Hewlett-Packard (HPQ)

Plan Design Changes

        In fiscal 2007, HP modified its U.S. defined benefit pension plan for the remaining number of U.S. employees still accruing benefits under the program. Effective January 1, 2008, these employees will cease accruing pension benefits, and HP will calculate the final pension benefit amount based on pay and service through December 31, 2007. In addition, HP limited future eligibility for the Pre-2003 HP Retiree Medical Program to those employees who were within five years of satisfying the program's retirement criteria on June 30, 2007. These actions resulted in reductions to the U.S. defined benefit and post-retirement plan obligations. As a result, HP recognized one-time curtailment gains of $541 million for the U.S. defined benefit pension plan and $1 million for the post-retirement benefit plan. As part of this announcement, HP offered an option for eligible affected employees to participate in the 2007 EER. A total of 3,080 employees participated in the 2007 EER. HP recognized a special termination benefit expense of $307 million in fiscal 2007, which reflects aggregate additional lump-sum benefits that HP expects to pay to those individuals participating in the 2007 EER. HP will distribute this amount from the plan assets. Also, HP recognized a special termination benefit expense of $60 million for the HP retiree medical plans for those employees participating in the 2007 EER. This expense amount reflects the additional medical coverage that HP expects to provide to those employees participating in the 2007 EER. The total $367 million expense for the 2007 EER was included in the restructuring charge of fiscal 2007. HP will fund the cash expenditures associated with the 2007 EER primarily by using available U.S. pension plan assets. Eligible employees whose pension accruals will cease effective December 31, 2007 will benefit from an increased company 401(k) match opportunity from 4 percent to 6 percent of eligible earnings effective January 1, 2008.

        In fiscal 2007, HP also recognized a net settlement loss of $8 million for its U.S. pension plans, including a settlement loss of $36 million, which was partially offset by a settlement gain of $28 million for its U.S. pension plans. The settlement loss of $36 million related to the distributions and the subsequent transfer of accrued pension benefits from the U.S. Excess Benefit Plan to the U.S. Executive Deferred Compensation Plan for the terminated vested plan participants. The distributions and the transfer of this pension obligation represented a reduction in the projected benefit obligation and exceeded the sum of service and interest cost for this plan. As a result, HP recognized a portion of the unrecognized loss, re-measured as of January 31, 2007, in the second quarter of fiscal 2007. The settlement gain of $28 million primarily resulted from the distribution of lump-sum benefit payments

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made to pension plan participants who left HP under the 2007 EER. These lump sum benefit payments, which were paid out to participants during the October 1, 2006 to September 30, 2007 measurement period, represent a reduction in the projected benefit obligation. As a result, a portion of the unrecognized gain was recognized in fiscal 2007. The gain was recorded in accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," which requires that a settlement event be recorded once prescribed payment thresholds have been reached. HP recorded this $28 million as a reduction to the restructuring charge recorded in connection with the 2007 EER.

        In fiscal 2007, HP recognized a net curtailment gain of $26 million for its U.S. post-retirement benefit plans. The gain included $16 million and $9 million, resulting from the reduction in the eligible plan population stemming from the 2007 EER and the restructuring plans implemented in fiscal 2005, respectively. HP reported these gains as reductions to the restructuring charge. HP also recorded a one-time curtailment gain of $1 million for its post-retirement benefit plans as a result of the modification of its Pre-2003 HP Retiree Medical Program in fiscal 2007 as described above in detail.

        In fiscal 2007 HP recognized net curtailment gains of $13 million in connection with its non-U.S. defined benefit plans. These gains reflected a plan design change in Mexico and Canada of $11 million where HP ceased pension accruals for current employees who did not meet defined criteria based on age and years of service and a $2 million gain related to the fiscal 2005 restructuring programs recorded as a reduction to the restructuring charges in fiscal 2007. Also in fiscal 2007, HP recognized a restructuring settlement expense of $4 million. The settlement expense reflected primarily the distribution of lump-sum benefit payments in Mexico and Canada, thereby resulting in a portion of the unrecognized loss being recorded as expense once the settlement recognition thresholds had been reached. In addition, HP incurred a $4 million restructuring special termination benefit expense associated with the early retirement of employees in the U.K. and Ireland.

Plan design changes

        In the third quarter and the first nine months of fiscal 2007, HP recognized curtailment gains of $16 million and $26 million, respectively, for its U.S. post-retirement benefit plans. The gains primarily include $16 million recorded in the third quarter of fiscal 2007 and $9 million recorded in the first quarter of fiscal 2007 resulting from the reduction in the eligible plan population stemming from the 2007 EER and the fiscal 2005 restructuring plans, respectively. HP recorded these gains as reductions of restructuring charges. HP also recorded a one-time curtailment gain of $1 million for its post-retirement benefit plans as a result of the modification of its Pre-2003 HP Retiree Medical Program in February 2007 as described below in detail.

        In the first nine months of fiscal 2007, HP recognized a net curtailment gain of $9 million for its non-U.S. pension plans. This gain was recorded in the first quarter of fiscal 2007 and primarily reflected a plan design change in Mexico where HP ceased pension accruals for current employees who did not meet defined criteria based on age and years of service (calculated as of December 31, 2006). In the first nine months of fiscal 2007, HP recognized a settlement gain of $2 million resulting from the completed payout of its remaining pension obligations in Norway. In addition, HP incurred special termination benefit expense of $2 million associated with the early retirement of employees in the U.K. and Ireland.

        In the first nine months of fiscal 2007, HP recognized a settlement expense of $36 million for its U.S. pension plans. The settlement reflected distributions and the subsequent transfer of accrued pension benefits from the U.S. Excess Benefit Plan to the U.S. Executive Deferred Compensation Plan for the terminated vested plan participants. The distributions and the transfer of this pension obligation represented a reduction in the projected benefit obligation and exceeded the sum of service and interest cost for this plan. As a result, HP recognized a portion of the unrecognized loss, re-measured as of January 31, 2007, in the second quarter of fiscal 2007.

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        On February 20, 2007, HP announced it was modifying its U.S. defined benefit pension plan for the remaining number of U.S. employees still accruing benefits under the program. Effective January 1, 2008, these employees will cease accruing pension benefits, and HP will calculate the final pension benefit amount based on pay and service through December 31, 2007. In addition, HP will limit future eligibility for the Pre-2003 HP Retiree Medical Program to those employees who are within five years of satisfying the program's retirement criteria on June 30, 2007. These actions resulted in reductions to HP's U.S. defined benefit and post-retirement plan obligations. As a result, HP recognized one-time curtailment gains of $541 million for the U.S. defined benefit pension plan and $1 million for the post-retirement benefit plan. HP recorded the total curtailment gain of $542 million in the second quarter of fiscal 2007. As part of this announcement, HP offered an option for eligible affected employees to participate in the 2007 EER. A total of 3,080 employees participated in the 2007 EER. HP recognized a special termination benefit expense of $306 million in the second quarter of fiscal 2007, which reflects aggregate additional lump-sum benefits that HP expects to pay to those individuals participating in the 2007 EER. HP will distribute this amount from the plan assets. Also, HP recognized a special termination benefit expense of $60 million for the HP retiree medical plans for those employees participating in the 2007 EER. This expense amount reflects the additional medical coverage that HP expects to provide to those employees participating in the 2007 EER. The total $366 million expense for the 2007 EER was recorded as the restructuring charges in the second quarter of fiscal 2007. HP funded the cash expenditures associated with the 2007 EER primarily by using available U.S. pension plan assets. Eligible employees whose pension accruals will cease effective December 31, 2007 will benefit from an increased company 401(k) match opportunity from 4 percent to 6 percent of eligible earnings effective January 1, 2008.

Plan design changes

        In the first quarter of fiscal 2007, HP recognized a net curtailment gain of $9 million for its U.S. retiree medical plan. The gain reflects the reduction in the eligible plan population stemming from the restructuring plans implemented in fiscal 2005. HP recorded the gain as a reduction of restructuring charges in the first quarter of fiscal 2007.

        In the first quarter of fiscal 2007, HP recognized a net curtailment gain of $9 million for its non-U.S. pension plans. This gain primarily reflects a plan design change in Mexico where HP ceased pension accruals for current employees who did not meet defined criteria based on age and years of service (calculated as of December 31, 2006). In the second quarter of fiscal 2007, HP recognized a settlement gain of $2 million resulting from the completed payout of its remaining pension obligations in Norway. In addition, HP incurred a $1 million special termination benefit expense associated with the early retirement of employees in the U.K. and Ireland.

        In the second quarter of fiscal 2007, HP recognized a settlement expense of $36 million for its U.S. pension plans. The settlement reflects distributions and the subsequent transfer of accrued pension benefits from the U.S. Excess Benefit Plan to the U.S. Executive Deferred Compensation Plan for the terminated vested plan participants. The distributions and the transfer of this pension obligation represented a reduction in the projected benefit obligation and exceeded the sum of service and interest cost for this plan. As a result, HP recognized a portion of the unrecognized loss, remeasured as of January 31, 2007, for the second quarter of fiscal 2007.

        On February 20, 2007, HP announced it was modifying its U.S. defined benefit pension plan for the remaining number of U.S. employees still accruing benefits under the program. Effective January 1, 2008, these employees will cease accruing pension benefits, and HP will calculate the final pension benefit amount based on pay and service through December 31, 2007. In addition, HP will limit future eligibility for the Pre-2003 HP Retiree Medical Program to those employees who are within five years of satisfying the program's retirement criteria on June 30, 2007. These actions resulted in reductions to HP's U.S. defined benefit and post-retirement plan obligations. As a result, HP recognized one-time curtailment gains of $541 million for the U.S. defined benefit pension plan and $1 million for the post-retirement benefit plan. HP recorded the total curtailment gain of $542 million in the second quarter of fiscal 2007. As part of this announcement, HP offered an option for eligible affected employees to participate in the 2007 EER. A total of 3,077 employees participated in the 2007 EER. HP recognized a special termination benefit expense of $306 million in the second quarter of fiscal 2007, which reflects aggregate additional lump-sum benefits that HP expects to pay to those individuals participating in the 2007 EER. HP will distribute this amount from the plan assets. Also, HP recognized a special termination benefit expense of $60 million for the HP retiree medical plans for those employees participating in the 2007 EER. This expense amount reflects the additional medical coverage that HP expects to provide to those employees participating in the 2007 EER. The total $366 million expense for the 2007 EER was included in the restructuring charge in the second quarter of fiscal 2007. HP will fund the cash expenditures associated with the 2007 EER primarily by using available U.S. pension plan assets. Eligible employees whose pension accruals will cease effective December 31, 2007 will benefit from an increased company 401(k) match opportunity from 4 percent to 6 percent of eligible earnings effective January 1, 2008.

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Plan design changes

In the first quarter of fiscal 2007, HP recognized a net curtailment gain of $9 million for the Pre-2003 HP U.S. Retiree Medical Program. This gain reflects the reduction in the eligible plan population stemming from the U.S. Enhanced Retirement Program and the restructuring plans implemented in fiscal 2005. HP recorded such gain as a reduction of restructuring charges in the first quarter of fiscal 2007.

In the first quarter of fiscal 2007, HP recognized a net curtailment gain of $9 million for its non-U.S. pension plans. The net gain primarily reflects a plan design change in Mexico where HP ceased pension accruals for current employees who did not meet defined criteria based on age and years of service (calculated as of December 31, 2006).

On February 20, 2007, HP announced it will modify its U.S. defined benefit pension plan for those employees currently accruing benefits under the program, effective January 1, 2008. The final pension benefit amount will be calculated based on pay and service through December 31, 2007. In addition, future eligibility for the Pre-2003 HP Retiree Medical Program will be limited to those employees who are within five years of satisfying the program’s eligibility criteria on June 30, 2007. These actions will result in reductions to the U.S. defined benefit and post-retirement plan obligations. The company estimates that it will record a one-time curtailment gain of approximately $500 million in the second quarter of fiscal 2007. As part of this announcement, HP is offering an option for eligible U.S. employees to participate in the 2007 EER. The cost for the 2007 EER is expected to be recorded in the second quarter of fiscal 2007 as restructuring charges. HP expects approximately 3,000 employees to exit the company by May 2007. Employees not wishing to take advantage of the 2007 EER will benefit from an increased company 401(k) match from 4 percent to 6 percent of eligible earnings. HP expects the curtailment gain to approximate the cost of the 2007 EER.

Plan Design Changes

        In conjunction with management's plan to restructure certain of its operations, as discussed in Note 8 to the Consolidated Financial Statements, HP modified its U.S. retirement programs to align more closely to industry practice. Effective January 1, 2006, HP no longer offers U.S. defined benefit pension plans and subsidized retiree medical programs to new U.S. hires. In addition, HP ceased pension accruals and eliminated eligibility for the subsidized retiree medical program for current

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employees who did not meet defined criteria based on age and years of service (calculated as of December 31, 2005).

        Additionally, the HP subsidy for the retiree medical program will be capped upon reaching two times the 2003 subsidy levels.

        During fiscal 2006, HP recognized curtailment gains of $24 million for the HP subsidized U.S. retiree medical program. The gains reflected the reduction in the eligible plan population stemming from the U.S. Enhanced Early Retirement program and the restructuring plans implemented in fiscal 2005. HP recorded such gains as reductions of restructuring charges. As subsequent headcount reductions take place under the restructuring program, HP expects additional curtailment accounting to occur for U.S. pension and post-retirement plans during the first quarter of fiscal 2007.

        During fiscal 2006, HP also recognized settlement gains of $46 million for the U.S. pension plans. During the measurement period between October 1, 2005 and September 30, 2006, lump-sum benefit payments were made primarily to pension plan participants who left HP under the U.S. Enhanced Early Retirement program and the restructuring plans. These lump sum benefit payments represent a reduction in the projected benefit obligation. As a result, a portion of the unrecognized gain was recognized in fiscal 2006. The gain was recorded in accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," which requires that a settlement event be recorded once prescribed payment thresholds have been reached. HP recorded the gain as a reduction of restructuring charges in fiscal 2006.

        Effective January 1, 2006, HP increased its matching 401(k) contribution to 6% from 4% of eligible salary for those employees who had their pension and retiree medical-program benefits frozen and for all new employees.

Plan Design Changes

        In conjunction with management's plan to restructure certain of its operations, as discussed in Note 7 to the Consolidated Condensed Financial Statements, HP modified its U.S. retirement programs to align more closely to industry practice. Effective November 30, 2005, HP merged the Hewlett-Packard Company Cash Account Pension Plan into the HP Retirement Plan. HP treats the merged plan as one plan for certain legal and financial purposes, including funding requirements. The merger has no impact on the separate benefit structures of the plans. Effective January 1, 2006, HP no longer

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offers U.S. defined benefit pension plans and subsidized retiree medical programs to new U.S. hires. In addition, HP ceased pension accruals and eliminated eligibility for the subsidized retiree medical program for current employees who did not meet defined criteria based on age and years of service (calculated as of December 31, 2005). Additionally, the HP subsidy for the retiree medical program will be capped upon reaching two times the 2003 subsidy levels.

        During the three and nine months ended July 31, 2006, HP recognized curtailment gains of $2 million and $19 million, respectively, for the HP subsidized U.S. retiree medical program. The gains reflect the reduction in the eligible plan population stemming from the U.S. Enhanced Early Retirement program and the restructuring plans implemented in fiscal 2005. HP recorded such gains as reductions of restructuring charges. As subsequent headcount reductions take place under the restructuring program, HP expects additional curtailment accounting to occur for U.S. pension and post-retirement plans during the fourth quarter of fiscal 2006.

        In the third quarter and first nine months of fiscal 2006, HP recognized settlement gains of $7 million and $44 million, respectively, for the U.S. pension plans. During the measurement period between April 1, 2006 and June 30, 2006, and the period between October 1, 2005 and March 31, 2006, lump-sum benefit payments were made primarily to pension plan participants who left HP under the U.S. Enhanced Early Retirement program and the restructuring plans. These lump-sum benefit payments represent a reduction in the projected benefit obligation. As a result, a portion of the unrecognized gain, re-measured as of June 30, 2006 and March 31, 2006, respectively, was recognized in the third quarter and second quarter of fiscal 2006, respectively. The gain was recorded in accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," which requires that a settlement event be recorded once prescribed payment thresholds have been reached. As these gains related to the restructuring actions taken in the fourth quarter of fiscal 2005, HP recorded the gain as a reduction of restructuring charges in both the third quarter and first nine months of fiscal 2006. As subsequent lump-sum benefit payments are paid out to plan participants, HP expects additional settlement to occur for the U.S. pension plans during the fourth quarter of fiscal 2006.

        Effective January 1, 2006, HP increased its matching 401(k) contribution to 6% from 4% of eligible salary for those employees who had their pension and retiree medical-program benefits frozen and for all new employees.

        In March 2006, the FASB issued an exposure draft that will amend SFAS No. 87, "Employers' Accounting for Pensions," No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and No. 132(R), "Employers' Disclosures about Pensions and Other Postretirement Benefits." The Board expects to issue a final statement by September 30, 2006. The proposed statement will require the recognition in the statement of financial position of the over-funded or under-funded status of defined benefit and postretirement plans and will eventually require the measurement of plan assets and plan obligations as of the date of the statement of financial position. HP will continue to monitor the FASB's progress on this issue and, once finalized, will evaluate the potential impact on its financial position.

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Plan Design Changes

        In conjunction with management's plan to restructure certain of its operations, as discussed in Note 7 to the Consolidated Condensed Financial Statements, HP modified its U.S. retirement programs to align more closely to industry practice. Effective November 30, 2005, HP merged the Hewlett-Packard Company Cash Account Pension Plan into the HP Retirement Plan. HP treats the merged plan as one plan for certain legal and financial purposes, including funding requirements. The merger

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has no impact on the separate benefit structures of the plans. Effective January 1, 2006, HP no longer offers U.S. defined benefit pension plans and subsidized retiree medical programs to new U.S. hires. In addition, HP ceased pension accruals and eliminated eligibility for the subsidized retiree medical program for current employees who did not meet defined criteria based on age and years of service (calculated as of December 31, 2005). Additionally, the HP subsidy for the retiree medical program will be capped upon reaching two times the 2003 subsidy levels.

        During the three and six months ended April 30, 2006, HP recognized curtailment gains of $4 million and $17 million, respectively, for the HP subsidized U.S. retiree medical program. The gains reflect the reduction in the eligible plan population stemming from the U.S. Enhanced Early Retirement program and the restructuring plans implemented in fiscal 2005. HP recorded such gains as reductions of restructuring charges. As subsequent headcount reductions take place under the restructuring program, HP expects additional curtailment accounting to occur for U.S. pension and post-retirement plans during the remainder of fiscal 2006.

        In the second quarter of fiscal 2006, HP recognized a settlement gain of $37 million for the U.S. pension plans. During the measurement period between October 1, 2005 and March 31, 2006, lump-sum benefit payments were made primarily to pension plan participants who left HP under the U.S. Enhanced Early Retirement program and the restructuring plans. These lump-sum benefit payments represent a reduction in the projected benefit obligation. As a result, a portion of the unrecognized gain, remeasured as of March 31, 2006, was recognized for the second quarter of fiscal 2006. The gain was recorded in accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," which requires that a settlement event be recorded once prescribed payment thresholds have been reached. HP recorded the gain as a reduction of restructuring charges in the second quarter of fiscal 2006. As subsequent lump-sum benefit payments are paid out to plan participants, HP expects additional settlement to occur for the U.S. pension plans during the remainder of fiscal 2006.

        Effective January 1, 2006, HP increased its matching 401(k) contribution to 6% from 4% of eligible salary for those employees who had their pension and retiree medical-program benefits frozen and for all new employees.

        In March 2006, the Financial Accounting Standards Board ("FASB") issued an exposure draft that will amend SFAS No. 87, "Employers' Accounting for Pensions," No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and No. 132(R), "Employers' Disclosures about Pensions and Other Postretirement Benefits." The proposed statement will require the recognition in the statement of financial position of the overfunded or underfunded status of a defined benefit postretirement plan and will also measure the plan assets and plan obligations as of the date of the statement of financial position. HP will continue to monitor the FASB's progress on this issue and, once finalized, will evaluate the potential impact on its results of operations or financial position.

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Plan Design Changes

        In conjunction with management's plan to restructure certain of its operations, as discussed in Note 7 to the Consolidated Condensed Financial Statements, HP modified its U.S. retirement programs to more closely align to industry practice. Effective November 30, 2005, HP merged the Hewlett-Packard Company Cash Account Pension Plan into the HP Retirement Plan. HP treats the merged plan as one plan for certain legal and financial purposes, including funding requirements. The merger has no impact on the separate benefit structures of the plans. Effective January 1, 2006, HP no longer offers U.S. defined benefit pension plans and subsidized retiree medical programs to new U.S. hires. In addition, HP ceased pension accruals and eliminated eligibility for the subsidized retiree medical program for current employees who did not meet defined criteria based on age and years of service (calculated as of December 31, 2005). Additionally, the HP subsidy for the retiree medical program will be capped upon reaching two times the 2003 subsidy levels.

        In the first quarter of fiscal 2006, HP recognized a curtailment gain of $13 million for the HP subsidized U.S. retiree medical program. This gain reflects the reduction in the eligible plan population stemming from the U.S. Enhanced Early Retirement program and the restructuring plans implemented in fiscal 2005. HP recorded such gain as a reduction of restructuring charges in the first quarter of fiscal 2006. As subsequent headcount reductions take place under the restructuring program, HP expects additional curtailment accounting to occur for U.S. pension and post-retirement plans during the remainder of fiscal 2006.

        Effective January 1, 2006, HP increased its matching 401(k) contribution to 6% from 4% of eligible salary for those employees who had their pension and retiree medical-program benefits frozen and for all new employees.

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Plan Design Changes

        During fiscal 2005 substantially all of HP's employees were covered under various defined benefit pension plans, defined contribution plans, or both, when they met the eligibility requirements of the plans. In addition, HP sponsors medical and life insurance plans that provide benefits to retired U.S. employees who meet plan eligibility requirements. In conjunction with management's plan to restructure certain of its operations, as discussed in Note 7 to the Consolidated Financial Statements, HP modified its U.S. retirement programs to more closely align to industry practice. Effective January 1, 2006, HP will not offer U.S. defined benefit pension plans and subsidized retiree medical programs to new U.S. hires. In addition, HP will cease pension accruals and eliminate eligibility for the subsidized retiree medical program for current employees who do not meet defined criteria based on age and years of service (calculated as of December 31, 2005). Additionally, the HP subsidy for the retiree medical program will be capped upon reaching two times the 2003 subsidy levels. These actions resulted in reductions to the U.S. defined benefit and post-retirement plan obligations of $526 million and $556 million respectively. HP recognized the reduction in the defined benefit obligation as a curtailment event and resulted in a gain of $199 million in the fourth quarter of fiscal 2005. HP recognized the reduction in the post-retirement plan obligation as a negative plan amendment.

        In addition, HP recognized a special termination benefit of $352 million in the fourth quarter of fiscal 2005, which reflects aggregate additional lump-sum benefits that have been paid or that HP expects to pay to those individuals participating in the 2005 U.S. Enhanced Early Retirement program. HP will distribute this amount from the plan assets. HP recognized the special termination benefit of $55 million for the HP retiree medical plans for those employees participating in the U.S. Enhanced Early Retirement program. This expense amount reflects the present value of approximately two years of added medical coverage that HP expects to pay and will be distributed from both plan assets and HP assets as these benefits are paid. HP expects to pay the majority of these added retiree medical benefits over the next two years.

Plan Design Changes

        In conjunction with management's announcement to restructure certain of its operations, as discussed in Note 6 to the Consolidated Condensed Financial Statements, HP modified its U.S. retirement programs to match industry benchmarks better. Effective January 2006, HP will cease pension accruals and eliminate eligibility for the subsidized retiree medical program for current employees who do not meet defined criteria based on age and years of service. As a result, a curtailment gain of approximately $200 million will be recognized in the fourth quarter of fiscal 2005 stemming from the elimination of future benefit accruals by the affected employee group.

        Beginning January 2006, HP will increase its matching 401(k) contribution to 6% from 4% of eligible salary for those employees who had their pension and retiree medical-program benefits frozen and for all new employees.

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        HP is currently evaluating the effect of the restructuring and early retirement programs on its pension and retiree medical program expense and expects to reflect such effects beginning in the first quarter of fiscal 2006.