and
Research Company serves as
advisor to the Fidelity mutual
funds offered under TAXCAP
(except the HP Stock Fund).
Pilgrim Baxter & Associates
serves as advisor to the
Pilgrim Baxter Growth Fund.
Templeton Worldwide Incorporated
serves as advisor to the Templeton
Foreign Fund.
Investment Instructions See page 174 When You May Join
by Participant The Plan and page 177 Fund
Information of this HP
Benefits Summary.
Transaction Fees in Connection There are no transaction fees
With Purchase or Sale of imposed on the purchase, sale or
Investment Alternatives exchange of the investment
alternatives in TAXCAP. See
the mutual fund prospectuses
for the operating expenses
imposed within each mutual
fund.
Funds Prospectus on Initial After the initial investment
Investment in a TAXCAP investment
alternative (other than the HP
Stock Fund), Fidelity will
mail a copy of the most recent
fund prospectus to the
participant.
Investment Alternative Fidelity Management Trust
Voting Rights Company, the TAXCAP Trustee,
will mail the notice of
meetings and all proxy
solicitation materials
relating to voting, tender or
similar rights to each
participant invested in a
TAXCAP investment alternative
(other than the HP Stock Fund)
to the extent voting rights in
the mutual fund are available
to fund investors. The
procedures for voting HP stock
are described in Section 4 of
the Trust Agreement Pursuant
to the Hewlett-Packard Company
Tax Saving Capital Accumulation
Plan available from HP upon request.
HP Stock Fund Purchase, Holding, Information regarding the purchase,
Sale and Voting of HP Stock holding and sale of HP stock and
(see page 177 for description the exercise of voting, tender and
of HP Stock Fund.) similar rights with respect to HP
stock by participants is maintained
under procedures intended to safeguard
confidentiality. The purchase, holding
and sale of HP stock is governed by
the procedures described in this HP
Benefits Summary at page 174 When You
May Join The Plan and at page 177 Fund
Information. Voting, tender and similar
rights with respect to HP stock are
passed through to participants and these
rights are exercised confidentially as
with any HP shareholder. The procedures
for voting HP stock are described in
Section 4 of the Trust Agreement Pursuant
to the Hewlett-Packard Company Tax Saving
Capital Accumulation Plan available from
HP upon request. These procedures are
monitored and carried out by:
1. Fidelity Management Trust
Company, as a plan
fiduciary and TAXCAP
Trustee
82 Devonshire Street
Boston, Massachusetts 02109
Telephone: (617) 570-7000
2. Harris Trust and Savings
Bank, as HP's stock
transfer agent and agent of
the TAXCAP Trustee
111 West Monroe Street
Chicago, IL 60604
Telephone: (312) 461-5545
Required Information Description of Information or Source
---------------------- ------------------------------------
General and General and participant-specific
Participant-Specific investment information is provided by Fidelity
Investment Information Investments, 82 Devonshire Street, Boston,
Massachusetts, 02109. The following
information sources can be requested from
Fidelity by phone at 800-457-4015. The
TAXCAP Quarterly Participant Statement and
Statement Supplement are mailed to each
participant every three months.
Information Sources
Mutual Fund TAXCAP Fidelity
Mutual Fund Annual/ Quarterly TAXCAP
Prospectus Semiannual Participant Automated
Report Statement and Phone
Statement Service
Supplement
----------- ---------- ------------- ---------
A. Annual Operating
Expenses of Available
Investment Alternatives X
B. Copies of Prospectuses X
C. Copies of Financial
Statements and Reports
of Available Investment
Alternatives X
D. List of Assets in the
Portfolio of Available
Investment Alternatives X
E. Value of Shares/Units in
Available Investment
Alternatives X X X X
F. Past and Current
Investment Performance
of Available Investment
Alternatives X X X
G. Value of Shares/Units in
Designated Investment
Alternatives in
Participant's Account X X
Who Can Join The Plan
You are eligible to join TAXCAP if you are a regular full-time or
regular part-time employee on the U.S. payroll except employees in
Puerto Rico. You are not eligible to join TAXCAP if you are classified
in any other employment status. If you meet the eligibility requirements,
you may enroll in TAXCAP - enrollment is not automatic.
When You May Join The Plan
You may join TAXCAP starting with the first entry date one year after
your original hire date. Entry dates are February 1, May 1, August 1,
and November 1. TAXCAP Administration will let you know when you first
become eligible.
For Example:
If your hire date is May 1, 1995, (the first business day of the quarter),
you may first enroll on May 1, 1996, your first entry date. If you choose
not to enroll on May 1, 1996, you may enroll during any subsequent pay
period.
You can enroll in TAXCAP via HP's Telephone Activated Benefits
System - TABS. TABS phone number is 800-262-TABS (8227) or Telnet
857-TABS (8227). When you call TABS you must enter your desired
deferral percentage and specify the investment mix you want in whole
percent increments. Investment mixes must total 100 percent. Once you
have enrolled in TAXCAP via TABS, your participation will begin in the
first pay period after you become eligible.
Your Beneficiary
Once you enroll via TABS, you should also name a beneficiary to receive
your TAXCAP benefits at your death. A TAXCAP Beneficiary Form #0070 is
available on Personnel on the Web. If you are married, your spouse will
automatically be your sole beneficiary. If you wish to name someone other
than your spouse as beneficiary for any part of your TAXCAP benefit,
federal law requires that you obtain your spouse's written consent. The
spouse's written consent must be given on the beneficiary form. This
consent must be witnessed by a Plan representative or a notary public.
If your spouse does not provide consent, the full value of your account
will be paid to your spouse in the event of your death, regardless of whom
you have named as beneficiary. If you remarry, any previous consent is no
longer valid and you must obtain your new spouse's consent. To change your
beneficiary, you must complete a new beneficiary form and submit it to the
U.S. Employee Service Center (USESC).
If you do not name a beneficiary or if your beneficiary is not living
at the time of your death payment of your TAXCAP account will be made,
in the following order, to:
your surviving spouse/domestic partner
your surviving children in equal portions
your surviving parents in equal portions
your estate
How Much You May Defer
You may defer up to 10 percent or 12 percent of your pay. You will be
informed on your earnings statement for the pay period ending December
15 the maximum percentage you are eligible to defer for the following
calendar year. Generally, pay is your regular wage or salary. Pay is
defined more completely in the Glossary at page 221 for purposes of
both the 10 or 12 percent deferral limit and the type of pay which is
subject to deferral.
You may participate in both TAXCAP and the Stock Purchase Plan.
If you contribute to the Stock Purchase Plan at 5 percent or less,
you may contribute to TAXCAP as described above. If you contribute
to the Stock Purchase Plan at 6 percent or more, your TAXCAP and
Stock Purchase Plan contributions cannot exceed 10 percent. These
limits are shown in the following tables:
This table applies to you only if your TAXCAP plan year compensation
is more than an amount defined by federal tax laws ($80,000 for the
plan year ending December 31, 1996).
Stock TAXCAP Combined Total
Purchase Maximum Maximum Company
Contribution Contribution Contribution Match
(%) (%) (%) (%)
10 0 10 5
9 1 10 5 1/2
8 2 10 6
7 3 10 6 1/2
6 4 10 6 1/2
5 10 15 6 1/2
4 10 14 6
3 10 13 5 1/2
2 10 12 5
1 10 11 4 1/2
0 10 10 4
This table applies to you only if your TAXCAP plan year compensation
is less than an amount defined by federal tax laws ($80,000 for the
plan year endig December 31, 1996).
Stock TAXCAP Combined Total
Purchase Maximum Maximum Company
Contribution Contribution Contribution Match
(%) (%) (%) (%)
10 0 10 5
9 1 10 5 1/2
8 2 10 6
7 3 10 6 1/2
6 4 10 6 1/2
5 12 17 6 1/2
4 12 16 6
3 12 15 5 1/2
2 12 14 5
1 12 13 4 1/2
0 12 12 4
As soon as your TAXCAP contribution equals the maximum amount ($9,500
in 1997) allowed by the Internal Revenue Service, you may participate
in the Stock Purchase Plan at 10 percent of your pay for the rest of
the calendar year. If you are participating in the Stock Purchase Plan
at the time you reach the TAXCAP IRS limit, your participation in the
Stock Purchase Plan will be increased automatically.
You may change your deferral rate any pay period. You can stop your
deferrals at any time. However, when your deferrals stop, so do HP's
contributions. Once you have stopped, you can resume your deferrals
as of any February 1, May 1, August 1, or November 1. Your deferrals
are paid into the trust and invested in your designated investment
alternatives on the scheduled HP paydays.
How Your Deferrals Can Reduce Your Current Taxes
Federal and most state income taxes are based on the portion of your
pay remaining after your deferrals have been taken. Therefore,
participating in TAXCAP lowers your current federal taxable income and
possibly lowers current state and local taxable income.
For Example:
Assume your annual pay is $35,000 and you elect to defer 6 percent
in TAXCAP. Your annual deferral will be $2,100. Although your
actual pay is $35,000, your taxable pay will be $32,900. This is
because you are deferring $2,100 in TAXCAP before taxes.
As of late 1994, the state of Pennsylvania and some cities are the
only tax-levying entities that consider your contributions to be part
of your taxable income. Your contributions are also subject to FICA
(Social Security withholding tax).
How Much HP Contributes
HP contributes $1 for every $1 you contribute of the first 1 percent,
2 percent or 3 percent of your pay. HP contributes $.50 for every $1
on the next 2 percent you defer in the Plan. Contributions above 5
percent are not matched by HP. You do not pay any income taxes on HP's
contributions until you receive them from the Plan.
Your Contributions HP Contributions
1 percent of your pay 1 percent of your pay
2 percent 2 percent
3 percent 3 percent
4 percent 3 1/2 percent
5 percent 4 percent
6 percent or more 4 percent
HP's contributions are paid into the trust and are invested in your
designated investment alternatives after the end of each fiscal
quarter. HP's contributions will be added to your account if you:
* Are an employee on the last business day of the fiscal quarter.
* Retired from HP during the fiscal quarter at age 55 or older with at
least 15 years of service, as defined in the Retirement Plan.
* Died during the fiscal quarter.
How Your TAXCAP Account Is Invested
You can choose to invest the money in your TAXCAP account among the
nine investment alternatives described below. Investment earnings or
dividends will be reinvested in the options you have chosen and
included in your account balance. You can invest your account
entirely in one option or you can divide it among the nine options,
in any whole percentage combination. Investment mixes must total 100
percent.
For Example:
You can choose to invest 100 percent in one option or choose to invest
15 percent in one option, 64 percent in another, 16 percent in a
third, and 5 percent in a fourth.
After the end of each pay period, your deferrals are invested as you
choose. In the following paragraphs, the options are described
beginning with the most conservative and ending with the most
aggressive.
* Fidelity Retirement Money Market Portfolio - Retirement Money Market
Portfolio is a money market fund. It seeks as high a level of current
income as is consistent with the preservation of principal and liquidity.
It invests in high-quality, U.S. dollar-denominated money market
instruments of U.S. and foreign issuers. While the Portfolio seeks to
maintain a $1.00 share price, there is no assurance that it will be able to
do so. An investment in the Portfolio is not insured or guaranteed by the
U.S. government. The Portfolio's yield will fluctuate. Retirement Money
Market Portfolio is a conservative, relatively low-risk investment.
* Fidelity Intermediate Bond Fund - Intermediate Bond Fund is an income
fund. It seeks a high level of current income by investing primarily
in high and medium grade fixed income obligations. These fixed income
obligations include corporate bonds, mortgage securities, bank
obligations and U.S. government and agency securities. The Fund's
dollar-weighted average portfolio maturity ranges between three and
ten years. The Fund's share price, yield and return will fluctuate.
* Fidelity U.S. Equity Index Portfolio - U.S. Equity Index Portfolio is a
growth and income fund. It seeks investment results that correspond to
the total return performance of the S&P 500 Index, which is comprised of
common stocks. Dividend amounts will vary. The Portfolio's share price
and return will fluctuate.
* Fidelity Growth & Income Portfolio - Fidelity Growth & Income Portfolio
is a growth and income fund. It seeks long-term capital growth,
current income and growth of income. It invests primarily in the
securities of companies with the potential for growth of earnings
while paying current dividends. Consistent with the objective, the
Portfolio's manager will generally sell securities of companies for
which dividends fall to a level lower than the yield of the S&P 500.
The Fund's share price, yield, and return will fluctuate.
* Fidelity Magellan Fund - Magellan Fund is a growth fund. It seeks
long-term capital appreciation by investing in the stocks of both
well-known and lesser-known companies with potentially above-average
growth potential and a correspondingly higher level of risk.
Securities may be of foreign and domestic companies. The Fund's share
price and return will fluctuate.
* Fidelity Contrafund - Fidelity Contrafund is a diversified growth fund.
It seeks capital appreciation. It invests in the securities of
companies that are believed to be undervalued or out of favor with the
market. Contrafund invests in the common stock and securities
convertible into common stock of all types of companies, and in all
industries. Contrafund generally invests in smaller to medium size
companies which may carry a higher degree of risk. From time to time,
international securities may be purchased by the Fund. When market
conditions warrant, the Fund may also invest temporarily in debt
securities. The Fund's share price and return will fluctuate.
* Templeton Foreign Fund (Effective February 1, 1996.) The Templeton
Foreign Fund is an international stock fund. It seeks long-term
capital growth by investing primarily in stocks of companies outside
the United States. International investments can present the potential
for expanded investment opportunities over domestic funds, significant
growth potential, as well as an opportunity through diversification to
reduce overall equity portfolio risk. Foreign investing can also
involve special considerations, including currency fluctuations and
political uncertainty. Share price and return will fluctuate.
* Pilgrim Baxter Growth Fund (Effective February 1, 1996.) The PBHG
Growth Fund seeks capital appreciation by investing in small companies
that have an outlook for strong growth in earnings and potential for
significant capital appreciation. To maximize returns and limit risk,
a disciplined investment approach, which is both quantitative and
fundamental in nature is employed. Because of the small, growth
oriented nature of the companies that the Fund invests in, the Fund's
market price will undoubtedly experience more volatility than the
market in general. There is no guarantee that the Fund will meet its
objective and the price and returns will fluctuate.
* Hewlett-Packard Stock Fund - The Hewlett-Packard Stock Fund enables you
to become a stockholder in the Company and to participate in HP's
growth by investing almost exclusively in Hewlett-Packard Common
Stock. Like a mutual fund, this option holds a small percentage of
high-quality money market instruments providing the option with same
day exchangeability without the five-day-settlement period normally
associated with purchases and sales of common stocks. Unlike a mutual
fund, this option is neither a managed nor diversified portfolio and
is subject to both the normal external factors affecting the general
level of stock prices and to specific factors affecting HP. As a TAXCAP
participant investing in the Hewlett-Packard Stock Fund, you have the
right to vote the full shares of stock represented by your TAXCAP account.
Each year before the annual meeting, information will be mailed to you
that will enable you to exercise your voting right.
If you do not specify how your account is to be invested when
enrolling through TABS, the entire amount will automatically be
invested in the Fidelity Retirement Money Market Portfolio which is
the most conservative investment. This also applies when you enroll
through the TAXCAP Activity form.
Once you have enrolled in TAXCAP you may change your investment mixes
for future contributions in 1 percent increments as often as you feel
necessary by calling Fidelity at their toll free number 800-457-4015.
You may also exchange your current account balance as often as you
feel necessary by calling Fidelity at this number.
Fund Information
To obtain your current account balances or performance and investment
information about the funds offered in TAXCAP, call the Fidelity
toll-free automated phone line at 800-457-4015, 24 hours a day, seven
days a week. To access your account, you must have your Social
Security number, and your Personal Identification Number (PIN) with
Fidelity. To establish a Fidelity PIN, you will need to pass the
security check by providing your Social Security number, your date of
birth, and your employee number (eight digits - you must enter leading
zeros). The fund codes are:
Fidelity Retirement Money Market Portfolio 0630
Fidelity Intermediate Bond Fund 0032
Fidelity U.S. Equity Index Portfolio 0650
Fidelity Growth & Income Portfolio 0027
Fidelity Magellan Fund 0021
Fidelity Contrafund 0022
Templeton Foreign Fund 9500
Pilgrim Baxter Growth Fund 9706
HP Stock Fund 8655
To exchange existing assets from one investment option to another or
to redirect your future contributions to a different investment option
with the help of a Fidelity representative, you can call the same
toll-free number, 800-457-4015. A Fidelity representative is on duty
from 8:30 am to 12:00 am Eastern Time. FIDELITY REPRESENTATIVES CAN
ONLY GIVE INFORMATION ABOUT THE FUNDS AND LIMITED PLAN INFORMATION.
THEY CANNOT PROVIDE FINANCIAL ADVICE.
If you have a hearing impairment, you can call Fidelity toll-free at
800-835-5089 (if you have a TDD) to conduct account transactions or to
get specific information about your TAXCAP account. A Fidelity
representative will be available to answer your questions any business
day from 8:30 am to 8:00 pm Eastern Time.
Quarterly Participant Statements
Approximately four weeks after the end of each fiscal quarter you will
receive a statement from Fidelity summarizing all of your account
activity and administrative costs since the last statement and the
total value of your account.
The information provided includes:
* the beginning balance, which is the closing balance from the previous
statement
* investment performance (gains or losses)
* investment elections (mixes)
* any fund exchange activities that you authorized for the quarter
* your deferrals for the quarter
* loan information
* HP's contributions for the quarter
* your ending balance
How You Vest in Your Account
You are 100 percent vested in the value of all funds contributed to
your account from the moment they are placed in your account. This
includes your deferrals, HP's contributions, rollover contributions,
and gains or losses. The trustee holds the assets for your exclusive
benefit and they cannot be used for any other purpose.
Being immediately 100 percent vested does not mean you have immediate
access to the funds. Rather, it means that 100 percent of your
account can be distributed if you leave HP or die.
When Payouts Are Made
The primary purpose of TAXCAP is to help you meet your retirement
goals. Therefore, your account value is only payable when you leave
HP or die. EXCEPTIONS: While you are still an HP employee, you can
request an in-service hardship withdrawal, or after you reach age 59 1/2,
you can withdraw all or part of your account.
When Your HP Career Ends
The full value of your TAXCAP account is payable when you leave HP or
die. The distribution options you have are:
* lump sum amount in cash
* HP stock and cash (only available for that portion of your account
invested in HP Stock Fund) payable to you
* a direct rollover from TAXCAP to a Fidelity Investments Individual
Retirement Account (IRA)
* a direct rollover from TAXCAP to any other Individual Retirement
Arrangement or another employer's Qualified Retirement Plan
At the time of termination, the U.S. Employee Service Center (USESC)
will mail you information on how to complete the TAXCAP distribution
process, including a federally required Tax Notice.
Upon their notice from the USESC of your termination, Fidelity will
send to your home address, a termination kit describing your distribution
options.
You will then be able to request your distribution by calling Fidelity
Investments at 1-800-457-4015 on business days between 8:30 a.m. and
12:00 a.m. Eastern time to speak with a Fidelity telephone representative.
No distribution forms are needed.
Any benefit paid from TAXCAP will be based on the closing price of the
New York Stock Exchange on the business day you call Fidelity for your
distribution (if you call before 4:00 p.m. Eastern time). If you call
after 4:00 p.m. Eastern time, your distribution will be valued as of the
close of the market on the following business day.
Exceptions:
- If you are an employee who had money transferred from the Avantek,
AOT, EEsof or CMS 401(k) plans to TAXCAP with the acquisition, you
will be required to submit TAXCAP distribution forms including spousal
consent. These forms will be provided to you by the USESC in the
packet that is sent to your home at the time of your termination. The
completed forms should be sent to TAXCAP Administration for processing.
- If you are a beneficiary of a deceased HP employee, distribution forms
will be provided to you by the USESC. Completed forms should be
returned to the USESC who will forward them to TAXCAP Administration
for processing.
If you elect a direct rollover form of payment, no federal or state
income tax withholding will apply to the amount directly rolled over.
If you elect to have a portion of your TAXCAP account paid directly to
you, that portion of the distribution and any loan amount outstanding
in your account will be subject to mandatory 20 percent federal income tax
withholding and, where applicable, elective state income tax withholding.
You can avoid the mandatory federal income tax withholding by electing to
roll over 100 percent of your distribution through the direct rollover
options.
If you elect to be paid in HP stock for your investments in the TAXCAP HP
Stock Fund, you will receive an HP stock certificate for the equivalent
number of whole shares in your TAXCAP HP Stock Fund. The remainder of your
TAXCAP account after the stock shares are issued will be paid in cash.
This distribution is subject to the mandatory 20 percent federal income tax
withholding. However, income tax will be withheld only to the extent of
your cash distribution.
If your account is less than $3,500, and you do not request a distribution,
your account will be paid out as a lump sum cash distribution. Once a
quarter, accounts of all terminated employees are reviewed. If your
account balance is less than $3,500, a letter will be sent to your home
address as it appears on the Fidelity system informing you that your
account will be distributed as a cash distribution unless you make an
election within 60 days. If no election is made, and your account remains
less than $3,500 after the 60 days, your account will be distributed in
cash. If after the 60 days, your account balance exceeds $3,500, no
automatic distribution will occur.
If you do not request a distribution before you reach age 65, Fidelity
will automatically distribute your account balance to you at age 65 in
cash.
If you have a loan outstanding at termination see "Loan Outstanding at
Termination" on page 181.
While You Are an HP Employee Age 59 1/2 and Hardship Withdrawals
Withdrawals from TAXCAP are available after age 59 1/2. After you reach
age 59 1/2, you may withdraw all or part of your account. The minimum
amount you can withdraw is $1,000, or if there is less in the account,
the entire value of the account. The withdrawal will be subject to
mandatory 20 percent federal income tax withholding unless it is
directly rolled over. The withdrawal will not be subject to the 10
percent early withdrawal tax penalty.
Hardship withdrawals are available to participants who meet certain
stringent Internal Revenue Service (IRS) requirements. The maximum
withdrawal amount available is specified by IRS Regulations. The
following financial needs qualify a participant for a TAXCAP hardship
withdrawal:
* Unreimbursed medical expenses for you, your spouse or dependents.
* Purchase or construction of your principal residence.
* Payment of tuition and related educational fees for the next 12 months
of post-secondary education for you, your spouse, your children, or
dependents.
* Prevention of eviction from or foreclosure on the mortgage on your
principal residence.
* Funeral expenses of a family member.
As a further requirement for applying for a hardship withdrawal, you
must exhaust all other financial resources available to you. One of
these resources is loans available through TAXCAP. You must have two
TAXCAP loans outstanding prior to applying for a hardship withdrawal.
If you are not eligible to apply for a loan, then you may
apply for a hardship withdrawal directly.
As a condition of receiving your hardship withdrawal, the IRS
requires that you will be unable to contribute to TAXCAP
or the Stock Purchase Plan until the beginning of the quarter
following one year from the date of your hardship withdrawal. The
combined amount of your deferrals into TAXCAP for the year you request
a hardship withdrawal and the next calendar year will be limited to
the next year's maximum employee pre-tax contribution limit as set by
the IRS. ($9,500 for calendar year 1997).
The minimum withdrawal amount is the lesser of $1,000 or all that is
available. All withdrawals are subject to mandatory 20 percent
federal income tax withholding unless directly rolled over. Hardship
withdrawals may be subject to a 10 percent early withdrawal tax
penalty. There are exceptions to the 10 percent tax penalty so you
should consult your accountant or tax advisor. Withdrawals are funded
through the sale of your TAXCAP investments beginning with the most
conservative and progressing to the most aggressive investment fund.
To request a withdrawal, call Fidelity at 800-457-4015 for your
maximum available withdrawal amount and an application. Fill out the
required information and mail the application to Hewlett-Packard
Company, TAXCAP Administration, 3000 Hanover Street, Palo Alto,
California, 94304, MS 20BAX.
In-service withdrawal requests are processed each business day by
TAXCAP Administration, and checks are issued from Fidelity within
seven business days after the application is received by TAXCAP
Administration.
Special rules apply for in-service withdrawals for certain acquisition
employees, (see page 181 for details).
How You Can Borrow From Your Account
While you are an active employee, regular full-time or regular
part-time, you can borrow from your TAXCAP account. You cannot borrow
from your account if you are on a medical, military, personal or
Family and Medical Leave Act leave of absence, or receiving benefits
under the Income Protection Plan.
The maximum amount available is 50 percent of the account balance
(including outstanding loan amounts) on the date of valuation less any
loan balance outstanding. The total of all loans is limited to
$50,000 minus the highest loan balance outstanding during the prior
12-month period. Loans are subject to a $1,000 minimum. No more than
two loans can be outstanding at any time.
This chart shows the maximum outstanding loan amount you may have at
any one time.
If your TAXCAP account The maximum/outstanding
balance is... loan amount...
$2,000-$100,000 50 percent of
account balance
$100,000+ $50,000
To initiate a loan, call Fidelity at 800-457-4015. Once you have
provided the proper security information, the Fidelity representative
will guide you through the steps of the loan process and inform you of
any restrictions that may apply (maximum allowable loan amount, etc.).
Your eligibility for a loan is based on your account value as of the
date you call Fidelity to request a loan.
Once the details of the loan transaction have been agreed to and
confirmed by phone, the Fidelity representative will generate a TAXCAP
Loan Agreement and Promissory Note that will be mailed to your home
address on file at Fidelity. Upon receipt of the TAXCAP Loan Agreement
and Promissory Note, you must review the information to make sure
everything is correct. The loan amount will be liquidated from your
account on the same day that you call (if the call is received at
Fidelity before 4:00 p.m. Eastern Time). Your loan check will
automatically be generated from Fidelity and mailed to your home
address on file at Fidelity on the second business day after the
original call from you to initiate the loan. There is endorsement
disclosure information on the back of the loan check that states by
endorsing the loan check, you have entered a legally binding contract
with TAXCAP, and that you have agreed to all the terms and conditions
under the loan provisions in the Hewlett-Packard Company Tax Saving
Capital Accumulation Plan. If the terms in the TAXCAP Loan Agreement
and Promissory Note are not correct, do not sign, cash or deposit your
loan check. Call a Fidelity plan representative immediately at
800-457-4015.
* Special rules for certain acquisition employees apply here (see page
181 for details).
How Your Loan Is Funded
Your loan will be funded through the sale of your
TAXCAP investments in the following order:
Fidelity Retirement Money Market Portfolio
Fidelity Intermediate Bond Fund
Fidelity U.S. Equity Index Portfolio
Fidelity Growth & Income Portfolio
Fidelity Magellan Fund
Fidelity Contrafund
Templeton Foreign Fund
Pilgrim Baxter Growth Fund
Hewlett-Packard Stock Fund
For Example:
You have a total of $30,000 in TAXCAP investments. You have $10,000
in the Retirement Money Market Portfolio, $10,000 in the Intermediate
Bond Fund and $10,000 in the Magellan Fund. If you want to take a
$15,000 loan, $10,000 will come from your Retirement Money Market
Portfolio and the remaining $5,000 will come from your Intermediate
Bond Fund.
How You Repay Your Loan
You repay your loan through automatic, irrevocable payroll deductions.
You can choose to repay the loan over one, two, three, or four years.
TAXCAP loan interest rates are determined by the prime rate on the
last business day of the month preceding the loan request plus 1/2
percent. The loan interest rate may change monthly. TAXCAP loans are
amortized on a semi-monthly basis. Amounts repaid are reinvested
semi-monthly based on your investment elections (mixes) in effect at
the time of reinvestment.
Payroll deductions for your loan will begin approximately two weeks
after receipt of the loan distribution check. Repayments, including
interest paid, will be taken out of your paycheck each payday.
Payroll deductions CANNOT be discontinued until the loan is fully
repaid.
Loan Prepayment
If you wish, you may prepay the full amount of the outstanding
principal and accrued interest without penalty. You cannot make
partial prepayments except in the case of certain leaves of absence.
To initiate a prepayment, you can call Fidelity at 800-457-4015. Once
you have provided the proper security information, the Fidelity
representative will guide you through the steps of the prepayment
process. The Fidelity representative will provide you with the
prepayment amount and the terms of the prepayment transaction.
Once you have agreed to the terms of the prepayment, send a money
order, cashier's check or HP Credit Union teller check payable to
"Fidelity Investments" and mail to:
Fidelity Investments
Client Service Operations
P.O. Box 9029
Boston, MA 02205-0929
The prepayment will be invested according to your investment elections
(mixes) on file at the time of repayment to the TAXCAP trust fund.
The next statement that you receive will reflect that your loan is
paid in full.
If you are transferring to a foreign entity or to HP's Flex Force as
an Internal Temporary Worker, you must prepay your loan in full prior
to transfer.
Loan Repayment while on Leave of Absence
If you have a TAXCAP loan outstanding and you are receiving a disability
benefit (medical leave only) your loan repayment will be taken from your
disability benefit and any FTO pay you receive from HP.
If you have a TAXCAP loan outstanding and you are on unpaid leave of
absence your loan repayments will be suspended. When you return from
the leave of absence, your loan payroll deductions will resume. The
Internal Revenue Code and Internal Revenue Service (IRS) regulations
do not permit a TAXCAP loan to be extended beyond the 60th month from
the date the loan was taken. If the 60th month is reached while you
are on a:
* medical leave of absence (also during the Family and Medical Leave Act
(FMLA) entitlement period for one's own illness), your outstanding
loan amount and accrued interest will be considered a taxable
distribution to you in that year. You will be taxed on the outstanding
loan amount and the accrued interest owed on the loan as ordinary
income.
* personal leave of absence (also during the FMLA entitlement period for
reasons other than one's own illness) or military leave, your
outstanding loan amount will be considered a taxable distribution to
you in that year. You will be taxed on the outstanding loan amount and
the accrued interest owed on the loan as ordinary income. You will
also have to pay a 10 percent penalty.
YOU CAN REPAY THE LOAN IN FULL PRIOR TO THE 60TH MONTH AND AVOID
TAXATION IN THAT YEAR.
If you desire to make your loan payments during a personal leave of
absence, the loan repayment procedure is as follows: You can initiate
the process by calling TAXCAP Administration. They will determine the
amount and timing of the repayment. You will be requested to forward
your money order, cashier's check or HP Credit Union teller check made
payable to Fidelity Investments. You will be given instructions on the
rest of the process during the call. If applicable, you will resume
payroll deductions upon returning to work. Repayments will be invested
according to your investment election (mixes) on file at the time of
repayment to the TAXCAP trust fund.
Loan Outstanding at Termination
If you leave HP while a loan is outstanding, the amount you owe will
be subtracted from the payout of your TAXCAP account. For income tax
purposes, HP will report the amount you owe on your loan as part of the
total payout you received from the Plan. Therefore, the entire amount
distributed from the Plan including the outstanding loan amount and
interest due is taxable income and subject to 20 percent mandatory
federal income tax withholding unless the part of your account actually
distributed from TAXCAP is subject to a direct rollover. You can defer
taxation on your loan amount by rolling over this amount to an Individual
Retirement Arrangement (IRA) or a qualified plan within 60 days of the
distribution. Once a quarter, accounts of terminated employees are
reviewed. Terminated participants who have a TAXCAP loan outstanding
will be sent a letter to their address file at Fidelity to notify them
that the outstanding loan balance will be defaulted to a taxable
distribution unless the loan is repaid in full within 60 days.
Special Rules For Acquisition Employees
If you were formerly employed by Avantek, AOT, EEsof or Colorado
Memory Systems (CMS) and had money transferred from the Avantek, AOT,
EEsof or CMS plan to TAXCAP, there are special TAXCAP rules described
in this section that apply to you. In addition to cash or HP stock
distributions upon termination of employment, you may also receive
your distribution in installments or various annuity forms of benefit
single life, joint and survivor or term certain annuities. Former
Avantek, EEsof and CMS plan participants may also elect an in-service
withdrawal of any money formerly attributed to a rollover account in
the Avantek, EEsof and CMS plans.
Upon termination of employment, you will need spousal consent to
receive your distribution in any form other than a joint and survivor
annuity. You will also need spousal consent to receive in-service
withdrawals (at age 59 1/2, for hardship, or for an Avantek rollover
account) as well as for loans.
Loan requests for acquisition employees will be processed through
TAXCAP Administration on a daily basis. Acquisition employees can call
Fidelity at 800-457-4015 to request a loan application. Fidelity will
mail the application to the home address on file. You will need to
check the appropriate marital status on the application, sign the
application, and, if you are married, have your spouse sign the
consent for the withdrawal and have the spousal consent form witnessed
by either a plan representative or a notary public. The completed
forms need to be mailed to TAXCAP Administration at Corporate Offices
for processing. TAXCAP Administration will review the application for
accuracy and release the loan for processing by Fidelity. Fidelity
will issue the loan check on the next business day after the loan
application has been approved and released by TAXCAP Administration.
The rules regarding beneficiary designations described at page 174
will apply to you. In addition, if you name someone other than your
spouse as beneficiary before the plan year in which you turn age 35,
you must complete a new beneficiary form in the plan year you turn age
35 or your spouse will automatically become your beneficiary.
Special claim forms for former Avantek, AOT, EEsof, and CMS plan
participants have been prepared and will be provided to you as needed.
These forms will reflect the special rules described in this section.
How To Make Changes Or Receive Your Money
This chart provides a brief summary of how to change the way you are
participating in TAXCAP and to receive money from your account.
If You Want To... You Need To...
--------------------- --------------------------------------
Enroll in the Plan. Call TABS at 800-262-TABS or Telnet
857-TABS and enroll in TAXCAP. You
must enter your desired TAXCAP
deferral percentage and specify the
investment mix you want in whole
percent increments. Investment mixes
must total 100 percent. Once you
have enrolled in TAXCAP, your
participation will begin in the
first pay period after you become
eligible. It is your responsibility
to complete a beneficiary
designation form for TAXCAP and
return it to the USESC upon enrollment.
Change your deferral Call TABS and make the desired
percentage. TAXCAP deferral percentage changes.
TABS will tell you when your changes
will become effective.
Stop making deferrals into Call TABS and change your deferral
TAXCAP (that is, change to 0 percent. Your deferral will stop
change the percentage as of the first possible pay period after you
to zero). call TABS. TABS will tell you when
your deferrals will be stopped.
Resume making deferrals to Call TABS to re-enroll. TABS will
TAXCAP after you have tell you when you are eligible to begin
stopped. deferrals again.
Resume making deferrals Take no action. Your deferrals will
after a period of resume automatically at the previous
suspension due to a formal percentage when you return. If you
leave of absence. wish to change your percentage or
cease deferrals entirely, call TABS
upon your return. TABS will tell you
when your deferral amount will be
changed or stopped.
Change your beneficiaries. Complete a new beneficiary form. If
you are married and your spouse is
not named as your sole beneficiary,
your TAXCAP account will be
distributed to your spouse upon your
death unless the spousal consent
section on the beneficiary form is
completed. The change in beneficiary
will be effective when the completed
beneficiary form is received by USESC.
Apply for a withdrawal Call Fidelity Investments at
after age 59 1/2.* 800-457-4015 to obtain an
application. Once Fidelity mails you
the application, sign it and send it
to TAXCAP Administration.
Apply for a hardship Call Fidelity Investments at
withdrawal.* 800-457-4015 to obtain an
application. Once Fidelity mails you
the application, sign it and send it
to TAXCAP Administration.
Apply for a loan.* Call Fidelity Investments at
800-457-4015 to initiate a loan.
Once you have agreed to the terms of
your loan, your account will be
liquidated for the loan amount. The
TAXCAP Loan Agreement and Promissory
Note and loan check will be mailed
to you.
Elect payout options.** To receive payment of your TAXCAP
account balance you should call Fidelity
at 800-457-4015 after you have received
the TAXCAP termination kit from Fidelity.
* Special rules for certain acquisition employees apply here (see
page 181 for details).
** Special rules for certain acquisition employees apply here (see
page 178 for details)
How To Claim Benefits
To receive payment of your TAXCAP account balance, follow the
procedures under "When Payouts are Made on page 178).
If information provided results in incorrect benefit amounts (whether
the information is false, wrong or incomplete), the benefit amount
will be adjusted. If TAXCAP pays a larger benefit amount than it should
have, reasonable steps will be taken to recover the overpayment.
If a Qualified Domestic Relations Order has required TAXCAP to set
aside a portion of your account for payment to your ex-spouse or
children, you will have no rights to that portion of the value of
your account. If TAXCAP determines that a person who is to receive
benefits has become unable to handle them properly, HP may make any
reasonable arrangement to distribute the benefits on the person's behalf.
If A Claim Is Denied
If all or part of a claim is denied, HP will notify the claimant (you
or your beneficiary) in writing, within 90 days after the claim is
received. This notice will explain:
* Why the claim was denied and the specific Plan provisions on which the
denial is based.
* What additional information is needed and why.
* How to appeal the denial.
* The Plan's review procedure.
If you or your beneficiary do not receive this notice within 90 days
after HP receives the claim, you or your beneficiary can consider the
claim denied. To appeal a claim denial, use the procedure described
in the next section.
How to Appeal a Denied Claim
You or your beneficiary can appeal a denied claim by submitting a
written request for the appeal to the Plan's Review Panel. You or
your beneficiary must make the request within 60 days after the date
of the denial. If you or your beneficiary do not receive a written
denial, you must make the request within 150 days after the date you
first filed the claim.
Send the written request to:
Review Panel Under the Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
3000 Hanover Street, 20BAX
Palo Alto, CA 94304
The request must explain why you or your beneficiary believe an appeal
is in order and it must include supporting facts and any other
pertinent information. HP will let you or your beneficiary review any
pertinent documents which legally can be disclosed in preparing the
request.
The Review Panel will act upon the request within 60 days after
receiving it. The Panel may ask for additional time, but a decision,
in writing, will be given within 120 days after the date of the
written request for appeal. You or your beneficiary will receive a
written explanation of the reasons for the Panel's decision. If you
or your beneficiary do not receive notice of the Panel's decision by
the end of the 120-day period, you may consider the appeal denied.
If the Panel decides that benefits should have been paid, HP will take
whatever action is necessary to pay them as soon as possible after
receiving notice of the Panel's decision.
You Cannot Assign Benefits
No action can be taken to assign your interest in the Plan or your
account to anyone other than you. However, a court order that divides
your benefits under this Plan as part of a marital settlement
agreement will be allowed if it is a Qualified Domestic Relations
Order as defined by law and approved by HP.
How You Can Make Rollover Contributions
If you are a newly hired or rehired employee, you may be able to make
a rollover contribution to the Plan before you are otherwise eligible
to enroll. You may do this as described in this section if the check
is made payable to you. You may also make a direct rollover, as
prescribed by law, into TAXCAP if the check is made payable to Fidelity
Investments as trustee of the TAXCAP.
A rollover contribution is a contribution you make to the Plan with
the funds distributed to you from another qualified retirement plan in
order to preserve the tax deferred status of the money. A rollover
contribution will be allowed if HP decides that all IRS requirements
have been met.
There are two situations when you may make a rollover contribution to
TAXCAP with a payout from a qualified retirement plan from a previous
employer:
* You are still in possession of this payout and less than 60 days have
elapsed since the date the payout was received by you.
* You originally rolled the payout into a new and separate IRA.
Contact the U.S. Employee Service Center or go to personnel on the Web for
a rollover contribution form if you think you are qualified.
If You Leave and Are Rehired
If you leave HP and are rehired, your eligibility to enroll will be
measured from your original hire date, as if you had never left. It
does not matter whether you had previously participated in TAXCAP or
not. Therefore, if less than a year has passed since your original
hire date, you become eligible to enroll, after you are on HP's
payroll, on the same entry date on which you would have been eligible
when you were first hired. If more than a year has passed since your
original hire date and you are already eligible to enroll when you
return, you may enroll immediately or during any following pay period,
after you are on HP's payroll.
Under no circumstances will you receive a payout while on HP's
payroll. Payment cannot be made until you leave HP or die.
What Circumstances Can Affect Your Benefits
The chart below describes situations which can affect your benefits.
This Situation Has This Effect on Your Account
------------------------- ---------------------------------------------
You leave HP. Your deferrals and HP's contributions
end. You may elect a payout option of HP
stock, and/or cash, or direct rollover
to a Fidelity Investments or other IRA,
or qualified plan of your choice.
TAXCAP termination distributions are
processed after you notify Fidelity by
phone of your payout option.
You take an unpaid Your deferrals and HP's contributions
personal, military or are suspended during leave of absence.
Family and Medical Leave Your deferrals and HP's contributions
Act leave of absence. resume automatically once you return
You take a medical leave to active employment status. You are
of absence and are not not eligible to take a loan while on
integrating FTO with IPP. leave of absence.
You are on medical leave You may continue your deferrals and
of absence, you are contributions under TAXCAP. The amount
disabled and on the HP contributed will be a percentage of
Income Protection Plan, both your IPP benefits and the FTO pay
integrating FTO and in you receive from HP while on IPP.
the first 90 days of You are not eligible to take a loan
disability. while on IPP.
You are on medical leave As with FTO accrual, cash profit-sharing
of absence, you are and the Stock Purchase Plan, you will no
disabled and have been longer be able to continue deferrals to
on Income Protection TAXCAP. You are not eligible to take a loan
for 90 days. You are while on IPP.
still integrating FTO
benefits.
You die. Your deferrals and HP's contributions end.
Your beneficiaries may elect a payout
option of HP stock, and/or cash or a
direct rollover to an IRA. TAXCAP
termination distributions are processed
after payment application forms from the
beneficiary are received by TAXCAP
Administration.
When Your Participation Is Automatically Suspended
Your participation in TAXCAP is automatically suspended while you are
on:
* A leave of absence without pay
* A non-U.S. Hewlett-Packard payroll
* The HP Income Protection Plan after 90 days of disability. (The
suspension will start with the pay period after the 90th day.
However, your deferrals before the 90th day will be eligible for HP's
contributions.)
During this time, you cannot make deferrals and HP will not make any
contributions to your account. Your account will continue to share in
the performance of the investment alternatives you have selected.
Your deferrals will automatically resume when you return to active
employment status.
Upon return to employment from "military service" as defined in the
Uniformed Services Employment and Re-employment Rights ACT (USERRA),
you have the right to make deferrals into TAXCAP for the period of
your unpaid military leave of absence. If you elect to make such
deferrals, HP will also make a company match. The amount of your
deferrals and company match will be as allowed by TAXCAP and USERRA.
If you wish to make such contributions contact TAXCAP Administration.
How Your Deferrals May Be Limited
The Internal Revenue Code places a limit on the amount you may defer
in TAXCAP during a calendar year. This limit is $9,500 for calendar
year 1997. This limit does not include HP's contributions.
In addition, the IRS requires the Plan to pass a special test - called a
non-discrimination test - designed to ensure a fair mix of deferrals and
HP's contributions among employees at all income levels. If the Plan
does not meet the test, it may be necessary to reduce the deferral
rate of higher-paid participants from time to time. If so, the
percentage of pay that those participants may defer may be reduced
below 10 percent. You will be notified if you are affected by this
test.
TAXCAP deferrals may only be taken from the first $160,000 of covered
compensation (generally, wages or salary, commissions and shift
differential) in the plan year January 1, 1997 through December 31,
1997. This limitation will be periodically adjusted for cost of living
by the Secretary of the Treasury.
TAXCAP Participation Does Not Affect Your Other HP Benefits
Although participating in TAXCAP reduces your taxable pay, it does not
affect your Social Security or other pay-related-HP benefits, nor will
participation affect future pay increases.
Changing or Ending The Plan
Although HP expects to continue the Plan indefinitely, HP reserves the
right to amend or terminate the Plan at any time. No amendment of the
Plan will reduce the benefits that any participant has accumulated
before the date the amendment is adopted, except as allowed by law.
The assets of the trust fund exist to provide benefits under the Plan
and to pay reasonable expenses of administering the Plan. No
amendment may divert any part of the assets for other purposes.
If the Plan is terminated, each participant retains a 100 percent
vested non-forfeitable right in his or her Plan accounts. No part of
the trust funds will revert to HP.
Under present law, the Pension Benefit Guaranty Corporation does not
insure the adequacy of trusts such as TAXCAP. Therefore, benefits
under TAXCAP are not insured.
This Plan is subject to Internal Revenue Service approval under the
Internal Revenue Code. The Plan and this book are subject to any
changes required by the Internal Revenue Service to meet applicable
federal rules and regulations.
Income Tax Withholding
The Unemployment Compensation Amendments of 1992, impose a mandatory
20 percent federal tax withholding rate on distributions that are not
directly and immediately rolled over to an individual retirement
account or individual retirement annuity (both referred to as IRAs) or
to another qualified plan.
If you request that any portion of your TAXCAP account balance be paid
directly to you, you will have 20 percent of that distribution
withheld as federal income taxes. In general, this applies to most
distributions, e.g., a distribution upon termination from HP, a
withdrawal at or after age 59 1/2 or a hardship withdrawal - but not
a TAXCAP loan.
The Company will provide you with a statement entitled TAXCAP Special
Tax Notice Regarding Plan Payments whenever you make a withdrawal from
the Plan. This statement will give you general information about
taxation of your benefits at the time your benefits are payable.
Special rules apply for payments made to individuals who live outside
the U.S.
How The Plan Is Funded
HP makes its contributions to the Plan's trust fund based on the
amount contributed by Plan participants. Assets in this trust are
invested according to the directions of the Plan participants within
the guidelines established by HP.
All the money in this trust is used exclusively for providing Plan
benefits to eligible employees and beneficiaries and for paying the
cost of administering the Plan.
How The Stock Purchase Plan Compares To TAXCAP
The following chart compares the Stock Purchase Plan to TAXCAP.
A Comparison
Stock Purchase Plan TAXCAP
------------------- --------------------------
Eligibility Regular full-time and Regular full-time and
regular part-time employees regular part-time employees
one year after your one year after your original
original hire date. hire date.
Earliest Date February 1, May 1, February 1, May 1, August 1,
Participation August 1 or November 1, or November 1, after you meet
Starts after you meet eligibility eligibility requirements.
requirements.
Employee Generally 1 to 10 Generally 1 to 10 percent of
Contributions percent of pay. pay, or 1 to 12 percent of
or Deferrals Combined maximum of 10 pay depending on your
(see tables, percent if you are in both TAXCAP annual compensation
page 175) Plans and in the Stock (Form combined Plan rules,
Purchase Plan at more than see tables on page 175.)
5%. (For combined Plan
rules, see tables on page
175).
Company Shares For every two Employee One dollar for every dollar
or Shares you purchase, you contribute for the
Contribution HP contributes one first 1 percent, 2 percent
share. The Company Shares or 3 percent of your pay.
are subject to a two-year $.50 for every dollar on
restriction period. the next 2 percent
percent of your pay. No
HP match above 5 percent
of your pay.
Income Taxes Income taxes are Income taxes are not
on Employee withheld from from your deferral amounts.
Contributions your contributions.
or Deferrals Taxes are also withheld
at the time of purchase
at quarter end, if the
valuation price is greater
than the purchase price.
Withholding Income taxes are Income taxes are not
Taxes on withheld on Company withheld from company
Company Shares at the end of the contributions.
Contributions restriction period.
Access to Funds Unrestricted shares can Leaving HP or upon death;
be withdrawn or sold at in-service withdrawals
any time. To receive ($1,000 minimum) are
Company Shares you must available at age 59 1/2;
hold your Employee Shares in-service hardship
for two years; or upon withdrawals are available
retirement or death. meeting certain IRS
Company Shares are requirements.
forfeited upon termination
during the two-year
restriction period.
Loans From Not allowed. Allowed $1,000 minimum.
Account
Form of Payout HP stock or cash. HP stock, cash, direct
rollover to an IRA or
qualified plan, or a
combination.
Stopping If you withdraw from the Your deferrals stay in
Contributions Stock Purchase Plan, your trust. HP contributions
or Deferrals contributions for the at the end of the quarter.
quarter are refunded and
no company contributions
will be made. If your
withdrawal is due to a
leave of absence, purchase
and match will occur.
EXHIBIT 3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 No. 2-92331 of Hewlett-Packard Company of our
report dated May 9, 1997, appearing in this Form 11-K.
Price Waterhouse LLP
San Jose, California
June 23, 1997
