The following description of the Tosco Corporation Capital Accumulation Plan (the “Plan”) provides only general information. Participants should refer to the Plan Documents for a more complete description of the Plan’s provisions.
Also after the completion of one year of continuous service, the Sponsor makes additional non-matching contributions of 5% (the “Pension Contribution”) and 2% (the “Profit Sharing Contribution”) of eligible compensation (up to $160,000 in 1999) to certain participants. The Pension Contribution is made to certain eligible employees who do not participate in the Tosco Pension Plan, a defined benefit pension plan. The Profit Sharing Contribution is made to certain eligible employees, as defined by the Plan Agreement. The Pension Contribution and Profit Sharing Contribution are available for withdrawal when the participant retires or ceases employment with the Sponsor. Effective January 1, 1998, the Plan was amended so that the Profit Sharing Contribution will not be offered to employees who were not receiving the contribution as of December 31, 1997. Participants receiving the Profit Sharing Contribution as of December 31, 1997 will continue to receive the contribution.
Participant investment choice dictates the allocation of the Sponsor’s contributions. Earnings on investments held by the Plan in the name of a participant are automatically invested in the respective fund from which the earnings were derived.
Vesting
Employees are immediately vested in their individual and in the Sponsor’s contributions, including earnings thereon.
Loans to Participants
The Plan, with certain limitations, may make loans to participants with an interest rate approximately equal to the prime interest rate plus 1% on the origination date. A loan from the Plan will be made for up to the lesser of 100% of the participant’s pre-tax contributions or 50% of the participant’s total account balance, with a maximum of $50,000 and a minimum of $1,000. The maturity on these loans is not to exceed five years. The participants are required to pay all loan origination and administrative fees. All interest payments made under the terms of the loan will be credited to the participant’s account and not considered general earnings of the Plan. Participants’ loans are repaid through payroll deductions and are collateralized by the participants’ vested account balances. Loans outstanding are included in the loan fund in the accompanying financial statements.
Payment of Benefits
Benefits of the Plan are payable upon reaching normal retirement, early retirement, termination, or in the event of death or disability. Benefits may be provided through the purchase of a 50% joint and survivor annuity (in the case of a married participant) or a life annuity (in the case of a single participant). Participants may also elect to receive benefits in a lump sum, another form of annuity or any other form approved by the Administrative Committee of the Plan. Married participants may not elect such other forms without the consent of their spouse. Any whole shares of stock in a participant’s stock fund account may be distributed in the form of shares of stock. All other amounts, including fractional shares of stock, will be distributed to the participant in cash.
Administration Fees
All Plan investment management fees are paid from the investment earnings of the individual investment funds and all other administration fees are paid by the Sponsor and are not reflected in the Plan’s financial statements.
2. Significant Accounting Policies
Basis of Presentation
The Plan's financial statements are presented on the accrual basis of accounting.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported changes in net assets available for benefits and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Investments
The Plan’s investments are stated at fair value. Common stock and mutual fund securities are valued at their quoted market price. Common and collective trust fund holdings are valued at contract value plus accrued income that approximates fair value. Participant loans are valued at cost, which approximates fair value. Purchases and sales of investments are recorded on a trade date basis.
The Plan’s statement of changes in net assets includes the net appreciation (depreciation) in the fair value of its investments, which consists of the realized gains or losses and the unrealized appreciation (depreciation) of those investments. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
3. Investments
Participants may designate, in one percent increments, the portion of his or her contribution to be placed in various funds. Loan repayments are allocated to these funds based on the participant’s current contribution designation. The characteristics of the different funds are as follows:
Primecap Fund
The Primecap Fund invests principally in a portfolio of common stocks of quality companies with perceived undervalued assets, the potential for rapid earnings growth, or both. Dividend income is incidental. Under normal circumstances, at least 80% of the assets of the Primecap Fund will be in such common stocks, or in securities convertible into common stocks.
Wellington Fund
The Wellington Fund invests in a portfolio of high-quality stocks and bonds normally in a ratio of 65% common stocks to 35% fixed income securities. Common stocks are selected principally on the basis of current dividend yield and reasonable prospects for earnings and dividend growth. The Wellington Fund’s securities (corporate and government bonds and money market instruments) emphasize high quality consistent with attractive income yields.
Money Market Reserves Fund
The Money Market Reserves Fund invests mainly in securities issued by the U.S. Treasury and agencies of the U.S. Government which mature in one year or less. The Federal Portfolio is designed to maintain a constant $1.00 per share value.
Index 500 Portfolio Fund
The Index 500 Portfolio Fund invests in a portfolio of common stocks and attempts to provide investment results that correspond to the price and yield performance of publicly-traded stocks in the aggregate (as represented by the Standard & Poor’s Composite Stock Price Index).
Long-Term U.S. Treasury Bond Fund
The Long-Term U.S. Treasury Bond Fund invests primarily in long-term U.S. Treasury Bonds with an objective to provide a high level of current income. Although the fund has negligible credit risk, the market value of the fund will fluctuate due to changes in interest rates prevailing in the economy.
International Growth Fund
The International Growth Fund invests in common stocks of companies based outside of the United States that are considered to have above-average growth and capital appreciation potential.
Collective Income Fund
The Collective Income Fund represents a proportional share of the American Express Trust Income Fund III (the “Fund”) which invests in a diversified portfolio of fixed income securities, investment contracts, and money market instruments. The combination of the interest earned on investments, less American Express’ costs of administering the fund, determines the fund’s rate of return.
Growth and Income Fund
The Growth and Income Fund invests primarily in equity securities, including common stock and securities convertible to common stock, of financially strong companies that offer high growth rates at attractive valuations. The portfolio may also include dividend-paying equity securities, fixed income securities, and money market instruments.
Tosco Stock Fund
The Tosco Stock Fund invests primarily in Tosco Corporation Common Stock. A small cash position in Vanguard money market reserves is maintained to provide liquidity necessary for periodic transactions (distributions and fund exchanges).
Phillips Petroleum Stock Fund
The Phillips Petroleum Stock Fund is a closed fund with investments in the common stock of Phillips Petroleum Company. Dividends earned are automatically reinvested in stock.
Loan Fund
The Loan Fund represents amounts borrowed by participants against their individual accounts. All loans are collateralized by the participants' account balance.
As of December 31, 1999 and 1998 the Plan investments were as follows:
Number of Fair Value
December 31, 1999 Participants per Unit Fair Value
----------------- ------------- ----------- -----------
Vanguard mutual funds:
Primecap Fund (a) 3,852 $ 62.07 $ 117,795,213
Wellington Fund (a) 2,753 27.96 50,655,152
Money Market Reserves Fund (a) 1,281 1.00 20,547,988
Index 500 Portfolio Fund (a) 3,722 135.33 77,869,998
Long-term U.S. Treasury Bond Fund 870 9.67 6,675,881
International Growth Fund 1,330 22.49 11,122,539
Collective Income Fund (a) 855 14.48 43,256,949
Growth and Income Fund 796 14.60 4,886,151
Tosco Stock Fund (a) 3,777 32.47 50,687,165
Phillips Petroleum Stock Fund 22 54.74 2,451,771
Loan Fund 1,145 6,876,226
--------------
$ 392,825,033
==============
Number of Fair Value
December 31, 1998 Participants per Unit Fair Value
----------------- ------------ ----------- -----------
Vanguard mutual funds:
Primecap Fund (b) 3,560 $ 47.66 $ 74,120,857
Wellington Fund (b) 2,873 29.35 51,190,326
Money Market Reserves Fund 1,300 1.00 15,105,675
Index 500 Portfolio Fund (b) 3,438 113.95 56,540,086
Long-term U.S. Treasury Bond Fund 915 11.36 8,149,034
International Growth Fund 1,336 18.77 7,460,945
Collective Income Fund (b) 899 13.66 42,638,446
Growth and Income Fund 765 17.88 3,943,062
Tosco Stock Fund (b) 3,935 30.83 43,415,945
Phillips Petroleum Stock Fund 25 49.65 2,717,197
Loan Fund 956 5,065,650
--------------
$ 310,347,223
==============
| | | (a) | This investment represents more than 5% of the Plan’s net assets available for benefits as of December 31, 1999. |
| | | (b) | This investment represents more than 5% of the Plan’s net assets available for benefits as of December 31, 1998. |
4. Federal Income Tax Status
The Internal Revenue Service has determined and informed the Sponsor by a letter dated September 21, 1995, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (the “Code”). The Plan has been amended since receiving the determination letter. However, management believes that the Plan, as amended, is in compliance with the Code, therefore no provision for income taxes has been included in the Plan’s financial statements.
5. Plan Termination
Although it has not expressed any intent to do so, the Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. Upon termination, the Plan’s assets would be distributed to the participants, as soon as possible and legally permitted, on the basis of their account balances existing on the date of termination as adjusted for investment gains and losses.
6. Party-In-Interest Transactions
Certain investments of the Plan are in shares of mutual funds managed by Vanguard. As Vanguard is the Plan’s administrator, these transactions qualify as Party-In-Interest transactions. In addition, certain Plan investments are in the Sponsor’s Common Stock. These transactions also qualify as Party-In-Interest transactions.
During the year ended December 31, 1999, the Sponsor paid administrative expenses totaling $171,401 on behalf of the Plan.
8. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits as of December 31, 1999 and 1998 as reflected in these financial statements to the amounts reflected in the Plan’s Form 5500:
1999 1998
--------------- -------------
Net assets available for benefits as reported in the financial statements $ 392,828,912 $ 310,374,748
Amounts allocated to withdrawing participants (2,089,460) (2,825,297)
--------------- -------------
Net assets available for benefits as reported in the Form 5500 $ 390,739,452 $ 307,549,451
=============== =============
The following is a reconciliation of benefits paid to participants for the year ended December 31, 1999 as reflected in
these financial statements to the amount reflected in the Plan's Form 5500:
Benefits paid to participants as reported in the financial statements $ 24,155,010
Amount allocated to withdrawing participants at December 31, 1999 2,089,460
Amount allocated to withdrawing participants at December 31, 1998 (2,825,297)
---------------
Benefits paid to participants as reported in the Form 5500 $ 23,419,173
===============
TOSCO CORPORATION CAPITAL ACCUMULATION PLAN
ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1999
Current
Identity of Issue, Borrower, Lessor or Similar Party Description of Investment Cost Value
- ---------------------------------------------------- ------------------------- ----------- ------------
(a) Vanguard / Primecap Fund 1,897,780 shares $73,877,007 $117,795,213
(a) Vanguard / Wellington Fund 1,811,701 shares 47,507,781 50,655,152
(a) Vanguard Money Market Reserves - Federal Portfolio 20,547,988 shares 20,547,988 20,547,988
(a) Vanguard Index Trust - 500 Portfolio 575,408 shares 50,354,651 77,869,998
(a) Vanguard Fixed Income Fund - LT U.S. Treasury Portfolio 690,371 shares 7,187,218 6,675,881
(a) Vanguard International Growth Portfolio 494,555 shares 8,969,949 11,122,539
American Express Trust Income Fund III 2,987,358 units 38,718,381 43,256,949
Warburg Pincus Growth & Income Fund 334,668 shares 5,737,545 4,886,151
(a) Tosco Stock Fund (b) 1,561,046 units 44,047,620 50,687,165
Phillips Petroleum Stock Fund (c) 44,789 units 876,451 2,451,771
Loans to Participants Interest rates from 7% to 10%
and maturities through 2004 6,876,226
-------------
$392,825,033
(a)
(b)
(c) | | Investment qualifies as a party-in-interest for the Plan.
Consists primarily of Tosco Corporation common stock.
Consists primarily of Phillips Petroleum Company common stock. |
TOSCO CORPORATION CAPITAL ACCUMULATION PLAN
ITEM 27(d) - SCHEDULE OF REPORTABLE (5%) TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
PUCHASES
Number of Purchase
Identity of Party Involved Description of Asset Transactions Price
- ----------------------------- ------------------------------------------------- ------------- -----------
The Vanguard Group Vanguard / Primecap Fund 243 $38,100,410
The Vanguard Group Vanguard Money Market Reserves - Federal Portfolio 236 18,590,765
The Vanguard Group Vanguard Index Trust - 500 Portfolio 234 28,667,110
Tosco Corporation Tosco Corporation Common Stock 210 19,967,923
SALES
Number of Selling Cost of Net Gain
Identity of Party Involved Description of Asset Transactions Price Asset or (Loss)
- ---------------------------- ---------------------------------- ------------ ----------- ----------- ---------
The Vanguard Group Vanguard / Primecap Fund 242 $18,545,385 $14,406,973 $4,138,412
The Vanguard Group Vanguard Index Trust - 500 Portfolio 243 19,072,534 16,125,837 2,946,697
Tosco Corporation Tosco Corporation Common Stock 247 15,751,345 15,247,384 503,961
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-54153) of Tosco Corporation of our report dated June 26, 2000 relating to the financial statements and financial statement schedules of the Tosco Corporation Capital Accumulation Plan as of December 31, 1999 and 1998, and for the year ended December 31, 1999, which appears in this Form 11-K.
PricewaterhouseCoopers LLP
Phoenix, Arizona
June 28, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TOSCO CORPORATION
(Registrant)
TOSCO CORPORATION
CAPITAL ACCUMULATION PLAN |
Date: June 28, 2000 | By: /s/ WANDA WILLIAMS
(Wanda Williams)
Vice President - Human Resources |
| By: /s/ RANDALL S. SCHULTZ
(Randall S. Schultz)
Plan Administrator |
