UNITED STATES
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
For the year ended DECEMBER 31, 2003
------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 333-98681
---------------------------------
CONOCOPHILLIPS SAVINGS PLAN
(Full title of the Plan)
CONOCOPHILLIPS
(Name of issuer of securities)
600 NORTH DAIRY ASHFORD
HOUSTON, TEXAS 77079
(Address of principal executive office) (Zip code)
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Financial statements of the ConocoPhillips Savings Plan, filed as part of this
annual report, are listed in the accompanying index.
(b) Exhibits
Exhibit 23 Consent of Independent Registered Public Accounting Firm
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
ConocoPhillips Savings Plan Committee has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
CONOCOPHILLIPS
SAVINGS PLAN
/s/ J. W. Sheets
--------------------------------
J. W. Sheets
Plan Financial Administrator
June 28, 2004
INDEX TO FINANCIAL STATEMENTS CONOCOPHILLIPS SAVINGS PLAN
AND SCHEDULES
Page
Report of Independent Registered Public Accounting Firm .... 3
Financial Statements
Statement of Net Assets Available for Benefits
at December 31, 2003 and 2002 .......................... 4
Statement of Changes in Net Assets Available for
Benefits for the Year Ended December 31, 2003 .......... 5
Notes to Financial Statements ............................ 6
Supplemental Schedules *
Schedule of Assets (Held at End of Year) as of
December 31, 2003, Schedule H, Line 4i ................. 17
Schedule of Reportable Transactions for the Year Ended
December 31, 2003, Schedule H, Line 4j ................. 20
Exhibit Index .............................................. 22
* Other supplemental schedules required by Section 2520.103-10 of the Department
of Labor Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 (ERISA) have been omitted because they
are not applicable.
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The ConocoPhillips Savings Plan Committee
ConocoPhillips Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the ConocoPhillips Savings Plan (Plan) as of December 31, 2003 and 2002, and
the related statement of changes in net assets available for benefits for the
year ended December 31, 2003. These financial statements are the responsibility
of the ConocoPhillips Savings Plan Committee (Committee). Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board United States. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by the Committee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2003 and 2002, and the changes in its net assets available for
benefits for the year ended December 31, 2003, in conformity with U.S. generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
(held at end of year) as of December 31, 2003, and reportable transactions for
the year then ended, are presented for purposes of additional analysis and are
not a required part of the financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Committee. The
supplemental schedules have been subjected to the auditing procedures applied in
our audits of the financial statements and, in our opinion, are fairly stated in
all material respects in relation to the financial statements taken as a whole.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Houston, Texas
June 28, 2004
3
STATEMENT OF NET ASSETS CONOCOPHILLIPS SAVINGS PLAN
AVAILABLE FOR BENEFITS
Thousands of Dollars
------------------------
At December 31 2003 2002
------------------------
ASSETS
Investments
Plan interest in Master Trusts
ConocoPhillips Stock Fund $ 1,356,479 -
DuPont Stock Fund 259,323 -
Stable Value Fund 1,947,229 -
Leveraged Stock and Loan II Suspense 1,104,422 373,455
ConocoPhillips Stock - 1,354,059
Insurance contract 13 15
Loans to Plan participants 70,976 24,050
Fidelity Low-Priced Stock Fund 111,173 -
Fidelity Magellan Fund 162,755 -
PIMCO Total Return Fund - Administrative Class 22,159 -
Credit Suisse Warburg Pincus Value II - 5,273
American Express Fixed Income Fund - 40,161
Vanguard Funds:
500 Index Fund 324,560 175,374
Asset Allocation Fund 5,957 1,062
Balanced Index Fund 18,252 11,157
Explorer Fund 86,800 1,708
Extended Market Index Fund 29,310 13,525
Federal Money Market Fund - 27,987
Growth Index Fund 7,986 2,645
Inflation-Protected Securities Fund 21,961 7,726
International Growth Fund 25,274 10,452
International Value Fund 36,375 -
LifeStrategy Conservative Growth Fund 9,303 811
LifeStrategy Growth Fund 15,443 996
LifeStrategy Income Fund 5,334 2,120
LifeStrategy Moderate Growth Fund 83,018 992
Long-Term Treasury Fund 16,905 15,466
Mid-Cap Index Fund 19,548 5,361
Morgan Growth Fund 17,307 1,148
Prime Money Market Fund 161,676 110,224
PRIMECAP Fund 194,619 90,499
Small-Cap Growth Index Fund 20,081 2,042
Small-Cap Value Index Fund 15,468 5,159
Total Bond Market Index Fund 75,334 68,312
Total International Stock Index Fund 13,048 4,837
Total Stock Market Index Fund 17,753 3,114
Value Index Fund 5,378 1,531
Wellington Fund 62,276 45,303
Windsor II Fund 70,253 6,396
Vanguard Retirement Savings Trust 1 -
--------------------------------------------------------------------------------
6,393,749 2,412,960
Interest Receivable -- 5
--------------------------------------------------------------------------------
Total Assets 6,393,749 2,412,965
--------------------------------------------------------------------------------
LIABILITIES
Securities Acquisition Loans 275,150 298,850
Interest Payable 300 378
--------------------------------------------------------------------------------
Total Liabilities 275,450 299,228
--------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 6,118,299 2,113,737
================================================================================
See Notes to Financial Statements.
4
STATEMENT OF CHANGES IN NET CONOCOPHILLIPS SAVINGS PLAN
ASSETS AVAILABLE FOR BENEFITS
Thousands
Year Ended December 31, 2003 of Dollars
-----------
ADDITIONS
Company Contributions
Company matching contributions $ 77,582
Funds for debt service 236
Basic allocation requirements 89,214
Participant Contributions 173,839
--------------------------------------------------------------------------------
340,871
--------------------------------------------------------------------------------
Investment Income
Dividends and interest 66,088
Interest, participant loans 2,001
Plan interest in Master Trusts
Stable Value Fund 23,211
DuPont Stock Fund 31,671
ConocoPhillips Stock Fund 334,531
Net appreciation in fair value
of investments 404,577
--------------------------------------------------------------------------------
862,079
--------------------------------------------------------------------------------
Other Additions
Asset transfers in 3,153,884
Other additions 255
--------------------------------------------------------------------------------
3,154,139
--------------------------------------------------------------------------------
Total 4,357,089
--------------------------------------------------------------------------------
DEDUCTIONS
Distributions to participants
or their beneficiaries 346,879
Interest expense 4,567
Administrative expense 585
Asset transfer out 411
Other deductions 85
--------------------------------------------------------------------------------
Total 352,527
--------------------------------------------------------------------------------
NET CHANGE 4,004,562
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of Year 2,113,737
--------------------------------------------------------------------------------
End of Year $ 6,118,299
================================================================================
See Notes to Financial Statements.
5
NOTES TO FINANCIAL STATEMENTS CONOCOPHILLIPS SAVINGS PLAN
NOTE 1--PLAN DESCRIPTION
The following describes the ConocoPhillips Savings Plan (CPSP) (Plan), subject
to and qualified by the more complete information appearing in the Plan
document.
General: The Plan is a defined contribution, 401(k) profit sharing plan which
includes a Stock Savings Feature and a Thrift Feature. This Plan was formerly
known as the Long-Term Stock Savings Plan of Phillips Petroleum Company (LTSSP);
the name was changed at the close of business on December 31, 2002, along with
the formal merger of the Thrift Plan of Phillips Petroleum Company (Thrift Plan)
into the CPSP. The Thrift Plan became the Thrift Feature of the CPSP, the LTSSP
became the Stock Savings Feature, and ConocoPhillips Company (Company) became
the Plan sponsor. At the same time, accounts in the Tosco Corporation Capital
Accumulation Plan (CAP) were transferred to CPSP. On October 3, 2003 assets of
the Thrift Plan for Employees of Conoco, Inc. (Conoco Thrift Plan) were merged
into CPSP.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA) and the Internal Revenue Code, as amended by the Tax Reform
Act of 1986 and subsequent legislation.
Eligibility: Generally, employees of ConocoPhillips Company (Company) and its
subsidiaries on the U.S. direct dollar payroll are eligible to participate in
the Plan, except non-managerial retail marketing outlet employees and certain
other employee classifications. Employees of ConocoPhillips Services Inc. became
eligible to participate in the Stock Savings Feature effective January 1, 2003,
and effective October 3, 2003, became eligible to participate in the Thrift
Feature.
A summary of the key provisions of the Plan are as follows:
Thrift Feature: Participants may contribute from 1 to 30 percent of pay on a
before-tax basis, an after-tax basis, or a combination of both. The Company
contributes $1 for each $1 deposited by the participant up to 1.25 percent of
pay. Participants have a choice of 31 investment funds in which to invest their
deposits.
Stock Savings Feature: The Stock Savings Feature is a stock bonus plan that
contains an Employee Stock Ownership Plan (ESOP). Participants contribute 1
percent of pay on a before-tax basis. Participants' Stock Savings Feature
contributions are invested in
6
the ConocoPhillips Stock Fund. Participants in the Stock Savings Feature receive
semiannual allocations of ConocoPhillips stock as of June 30 and December 31 of
each year. The semiannual allocation to participants is based on the ratio of
the participant's Stock Savings Feature (SSF) contributions to all participants'
SSF contributions for the allocation period. A supplemental allocation shall be
made each year-end if all shares released for allocation, based on loan payment
provisions, have not been allocated. Semiannual allocations and supplemental
allocations are invested in the ConocoPhillips Stock Fund and the Leveraged
Stock Fund.
Beginning June 30, 2003, the number of shares allocated semiannually on each
allocation date is 4,349 shares for each 100 employees eligible to make
deposits. After 2005 and through the allocation date following the date the
second loan is repaid, the number of shares to be allocated semiannually on each
basic allocation date will be 3,962 shares for each 100 eligible employees. In
late 1995, the Company extended the terms of the second loan to the year 2015.
Without the extension, allocations of stock to employees would have been
completed in 2005 or before. The extension required additional shares of
ConocoPhillips stock (Company Stock) to be delivered to the Plan. The Plan is
eligible to receive shares from the Company's Compensation and Benefits Trust
(CBT). In 2003, the Company used the CBT to contribute 1,483,780 shares of stock
to the Plan. The fair value of the shares was $80 million.
The Plan is required to retain and use eligible dividends on ConocoPhillips
stock to make payments on the loans it used to acquire ConocoPhillips stock for
the Stock Savings Feature. If the Company does not elect to make a special
contribution and if eligible dividends from participants' accounts are used to
make loan payments, participants receive a dividend replacement allocation. The
Plan used $15.9 million in dividends on allocated shares to make loan payments
and allocated 288,332 shares in dividend replacement allocations to
participants' accounts in 2003.
The Company made contributions to the Plan which, when aggregated with certain
Plan dividends and certain interest earnings, equaled the amount necessary to
enable the Plan to make its regularly scheduled payments of principal and
interest due on its loan. The Company can also elect to make contributions to
the Plan, as an alternative to using the dividends. Finally, the Company can
make contributions to the Plan in the amount necessary to bring the number of
shares of stock released for allocation up to the level required to complete the
basic allocation by contributing cash or by contributing ConocoPhillips common
stock.
7
Catch-up Deposits: Participants are eligible to make catch-up deposits to the
Thrift Feature beginning in the year they attain age 50. The participant is
allowed to elect catch-up deposits to be deducted as a dollar amount from each
paycheck up to the applicable dollar limit, as defined by the Plan, for such
plan year. An annual election is required to make catch-up deposits.
Participant Accounts: Participants' contributions are credited directly to
employees' accounts as soon as administratively practicable. The interest of
participants in each fund is represented by shares allocated to them.
Vesting: Participants are always vested in their contributions and amounts
credited to their accounts.
Expanded Investment Fund Options: The Thrift Feature of CPSP includes the
following new funds: CAP Fixed Income Fund and Vanguard Retirement Savings Trust
Fund. The CAP Fixed Income Fund is a blended fund consisting of Vanguard
Retirement Savings Trust and American Express Trust Income Fund III. No new
deposits are allowed to the American Express Trust Income Fund III. Beginning
January 1, 2003, and continuing each month through April 2003, a portion of the
American Express Trust Income Fund III was invested in the Vanguard Retirement
Savings Trust. In April 2003, the entire remaining CAP Fixed Income Fund balance
was transferred to the Vanguard Retirement Savings Trust. In October 2003, the
Stable Value Fund, the DuPont Stock Fund, the Vanguard International Value Fund,
the Fidelity Magellan Fund, the Fidelity Low-Priced Stock Fund, and the PIMCO
Total Return Fund were added; and the holdings in the Vanguard Retirement
Savings Trust were transferred into the Stable Value Fund. The DuPont Stock Fund
is closed to new investment elections, which leaves 31 options available for new
investment.
Share Accounting Method for Company Stock: Effective January 1, 2003, the CPSP
changed to a share accounting method for Company Stock versus the unit
accounting method used prior to that date. Any shares purchased or sold on any
business day are valued at the Participant Transaction Price, which is
calculated using a weighted-average price of the ConocoPhillips stock traded on
that business day and any carryover impact from the previous trading day.
Withdrawals: Total withdrawals from participant accounts can be made upon the
occurrence of specified events, including the attainment of age 59 1/2 or
termination of employment. Partial withdrawals are permitted in cases of
specified financial hardship and certain other cases, including special partial
withdrawal provisions for participants age 55 and over. Effective January 1,
2003, the special partial withdrawal
8
provisions for participants age 55 and over were eliminated. Unless a request
for withdrawal is made as of any earlier date, distribution is deferred to a
date not later than the first valuation date in October of the year age 69 is
attained. If the participant dies, distribution to a surviving spouse
beneficiary is deferred to the first valuation date in October in the year in
which the participant would have attained age 69. Effective January 1, 2003, the
age at which distributions are deferred to was changed to February 1st of the
year following the year the participant reaches 70 1/2. For a surviving spouse,
it was changed to the later of December 31st of the year the participant would
have reached age 70 1/2 or December 31st of the year following the year the
participant died. This deferral is revocable by the participant or the surviving
spouse. Distributions to non-spouse beneficiaries can be deferred approximately
five years. A participant can elect a direct rollover of the taxable and/or
non-taxable portion of most distributions to an Individual Retirement Account or
another tax-qualified plan.
Installment Payments: A terminated employee or a beneficiary who is the
surviving spouse of a participant is eligible to elect a distribution based on a
fixed-dollar amount or life-expectancy installment payments.
Installment distribution options offered under the Conoco Thrift Plan and
exercised by a participant were grandfathered into CPSP.
Dividend Pass Through: Effective January 1, 2003, a participant can make an
election to receive cash dividends from the Company Stock Fund on a portion of
his account invested in Company Stock. The distribution of these dividends is
made on each dividend payment date.
Forms of Payment: Generally, distributions from participant accounts invested in
ConocoPhillips Stock and DuPont Stock can be made in cash, stock, or a
combination of both. Distributions from all other funds in the Thrift Feature
are made in cash. An election to make an eligible rollover distribution is also
available.
Loans: Active employee participants (and effective January 1, 2003, terminated
employees or a beneficiary who is the surviving spouse of a participant) can
request a loan from their account in the CPSP. Effective October 3, 2003,
terminated employees or beneficiaries are no longer eligible to take new loans.
The minimum loan is $1,000. Generally, the maximum loan is the lesser of $50,000
or one-half of the value of the account. For those eligible for loans, three
outstanding loans are available at any
9
one time, one of which can be a home loan for a term of up to 238 months. Also,
participants who transferred in from the Conoco Thrift Plan with more than three
loans are permitted to continue their loans until paid off.
On July 21, 2003, pursuant to the Sarbanes-Oxley Act of 2002, participants were
mailed a notice explaining that due to the merger of the Conoco Thrift Plan with
CPSP, (i) requests for new loans had to be submitted on or before 4 p.m. Central
time, August 29, 2003, (ii) loan payments would temporarily suspend (except for
expatriates, employees on leave, terminated employees, and Duke Energy Field
Service employees) September 1, 2003 to be re-amortized and (iii) loan payments
and all transactions would resume the week of October 5, 2003.
Trust Agreements: On January 1, 2003, ConocoPhillips entered into both a Trust
Agreement and a Master Trust Agreement with Vanguard Fiduciary Trust Company, as
Trustee, and subsequently both were superceded by a Trust Agreement and a Master
Trust Agreement dated October 3, 2003. The Master Trust Agreement provides for
the administration by the Trustee of each Investment Fund in the Trust Fund that
consists primarily of ConocoPhillips stock in both the Stock Savings Feature and
the Thrift Feature. The Trust Agreement provides for the administration of all
the other assets in the Trust Fund by the Trustee or any Successor Trustee. An
additional Master Trust Agreement with the Trustee, effective October 3, 2003,
provides for the administration by the Trustee of the DuPont Stock Fund in the
Thrift Feature. Effective October 3, 2003, pursuant to a Master Trust Agreement,
the custodial trustee for the Stable Value Fund in the Thrift Feature is State
Street Bank and Trust Company.
Administration: The Plan is administered by the ConocoPhillips Savings Plan
Committee (Committee), a Plan Financial Administrator, a Plan Benefits
Administrator, and the Chief Financial Officer of the Company. Members of the
Committee are appointed by the Board of Directors of ConocoPhillips Company. The
Plan Financial Administrator and the Plan Benefits Administrator are the persons
who occupy, respectively, the ConocoPhillips positions of Treasurer and
Compensation and Benefits Manager. Members of the Committee and the Plan
Administrators serve without compensation, but are reimbursed by the Company for
necessary expenditures incurred in the discharge of their duties. Administrative
expenses of the Plan are paid by the Trustee from assets of the Plan to the
extent allowable by law, unless paid by the Company. In 2003, reimbursement of
administrative expenses paid to ConocoPhillips totaled $585,880.
10
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Plan's financial statements are presented on the accrual basis of
accounting. Distributions to participants or their beneficiaries are recorded
when paid.
USE OF ESTIMATES
The preparation of financial statements in conformity with U. S. generally
accepted accounting principles requires estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes and
schedules. Actual results could differ from those estimates.
NOTE 3--SECURITIES ACQUISITION LOANS
The Plan borrowed $250 million (Loan 1) and $400 million (Loan 2) in 1988 and
1990, respectively, and purchased 14,336,918 and 14,159,292 shares of common
stock from ConocoPhillips, respectively. The shares are held in a suspense
account until allocated to eligible participants based on the provisions of the
Plan. At December 31, 2003 and 2002, the market value of unallocated shares was
$464 million and $373 million, respectively. There were no other unallocated
assets at December 31, 2003 and December 31, 2002.
Loan 1 was fully repaid in June 1998 and all leveraged shares associated with
Loan 1 have been allocated to participant accounts.
Loan 2 was amended in 1995 to extend its term from 15 to 25 years, requiring
repayment in annual installments beginning in 2005, through the year 2015. Due
to loan prepayments, the first required payment is currently scheduled to be in
2009.
Any participating bank in the syndicate of lenders may cease to participate on
December 5, 2004, by giving not less than 180 days prior notice to the Plan and
ConocoPhillips. Based on the provision noted above, several lenders have given
cessation notice to the Plan and ConocoPhillips. The Plan and ConocoPhillips
plan to resyndicate the loan or refinance the note. Neither of these two options
would change the current allocation schedule of stock to Plan participants.
Each bank participating in the loan also has the optional right, if the current
Directors of ConocoPhillips or their approved successors cease to be a majority
of the Board of Directors, and upon not less than 90 days notice, to cease to
participate in the loan. Under the above conditions, such banks' rights and
11
obligations under the loan agreement must be purchased by ConocoPhillips if not
transferred to another bank of ConocoPhillips' choice.
The outstanding balance of Loan 2 at December 31, 2003, was $275 million. Loan 2
prepayments totaled $24 million in 2003. Loan 2 provides for variable interest
rates. The rates were 1.44 percent and 1.69 percent at December 31, 2003 and
2002, respectively.
Loan 2 is guaranteed by ConocoPhillips and is being repaid through contributions
made by the Company; dividends on certain allocated and unallocated shares, and
earnings on the short-term investment of dividends. The Loan 2 carrying amount
approximates fair value.
NOTE 4--INVESTMENTS
VALUATION
Common stock and mutual fund securities are valued at fair value, based on their
quoted market prices. The Stable Value Fund is managed under the ConocoPhillips
Company Defined Contribution Plans Master Trust. The assets in this fund include
guaranteed investment contracts and money market instruments. The guaranteed
investment contracts are valued at contract value and the money market
instruments are valued at amortized cost, both of which approximate fair value.
Participant loans are valued at carrying value, which approximates fair value.
Purchases and sales of investments are recorded on a trade date basis.
Investment securities are exposed to various risks, such as interest rate,
market, and credit risk. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that changes in risks
in the near term could materially affect participant account balances and the
amounts reported in the Statement of Net Assets Available for Benefits.
APPRECIATION
During 2003, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value as
follows:
Thousands
of Dollars
----------
ESOP assets $ 106,006
Leveraged Stock and Loan II Suspense 127,623
Mutual Funds 170,948
--------------------------------------------------------------------------------
$ 404,577
================================================================================
12
NOTE 5--NON-PARTICIPANT-DIRECTED INVESTMENTS
The ConocoPhillips common stock in the Loan 2 Suspense Account of the Stock
Savings Feature is the only non-participant-directed investment in the Plan.
Information about the net assets and the significant components of the changes
in net assets relating to this non-participant-directed investment is as
follows:
Thousands of Dollars
--------------------
At December 31 2003 2002
----------------------
Net Assets:
ConocoPhillips common stock $ 188,712 74,233
================================================================================
Changes in Net Assets during Year Ended December 31, 2003:
Company contributions $ 236
Dividends and interest 12,242
Net appreciation in fair value
of investments 127,623
Interfund transfers (21,055)
Interest expense (4,567)
--------------------------------------------------------------------------------
Net increase 114,479
Beginning of year 74,233
--------------------------------------------------------------------------------
End of year $ 188,712
================================================================================
NOTE 6--ASSET TRANSFERS IN
At the close of business on October 3, 2003, approximately $3.2 billion of
assets from the Thrift Plan for Employees of Conoco, Inc. (Conoco Thrift Plan)
were transferred into the Plan, as a result of the merger discussed in Note 1.
NOTE 7--TAX STATUS
The Internal Revenue Service (IRS) determined on March 23, 2004, that the Plan,
as amended and restated as of October 3, 2003, was qualified under Section
401(a) of the Internal Revenue Code of 1986 and that the Trust was exempt from
federal income tax under Section 501(a).
Subsequent amendments have been adopted, but are not expected to affect the
qualified status of the Plan. The Committee is not aware of any activity that
would affect the qualified status of the Plan.
13
NOTE 8--PARTY-IN-INTEREST TRANSACTIONS
A large portion of the Plan's assets are invested in Company Stock. Because
ConocoPhillips is the parent of the Company, transactions involving Company
Stock qualify as party-in-interest transactions. In addition, certain
investments of the Plan are in shares of mutual funds managed by Vanguard.
Because Vanguard is the Plan's trustee, these transactions also qualify as
party-in-interest transactions. Additional Plan assets are invested in DuPont
Stock. Transactions involving DuPont Stock also qualify as party-in-interest
transactions as certain contracts in the Stable Value Fund were managed by
DuPont Capital Management during 2003. All of these types of transactions were
exempt from the prohibited transaction rules.
NOTE 9--PLAN TERMINATION
In the event of termination of the Plan, participants and beneficiaries of
deceased participants would be vested with respect to, and would receive, within
a reasonable time, any funds in their accounts as of the date of the
termination. Unallocated assets leveraged to Loan 2 would be allocated pursuant
to applicable legal and contractual requirements.
NOTE 10--RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits as of
December 31, 2002, as reflected in these financial statements, to the amounts
reflected in the Plan's Form 5500:
Thousands of Dollars
--------------------
2002
----
Net assets available for benefits as
reported in the financial statements $6,118,299 $ 2,113,737
Add: Amounts allocated to withdrawing participants
at December 31, 2003 16
Less: Amounts allocated to withdrawing
participants at year-end 16 (16)
--------------------------------------------------------------------------------
Net assets available for benefits
as reported in the Form 5500 $6,118,315 $ 2,113,721
================================================================================
NOTE 11- - MASTER TRUSTS
Three investment options of the Plan are held in Master Trusts and administered
under Master Trust agreements entered into on January 1, 2003. These investment
options include the Stable Value Fund, ConocoPhillips Stock Fund, and DuPont
Stock Fund.
STABLE VALUE FUND
The Stable Value Fund option provided by the Plan is also available to
participants in the ConocoPhillips Store Savings Plan. Each plan's beneficial
interest in the commingled Master Trust funds is based on that plan's
proportionate share of the value of the total net assets in the Master Trust.
Investment
14
income for each plan is calculated using this same basis. The Plan's
proportionate share of Master Trust net assets and investment income was
approximately 99.9% as of December 31, 2003.
The Stable Value Fund consisted of guaranteed investment contracts (GICs),
separate account guaranteed investment contracts (SAGICs), Synthetic contracts
(SYNs), common collective trusts (CCTs), and short-term investments and cash.
The crediting interest rates for the Stable Value Fund's investment contracts
ranged from 3.23% to 7.68% as of December 31, 2003. The fund's blended rate of
return for 2003 was 5.33%.
The crediting rates for most SAGIC and SYN contracts were reset quarterly and
were based on the market value of the underlying portfolio of assets backing
these contracts. Inputs used to determine the crediting rate included each
contract's portfolio market value, current yield-to-maturity, duration (i.e.,
the present value of the weighted average life), and market value relative to
contract value. All contracts had a guaranteed rate of 0.0% or higher.
The Master Trust (Stable Value Fund) values as of December 31, 2003 were as
follows:
Thousands
of Dollars
----------
At Contract Value, which approximates fair value:
GICs $ 181,510
SAGICs 183,861
SYNs 1,502,584
CCTs 65,056
At Fair Value:
Short-term investments and cash 15,951
----------
$1,948,962
==========
The contract values of synthetic guaranteed investment contracts were net of
($46,176) at December 31, 2003 related to wrapper contracts, which guarantee the
contract value of the synthetic guaranteed investment contracts for participant
initiated withdrawal events.
Millions
of Dollars
----------
Stable Value Fund
Year Ended December 31, 2003
Contributions 17
Net Appreciation 23
Net Realized Gain 1
Asset Transfers In 2,015
Distributions (42)
Participant Loans (1)
Asset Transfers Out (63)
---------------------------------------------------------------------------------
Net Change 1,950
Beginning of Year -
---------------------------------------------------------------------------------
End of Year 1,950
=================================================================================
CONOCOPHILLIPS STOCK FUND
The ConocoPhillips Stock Fund is comprised of ConocoPhillips stock held in a
Master Trust. This investment option provided by
15
the Plan is also available to participants in the ConocoPhillips Store Savings
Plan and the Retirement Savings Plan of ConocoPhillips Company. Each plan's
beneficial interest in the commingled Master Trust funds is based on that plan's
proportionate share, determined by participant directed balances of the value of
the total net assets in the Master Trust. Investment income for each plan is
calculated using this same basis. The Plan's proportionate share of Master Trust
net assets and investment income was approximately 99.83% as of December 31,
2003.
Millions
of Dollars
----------
ConocoPhillips Stock Fund
Year Ended December 31, 2003
Contributions 138
Investment Income 5
Net Appreciation 265
Net Realized Gain 65
Asset Transfers In 1,185
Distributions (106)
Participant Loans (20)
Asset Transfers Out (173)
------
Net Change 1,359
Beginning of Year --
------
End of Year $1,359
======
DUPONT STOCK FUND
The DuPont Stock Fund is comprised of DuPont stock held in a Master Trust. This
investment option provided by the Plan is also available to participants in the
ConocoPhillips Store Savings Plan. Each plan's beneficial interest in the
commingled Master Trust funds is based on that plan's proportionate share,
determined by participant directed balances of the value of the total net assets
in the Master Trust. Investment income for each plan is calculated using this
same basis. The Plan's proportionate share of Master Trust net assets and
investment income was approximately 99.9% as of December 31, 2003.
Millions
of Dollars
----------
DuPont Stock Fund
Year Ended December 31, 2003
Investment Income 2
Net Appreciation 28
Net Realized Gain 1
Asset Transfers In 247
Distributions (4)
Asset Transfers Out (15)
----
Net Change 259
Beginning of Year --
----
End of Year 259
====
16
SCHEDULE OF ASSETS (HELD AT END OF YEAR) CONOCOPHILLIPS SAVINGS PLAN
Schedule H, Line 4i EIN 73-0400345, PLAN 022
At December 31, 2003
(c) Thousands of Dollars
(a)(b) Description of investment -----------------------
Identity of issue, including maturity date, (d) (e)
borrower, lessor rate of interest, collateral, Historical Current
or similar party par or maturity value Cost Value
------------------ ----------------------------- --------- ---------
CONOCOPHILLIPS* 16,842,415 SHARES,
LEVERAGED STOCK FUND
AND LOAN II SUSPENSE $382,839 $1,104,422
FIDELITY 3,178,189 UNITS, FIDELITY
INVESTMENTS LOW PRICE STOCK ** 111,173
FIDELITY 1,665,179 UNITS, MAGELLAN
INVESTMENTS FUND ** 162,755
PIMCO FUNDS 2,069,043 UNITS, PIMCO
TOTAL RETURN ** 22,159
--------------------------------------------------------------------------------------------------------------------
THE VANGUARD 3,161,198 UNITS, VANGUARD
GROUP* 500 INDEX INV ** 324,560
264,055 UNITS, VANGUARD
ASSET ALLOCATION FUND ** 5,957
999,006 UNITS, VANGUARD
BALANCED IX INV ** 18,252
1,322,762 UNITS, VANGUARD
EXPLORER FUND ** 86,800
1,099,416 UNITS, VANGUARD
EXTEND MKT INDEX INV ** 29,310
320,470 UNITS, VANGUARD
GROWTH INDEX INV ** 7,986
1,798,593 UNITS, VANGUARD
INFLA-PRO SECUR ** 21,961
1,566,918 UNITS, VANGUARD
INTL GROWTH FUND ** 25,274
17
SCHEDULE OF ASSETS (HELD AT END OF YEAR) CONOCOPHILLIPS SAVINGS PLAN
SCHEDULE H, LINE 4I EIN 73-0400345, PLAN 022
At December 31, 2003
(c) Thousands of Dollars
(a)(b) Description of investment -----------------------
Identity of issue, including maturity date, (d) (e)
borrower, lessor rate of interest, collateral, Historical Current
or similar party par or maturity value Cost Value
------------------ ----------------------------- ---------- ---------
THE VANGUARD 1,386,241 UNITS, VANGUARD
GROUP* INTL VALUE FUND ** 36,375
639,810 UNITS, VANGUARD
LIFEST CONSERV GROWTH ** 9,303
850,411 UNITS, VANGUARD
LIFEST GROWTH FUND ** 15,443
404,094 UNITS, VANGUARD
LIFEST INCOME FUND ** 5,334
4,998,095 UNITS, VANGUARD
LIFEST MODERATE GROWTH ** 83,018
1,486,828 UNITS, VANGUARD
LT TREASURY INV ** 16,905
1,488,822 UNITS, VANGUARD
MD-CAP INDEX FUND ** 19,548
1,163,886 UNITS, VANGUARD
MORGAN GROWTH INV ** 17,307
161,675,695 UNITS, VANGUARD
PRIME MONEY MKT ** 161,676
3,669,278 UNITS, VANGUARD
PRIMECAP FUND ** 194,619
1,535,236 UNITS, VANGUARD
SM-CAP GROWTH INDEX ** 20,081
1,346,205 UNITS, VANGUARD
SM-CAP VALUE INDEX ** 15,468
7,306,880 UNITS, VANGUARD
TOTAL BOND MKT INDEX ** 75,334
1,226,272 UNITS, VANGUARD
TOTAL INTL STOCK IDX ** 13,048
18
SCHEDULE OF ASSETS (HELD AT END OF YEAR) CONOCOPHILLIPS SAVINGS PLAN
SCHEDULE H, LINE 4I EIN 73-0400345, PLAN 022
At December 31, 2003
(c) Thousands of Dollars
(a)(b) Description of investment ----------------------
Identity of issue, including maturity date, (d) (e)
borrower, lessor rate of interest, collateral, Historical Current
or similar party par or maturity value Cost Value
------------------ ----------------------------- ---------- ---------
THE VANGUARD 683,053 UNITS, VANGUARD
GROUP* TOTAL STOCK MKT INV ** 17,753
283,786 UNITS, VANGUARD
VALUE INDEX INV ** 5,378
2,161,617 UNITS, VANGUARD
WELLINGTON INV ** 62,276
2,652,069 UNITS, VANGUARD
WINDSOR II FUND INV ** 70,253
1,302 UNITS, VANGUARD
RETIRE SAVINGS TRUST ** 1
-------------------------------------------------------------------------------
PARTICIPANTS* LOANS TO PLAN PARTICIPANTS,
AT 4.5% TO 9.5% - 70,976
-------------------------------------------------------------------------------
TRAVELERS INSURANCE GROUP ANNUITY CONTRACT GR-1966A,
DEFERRED SETTLEMENT ACCOUNT ** 13
-------------------------------------------------------------------------------
$ 2,830,718
================================================================================
* Party-in-interest
** Historical cost information is not required for participant-directed
investments.
19
SCHEDULE OF REPORTABLE TRANSACTIONS CONOCOPHILLIPS SAVINGS PLAN
SCHEDULE H, LINE 4J EIN 73-0400345, PLAN 022
SERIES OF TRANSACTIONS IN EXCESS
OF 5 PERCENT OF NET ASSETS
(CATEGORY III)
Year Ended December 31, 2003
Thousands of Dollars
-----------------------------------------------------------------------
(h) Current
value of
(a, b) Identity of asset on
party involved and (c) Value of (d) Value (g) Historical transaction (i) Net gain
description of asset purchases of sales cost of asset date or (loss)
-------------------- --------- -------- ------------- ---- ---------
Fidelity
Fidelity Low $ 112,764 112,764
Price Stock $ 9,974 9,665 9,974 309
Fidelity $ 166,873 166,873
Magellan $ 14,344 14,062 14,344 282
The Vanguard Group
Vanguard 500 $ 147,797 147,797
Index Inv $ 52,755 53,048 52,755 (293)
The Vanguard Group
Vanguard Prime $ 149,084 149,084
Money Mkt $ 125,349 125,349 125,349 -
The Vanguard Group
Vanguard $ 87,674 87,674
PRIMECAP Fund $ 21,465 20,128 21,465 1,337
20
SCHEDULE OF REPORTABLE TRANSACTIONS CONOCOPHILLIPS SAVINGS PLAN
SCHEDULE H, LINE 4J EIN 73-0400345, PLAN 022
SERIES OF TRANSACTIONS IN EXCESS
OF 5 PERCENT OF NET ASSETS
(CATEGORY III)
Year Ended December 31, 2003
Thousands of Dollars
--------------------------------------------------------------------------
(h) Current
value of
(a, b) Identity of asset on
party involved and (c) Value of (d) Value (g) Historical transaction (i) Net gain
description of asset purchases of sales cost of asset date or (loss)
-------------------- --------- -------- ------------- ---- ---------
The Vanguard Group
Stable Value $ 2,030,739 2,030,739
Fund $ 106,721 106,189 106,721 532
The Vanguard Group
Company Stock $ 516,235 467,532
Fund $ 298,012 232,653 298,012 65,359
The Vanguard Group
DuPont Stock $ 247,529 209,703
Fund $ 17,798 15,752 17,798 2,046
The Vanguard Group
Leveraged Stock $ 32,291 32,291
Fund $ 128,938 48,771 128,938 80,167
---------------------------------------------------------------------------------------------------------------------
Columns (e) and (f) are not applicable.
There were no category (i), (ii) and (iv) reportable transactions during 2003.
21
EXHIBIT INDEX CONOCOPHILLIPS SAVINGS PLAN
EIN 73-0400345, PLAN 022
Exhibit
Number Description
------ -----------
23 Consent of Independent Registered Public Accounting Firm
22