Separation related activities

In advance of the Separation, HP underwent a plan-by-plan analysis and determined which plans would be assigned to either HP or Hewlett Packard Enterprise. While some pension plans transitioned in their entirety to Hewlett Packard Enterprise or remain in their entirety with HP, other plans were split into two identical plans resulting in both companies splitting the plan’s assets and liabilities. In the fourth quarter of fiscal year 2015, the plans were legally separated and the amounts attributable to Hewlett Packard Enterprise were transferred and reported as discontinued operations in fiscal year 2015.

The Hewlett-Packard Company 401(k) Plan, now known as the HP Inc. 401(k) Plan, remained with HP. A new 401(k) Plan was created for the employees of Hewlett Packard Enterprise. Balances for Hewlett Packard Enterprise employees were transferred to the new plan post-Separation.

Defined Benefit Plans

HP sponsors a number of defined benefit pension plans worldwide. The most significant defined benefit plan, the HP Inc. Pension Plan (“Pension Plan”) is in the United States.

HP reduces the benefit payable to certain U.S. employees under the Pension Plan for service before 1993, if any, by any amounts due to the employee under HP’s frozen defined contribution Deferred Profit-Sharing Plan (“DPSP”). At October 31, 2016 and 2015, the fair value of plan assets of the DPSP was $606 million and $742 million, respectively. The DPSP obligations are equal to the plan assets and are recognized as an offset to the Pension Plan when HP calculates its defined benefit pension cost and obligations. The Pension Plan and the DPSP both remain entirely with HP post-Separation.

Post-Retirement Benefit Plans

HP sponsors retiree health and welfare benefit plans, of which the most significant are in the United States. Under the HP Inc. Retiree Welfare Benefits Plan, certain pre-2003 retirees and grandfathered participants with continuous service to HP since 2002 are eligible to receive partially-subsidized medical coverage based on years of service at retirement. HP’s share of the premium cost is capped for all subsidized medical coverage provided under the HP Inc. Retiree Welfare Benefits Plan. HP currently leverages the employer group waiver plan process to provide HP Inc. Retiree Welfare Benefits Plan post-65 prescription drug coverage under Medicare Part D, thereby giving HP access to federal subsidies to help pay for retiree benefits.

Certain employees not grandfathered under the above programs, and employees hired after 2002 but before August 2008, are eligible for credits under the HP Inc. Retirement Medical Savings Account Plan (“RMSA”) upon attaining age 45. Credits offered after September 2008 are provided in the form of matching credits on employee contributions made to a voluntary employee beneficiary association. On retirement, former employees may use these credits for the reimbursement of certain eligible medical expenses, including premiums required for coverage.

Defined Contribution Plans

HP offers various defined contribution plans for U.S. and non-U.S. employees. Total defined contribution expense was $100 million for fiscal year 2016, $92 million in fiscal year 2015 and $93 million in fiscal year 2014.

U.S. employees are automatically enrolled in the HP Inc. 401(k) Plan when they meet eligibility requirements, unless they decline participation. The quarterly employer matching contributions in the HP Inc. 401(k) Plan are 100% of an employee’s contributions, up to a maximum of 4% of eligible compensation. Effective January 2017, the funding of employer matching contributions will change to be made annually, sometime after the end of the calendar year.

Pension and Post-Retirement Benefit Expense

The components of HP’s pension and post-retirement benefit cost (credit) recognized in the Consolidated Statements of Earnings were as follows:



	For the fiscal years ended October 31
	2016			2015			2014			2016			2015			2014			2016			2015			2014
	U.S. Defined Benefit Plans									Non-U.S. Defined Benefit Plans									Post-Retirement Benefit Plans
	In millions
Service cost	$	—		$	1		$	1		$	47		$	208		$	234		$	1		$	5		$	5
Interest cost	543			556			554			20			289			454			20			28			32
Expected return on plan assets	(732		)	(849		)	(811		)	(36		)	(601		)	(776		)	(33		)	(39		)	(34		)
Amortization and deferrals:
Actuarial loss (gain)	55			52			13			28			213			236			(12		)	(11		)	(10		)
Prior service benefit (credit)	—			—			—			(3		)	(15		)	(21		)	(17		)	(19		)	(41		)
Net periodic benefit (credit) cost	(134		)	(240		)	(243		)	56			94			127			(41		)	(36		)	(48		)
Curtailment gain	—			—			—			(1		)	—			(6		)	—			—			—
Settlement loss (gain)	180			(79		)	1			3			—			4			—			—			—
Special termination benefits	—			—			—			—			7			11			4			1			32
Plan expense (credit) allocation⁽¹⁾	—			—			—			—			25			(6		)	—			28			18
Total benefit cost (credit) from continuing operations	$	46		$	(319	)	$	(242	)	$	58		$	126		$	130		$	(37	)	$	(7	)	$	2
Summary of total benefit (credit) cost:
Continuing operations	$	46		$	(319	)	$	(242	)	$	58		$	126		$	130		$	(37	)	$	(7	)	$	2
Discontinued operations	—			236			17			—			105			125			—			(28		)	(18		)
Total benefit cost (credit)	$	46		$	(83	)	$	(225	)	$	58		$	231		$	255		$	(37	)	$	(35	)	$	(16	)


⁽¹⁾	Plan expense (credit) allocation relates to the employees of HP covered under Hewlett Packard Enterprise plans or employees of Hewlett Packard Enterprise covered under HP plans.

Lump sum program

During fiscal year 2016, HP offered certain terminated vested participants of the Pension Plan the option of receiving their pension benefit in a one-time voluntary lump sum during a specific window. Approximately 16,000 plan participants elected to receive their benefits and as a result the pension plan trust paid $977 million in lump sum payments to these participants in fiscal year 2016. As a result of the lump sum program, HP recognized a settlement expense of approximately $177 million in October 2016. The resulting re-measurement coincided with annual year end plan remeasurement and no additional net periodic pension cost was incurred in fiscal year 2016.

In January 2015, HP offered certain terminated vested participants of the Pension Plan the option of receiving their pension benefit in a one-time voluntary lump sum during a specified window. Approximately 50% of the eligible participants elected to receive their benefits and as a result the pension plan trust paid $826 million in lump sum payments to these participants in fiscal year 2015. As a result of the lump sum program, HP recognized a settlement credit of approximately $79 million in fiscal year 2015. As a result of the settlement, additional net periodic benefit cost of $20 million was recorded in fiscal year 2015, which offset the actuarial gain from the settlement and was recognized in the Consolidated Statements of Earnings as Defined benefit plan settlement credits.

The weighted-average assumptions used to calculate the total periodic benefit (credit) cost were as follows:



	For the fiscal years ended October 31
	2016		2015		2014		2016		2015		2014		2016		2015		2014
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post-Retirement Benefit Plans
Discount rate	4.4	%	4.4	%	4.9	%	2.3	%	3.0	%	3.9	%	3.6	%	3.6	%	3.9	%
Expected increase in compensation levels	2.0	%	2.0	%	2.0	%	2.5	%	2.4	%	2.4	%	—		—		—
Expected long-term return on plan assets	6.9	%	7.2	%	7.7	%	5.6	%	6.9	%	7.0	%	8.0	%	9.0	%	8.9	%

Funded Status

The funded status of the defined benefit and post-retirement benefit plans was as follows:



	As of October 31
	2016			2015				2016			2015				2016			2015
	U.S. Defined Benefit Plans							Non-U.S. Defined Benefit Plans							Post-Retirement Benefit Plans
	In millions
Change in fair value of plan assets:
Fair value of assets — beginning of year	$	11,077		$	11,979			$	853		$	12,472			$	434		$	458
Acquisition/addition of plans	—			(1		)		—			9				—			—
Actual return on plan assets	736			506				(14		)	547				11			45
Employer contributions	32			8				20			487				18			38
Participant contributions	—			—				10			48				48			57
Benefits paid	(339		)	(301		)		(15		)	(297		)		(121		)	(124		)
Settlement	(1,330		)	(1,114		)		(9		)	(9		)		—			—
Currency impact	—			—				4			(737		)		—			—
Transfers to Hewlett Packard Enterprise	—			—				(157		)	(11,667		)	⁽¹⁾	—			(40		)	⁽¹⁾
Fair value of assets — end of year	$	10,176		$	11,077			$	692		$	853			$	390		$	434
Change in benefits obligation
Projected benefit obligation — beginning of year	$	12,709		$	13,386			$	1,082		$	13,885			$	597		$	840
Acquisition/addition of plans	—			(1		)		(2		)	4				—			—
Service cost	—			1				47			208				1			5
Interest cost	543			556				20			289				20			28
Participant contributions	—			—				10			48				48			57
Actuarial loss (gain)	561			(170		)		120			48				16			(49		)
Benefits paid	(339		)	(301		)		(15		)	(297		)		(121		)	(126		)
Plan amendments	—			—				—			(7		)		(30		)	—
Curtailment	—			—				(1		)	—				—			—
Settlement	(1,330		)	(1,114		)		(9		)	(9		)		—			—
Special termination benefits	—			—				—			7				4			1
Currency impact	—			—				(4		)	(825		)		—			(9		)
Transfers from Hewlett Packard Enterprise	—			365			⁽²⁾	—			—				—			—
Transfers to Hewlett Packard Enterprise	—			(13		)	⁽¹⁾	(128		)	(12,269		)	⁽¹⁾	—			(150		)	⁽¹⁾
Projected benefit obligation — end of year	$	12,144		$	12,709			$	1,120		$	1,082			$	535		$	597
Funded status at end of year	$	(1,968	)	$	(1,632	)		$	(428	)	$	(229	)		$	(145	)	$	(163	)
Accumulated benefit obligation	$	12,144		$	12,708			$	1,013		$	989			—			—


⁽¹⁾	In fiscal year 2015, in connection with the Separation, HP transferred plan assets and liabilities from HP’s plans to establish the Hewlett Packard Enterprise plans.


⁽²⁾	In October 2015, in connection with the Separation, Hewlett Packard Enterprise transferred to HP three unfunded non-qualified U.S. defined benefit plans.

The weighted-average assumptions used to calculate the projected benefit obligations for the fiscal years ended October 31, 2016 and 2015 were as follows:



	For the fiscal years ended October 31
	2016		2015		2016		2015		2016		2015
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				Post-Retirement Benefit Plans
Discount rate	4.0	%	4.4	%	1.6	%	2.3	%	3.4	%	3.6	%
Expected increase in compensation levels	2.0	%	2.0	%	2.7	%	2.5	%	—		—

The net amounts of non-current assets and current and non-current liabilities for HP’s defined benefit and post-retirement benefit plans recognized on HP’s Consolidated Balance Sheet were as follows:



	As of October 31
	2016			2015			2016			2015			2016			2015
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post-Retirement Benefit Plans
							In millions
Non-current assets	$	—		$	—		$	17		$	37		$	—		$	—
Current liabilities	(33		)	(35		)	(5		)	(4		)	(9		)	(43		)
Non-current liabilities	(1,935		)	(1,597		)	(440		)	(262		)	(136		)	(120		)
Funded status at end of year	$	(1,968	)	$	(1,632	)	$	(428	)	$	(229	)	$	(145	)	$	(163	)

The following table summarizes the pre-tax net actuarial loss (gain) and prior service benefit recognized in Accumulated other comprehensive loss for the defined benefit and post-retirement benefit plans.



	As of October 31, 2016
	U.S. Defined Benefit Plans		Non U.S. Defined Benefit Plans			Post-Retirement Benefit Plans
			In millions
Net actuarial loss (gain)	$	1,702	$	456		$	(105	)
Prior service benefit	—		(21		)	(112		)
Total recognized in Accumulated other comprehensive loss (gain)	$	1,702	$	435		$	(217	)

The following table summarizes HP’s pre-tax net actuarial loss (gain) and prior service benefit that are expected to be amortized from Accumulated other comprehensive loss (income) and recognized as components of net periodic benefit cost (credit) during the next fiscal year.



	U.S. Defined Benefit Plans		Non-U.S. Defined Benefit Plans			Post-Retirement Benefit Plans
			In millions
Net actuarial loss (gain)	$	73	$	39		$	(10	)
Prior service benefit	—		(3		)	(19		)
Total expected to be recognized in net periodic benefit cost (credit)	$	73	$	36		$	(29	)

Defined benefit plans with projected benefit obligations exceeding the fair value of plan assets were as follows:



	As of October 31
	2016		2015		2016		2015
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans
	In millions
Aggregate fair value of plan assets	$	10,176	$	11,077	$	626	$	418
Aggregate projected benefit obligation	$	12,144	$	12,709	$	1,070	$	684

Defined benefit plans with accumulated benefit obligations exceeding the fair value of plan assets were as follows:



	As of October 31
	2016		2015		2016		2015
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans
	In millions
Aggregate fair value of plan assets	$	10,176	$	11,077	$	619	$	409
Aggregate accumulated benefit obligation	$	12,144	$	12,708	$	960	$	609

Fair Value of Plan Assets

The table below sets forth the fair value of plan assets by asset category within the fair value hierarchy as of October 31, 2016. Refer to Note 10, “Fair Value” for details on fair value hierarchy.



	As of October 31, 2016
	U.S. Defined Benefit Plans											Non-U.S. Defined Benefit Plans								Post-Retirement Benefit Plans
	Level 1			Level 2			Level 3		Total			Level 1		Level 2		Level 3		Total		Level 1			Level 2		Level 3		Total
	In millions
Asset Category:
Equity securities⁽¹⁾	$	1,716		$	59		$	—	$	1,775		$	122	$	4	$	7	$	133	$	—		$	1	$	—	$	1
Debt securities⁽²⁾
Corporate	—			3,132			—		3,132			—		124		—		124		—			26		—		26
Government	—			1,782			—		1,782			—		26		—		26		—			42		—		42
Alternative Investments⁽³⁾	—			—			1,027		1,027			—		2		11		13		—			—		219		219
Common Contractual Funds ⁽⁴⁾	—			1,834			—		1,834			—		277		—		277		—			—		—		—
Real Estate Funds	—			—			—		—			1		24		—		25		—			—		—		—
Insurance Group Annuity Contracts	—			—			—		—			—		2		1		3		—			—		—		—
Common Collective Trusts and 103-12 Investment Entities⁽⁵⁾	—			639			—		639			—		11		—		11		—			51		—		51
Registered Investment Companies⁽⁶⁾	20			103			—		123			30		—		—		30		54			4		—		58
Cash and Cash Equivalents⁽⁷⁾	4			52			—		56			18		—		—		18		—			5		—		5
Other⁽⁸⁾	(169		)	(23		)	—		(192		)	7		16		9		32		(12		)	—		—		(12		)
Total	$	1,571		$	7,578		$	1,027	$	10,176		$	178	$	486	$	28	$	692	$	42		$	129	$	219	$	390


⁽¹⁾	Investments in publicly-traded equity securities are valued using the closing price on the measurement date as reported on the stock exchange on which the individual securities are traded.


⁽²⁾	The fair value for corporate, government and asset-backed debt securities is based on observable inputs of comparable market transactions. For corporate and government debt securities traded on active exchanges, fair value is based on observable quoted prices. Also included in this category is debt issued by national, state and local governments and agencies.

⁽³⁾

Alternative Investments primarily include private equities and hedge funds. The valuation of alternative investments, such as limited partnerships and joint ventures, may require significant management judgment. For alternative investments, valuation is based on net asset value (“NAV”) as reported by the Asset Manager and adjusted for cash flows, if necessary. In making such an assessment, a variety of factors are reviewed by management, including but not limited to the timeliness of NAV as reported by the asset manager and changes in general economic and market conditions subsequent to the last NAV reported by the asset manager. Depending on the amount of management judgment, the lack of near-term liquidity, and the absence of quoted market prices, these assets are classified in Level 2 or Level 3 of the fair value hierarchy. Further, depending on how quickly HP can redeem its hedge fund investments, and the extent of any adjustments to NAV, hedge funds are classified in either Level 2 or Level 3 of the fair value hierarchy.


•	Private equities include limited partnerships such as equity, buyout, venture capital, real estate and other similar funds that invest in the United States and internationally where foreign currencies are hedged.


•	Hedge funds include limited partnerships that invest both long and short primarily in common stocks and credit, relative value, event driven equity, distressed debt and macro strategies. Management of the hedge funds has the ability to shift investments from value to growth strategies, from small to large capitalization stocks and bonds, and from a net long position to a net short position.

⁽⁴⁾

The Common Contractual Fund is an investment arrangement in which institutional investors pool their assets. Units may be acquired in six different sub-funds focused on equities, fixed income, alternative investments and emerging markets. Each sub-fund is invested in accordance with the fund’s investment objective and units are issued in relation to each sub-fund. While the sub-funds are not publicly traded, the custodian strikes a net asset value either once or twice a month, depending on the sub-fund. These assets are valued at NAV and classified in Level 2 of the fair value hierarchy.

⁽⁵⁾

Department of Labor 103-12 IE (Investment Entity) designation is for plan assets held by two or more unrelated employee benefit plans which includes limited partnerships and venture capital partnerships. Common collective trusts, interests in 103-12 entities and registered investment companies are valued at NAV. The valuation for some of these assets requires judgment due to the absence of quoted market prices, and these assets are generally classified in Level 2 of the fair value hierarchy.


⁽⁶⁾	Includes publicly and privately traded Registered Investment Entities.


⁽⁷⁾	Includes cash and cash equivalents such as short-term marketable securities. Cash and cash equivalents include money market funds, which are valued based on NAV. Other assets were classified in the fair value hierarchy based on the lowest level input (e.g., quoted prices and observable inputs) that is significant to the fair value measure in its entirety.


⁽⁸⁾	Includes primarily unsettled transactions, international insured contracts, and derivative instruments. Such unsettled transactions relate primarily to fixed income securities settled in the first quarter of fiscal year 2017.

Changes in fair value measurements of Level 3 investments were as follows:



	For the fiscal year ended October 31, 2016
	U.S. Defined Benefit Plans									Non-U.S. Defined Benefit Plans														Post-Retirement Benefit Plans
	Corporate Debt			Alternative Investments			Total			Non U.S. Equities			Alternative Investments			Insurance Group Annuities			Other		Total			Alternative Investments
	In millions
Beginning balance at October 31, 2015	$	31		$	1,291		$	1,322		$	15		$	16		$	3		$	7	$	41		$	253
Actual return on plan assets:
Relating to assets still held at the reporting date	—			(128		)	(128		)	—			—			—			—		—			(9		)
Relating to assets sold during the period	—			131			131			—			—			—			—		—			14
Purchases, sales, and settlements (net)	(9		)	(267		)	(276		)	—			—			—			—		—			(39		)
Transfers in and/or out of Level 3	(22		)	—			(22		)	(8		)	(5		)	(2		)	2		(13		)	—
Ending balance at October 31, 2016	$	—		$	1,027		$	1,027		$	7		$	11		$	1		$	9	$	28		$	219

The table below sets forth the fair value of plan assets by asset category within the fair value hierarchy as of October 31, 2015.



	As of October 31, 2015
	U.S. Defined Benefit Plans											Non-U.S. Defined Benefit Plans								Post-Retirement Benefit Plans
	Level 1			Level 2			Level 3		Total			Level 1		Level 2		Level 3		Total		Level 1			Level 2		Level 3		Total
	In millions
Asset Category:
Equity securities⁽¹⁾	$	2,100		$	60		$	—	$	2,160		$	120	$	97	$	15	$	232	$	—		$	1	$	—	$	1
Debt securities⁽²⁾
Corporate	—			3,198			31		3,229			—		260		—		260		—			28		—		28
Government	—			1,712			—		1,712			—		59		—		59		—			39		—		39
Alternative Investments⁽³⁾	—			—			1,291		1,291			—		2		16		18		—			—		253		253
Common Contractual Funds⁽⁴⁾	—			1,837			—		1,837			—		182		—		182		—			—		—		—
Real Estate Funds	—			—			—		—			2		25		—		27		—			—		—		—
Insurance Group Annuity Contracts	—			—			—		—			—		5		3		8		—			—		—		—
Common Collective Trusts and 103-12 Investment Entities⁽⁵⁾	—			756			—		756			—		4		—		4		—			59		—		59
Registered Investment Companies⁽⁶⁾	38			176			—		214			30		—		—		30		52			3		—		55
Cash and Cash Equivalents⁽⁷⁾	5			71			—		76			18		—		—		18		4			3		—		7
Other⁽⁸⁾	(153		)	(45		)	—		(198		)	7		1		7		15		(8		)	—		—		(8		)
Total	$	1,990		$	7,765		$	1,322	$	11,077		$	177	$	635	$	41	$	853	$	48		$	133	$	253	$	434


⁽¹⁾	Investments in publicly-traded equity securities are valued using the closing price on the measurement date as reported on the stock exchange on which the individual securities are traded.


⁽²⁾	The fair value for corporate, government and asset-backed debt securities is based on observable inputs of comparable market transactions. For corporate and government debt securities traded on active exchanges, fair value is based on observable quoted prices. Also included in this category is debt issued by national, state and local governments and agencies.

⁽³⁾

Alternative Investments primarily include private equities and hedge funds. The valuation of alternative investments, such as limited partnerships and joint ventures, may require significant management judgment. For alternative investments, valuation is based on NAV as reported by the Asset Manager and adjusted for cash flows, if necessary. In making such an assessment, a variety of factors are reviewed by management, including but not limited to the timeliness of NAV as reported by the asset manager and changes in general economic and market conditions subsequent to the last NAV reported by the asset manager. Depending on the amount of management judgment, the lack of near-term liquidity, and the absence of quoted market prices, these assets are classified in Level 2 or Level 3 of the fair value hierarchy. Further, depending on how quickly HP can redeem its hedge fund investments, and the extent of any adjustments to NAV, hedge funds are classified in either Level 2 or Level 3 of the fair value hierarchy.


•	Private equities include limited partnerships such as equity, buyout, venture capital, real estate and other similar funds that invest in the United States and internationally where foreign currencies are hedged.


•	Hedge funds include limited partnerships that invest both long and short primarily in common stocks and credit, relative value, event driven equity, distressed debt and macro strategies. Management of the hedge funds has the ability to shift investments from value to growth strategies, from small to large capitalization stocks and bonds, and from a net long position to a net short position.

⁽⁴⁾

⁽⁵⁾


⁽⁶⁾	Includes publicly and privately traded Registered Investment Entities.


⁽⁷⁾	Includes cash and cash equivalents such as short-term marketable securities. Cash and cash equivalents include money market funds, which are valued based on NAV. Other assets were classified in the fair value hierarchy based on the lowest level input (e.g., quoted prices and observable inputs) that is significant to the fair value measure in its entirety.


⁽⁸⁾	Includes primarily unsettled transactions, international insured contracts, and derivative instruments. Such unsettled transactions relate primarily to fixed income securities settled in the first quarter of fiscal year 2016.

Changes in fair value measurements of Level 3 investments were as follows:



	For the fiscal year ended October 31, 2015
	U.S. Defined Benefit Plans								Non-U.S. Defined Benefit Plans														Post-Retirement Benefit Plans
	Corporate Debt		Alternative Investments			Total			Non U.S. Equities			Alternative Investments			Insurance Group Annuities			Other		Total			Alternative Investments
	In millions
Beginning balance at October 31, 2014	$	7	$	1,409		$	1,416		$	80		$	160		$	35		$	—	$	275		$	272
Actual return on plan assets:
Relating to assets still held at the reporting date	—		(26		)	(26		)	(13		)	(6		)	(7		)	—		(26		)	(2		)
Relating to assets sold during the period	—		144			144			—			(21		)	—			—		(21		)	46
Purchases, sales, and settlements (net)	24		(236		)	(212		)	—			(77		)	—			—		(77		)	(63		)
Transfers in and/or out of Level 3	—		—			—			(52		)	(40		)	(25		)	7		(110		)	—
Ending balance at October 31, 2015	$	31	$	1,291		$	1,322		$	15		$	16		$	3		$	7	$	41		$	253

Plan Asset Allocations

Refer to the fair value hierarchy table above for actual assets allocations across the benefit plans. The weighted-average target asset allocations across the benefit plans represented in the fair value tables above were as follows:



	2016 Target Allocation
Asset Category	U.S. Defined Benefit Plans		Non-U.S. Defined Benefit Plans		Post-Retirement Benefit Plans
Equity-related investments	53.9	%	44.3	%	67.7	%
Debt securities	46.1	%	38.8	%	29.2	%
Real estate	—		6.2	%	2.0	%
Cash and cash equivalents	—		2.7	%	1.1	%
Other	—		8.0	%	—
Total	100.0	%	100.0	%	100.0	%

Investment Policy

HP’s investment strategy is to seek a competitive rate of return relative to an appropriate level of risk depending on the funded status of each plan and the timing of expected benefit payments. The majority of the plans’ investment managers employ active investment management strategies with the goal of outperforming the broad markets in which they invest. Risk management practices include diversification across asset classes and investment styles and periodic rebalancing toward asset allocation targets. A number of the plans’ investment managers are authorized to utilize derivatives for investment or liability exposures, and HP may utilize derivatives to effect asset allocation changes or to hedge certain investment or liability exposures.

The target asset allocation selected for each U.S. plan reflects a risk/return profile HP believes is appropriate relative to each plan’s liability structure and return goals. HP conducts periodic asset-liability studies for U.S. plans in order to model various potential asset allocations in comparison to each plan’s forecasted liabilities and liquidity needs. HP invests a portion of the U.S. defined benefit plan assets and post-retirement benefit plan assets in private market securities such as private equity funds to provide diversification and a higher expected return on assets.

Outside the United States, asset allocation decisions are typically made by an independent board of trustees for the specific plan. As in the United States, investment objectives are designed to generate returns that will enable the plan to meet its future obligations. In some countries, local regulations may restrict asset allocations, typically leading to a higher percentage of investment in fixed income securities than would otherwise be deployed. HP reviews the investment strategy and provides a recommended list of investment managers for each country plan, with final decisions on asset allocation and investment managers made by the board of trustees for the specific plan.

Basis for Expected Long-Term Rate of Return on Plan Assets

The expected long-term rate of return on plan assets reflects the expected returns for each major asset class in which the plan invests and the weight of each asset class in the target mix. Expected asset returns reflect the current yield on government bonds, risk premiums for each asset class and expected real returns which considers each country’s specific inflation outlook. Because HP’s investment policy is to employ primarily active investment managers who seek to outperform the broader market, the expected returns are adjusted to reflect the expected additional returns net of fees.

Future Contributions and Funding Policy

In fiscal year 2017, HP expects to contribute approximately $26 million to its non-U.S. pension plans, $33 million to cover benefit payments to U.S. non-qualified plan participants and $9 million to cover benefit claims for HP’s post-retirement benefit plans. HP’s policy is to fund its pension plans so that it makes at least the minimum contribution required by local government, funding and taxing authorities.

Estimated Future Benefits Payments

As of October 31, 2016, HP estimates that the future benefits payments for the retirement and post-retirement plans are as follows:



Fiscal year	U.S. Defined Benefit Plans		Non-U.S. Defined Benefit Plans		Post-Retirement Benefit Plans
	In millions
2017	$	687	$	27	$	80
2018	635		24		61
2019	648		28		51
2020	674		29		47
2021	702		28		44
Next five fiscal years to October 31, 2026	3,685		188		167