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, 1998
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
December 31, 1998 and 1997
Index to Financial Statements
Page
Report of Independent Accountants 1
Financial Statements
Statement of Net Assets Available for Benefits
at December 31, 1998 and 1997 2
Statements of Changes in Net Assets Available for Benefits,
with Fund Information for the Years Ended December 31,
1998 and 1997 3-5
Notes to Financial Statements 6-12
Additional Information
Schedule I - Assets Held for Investment Purposes at
December 31, 1998 13-14
Schedule II - Transactions Occurring During the Year Ended
December 31, 1998 Which Were in Excess of 5%
of the Current Value of Plan Assets at
December 31, 1997 15
Note: Other schedules required by Section 2520.103-10 of the Department
of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974 have been
omitted because they are not applicable.
Report of Independent Accountants
April 26, 1999
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, 1998 and 1997, 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/PricewaterhouseCoopers LLP
- -----------------------------
PricewaterhouseCoopers LLP
San Jose, California
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
Associate General Counsel
and Assistant Secretary
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Net Assets Available for Benefits
(In thousands)
-------------------------------------------------------------------------
December 31,
1998 1997
---- ----
Assets:
Investments, at fair value:
Money Market Funds:
Fidelity Institutional Money Market Fund $ 5,738 $ 13,852
Fidelity Retirement Money Market Portfolio 388,605 250,080
Bond Funds:
Fidelity Intermediate Bond Fund 143,609 100,066
PIMCO Total Return Fund 25,927 -
Large Company Stock Funds:
Domini Social Equity Fund 20,711 -
Fidelity Contrafund 525,132 391,834
Fidelity Growth & Income Portfolio 459,048 303,763
Fidelity Magellan Fund 1,394,934 1,002,252
Harbor Capital Appreciation Fund 28,883 -
ICAP Equity Portfolio 6,459 -
Spartan U.S. Equity Index Fund 391,828 249,702
Worldwide Company Stock Fund:
Janus Aspen Series Worldwide Growth Portfolio 31,233 -
Small and Mid-Sized Company Stock Funds:
Fidelity Low-Priced Stock Fund 15,963 -
PBHG Growth Fund 119,142 154,947
U.S. Small and Mid Cap Index Fund 11,258 -
Foreign Company Stock Fund:
Templeton Foreign Fund A 77,154 92,389
Hewlett-Packard Company Common Stock 1,183,405 1,167,319
Loans receivable from participants 96,903 97,450
---------- ----------
Total Investments 4,925,932 3,823,654
Receivables:
Receivable from Hewlett-Packard Company 16,669 14,668
Receivable from brokers for securities sold 9,646 -
Investment income receivable 2,826 2,666
---------- ----------
Total Assets 4,955,073 3,840,988
Liabilities:
Payables:
Miscellaneous payables 112 2,309
Payables to brokers for securities purchased 1,097 -
---------- ----------
Total Liabilities 1,209 2,309
---------- ----------
Net Assets Available for Benefits $4,953,864 $3,838,679
========== ==========
The accompanying notes are an integral part of these financial
statements
<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, 1998
(In thousands)
- ----------------------------------------------------------------------------
Fund Information
---------------------------------------------------
Money Market Bond Funds
Fund
---------------- --------------------------------
<CAPTION>
Fidelity Ret. Fidelity PIMCO Total
Money Mkt. Intermediate Return
Portfolio Bond Fund Fund
<S> <C> <C> <C>
Contributions:
Cash
Employees $ 28,641 $ 11,472 $ 685
Company 12,123 5,094 274
Noncash
Employees
Company
Investment income:
Net realized and
unrealized
appreciation
(depreciation) in
fair value of
investments 8,624 593
Interest income 15,985
Dividend income
--------- --------- ---------
Total additions 56,749 25,190 1,552
--------- --------- ---------
Benefits paid to
participants 25,054 6,731 210
Loans deemed repaid
due to termination
--------- --------- ---------
Total deductions 25,054 6,731 210
--------- --------- ---------
Net increase
before interfund
transfers 31,695 18,459 1,342
Interfund transfers 107,239 25,186 24,677
--------- --------- ---------
Net increase (decrease) 138,934 43,645 26,019
Net assets available
for benefits:
Beginning of year 251,215 100,572 -
--------- --------- ---------
End of year $ 390,149 $ 144,217 $ 26,019
========= ========= =========
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, 1998
(In thousands)
- ----------------------------------------------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------------------------------
Large Company Stock Funds
---------------------------------------------------------------------------------------------------
<CAPTION>
Domini Fidelity Fidelity Fidelity Harbor ICAP Spartan U.S.
Social Contrafund Growth & Magellan Capital Equity Equity Index
Equity Income Fund Appreciation Portfolio Fund
Fund Portfolio Fund
--------- --------- --------- ---------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Cash
Employees $ 964 $ 40,157 $ 40,879 $ 79,200 $ 1,405 $ 367 $ 31,763
Company 307 16,444 16,211 35,286 511 149 12,701
Noncash
Employees
Company
Investment income:
Net realized and
unrealized
appreciation
(depreciation) in
fair value of
investments 2,007 124,399 95,064 344,813 3,408 171 79,786
Interest income
Dividend income
--------- --------- --------- ---------- --------- -------- ---------
Total additions 3,278 181,000 152,154 459,299 5,324 687 124,250
--------- --------- --------- ---------- --------- -------- ---------
Benefits paid to
participants 28 15,739 16,967 36,921 77 9 12,904
Loans deemed repaid
due to termination
--------- --------- --------- ---------- --------- --------- ---------
Total deductions 28 15,739 16,967 36,921 77 9 12,904
--------- --------- --------- ---------- --------- --------- ---------
Net increase
before interfund
transfers 3,250 165,261 135,187 422,378 5,247 678 111,346
Interfund transfers 17,574 (31,912) 20,531 (29,400) 23,794 5,820 31,221
--------- --------- --------- ---------- --------- --------- ---------
Net increase
(decrease) 20,824 133,349 155,718 392,978 29,041 6,498 142,567
Net assets available
for benefits:
Beginning of year - 393,765 305,379 1,006,069 - - 250,949
--------- --------- --------- ---------- --------- --------- ---------
End of year $ 20,824 $ 527,114 $ 461,097 $1,399,047 $ 29,041 $ 6,498 $ 393,516
========= ========= ========= ========== ========= ========= =========
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits,
with Fund Information
For the Year Ended December 31, 1998
(In thousands)
- ------------------------------------------------------------------------------------------
Fund Information
-------------------------------------------------------------------
Worldwide
Co. Stock Small and Mid-Sized Company Stock Funds
Fund
-------------- -------------------------------------------------
<CAPTION>
Janus Aspen
Series WW Fidelity Low- PBHG U.S. Small
Growth Priced Stock Growth and Mid Cap
Portfolio Fund Fund Index Fund
----------- ------------- ------ -----------
<S> <C> <C> <C> <C>
Contributions:
Cash
Employees $ 1,485 $ 713 $ 16,642 $ 705
Company 648 346 6,329 216
Noncash
Employees
Company
Investment income:
Net realized and
unrealized
appreciation
(depreciation) in
fair value of
investments 1,727 194 302 896
Interest income
Dividend income
--------- ---------- ---------- ----------
Total additions 3,860 1,253 23,273 1,817
--------- ---------- ---------- ----------
Benefits paid to
participants 150 183 4,298 22
Loans deemed repaid
due to termination
--------- ---------- ---------- ----------
Total deductions 150 183 4,298 22
--------- ---------- ---------- ----------
Net increase
before interfund
transfers 3,710 1,070 18,975 1,795
Interfund transfers 27,716 14,996 (55,078) 9,527
--------- --------- ---------- ----------
Net increase
(decrease) 31,426 16,066 (36,103) 11,322
Net assets available
for benefits:
Beginning of year - - 155,905 -
---------- --------- --------- ----------
End of year $ 31,426 $ 16,066 $ 119,802 $ 11,322
=========== ========= ========= ==========
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits,
with Fund Information
For the Year Ended December 31, 1998
(In thousands)
- --------------------------------------------------------------------------------------------------
Fund Information
-------------------------------------------------------------------------
Foreign HP Company Participant
Company Stock Fund Loans
Stock Fund
-------------- ---------------- ---------------
<CAPTION>
Templeton
Foreign
Fund A Total
---------
<S> <C> <C> <C>
Contributions:
Cash
Employees $ 10,216 $ 10,920 $ 276,214
Company 3,971 2 110,612
Noncash
Employees 44,117 44,117
Company 25,525 25,525
Investment income:
Net realized and
unrealized
appreciation
(depreciation) in
fair value of
investments (4,840) 122,185 779,329
Interest income 615 $ 8,458 25,058
Dividend income 11,442 11,442
---------- ----------- ---------- ----------
Total additions 9,347 214,806 8,458 1,272,297
---------- ----------- ---------- ----------
Benefits paid to
participants 3,141 31,808 154,242
Loans deemed repaid
due to termination 2,870 2,870
---------- ----------- ---------- ----------
Total deductions 3,141 31,808 2,870 157,112
---------- ----------- ---------- ----------
Net increase
before interfund
transfers 6,206 182,998 5,588 1,115,185
Interfund transfers (21,533) (164,223) (6,135) -
---------- ---------- ---------- ----------
Net increase (15,327) 18,775 (547) 1,115,185
(decrease)
Net assets available
for benefits:
Beginning of year 92,908 1,184,467 97,450 3,838,679
---------- ---------- ---------- ----------
End of year $ 77,581 $1,203,242 $ 96,903 $4,953,864
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits,
with Fund Information
For the Year Ended December 31, 1997
(In thousands)
------------------------------------------------------------------------------------------------------------------------
Fund Information
---------------------------------------------------------------------------------------------------
Money Bond Fund Large Company Stock Funds
Market
Fund
--------------- ------------- -------------------------------------------------------------
<CAPTION> Fidelity Fidelity Spartan U.S.
Fidelity Fidelity Fidelity Growth & Magellan Equity Index
Money Mkt. Intermediate Contrafund Income Fund Fund
Portfolio Bond Fund Portfolio
------------ ------------ ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Cash
Employees $ 21,275 $ 8,616 $ 32,231 $ 27,338 $ 62,917 $ 19,107
Company 9,187 4,028 14,079 11,295 30,506 8,333
Noncash
Employees
Company
Investment income:
Net realized and
unrealized
appreciation
(depreciation) in
fair value of
investments 6,479 67,447 63,055 205,644 53,296
Interest income 13,941
Dividend income
----------- ----------- ----------- ----------- ---------- ----------
Total additions 44,403 19,123 113,757 101,688 299,067 80,736
----------- ----------- ----------- ----------- ---------- ----------
Benefits paid to
participants 18,302 4,079 11,470 11,966 31,236 6,202
Loans deemed repaid
due to termination
----------- ----------- ----------- ----------- --------- ----------
Total deductions 18,302 4,079 11,470 11,966 31,236 6,202
----------- ----------- ----------- ----------- --------- ----------
Net increase
before interfund
transfers 26,101 15,044 102,287 89,722 267,831 74,534
Interfund transfers (18,497) 4,907 19,218 32,716 (50,632) 38,597
----------- ----------- ----------- ---------- ---------- -----------
Net increase
(decrease) 7,604 19,951 121,505 122,438 217,199 113,131
Net assets available
for benefits:
Beginning of year 243,611 80,621 272,260 182,941 788,870 137,818
----------- ----------- ----------- ----------- ----------- ----------
End of year $ 251,215 $ 100,572 $ 393,765 $ 305,379 $1,006,069 $ 250,949
========== ========== ========== ========== ========== =========
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits,
with Fund Information
For the Year Ended December 31, 1997
(In thousands)
- --------------------------------------------------------------------------------------------------------------------
Fund Information
--------------------------------------------------------------------------
Small and Foreign
Mid Sized Company HP Company Participant
Company Stock Fund Stock Fund Loans
Stock Fund
----------- ---------- ----------- -----------
<CAPTION>
Templeton
PBHG Foreign
Growth Fund Fund A Total
------------ ----------- -----------
<S> <C> <C> <C> <C>
Contributions:
Cash
Employees $ 19,102 $ 9,276 $ 8,714 $ 208,576
Company 7,683 3,798 5,532 94,441
Noncash
Employees 39,202 39,202
Company 17,856 17,856
Investment income
Net realized and
unrealized
appreciation
(depreciation)
in fair value of
investments (6,910) 3,837 227,534 620,382
Interest income 678 $ 7,751 22,370
Dividend income 9,759 9,759
----------- ----------- ----------- ----------- ----------
Total additions 19,875 16,911 309,275 7,751 1,012,586
----------- ----------- ----------- ----------- ----------
Benefits paid to
participants 4,505 3,300 29,282 120,342
Loans deemed repaid
due to termination 2,366 2,366
----------- ----------- ----------- ----------- ----------
Total deductions 4,505 3,300 29,282 2,366 122,708
----------- ----------- ----------- ----------- ----------
Net increase
before interfund
transfers 15,370 13,611 279,993 5,385 889,878
Interfund transfers (33,919) 21,562 (16,511) 2,559 -
----------- ----------- ----------- ----------- ----------
Net increase
(decrease) (18,549) 35,173 263,482 7,944 889,878
Net assets available
for benefits:
Beginning of year 174,454 57,735 920,985 89,506 2,948,801
----------- ----------- ----------- ----------- ----------
End of year $ 155,905 $ 92,908 $1,184,467 $ 97,450 $3,838,679
========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements
</TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
Notes to Financial Statements
1. Plan Description:
----------------
Purpose and Plan Benefits
The purpose of the Hewlett-Packard Company (the Company) Tax Saving
Capital Accumulation Plan (the Plan) is to provide eligible employees an
opportunity for regular savings of tax-deferred dollars for their
retirement to supplement benefits provided under the Company's
Retirement Program and the Federal Social Security Act. The following
brief description of the Plan is provided for general information
purposes only. Participants should refer to the Plan agreement for a
more complete description of the Plan's provisions.
The Plan is designed to qualify as a stock bonus plan under Section
401(a) of the Internal Revenue Code of 1986, as amended (the Code), and
to meet the requirements set forth in Section 401(k) of the Code. The
Plan is also intended to qualify as an individual account plan which
permits each participant to exercise control over certain assets of the
Plan pursuant to Section 404(c) of the Employee Retirement Income
Security Act of 1974 (ERISA).
Fidelity Investments provides recordkeeping and investment management for
the Plan. Fidelity Management Trust Company provides trustee services 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 Plan 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 date of hire.
Employee Contributions
Effective February 1, 1998, all employees who were 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 by the employee upon
becoming eligible after the one year waiting period.
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 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.
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 the 1999
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 sixteen investment options. Participant accounts that
are established at the three percent deferral default for new hires will
have their contributions invested in the fund designated as the Plan default
fund until the participant makes a change to that investment election. In
1998, the Plan default fund was the Fidelity Retirement Money Market
Portfolio. On March 1, 1999, the default fund became the Fidelity
Institutional Money Market Fund. 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. Fourteen of
the sixteen investment options are mutual funds of registered investment
companies; the U.S. Small and Mid Cap Index Fund is a common/collective
trust, and the Hewlett-Packard Company Stock Fund is an investment option
consisting primarily of the Company's stock. The sixteen investment funds
are:
Fidelity Retirement Money Market Portfolio
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.
Fidelity Intermediate Bond Fund
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.
PIMCO Total Return Fund
A fund comprised of investments in the PIMCO Total Return Fund. The
fund invests primarily in debt securities, including U.S. government
securities, corporate bonds, and mortgage-related securities.
Portfolio duration generally ranges from three to six years.
Domini Social Equity Fund
A fund comprised of investments in the Domini Social Equity Fund. The
fund invests in all the stocks that make up the Domini Social Index,
in approximately the same proportions as they are represented in the
Index. The Index is comprised of approximately 400 companies that
meet certain social criteria.
Fidelity 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.
Fidelity Growth & Income Portfolio
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 potential for increased earnings.
Fidelity Magellan Fund
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.
Harbor Capital Appreciation Fund
A fund comprised of investments in the Harbor Capital Appreciation
Fund. Investments are made in equity securities of established
companies with above-average potential for growth.
ICAP Equity Portfolio
A fund comprised of investments in the ICAP Equity Portfolio. The
fund invests primarily in domestic equities of market capitalization
of at least $500 million. The fund attempts to achieve a total return
greater than the S&P 500 Index with an equal or lesser degree of risk.
Spartan U.S. Equity Index Fund
A fund comprised of investments in the Spartan U.S. Equity Index Fund.
The fund manager makes investments in equity securities and attempts
to duplicate the composition and total returns of the Standard &
Poor's Daily Stock Price Index of 500 Common Stocks.
Janus Aspen Series Worldwide Growth Portfolio
A fund comprised of investments in the Janus Aspen Series Worldwide
Growth Portfolio. The fund invests primarily in foreign and domestic
companies, and investments are usually spread across at least 5
different countries, including the United States.
Fidelity Low-Priced Stock Fund
A fund comprised of investments in the Fidelity Low-Priced Stock Fund.
The fund invests primarily in equity securities that are priced at $35
per share or less. The stocks purchased are considered to be
undervalued and out of favor with other investors yet offer the
possibility of significant growth.
PBHG Growth Fund
A fund comprised of investments in the 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.
U.S. Small and Mid Cap Index Fund
A common/commingled trust comprised of investments in the U.S. Small
and Mid Cap Index Fund. Investments are in the stocks that make up
the Russell 2500 Index, in approximately the same proportions as they
are represented in the Index. The Index is comprised of the 3,000
largest stocks in the U.S. less those stocks which are included in the
S&P 500 Index.
Templeton Foreign Fund A
A fund comprised of investments in the Templeton Foreign Fund A. 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.
Hewlett-Packard Company Stock Fund
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 Money
Market Fund.
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 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, 1998
carried interest rates which ranged from 6.5% to 10.5%.
The Plan also provides for hardship withdrawals subject to certain
restrictions as defined by the Code 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 and 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. Sales and purchases are recorded on the trade date. 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 registered investment
companies and the common/commingled trust are recognized as part of the net
realized and unrealized appreciation (depreciation) in fair value of
investments.
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 $44,117,000 in 1998 and
$39,202,000 in 1997. Stock contributions attributable to Company
contributions totaled $25,525,000 in 1998 and $17,856,000 in 1997.
Contributions of Hewlett-Packard Company common stock are valued at
their fair market value at the closing price, as quoted on the New York
Stock Exchange, on the date of contribution.
4. Investments:
-----------
The number of shares of Hewlett-Packard Company common stock in the
Stock Fund was 17,323,398 at the end of 1998 and 18,677,095 at the end
of 1997. 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, 1998 and 1997 was 23,855,462 and
25,574,187, respectively, and the net asset value was $50.32 and $46.20
at these dates. The net asset values on the participant statement
dates for 1998 were $45.94, $54.70, $38.71 and $46.46 at February 6, 1998,
May 6, 1998, August 6, 1998 and November 6, 1998, respectively. The net
asset values on the participant statement dates for 1997 were $37.89,
$40.09, $51.89 and 46.91 at February 6, 1997, May 6, 1997, August 6, 1997
and November 6, 1997, 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; however, 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. Related Party Transactions:
--------------------------
Certain Plan investments are shares of mutual funds managed by an affiliate
of Fidelity Management Trust Company, the Plan Trustee, and therefore, these
transactions qualify as party-in-interest. Any purchases and sales of these
funds are open market transactions at fair market value. Consequently, such
transactions are permitted under the provisions of the Plan and are exempt
from the prohibition of party-in-interest transactions under ERISA.
7. Subsequent Event:
----------------
On March 2, 1999, the Company announced a plan to create two independent,
publicly-traded companies: the computing and imaging company and the
measurement company. The completion of the realignment is expected in
the year 2000 and is contingent upon receiving certain tax and regulatory
approvals. At this point, the impact of the transaction on the Plan is
unknown.
<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, 1998 (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>
Fidelity Investments*
Fidelity Institutional
Money Market Fund Money Market Fund,
$1.00 par value 5,738,184 $ 5,738 $ 5,738
Fidelity Investments*
Fidelity Retirement Money
Market Portfolio Money Market Fund,
$1.00 par value 388,604,659 388,605 388,605
Fidelity Investments*
Fidelity Intermediate
Bond Fund Fixed Income Mutual
Fund, no par value 13,983,388 142,888 143,609
Pacific Investment
Management Company
PIMCO Total Return Fund Fixed Income Mutual
Fund, no par value 2,459,836 26,635 25,927
Domini Social Investments
LLC
Domini Social Equity Fund Equity Mutual Fund,
no par value 602,066 18,954 20,711
Fidelity Investments*
Fidelity Contrafund Equity Mutual Fund,
no par value 9,246,913 398,792 525,132
Fidelity Investments*
Fidelity Growth &
Income Portfolio Equity Mutual Fund,
no par value 10,014,147 336,458 459,048
Fidelity Investments*
Fidelity Magellan Fund Equity Mutual Fund,
no par value 11,545,553 951,773 1,394,934
Harbor Capital Advisors,
Inc.
Harbor Capital
Appreciation Fund Equity Mutual Fund,
no par value 720,267 26,907 28,883
Institutional Capital
Corporation
ICAP Equity Portfolio Equity Mutual Fund,
no par value 167,193 6,220 6,459
Fidelity Investments*
Spartan U.S. Equity
Index Fund Equity Mutual Fund,
no par value 8,913,297 262,387 391,828
Janus
Janus Aspen Series
Worldwide Growth
Portfolio Equity Mutual Fund,
no par value 1,073,675 29,073 31,233
Fidelity Investments*
Fidelity Low-Priced
Stock Fund Equity Mutual Fund,
no par value 698,606 16,374 15,963
Pilgrim Baxter &
Associates
PBHG Growth Fund Equity Mutual Fund,
no par value 4,664,904 118,519 119,142
Bankers Trust Company
U.S. Small & Mid Cap
Index Fund Common/Collective Trust
no par value 31,073 9,122 11,258
Franklin Templeton
Templeton Foreign Fund A Equity Mutual Fund,
no par value 9,195,907 91,976 77,154
Hewlett-Packard Company* Common Stock,
$0.01 par value 17,323,398 754,274 1,183,405
Participant Loans* Loans issued for
terms of 1-4 years,
with 6.5% to 10.5%
interest 96,903
----------
Total assets held for investment $4,925,932
==========
* Party-in-interest ==========
</TABLE>
<TABLE>
Hewlett-Packard Company
Tax Saving Capital Accumulation Plan (Plan 004) Schedule II
Employer Identification Number 94-1081436 Form 5500
Transactions Occurring During the Year Ended December 31, 1998 (Item 27d - Schedule of Reportable
Which Were in Excess of 5% of the Current Value of Plan Transactions)
Assets at December 31, 1997
(In thousands, except number of transactions)
<CAPTION>
Proceeds
Purchases from Sales
and Fair and Fair
Value at Value at Cost of Net
Identity of Party Involved Number of Date of Date of Assets Realized
Description of Asset Transactions Transaction Transaction Disposed Gain/(Loss)
- -------------------------- ------------ ----------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Fidelity Institutional
Market Fund*
Money Market Fund 128 $ 426,139 $ 434,253 $ 434,253 -
Fidelity Retirement Money
Market Portfolio*
Money Market Fund 256 876,785 738,261 738,261 -
Fidelity Intermediate
Bond Fund*
Bonds 256 136,931 94,466 94,300 $ 582
Fidelity Contrafund*
Equity Mutual Fund 252 181,451 133,799 115,347 12,998
Fidelity Growth & Income
Portfolio*
Equity Mutual Fund 252 201,327 117,541 100,646 10,506
Fidelity Magellan Fund*
Equity Mutual Fund 252 330,467 218,216 184,809 20,636
Spartan U.S. Equity Index
Fund*
Equity Mutual Fund 252 215,724 146,220 129,866 14,124
Hewlett-Packard Company*
Common Stock 239 393,738 496,154 319,938 176,216
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.
* Party-in-interest
</TABLE>
HEWLETT-PACKARD COMPANY
TAX SAVING CAPITAL ACCUMULATION PLAN
This section is a "Summary Plan Description" as required by the Employee
Retirement Income Security Act of 1974 (ERISA). This section provides the
highlights of the Plan, but it is far shorter and less technical than the
official Plan documents. The official Plan documents are always used to
determine when and what benefits will be provided under the Plan.
You Will Find Information About: On Page:
What TAXCAP Offers You 167
TAXCAP: A Participant-Directed Investment Plan 168
Who Can Join The Plan 170
When You May Join The Plan 170
How Much You May Contribute 170
How Your Contributions Can Reduce Your Current Taxes 171
How Much HP Contributes 171
How Your TAXCAP Account Is Invested 172
When Payouts Are Made 175
How You Can Borrow From Your Account 177
Special Rules For Acquisition Employees 179
How To Make Changes Or Receive Your Money 180
How To Claim Benefits 181
If A Claim Is Denied 181
How You Can Make Rollover Contributions 181
What Circumstances Can Affect Your Benefits 182
How The Plan Is Funded 184
How The Stock Purchase Plan Compares To TAXCAP 185
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 78 branches nationwide, Fidelity is one of the largest and best known
investment management organizations in the country. The firm currently
manages more than $700 billion for more than 40 million individual and
institutional accounts. As a leader in the mutual fund industry, Fidelity
has developed both investment products and services that are now standard
for the industry.
If you are a regular full-time or regular part-time employee, you are
automatically enrolled in TAXCAP on your date of hire unless you decline
participation in writing. If you decline participation, you may join
TAXCAP in any subsequent pay period.
If you are automatically enrolled in TAXCAP when you are hired, your
contribution rate is 3 percent of your pay. You may increase or decrease
your contribution rate in any pay period. If you do not specify an
investment election, your contributions will be invested in the Institutional
Money Market Fund.
Under TAXCAP, you can elect to have HP contribute up to 20 percent of your
pay into your TAXCAP account through payroll deductions.
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 up to 20 percent to TAXCAP. 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 sixteen
options: six mutual funds from the Fidelity family of funds, one Fidelity
institutional fund, seven mutual funds outside the Fidelity family of funds,
one commingled pool 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:
fiscal quarter
fiscal year
pay
Pension Benefit Guaranty Corporation (PBGC)
TAXCAP
valuation date
vested
years of service
TAXCAP: A Participant-Directed Investment Plan
TAXCAP requires that you decide how the assets in your account are
invested. TAXCAP is intended to be a "404(c) plan" which means it is
described in Section 404(c) of ERISA and Section 2550.404(c)-1 of Title
29 of the Code of Federal Regulations. Plan fiduciaries of a 404(c) plan
like TAXCAP are not liable for plan losses that are the direct and
necessary result of your investment instructions. The following
information is given to you so that TAXCAP will comply with Section 404(c)
and applicable regulations under ERISA.
Required Information Description of Information or Source
----------------------- ------------------------------------------
Investment Alternatives See page 172 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 the TAXCAP line at 800-457-
4015 and when you first invest in a mutual
fund.
Investment Managers Fidelity Management and Research Company
serves as an advisor to the Fidelity mutual
funds offered under TAXCAP (except the HP
Stock Fund). Pilgrim Baxter & Associates
serves as advisor to the PBHG Growth Fund.
Templeton Worldwide Incorporated serves as
as advisor to the Templeton Foreign Fund A.
Pacific Investment Management Company serves
as advisor to the PIMCO Total Return Fund
(Institutional Shares). Domini Social
Investments, LLC and Mellon Equity Associates
serve as advisor and manager, respectively,
of the Domini Social Equity Fund. Harbor
Capital Advisors, Inc., and Jennison Assoc-
iates Capital Corporation serve as advisor
and sub-advisor, respectively, of the Harbor
Capital appreciation Fund. Institutional
Capital Corporation serves as advisor to the
ICAP Equity Portfolio. Janus serves as
advisor to the Janus Aspen Series World-
wide Growth Portfolio. Bankers Trust
Company manages the U.S. Small and Mid
Cap Index Fund.
Investment Instructions See page 170 When You May Join The Plan
By Participant and page 174 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 and the U.S. Small and Mid Cap
Index 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 (see page 173 of voting, tender and similar rights with
for description of HP respect to HP Stock by participants is
Stock Fund.) maintained under procedures intended to
safeguard confidentiality. The purchase,
holding and sale of HP stock is governed by
the procedures described in this HP Benefits
Summary at page 170 WHEN YOU MAY JOIN THE
PLAN and at page 174 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.
INFORMATION SOURCES
----------------------------------------------------------------------------
Mutual Fund Mutual Fund TAXCAP Fidelity
Prospectus Annual/ Quarterly TAXCAP
Semiannual Participant Automated
Report Statement and Phone
Statement Service
Supplement
----------- --------- ------------ --------
A. Annual Operating
Expenses of Available
Investment Alternatives X
B. Copies of Prospectuses X
C. Copies of Financial
Statements and Reports
of Available Investment
Alternatives X
D. List of Assets in the
Portfolio of Available
Investment Alternatives X
E. Value of Shares/Units
in Available Investment
Alternatives X X X X
F. Past and Current
Investment Performance
of Available Investment
Alternatives X X X
G. Value of Shares/Units in
Designated Investment
Alternatives in
Participant's Account X X
------------------------------------------------------------------------------
Who Can Join The Plan
You are eligible to join TAXCAP if you are a regular full-time or regular
part-time employee on the U.S. payroll except employees in Puerto Rico. You
are not eligible to join TAXCAP if you are classified in any other employment
status. If you meet the eligibility requirements, enrollment is automatic
unless you decline participation in writing.
When You May Join The Plan
You will be automatically enrolled in TAXCAP on your date of hire unless
you decline participation in writing. If you decline participation when
you are hired, you may join in any subsequent pay period.
You can enroll in TAXCAP using HP's Telephone Activated Benefits System -
TABS. The phone number for TABS 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.
Of the 16 investment options now offered through TAXCAP, only nine are
currently available through TABS. If you want to invest in any of the
newly offered funds not listed in TABS, you must first enroll through TABS
in those funds that are available through TABS, then wait until you receive
the next earnings statement that reflects your enrollment. At any time after
receipt of your earnings statement that reflects you enrollment in TAXCAP,
you can call the Fidelity TAXCAP line at 800-457-4015 to change your
investment choices and contribution levels.
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 at URL: http://persweb.corp.hp.com/forms0070.pdf.
If you do not designate a beneficiary and you are married when you die,
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
How Much You May Contribute
You may contribute up to 20 percent of your pay. Generally, pay is your
regular wage or salary. Pay is defined more completely in the Glossary
on page 219.
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 up to 20 percent to TAXCAP. 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:
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
1999) 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 1998, 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 sixteen
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 sixteen options, in any whole percentage combination.
Investment mixes must total 100 percent.
FOR EXAMPLE:
You can choose to invest 25 percent in four different options
or you can choose to invest 10 percent in ten different options.
After the end of each pay period, your contributions are invested as you
choose. In the following paragraphs, the options are described.
o Institutional Money Fund - The Institutional Money Fund is a unitized
trust fund at the Fidelity Management Trust Company. Its assets are
invested in the Fidelity Institutiional Money Market Fund, which 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 Fund seeks to maintain a $1.00 share price, there is no assurance
that it will be able to do so. An investment in the fund is not insured
or guaranteed by the U.S. government. The fund's yield will fluctuate.
Institutional Money Market Fund is a conservative, relatively low-risk
investment.
o Fidelity Intermediate Bond Fund - The Fidelity Intermediate Bond Fund
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 PIMCO Total Return Fund (Institutional Shares) - The PIMCO Total Return
Fund (Institutional Shares) seeks total return consistent with the
preservation of capital. The Fund invests at least 65 percent of assets
in debt securities, including U.S. government securities, corporate
bonds, and mortgage-related securities. It may invest up to 20 percent
of assets in foreign denominated securities. While portfolio duration
generally ranges three to six years, investments may include short and
long maturity bonds.
o Domini Social Equity Fund - The Domini Social Equity Fund seeks investment
results that correspond to the total return performance of the Domini
Social Index, which is comprised of approximately 400 companies that meet
certain social criteria. The Fund invests at least 80 percent of assets
in stocks in the index and includes companies of positive records in
community involvement, the environment, employee relations and hiring
practices. The index also includes about 150 companies not included in
the S&P 500
o Fidelity Contrafund - The Fidelity Contrafund seeks capital appreciation
by investing in common stocks and convertible securities of companies
that are believed to be undervalued or out of favor with the investing
public, and that may have favorable long term outlooks because of
termination of unprofitable operations; changes in management, industry,
or products; or a possible merger or acquisition. The Fund may invest
in foreign securities, and up to 5 percent of assets may be invested
in lower-quality debt obligations. The Fund's share price and return
will fluctuate.
o Fidelity Growth & Income Portfolio - The Fidelity Growth & Income Portfolio
seeks long-term capital growth, current income and growth of income
consistent with reasonable investment risk. 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 - The Magellan Fund 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. Up to 20 percent of assets may be
invested in debt securities of all types and qualities. There are no
limitations placed on total foreign investments, but no more than 40
percent of assets may be invested in companies operating exclusively in
one foreign country.
o Harbor Capital Appreciation Fund - The Harbor Capital Appreciation Fund
seeks long-term growth of capital by investing in equity securities of
established companies with above-average potential for growth. The Fund
invests at least 65 percent of its assets in companies of market
capitalization of at least $1 billion. The Fund may invest up to 20
percent of its assets in foreign securities.
o ICAP Equity Portfolio - The ICAP Equity Portfolio seeks total return of
moderate risk and invests in domestic equities of market capitalization of
at least $500 million. The Portfolio attempts to achieve a total return
greater than the S&P 500 Index with an equal or lesser degree of risk.
Investments are made based on corporate models which search for issuers
possessing best relative value based on P/E projections and earnings
momentum.
o Spartan U.S. Equity Index Fund - The Spartan U.S. Equity Index Fund 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 Janus Aspen Series Worldwide Growth Portfolio - The Janus Aspen Series
Worldwide Growth Portfolio seeks long-term growth of capital consistent
with preservation of capital. The Portfolio invests primarily in foreign
and domestic companies, and investments are usually spread across at
least five countries and may use derivatives for hedging purposes as a
means of enhancing returns.
o Fidelity Low-Priced Stock Fund - The Fidelity Low-Priced Stock Fund
seeks capital appreciation by investing at least 65 percent of assets
in equity securities that are priced at $35 per share or less. The
issuing companies often have market capitalizations of less than $100
million. The low-priced stocks purchased are considered to be undervalued
and out of favor with other investors yet offer the possibility of
significant growth. The Fund reserves the right to invest, without
limitation, in preferred stocks and investment-grade debt for temporary
defensive purposes. A short-term trading fee of 1.5 percent of the value
of the shares sold is charged if the shareholders sell shares held less
than 90 days.
o PBHG 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. The Fund
may invest up to 15 percent of assets in foreign securities. It may
invest up to 5 percent of assets in warrants and rights. Because of
the small, growth-oriented nature of the companies that the Fund invests
in, the Funds market price will undoubtedly experience more volatility
than the market in general. There is no guarantee that the Fund will
meet its objectives and the price and returns will fluctuate.
o U.S. Small & Mid-Cap Equity Index Fund - The U.S. Small and Mid-Cap Equity
Index Fund seeks to provide investment results that correspond to the
performance of the Russell "2500" Index. The Russell "2500" Index is
comprised of the stocks in the Russell 3000 Index (which consists of the
3000 largest stocks in the U.S.) less those stocks which are included in
the S&P 500 Index. The Russell "2500" Index calculated for Bankers Trust
Company, the fund manager, by Frank Russell. The Fund offers exposure to
2,500 smaller and mid-sized companies.
o Templeton Foreign Fund A - The Templeton Foreign Fund A 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 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 Institutional Money Market Fund 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:
Institutional Money Market Fund 1400
Fidelity Intermediate Bond Fund 0032
PIMCO Total Return Fund(Institutional Shares) 9622
Domini Social Equity Fund 3967
Fidelity Contrafund 0022
Fidelity Growth & Income Portfolio 0027
Fidelity Magellan Fund 0021
Harbor Capital Appreciation Fund 2171
ICAP Equity Portfolio 3603
Spartan U.S. Equity Index Fund 0650
Janus Aspen Series Worldwide Growth Portfolio 2170
Fidelity Low-Priced Stock Fund 0316
PBHG Growth Fund 9706
U.S. Small and Mid-Cap Equity Index Fund 2451
Templeton Foreign Fund A 9500
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
midnight, 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 midnight, 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 personal portfolio rate of return
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
midnight, 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 178.
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 1999).
The minimum withdrawal amount is the lesser of $1,000 or all that is
available. All hardship withdrawals are subject to mandatory 20 percent
federal income tax withholding. 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 Fidelity
and checks are issued from Fidelity within seven business days after the
application is received.
Special rules apply for in-service withdrawals for certain acquisition
employees, (see page 179 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
179 for details).
How Your Loan Is Funded
Unless you direct how you want your account sold, your loan will be funded
through the sale of your TAXCAP investments in the following order:
Institutional Money Market Fund
Fidelity Intermediate Bond Fund
PIMCO Total Return Fund (Institutional Shares)
Domini Social Equity Fund
Fidelity Contrafund
Fidelity Growth & Income Portfolio
Fidelity Magellan Fund
Harbor Capital Appreciation Fund
ICAP Equity Portfolio
Spartan U.S. Equity Index Fund
Janus Aspen Series Worldwide Growth Portfolio
Fidelity Low-Priced Stock Fund
PBHG Growth Fund
U.S. Small and Mid Cap Index Fund
Templeton Foreign Fund
Hewlett-Packard Stock Fund
FOR EXAMPLE:
You have a total of $30,000 in TAXCAP investments. You
have $10,000 in the Institutional Money Market Fund,
$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, unless you direct Fidelity to sell your account in a
different order.
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 Operations Company" 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 of Employment
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 170 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//web.401k.retirement.hp.com
------------------------------------------------------------------------
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 contribution to 0.
tions into TAXCAP (that percent. Your contribution will stop as of
is change the percentage the first possible pay period after you call
to zero). TABS. TABS will tell you when your contri-
butions 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 the 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 initiate the transaction.
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 179 for details).
** Special rules for certain acquisition employees apply here (see
page 179 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. employment status. You are not eligible to
take a loan while on leave of absence.
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 Income the FTO pay you receive from HP while on IPP.
Protection Plan You are not eligible to take a loan while on IPP.
during the first
90 days of disabil-
ity.
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 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.
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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 in writing.
If you do not specify how your account is to be invested, the entire
amount will automatically be invested in the Institutional Money Market
Fund, which is the most conservative investment.
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 1999, 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 20 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, 1999 through December 31, 1999. 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.
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A Comparison
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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 unless you decline par-
Starts Purchase Plan. Otherwise ticipation in writing. If
any February 1, May 1, you decline participation,
August 1 or November 1 in any pay period thereafter.
thereafter.
Employee Generally 1 to 10 percent Generally 1 to 20 percent
Contributions percent of pay. Combined of pay. (For combined Plan
(See table, maximum of 10 percent if rules, see table on page 171.)
page 171) you are in both Plans and
the Stock Purchase Plan
at more than 5%. (For
combined Plan rules, see
table on page 171.)
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. 2
Account loans not exceeding a maximum
50% of account or $50,000.
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 If you withdraw from TAXCAP,
Contributions Stock Purchase Plan, your your contributions stay in
During contributions for the trust. HP contributions are
Quarter quarter are refunded and made at the end of the quarter.
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 april 26, 1999 relating to the financial
statements, which appears in this Form 11-K.
/s/PricewaterhouseCoopers LLP
-----------------------------
PricewaterhouseCoopers LLP
San Jose, California
June 16, 1999