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, 1997
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, 1997 and 1996 2
Statements of Changes in Net Assets Available for Benefits,
with Fund Information for the Years Ended December 31,
1997 and 1996 3-4
Notes to Financial Statements 5-10
Additional Information
Schedule I - Assets Held for Investment Purposes at
December 31, 1997 11
Schedule II - Transactions Occurring During the Year Ended
December 31, 1997 Which Were in Excess of 5%
of the Current Value of Plan Assets at
December 31, 1996 12
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.
<PAGE>
Report of Independent Accountants
May 13, 1998
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 statements 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, 1997 and 1996, 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 statements 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.
/s/ Price Waterhouse LLP
------------------------
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
---------------------------
Ann O. Baskins
Assistant Secretary
and Senior Managing Counsel
<PAGE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Net Assets Available for Benefits
(In thousands)
------------------------------------------------------------------------
December 31,
------------------
1997 1996
Assets:
Investments, at fair value:
Hewlett-Packard Company Common Stock $1,167,319 $ 902,070
Templeton Foreign Fund Class I 92,389 56,940
PBHG Growth Fund 154,947 171,788
Fidelity Contrafund 391,834 268,702
Fidelity Magellan Fund 1,002,252 780,799
Fidelity Growth
& Income Portfolio 303,763 180,466
Fidelity Spartan U.S.
Equity Index Fund 249,702 136,145
Fidelity Intermediate Bond Fund 100,066 79,614
Fidelity Retirement Money Market
Portfolio 250,080 241,247
Fidelity Institutional Cash Portfolio
Money Market Class I 13,852 9,670
Loans receivable from participants 97,450 89,506
--------- ----------
Total assets held for investment 3,823,654 2,916,947
Receivables:
Receivable from Hewlett-Packard Company 14,668 28,625
Investment income receivable 2,666 2,191
Miscellaneous receivables - 1,038
---------- ----------
Total assets 3,840,988 2,948,801
---------- ----------
Liabilities:
Miscellaneous payables 2,309 -
---------- ----------
Total liabilities 2,309 -
---------- ----------
Net assets available for benefits $3,838,679 $2,948,801
========== ==========
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, 1997
(In thousands)
Fund Information
<CAPTION> PBHG Contra- Growth &
Stock Templeton Growth fund Magellan Income
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employees $ 8,714 $ 9,276 $ 19,102 $ 32,231 $ 62,917 $ 27,338
Company 5,532 3,798 7,683 14,079 30,506 11,295
Noncash 57,058
Investment income:
Net realized and
unrealized
appreciation in
fair value of
investments:
Hewlett-Packard
Company Common
Stock 227,534
Net investment gain/
(loss) from registered
investment companies 3,837 (6,910) 67,447 205,644 63,055
Interest income 678
Dividend income 9,759
-------- ------- -------- -------- -------- --------
Total additions 309,275 16,911 19,875 113,757 299,067 101,688
-------- ------- -------- -------- -------- --------
Benefits paid to
participants 29,282 3,300 4,505 11,470 31,236 11,966
Loans deemed repaid
due to termination
-------- ------- -------- -------- -------- --------
Total deductions 29,282 3,300 4,505 11,470 31,236 11,966
-------- ------- -------- -------- -------- --------
</TABLE>
<PAGE>
<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, 1997 (Continued)
(in thousands)
Fund Information
<CAPTION> Equity Intermediate Money
Index Bond Market Loan Total
<S> <C> <C> <C> <C> <C>
Contributions:
Employees $ 19,107 $ 8,616 $ 21,275 $ $ 208,576
Company 8,333 4,028 9,187 94,441
Noncash 57,058
Investment income:
Net realized and
unrealized
appreciation in
fair value of
investments:
Hewlett-Packard
Company Common
Stock 227,534
Net investment gain/
(loss)from registered
investment companies 53,296 6,479 392,848
Interest income 13,941 7,751 22,370
Dividend income 9,759
--------- ------- -------- ------- ----------
Total additions 80,736 19,123 44,403 7,751 1,012,586
--------- ------- -------- ------- ----------
Benefits paid to
participants 6,202 4,079 18,302 120,342
Loans deemed repaid
due to termination 2,366 2,366
--------- ------- -------- ------- ----------
Total deductions 6,202 4,079 18,302 2,366 122,708
--------- ------- -------- ------- ----------
</TABLE>
<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, 1997 (Continued)
(in thousands)
Fund Information
<CAPTION>
PBHG Growth &
Stock Templeton Growth Contrafund Magellan Income
<S> <C> <C> <C> <C> <C> <C>
Net increase
before interfund
transfers 279,993 13,611 15,370 102,287 267,831 89,722
Interfund transfers (16,511) 21,562 (33,919) 19,218 (50,632) 32,716
---------- ------- -------- -------- ---------- --------
Net increase/(decrease) 263,482 35,173 (18,549) 121,505 217,199 122,438
Net assets available
for benefits:
Beginning of year 920,985 57,735 174,454 272,260 788,870 182,941
---------- ------- -------- -------- ---------- --------
End of year $1,184,467 $92,908 $155,905 $393,765 $1,006,069 $305,379
========== ======= ======== ======== ========== ========
</TABLE>
<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, 1997 (Continued)
(in thousands)
Fund Information
<CAPTION>
Equity Intermediate Money
Index Bond Market Loan Total
<S> <C> <C> <C> <C> <C>
Net increase before
interfund transfers 74,534 15,044 26,101 5,385 889,878
Interfund transfers 38,597 4,907 (18,497) 2,559 -
-------- -------- -------- ------- ----------
Net increase/(decrease) 113,131 19,951 7,604 7,944 889,878
Net assets available
for benefits:
Beginning of year 137,818 80,621 243,611 89,506 2,948,801
-------- -------- -------- ------- ----------
End of year $250,949 $100,572 $251,215 $97,450 $3,838,679
======== ======== ======== ======= ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<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 5,167 (1,895) 42,465 86,420 24,837
Interest Income 532
Dividend income 8,240
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
-------- ------- -------- -------- -------- --------
</TABLE>
<PAGE>
<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 22,252 2,576 181,822
Interest income 10,635 7,092 18,259
Dividend income 8,240
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
--------- ------- -------- ------- ----------
</TABLE>
<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 (Continued)
(in thousands)
Fund Information
<CAPTION>
PBHG Growth &
Stock Templeton Growth Contrafund Magellan Income
<S> <C> <C> <C> <C> <C> <C>
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>
<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 (Continued)
(in thousands)
Fund Information
<CAPTION>
Equity Intermediate Money
Index Bond Market Loan Total
<S> <C> <C> <C> <C> <C>
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>
<PAGE>
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 of 1974 (ERISA).
Fidelity Investments provides recordkeeping and trustee services as well
as investment management for the Plan. The Company determines
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. Effective February 1, 1998,
there is no waiting period for eligibility. Prior to February 1, 1998,
the waiting period was one year from the date of hire. Also effective
February 1, 1998, all employees who are hired on or after February 1, 1998
are deemed to have elected a three percent deferral effective on the first
day of their employment, unless the employee makes a change to that
election in the manner prescribed by the company. Prior to February 1,
1998, participation was initiated at the election of the employee upon
becoming eligible after the one year waiting period.
Employee Contributions
Effective January 1, 1998, participating employees may have from 1% to 20%
of their salary deferred by the Company through payroll deductions and have
contributions made directly to their 401(k) account. Prior to January 1,
1998, participating employees could defer 1% to 12% of their salary.
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 401(k) 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% of salary deferred and an amount equal to half of the
employee's deferral for the next 2% of salary deferred. The Company
matching contribution is deposited into the individual employee's 401(k)
account after the end of each of the Company's fiscal quarters, which are
January 31, April 30, July 31 and October 31.
Beginning with the 1997 Plan year, the Company may guarantee a minimum
amount of employee and Company contributions that will be made to the
Plan in a Plan year. The amount, if any, that this minimum exceeds the
actual employee and Company contributions as determined above will be
allocated to nonhighly compensated employees (as defined in the Code)
in the manner prescribed by the Plan document. Minimum contributions
were guaranteed for part of the 1997 Plan year and the 1998 Plan year.
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. Participant accounts that
are established at the three percent deferral default for new hires will
have their contributions invested in the Fidelity Retirement Money Market
Fund until the participant makes a change to that investment election.
Participating employees can transfer their invested funds among the
investment options and/or change the investment of their future
contributions as often 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. The other fund
managers are Pilgrim Baxter and Associates and 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. This 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 stocks 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 Spartan
U.S. Equity Index Fund. The fund manager makes investments
in equity securities and attempts to duplicate the compos-
ition and total returns of the Standard & Poor's Daily Stock
Price Index of 500 Common Stocks.
Intermediate
Bond - A fund comprised of investments in the 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 the Fidelity
Retirement Money Market Portfolio. Investments are
made in high quality, U.S. dollar-denominated 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 from 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. Loans outstanding
at December 31, 1997 carried interest rates which range from 6.5% to
10.65%.
The Plan also provides for hardship withdrawals subject to certain
restrictions as well as in-service withdrawals at age 59-1/2.
Benefits are payable in a lump sum. Certain participants from particular
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 will be nonforfeitable.
Benefits will continue to be distributed in accordance with the Plan.
The trustee will 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, which approximates fair value. Benefits are recorded
when paid.
All dividends and capital distributions received from the PBHG Growth
Fund, the Templeton Foreign Fund Class I, the Fidelity Contrafund, the
Fidelity Magellan Fund, the Fidelity Growth & Income Portfolio, the
Fidelity Spartan U.S. Equity Index Fund 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 $39,202,000 in 1997 and
$31,839,000 in 1996. Stock contributions attributable to Company
contributions totaled $17,856,000 in 1997 and $20,915,000 in 1996.
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 18,677,095 at the end of 1997 and 17,951,642 at the end
of 1996. 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, 1997 and 1996 was 25,574,187 and
24,556,337, respectively, and the net asset value was $46.20 and $37.26
at these dates. The net asset value on the participant statement
dates for 1997 was $37.89, $40.09, $51.89 and $46.91 at February 6, 1997,
May 6, 1997, August 6, 1997 and November 6, 1997, respectively. The net
asset value on the participant statement dates for 1996 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 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 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.
<PAGE>
<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, 1997 (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 6,102,662 $158,610 $ 154,947
Franklin Templeton
Templeton Foreign
Fund Class I Equity Mutual Fund,
no par value 9,285,332 97,045 92,389
Hewlett-Packard Company Common Stock,
$1.00 par value 18,677,095 684,336 1,167,319
Fidelity Investments
Fidelity Contrafund Equity Mutual Fund,
no par value 8,403,051 332,688 391,834
Fidelity Investments
Fidelity Magellan Fund Equity Mutual Fund,
no par value 10,520,118 806,115 1,002,252
Fidelity Investments
Fidelity Growth &
Income Portfolio Equity Mutual Fund,
no par value 7,972,791 235,776 303,763
Fidelity Investments
Fidelity Spartan U.S.
Equity Index Fund Equity Mutual Fund,
no par value 7,138,429 176,530 249,702
Fidelity Investments
Fidelity Intermediate
Bond Fund Fixed Income Mutual
Fund, no par value 9,839,363 100,257 100,066
Fidelity Investments
Fidelity Retirement
Money Market Portfolio Money Market Fund,
$1.00 par value 250,080,102 250,080 250,080
Fidelity Investments
Fidelity Institutional
Cash Portfolio
Money Market Class I Money Market Fund,
$1.00 par value 13,852,139 13,852 13,852
Participant Loans Loans issued for terms
of 1 - 4 years, with
6.5% to 10.65% interest 97,450
------
Total assets held for investment $3,823,654
==========
</TABLE>
<PAGE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan (Plan 004)
Employer Identification Number 94-1081436
Transactions Occurring During the Year Ended December 31, 1997 Schedule II
Which Were in Excess of 5% of the Current Value of Form 5500
Plan Assets at December 31, 1996 (Item 27d - Schedule of
(In thousands except number of transactions) Reportable Transactions)
<CAPTION>
Purchases Proceeds
and Fair From Sales
Value at and Fair Cost of Net
Identity of Party Involved Number of Date of Value at Date Assets Realized
Description of Asset Transactions Transaction of Transaction Disposed Gain/(Loss)
<S> <C> <C> <C> <C> <C>
Hewlett-Packard Company
Common Stock 195 315,255 277,988 147,312 130,675
Pilgrim Baxter & Associates
PBHG Growth Fund
Equity Mutual Fund 253 $109,259 $119,191 $124,379 ($7,141)
Contrafund
Equity Mutual Fund 253 173,286 80,620 72,764 7,092
Fidelity Magellan Fund
Equity Mutual Fund 253 250,485 170,880 149,049 17,777
Fidelity Growth & Income
Portfolio
Equity Mutual Fund 253 143,455 69,892 61,949 9,051
Fidelity Spartan U.S. Equity
Index Fund
Equity Mutual Fund 253 145,456 80,063 72,046 12,050
Fidelity Retirement Money
Market Portfolio
Money Market Fund 256 541,790 532,957 532,957 -
Fidelity Institutional Cash
Portfolio Money Market Class I
Money Market Fund 131 347,744 340,785 340,785 -
Note: The normal expenses associated with asset purchases and sales are built into the cost records
and are therefore not shown separately here. Additionally, the number of transactions for the
mutual funds represent recordkeeping transaction activity, not the gross number 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.
TAX SAVING CAPITAL ACCUMULATION PLAN
You Will Find Information About: On Page:
What TAXCAP Offers You 163
TAXCAP: A Participant-Directed Investment Plan 164
Who Can Join The Plan 166
When You May Join The Plan 166
How Much You May Contribute 166
How Your Contributions Can Reduce Your Current Taxes 167
How Much HP Contributes 167
How Your TAXCAP Account Is Invested 168
When Payouts Are Made 170
How You Can Borrow From Your Account 171
Special Rules For Acquisition Employees 173
How To Make Changes Or Receive Your Money 174
How To Claim Benefits 175
If A Claim Is Denied 175
How You Can Make Rollover Contributions 175
What Circumstances Can Affect Your Benefits 176
How The Plan Is Funded 178
How The Stock Purchase Plan Compares To TAXCAP 179
<PAGE>
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 with an incentive to save regularly for retirement on
a pretax basis while receiving 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, as well as employee communications. Headquartered in Boston,
with 82 branches nationwide, Fidelity is one of the largest and best known
investment management organizations in the country. The firm currently
manages more than $400 billion for more than 20 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, hired on or
after February 1, 1998, you are automatically enrolled in TAXCAP on your
date of hire unless you decline participation. If you decline
participation, you may join TAXCAP in any subsequent pay period. If you
are a regular full-time or regular part-time employee hired before
February 1, 1998, you may join in any pay period.
If you are automatically enrolled in TAXCAP when you are hired, your
contribution rate is 3 percent of your pay. You may change your
contribution rate in any pay period.
Under TAXCAP, you can elect to have HP contribute from 1 to either 10 or
20 percent of your pay into your TAXCAP account through payroll
deductions. The maximum percent of your pay that you can contribute to
TAXCAP each year is based on what you earned during the previous calendar
year. If your total HP compensation for 1997 is less than an amount
defined by federal tax laws ($80,000 for 1997), you can contribute up to
20 percent of your pay to TAXCAP during 1998. If your HP compensation for
1997 is greater then $80,000, you can contribute up
to 10 percent of your salary.
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 makes a matching contribution of $1 for every $1 you contribute of the
first 1 percent, 2 percent or 3 percent of your pay. HP makes a matching
contribution of $.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
contributions 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 can be 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:
o fiscal quarter
o fiscal year
o pay
o Pension Benefit Guaranty Corporation (PBGC)
o TAXCAP
o valuation date
o vested
o 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 168 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 166 When You May Join The Plan
By Participant and page 169 Fund Information of this HP
Benefits Summary.
Transaction Fees in There are no transaction fees imposed on
Connection with Purchase the purchase, sale or exchange of the
or Sale of Investment investment alternatives in TAXCAP. See
Alternatives the mutual fund prospectuses for the
operating expenses imposed within each
mutual fund.
Fund Prospectus on Initial After the initial investment in a TAXCAP
Investment 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 Company, the
Voting Rights 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, Information regarding the purchase, Holding,
Holding, Sale and Voting and sale of HP stock and the exercise of
of HP stock of voting, tender and similar rights with
(see page 169 for respect to HP Stock by participants is
description of HP Stock is maintained under procedures intended to
Fund) safeguard confidentiality. The purchase,
holding and sale of HP stock is governed by
the procedures described in this HP Benefits
Summary at page 166 WHEN YOU MAY JOIN THE
PLAN and at page 169 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
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
General and Participant General and participant-specific invest-
Specific Investment ment information is provided by Fidelity
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.
<PAGE>
INFORMATION SOURCES
------------------------------------------------------------------------
Mutual Fund TAXCAP Fidelity TAXCAP
Prospectus Annual/ Quarterly Automated
Semiannual Participant Phone
Report Statement and Service
Statement
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 and were hired
before February 1, 1998, you may enroll in TAXCAP in any pay period. If you
meet the eligibility requirements and are hired on or after February 1,
1998, enrollment is automatic unless you decline participation.
When You May Join The Plan
If you are hired on or after February 1, 1998, you will be automatically
enrolled in TAXCAP on your date of hire unless you decline participation.
If you decline participation, you may join in any subsequent pay period.
If you were hired before February 1, 1998, you may enroll in any pay period.
You can enroll in TAXCAP using HP's Telephone Activated Benefits Systems
TABS. TABS phone number is 800-262-TABS (8227) or Telnet 857-TABS (8227).
When you call TABS, you must enter your desired contribution rate and
specify the investment mix you want in whole percent increments. Investment
mixes must total 100 percent. Once you have enrolled in TAXCAP using TABS,
your participation will begin in the following pay period.
Your Beneficiary
Once you enroll, you should also name a beneficiary to receive your TAXCAP
benefits at your death. A TAXCAP Beneficiary Form #0070 is available on the
Human Resources Web site. 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 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:
o your surviving spouse/domestic partner
o your surviving children in equal portions
o your surviving parents in equal portions
o your estate<PAGE>
How Much You May Contribute
You may contribute up to 10 percent or 20 percent of your pay, depending on
your annual HP compensation. Your earnings statement for the pay period
ending December 15 will show the maximum percentage you are eligible to
contribute for the following calendar year. Generally, pay is your regular
wage or salary. Pay is defined more completely in the Glossary at page 213
for purposes of both determining the 10 or 20 percent contribution limit and
the type of pay from which your contributions will be made.
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 table:
-------------------------------------------------------------------------
The contribution rates in the first ten rows of the following table are
available to you only if your total HP compensation for 1997 (or if you
were hired after January 1, 1997, your annual rate of pay) does not exceed
$80,000 (an amount defined by federal tax laws).
--------------------------------------------------------------------------
Total
Combined TAXCAP
TAXCAP and Stock
Maximum and Stock Purchase
Stock Purchase Company
TAXCAP Purchase Maximum Matching
Contribution Contribution Contribution Contribution
(%) (%) (%) (%)
20% 5% 25% 6.5%
19% 5% 24% 6.5%
18% 5% 23% 6.5%
17% 5% 22% 6.5%
16% 5% 21% 6.5%
15% 5% 20% 6.5%
14% 5% 19% 6.5%
13% 5% 18% 6.5%
12% 5% 17% 6.5%
11% 5% 16% 6.5%
10% 5% 15% 6.5%
9% 5% 14% 6.5%
8% 5% 13% 6.5%
7% 5% 12% 6.5%
6% 5% 11% 6.5%
5% 5% 10% 6.5%
4% 6% 10% 6.5%
3% 7% 10% 6.5%
2% 8% 10% 6.0%
1% 9% 10% 5.5%
0% 10% 10% 5.0%
----------------------------------------------------------------------------
As soon as your TAXCAP contribution equals the maximum amount ($10,000 in
1998) 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 contribution rate in any pay period. You can stop your
contributions at any time. However, when your contributions stop, so does
the company match. Once you have stopped, you can resume your contribution
as of any February 1, May 1, August 1, or November 1. Your contributions
are paid into the trust and invested in your designated investment
alternatives on the scheduled HP paydays.
How Your Contributions Can Reduce Your Current Taxes
Federal and most state income taxes are based on the portion of your
pay remaining after your contributions 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 contribute 6
percent in TAXCAP. Your annual contribution will be $2,100.
Although your actual pay is $35,000, your taxable pay will be
$32,900. This is because you are contributing $2,100 in TAXCAP
before taxes.
As of late 1997, 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 makes matching contributions of $1 for every $1 you contribute of
the first 1 percent, 2 percent or 3 percent of your pay. HP makes
matching contributions of $.50 for every $1 on the next 2 percent you
contribute 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 Contribution 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 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:
o Are an employee on the last business day of the fiscal quarter
o 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.
o Died during the fiscal quarter.
HP may commit to make minimum contributions to TAXCAP for a calendar year
in advance of the time they are otherwise due. This commitment will be
allocated to both your contributions and the HP matching contribution.
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 contributions are invested as you
choose. In the following paragraphs, the options are described beginning
with the most conservative and ending with the most aggressive.
o 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.
o 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.
o Fidelity Spartan U.S. Equity Index Fund - Fidelity Spartan U.S. Equity
Index Fund 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 Fund's
share price and return will fluctuate.
o 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.
o 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.
o 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.
o Templeton Foreign Fund - 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.
o Pilgrim Baxter Growth Fund - 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.
o Hewlett-Packard Stock Fund - The Hewlett-Packard Stock Fund enables you
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 exchange-
ability without the three-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, the entire amount
will automatically be invested in the Fidelity Retirement Money Market
Portfolio which is the most conservative investment.
Once you are 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 Spartan U.S. Equity Index Fund 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 a.m. to 12:00
a.m. 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 a.m.
to 12:00 a.m. 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
since the last statement and the total value of your account.
The information provided includes:
o The beginning balance, which is the closing balance from the
previous statement
o investment performance (gains or losses)
o investment elections (mixes)
o any fund exchange activities that you authorized for the quarter
o your contributions for the quarter
o loan information
o HP's matching contributions for the quarter
o 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
contributions, HP's matching 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:
o lump sum amount in cash payable to you
o HP stock and cash (only available for that portion of your account
invested in the HP Stock Fund) payable to you
o a direct rollover from TAXCAP to a Fidelity Investments Individual
Retirement Account (IRA)
o 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 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 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:
o 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.
o 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 plus any loan balance 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 $5,000, 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 $5,000, 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 $5,000
after the 60 days, your account will be distributed in cash. If after the
60 days, your account balance exceeds $5,000, 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 in cash at age 65.
If you have a loan outstanding at termination see Loan Outstanding at
Termination on page 173.
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:
o Unreimbursed medical expenses for you, your spouse or dependents.
o Purchase or construction of your principal residence.
o Payment of tuition and related educational fees for the next 12
months of post-secondary education for you, your spouse, your
children, or dependents.
o Prevention of eviction from or foreclosure on the mortgage on your
principal residence.
o 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 contributions 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 ($10,000 for calendar year 1998).
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 173 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 loan 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 is...
---------------------- -----------------------
$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 repre-
sentative immediately at 800-457-4015.
Special rules apply for loans for certain acquisition employees (see page
173 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 Spartan U.S. Equity Index Fund
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" to:
Fidelity Investments
Client Service Operations
P.O. Box 9029
Boston, MA 02205-9029
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 an 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:
o 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.
o 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 PREPAY 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 on 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 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 166 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 partici-
pants 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. You
You also visit the TAXCAP Web site at
http//:persweb.corp.hp.com/benefits/taxcap/txcpinfo.htm
------------------------------------------------------------------------
If You Want To... You Need To...
--------------------- -------------------------------------------
Enroll in the Plan if Call TABS at 800-262-TABS or Telnet 857-TABS
you declined partici- and enroll in TAXCAP. You must enter your
pation when you were desired TAXCAP contribution rate and specify
hired. the investment mix you want in whole percent
increments. Investment mixes must total 100
percent. Once you have enrolled in TAXCAP,
TABS will tell you when you are eligible to
begin contributions. Upon enrollment, it is
your responsibility to complete a beneficiary
designation form for TAXCAP and return it to
the USESC.
Change your contribu- Call TABS and make the desired TAXCAP
tion rate. contribution rate changes. TABS will tell
you when your changes will become effective.
Stop making contribu- Call TABS and change your deferral to 0. Your
tions into TAXCAP (that contribution will stop as of the first possible
is change the percentage possible pay period after you call TABS. TABS
to zero). will tell you when your contributions will be
stopped.
Resume making contribu- Call TABS to re-enroll. TABS will tell you
tions to TAXCAP (re-enroll) when you are eligible to begin contributions
after you have stopped. again.
Resume making contribu- Take no action. Your contributions will resume
tions after a period of automatically at the previous percentage when
suspension due to a formal you return. If you wish to change your percent-
leave of absence. age or cease contributions entirely, call TABS
on your return. TABS will tell you when your
contribution 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 comple-
ted beneficiary form is received by USESC.
Change the investment mix Call Fidelity Investments at 800-457-4015.
of your current contribu-
tions.
Transfer assets between Call Fidelity Investments at 800-457-4015.
the various investment
alternatives.
Apply for a withdrawal Call Fidelity Investments at 800-457-4015
after age 59 1/2. to obtain an application. Once Fidelity mails
you the application, sign it and send it to
TAXCAP Administration, 3000 Hanover Street,
MS 20BAX, Palo Alto, CA 94304.
Apply for a hardship Call Fidelity Investments at 800-457-4015
withdrawal.* to obtain an application. Once Fidelity mails
you the application, sign it and send it to
TAXCAP Administration, 3000 Hanover Street,
MS 20BAX, Palo Alto, CA 94304.
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 173 for details).
** Special rules for certain acquisition employees apply here (see
page 173 for details)
How To Claim Benefits
To receive payment of your TAXCAP account balance, follow the procedures
under When Payouts are Made on page 170.
If information provided by you 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:
o Why the claim was denied and the specific Plan provisions on which
the denial is based.
o What additional information is needed and why.
o How to appeal the denial.
o 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. 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 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:
o You are still in possession of the payout made payable to you and
less than 60 days have elapsed since the date the payout was
received by you.
o You originally rolled the payout into a new and separate IRA.
Contact the U.S. Employee Service Center or go to the Human Resources Web
site for a rollover contribution form if you think you are qualified.
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 contributions and HP's contributions end.
You may elect a payout option of HP stock, and/or
cash, or direct rollover to a Fidelity Investments
IRA 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 contributions and HP's contributions
personal, military are suspended during leave of absence. Your
or Family and Medical contributions and HP's contributions resume
Leave Act leave of automatically once your return to active
absence. You take employment status. You are not eligible to
a medical leave of take a loan while on leave of absence.
absence and are not
integrating FTO with
IPP.
You are on medical You may continue your contributions and HP's
leave of absence, contributions under TAXCAP. The amount contributed
you are disabled will be a percentage of both your IPP benefits and
and the HP Income the FTO pay you receive from HP while on IPP.
Protection Plan, You are not eligible to take a loan while on IPP.
integrating FTO
and in the first
90 days of dis-
ability.
You are on medical As with FTO accrual and the Stock Purchase Plan,
leave of absence, you will no longer be able to continue contribu-
you are disabled and tions to TAXCAP. You are not eligible to take a
have been on the loan while on IPP.
Income Protection
Plan for 90 days.
You are still
integrating FTO
benefits.
You die. Your contributions 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 administ-
ration.
---------------------------------------------------------------------------
If You Leave and Are Rehired
If you leave HP and are rehired, you will be automatically enrolled in
TAXCAP on your rehire date unless you decline participation.
Under no circumstances will you receive a payout while on HP's payroll.
Payment cannot be made until you leave HP or die.
When Your Participation Is Automatically Suspended
Your participation in TAXCAP is automatically suspended while you are on:
o A leave of absence without pay
o A non-U.S. Hewlett-Packard payroll
o The HP Income Protection Plan after 90 days of disability. (The
suspension will start with the pay period after the 90th day.
However, your contributions before the 90th day will be eligible for
HP's contributions.)
During this time, you cannot make contributions and HP will not make any
matching contributions to your account. Your account will continue to share
in the performance of the investment alternatives you have selected. Your
contributions will automatically resume when you return to active employment
status.
Upon returning to employment from "military service" as defined in the
Uniformed Services Employment and Reemployment Rights Act (USERRA), you have
the right to make contributions into TAXCAP for the period of your unpaid
military leave of absence. If you elect to make such contributions, HP will
also make a company match. The amount of your contributions and company
match will be as allowed by TAXCAP and USERRA. If you wish to make such
contributions, contact TAXCAP Administration.
How Your Contributions May Be Limited
The Internal Revenue Code places a combined limit on the amount you may
contribute to TAXCAP and all other 401(k) plans during a calendar year. For
calendar year 1998, this limit is $10,000 for all 401(k) plans combined.
This limit does not include HP's matching 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 contributions 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 contribution rate of
higher-paid participants from time to time. If so, the percentage of pay
that those participants may contribute may be reduced below 10 percent.
You will be notified if you are affected by this test.
TAXCAP contributions 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, 1998 through December 31, 1998.
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 retirement plan.
If you request that any portion of your TAXCAP account balance be paid
directly to you, 20 percent of that distribution will automatically be
withheld for 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 employ- regular part-time employees
ees are eligible on your are eligible on your hire date.
hire date. Enrollment is automatic if
hired on or after February 1,
1998 unless you decline
participation.
Earliest Date On your hire date if you Automatically, on your hire
Participation timely enroll in the Stock date if hired on or after
Starts Purchase Plan. Otherwise February 1, 1998 unless you
any February 1, May 1, decline participation. If
August 1 or November 1 you decline participation,
thereafter. in any pay period thereafter.
Employee Generally 1 to 10 percent Generally 1 to 10 percent
Contributions percent of pay. Combined of pay, or 1 to 20 percent
(See table, maximum of 10 percent if of pay depending on your
page 167) you are in both Plans and TAXCAP annual compensation.
the Stock Purchase Plan (For combined Plan rules see
at more than 5%. (For see table on page 167.)
combined Plan rules, see
table on page 167.)
Company Shares For every two Employee One dollar for every dollar
or Matching Shares you purchase, HP you contribute for the first
Contributions contributes one share. 1 percent, 2 percent or 3
The Company Shares are percent of your pay. $.50
subject to a two-year for every dollar on the next
restriction period. 2 percent of your pay. No
HP match above 5 percent of
your pay.
Income Taxes Income taxes are withheld Federal and most state income
on Employee from your contributions. taxes are not withheld from
Contributions Taxes are also withheld from your contribution amounts.
at the time of purchase
at quarter end, if the
valuation price is greater
than the purchase price.
Withholding Income taxes are withheld Federal and most state income
Taxes on on Company Shares at the taxes are not withheld from
Company end of the restriction from company contributions.
Contributions period.
Access to Unrestricted Shares can Leaving HP or upon death;
Funds be withdrawn or sold at in-service withdrawals ($1,000)
any time. To receive minimum) are available at age
Company Shares you must age 59 1/2; in-service hardship
hold your Employee Shares hardship withdrawals are avail-
for two years; or upon able upon meeting certain IRS
retirement, permanent requirements.
disability, or death.
Company Shares are for-
feited upon termination
during the two year
restriction period.
Loans From Not allowed. Allowed--$1,000 minimum.
Account
Form of HP stock or cash. HP stock, cash, direct rollover
Payout to an IRA or qualified plan, or
a combination.
Stopping If you withdraw from the Your contributions stay in
Contributions Stock Purchase Plan, your trust. HP contributions are
During contributions for the made at the end of the quarter.
Quarter quarter are refunded and
no company Shares will be
purchased. If your with-
drawal is due to a leave
of absence, purchase
and match will occur.
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EXHIBIT 3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statement constituting part of Post-Effective
Amendment No.4 to the Registration Statement on Form S-8
(Registration No. 2-92331) of Hewlett-Packard Company of
our report dated May 13, 1998 appearing in this Form 11-K.
/s/ Price Waterhouse LLP
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Price Waterhouse LLP
San Jose, California
June 23, 1998