Exhibit 99(c)
FORM 11-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2001
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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 33-28669
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RETIREMENT SAVINGS PLAN OF
PHILLIPS PETROLEUM COMPANY
(Full title of the Plan)
PHILLIPS PETROLEUM COMPANY
(Name of issuer of securities)
Bartlesville, Oklahoma 74004
(Address of principal executive office) (Zip code)
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
--------------------
Financial statements of the Retirement Savings Plan of Phillips
Petroleum Company, filed as a part of this annual report, are
listed in the accompanying index.
(b) Exhibits
--------
Exhibit 1 Consent of Ernst & Young LLP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Retirement Savings Plan Committee has duly caused this
annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
RETIREMENT SAVINGS PLAN OF
PHILLIPS PETROLEUM COMPANY
/s/ Rand C. Berney
----------------------------------
Rand C. Berney
Member
Retirement Savings Plan Committee
June 19, 2002
1
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Index To Financial Statements Retirement Savings Plan Of
And Schedules Phillips Petroleum Company
Page
Report of Independent Auditors ............................. 3
Financial Statements
Statement of Net Assets Available for Benefits
at December 31, 2001 ................................... 4
Statement of Net Assets Available for Benefits
at December 31, 2000 ................................... 5
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2001 ................... 6
Notes to Financial Statements ............................ 7
Supplemental Schedules
Schedule of Assets (Held at End of Year) as of
December 31, 2001, Schedule H, Line 4i ................. 12
Schedule of Reportable Transactions for the Year Ended
December 31, 2001, Schedule H, Line 4j ................. 13
2
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Report Of Independent Auditors
The Retirement Savings Plan Committee
Retirement Savings Plan of Phillips
Petroleum Company
We have audited the accompanying statements of net assets
available for benefits of the Retirement Savings Plan of Phillips
Petroleum Company (Plan) as of December 31, 2001 and 2000, and
the related statement of changes in net assets available for
benefits for the year ended December 31, 2001. These financial
statements are the responsibility of the Retirement 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 auditing standards
generally accepted in the 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, 2001 and 2000,
and the changes in its net assets available for benefits for the
year ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
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, 2001, 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
Tulsa, Oklahoma
June 19, 2002
3
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Statement Of Net Assets Retirement Savings Plan Of
Available For Benefits Phillips Petroleum Company
At December 31, 2001
Non-
Participant
Participant Directed Directed
-------------------- -----------
Fixed Fixed
Investment Stock Investment
Total Fund Fund Fund
-------------------------------- -----------
Assets
Investments
Insurance contract $7,671,613 818,060 - 6,853,553
Common stock 665,030 - 665,030 -
Money market fund 3,088 - 3,088 -
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Total Assets 8,339,731 818,060 668,118 6,853,553
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Net Assets Available
for Benefits $8,339,731 818,060 668,118 6,853,553
=====================================================================
See Notes to Financial Statements.
4
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Statement Of Net Assets Retirement Savings Plan Of
Available For Benefits Phillips Petroleum Company
At December 31, 2000
Non-
Participant
Participant Directed Directed
-------------------- -----------
Fixed Fixed
Investment Stock Investment
Total Fund Fund Fund
--------------------------------- -----------
Assets
Investments
Insurance contract $10,855,775 1,118,878 - 9,736,897
Common stock 629,208 - 629,208 -
Money market fund 1,746 - 1,746 -
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11,486,729 1,118,878 630,954 9,736,897
Employer Contributions
Receivable 34,918 - - 34,918
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Total Assets 11,521,647 1,118,878 630,954 9,771,815
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Net Assets Available
for Benefits $11,521,647 1,118,878 630,954 9,771,815
=====================================================================
See Notes to Financial Statements.
5
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Statement Of Changes In Net Retirement Savings Plan Of
Assets Available For Benefits Phillips Petroleum Company
Year Ended December 31, 2001
Non-
Participant
Participant Directed Directed
-------------------- -----------
Fixed Fixed
Investment Stock Investment
Total Fund Fund Fund
--------------------------------- -----------
Additions
Investment Income
Interest $ 520,524 53,030 154 467,340
Dividends 15,405 - 15,405 -
Net appreciation in
fair value of
common stock 37,028 - 37,028 -
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Total 572,957 53,030 52,587 467,340
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Deductions
Withdrawals and
Distributions 3,754,873 353,848 15,423 3,385,602
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Net Change (3,181,916) (300,818) 37,164 (2,918,262)
Net Assets Available
for Benefits
Beginning of Year 11,521,647 1,118,878 630,954 9,771,815
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End of Year $ 8,339,731 818,060 668,118 6,853,553
=====================================================================
See Notes to Financial Statements.
6
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Notes To Financial Statements Retirement Savings Plan Of
Phillips Petroleum Company
Note 1--Plan Description
The following description of the Retirement Savings Plan of
Phillips Petroleum Company (Plan) is subject to and qualified by
the more complete information appearing in the Plan document.
The Plan is a defined contribution plan sponsored by Phillips
Petroleum Company (Phillips or the Company) for any domestic
subsidiary or division that the Company approves for
participation in the Plan and that has adopted and become a party
to the Plan for the current participation of their active
employees (Participating Employer). For the year ending
December 31, 2000, Phillips Driscopipe (with respect to hourly
employees only), was the only Participating Employer. Effective
January 1, 2001, Phillips Driscopipe ceased to be a Participating
Employer, following its contribution to Chevron Phillips Chemical
Company on July 1, 2000. The Plan currently has no Participating
Employers.
Other subsidiaries or divisions having present or former
employees holding interests in the Plan are Catalyst Resources,
Inc., Drilling Specialties Company, Phillips Coal Company, and
Phillips Uranium Corporation.
Generally, an employee of a Participating Employer becomes a
participant after completing a six-month period of service of
500 or more hours. Participation in the Plan by each eligible
employee is mandatory. Each month the Participating Employer or
the Company contributes an amount equal to 5 percent of each
participant's regular monthly earnings. A participant can make
after-tax deposits, in whole percentages, ranging from 1 to
10 percent of his regular monthly earnings. Participants can
elect to change their deposit rates once each six months.
Effective January 1, 1996, the hourly employees of Phillips
Driscopipe were no longer permitted to make deposits under this
Plan. However, the Participating Employer or the Company
continued to make contributions to this Plan on their behalf
through December 31, 2000.
Plan assets consist of the Stock Fund, the Fixed Investment Fund
and the Temporary Investment Fund. Investments for each fund
are: Stock Fund (common stock of the Company and the Vanguard
Prime Money Market Fund); Fixed Investment Fund (an insurance
contract with Travelers Insurance Company (Travelers) under which
Travelers guarantees repayment of the principal paid to it and a
minimum effective rate of interest thereon as determined by
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Travelers annually); and Temporary Investment Fund (specified
short-term securities--currently, this Fund is inactive). The
Trustee for all Plan assets is Vanguard Fiduciary Trust Company
(Vanguard). The interests of participants in each fund are
represented by units allocated to them.
If a Participating Employer allowed participant deposits into the
Plan, those deposits would be placed first in the Temporary
Investment Fund and remain there until the valuation date on or
about the 20th day of the following month. Deposits and earnings
thereon would be paid into the Stock Fund or the Fixed Investment
Fund as directed by the participant. No investment directions
may be made with respect to Participating Employer contributions,
all of which are invested only in the Fixed Investment Fund. The
Plan allows limited transfers between the Stock Fund and the
Fixed Investment Fund.
A participant's interest in his own deposits is vested at all
times, and his interest in Participating Employer contributions
becomes fully vested on the earliest of the following dates:
(a) upon attainment of age 65 or upon normal retirement; (b) upon
completing five years of vesting service; (c) upon death;
(d) upon becoming totally and permanently disabled; (e) upon
being laid off for lack of work; (f) upon termination or partial
termination of the Plan or discontinuance of Participating
Employer contributions; or (g) upon certain other events.
Partial vesting in Participating Employer contributions takes
place in one year increments, with complete vesting after five
years of vesting service. A participant who has made deposits
may withdraw any amount attributable to those deposits.
Withdrawals of deposits may be made only once each six months.
Suspensions of employee deposits for three and six months apply
for partial and complete withdrawals, respectively.
A participant's interest in the contributions of a Participating
Employer becomes available for distribution upon specified
events, including severance of employment or retirement.
Termination of employment will result in forfeiture of
Participating Employer contributions if a participant's interest
attributable to those Participating Employer contributions is not
vested. Forfeitures are used to reduce employer contributions.
A participant who retires generally may postpone distribution
until no later than the first valuation date in October of the
year age 69 is attained.
Distributions from the Fixed Investment Fund are made in cash
while those from the Stock Fund are in whole shares of the
Company's common stock, plus cash for fractional shares, unless
the participant directs that the distribution be wholly or
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partially in cash. Distribution in the form of an annuity is
also available, as set forth in the Plan.
In the event of termination of the Plan, participants and
beneficiaries of deceased participants will be vested with
respect to, and will receive, within a reasonable time, any funds
in their accounts as of the date of the termination.
The Plan is administered by the Retirement Savings Plan
Committee, a Plan Financial Administrator and a Plan Benefits
Administrator. The members of the Committee are appointed by the
Board of Directors of the Company. The Committee has power to
interpret the Plan and the Plan Benefits Administrator has the
authority to determine eligibility for benefits. The Plan
Financial Administrator has the responsibility to manage and
control the assets of the Plan in accordance with the terms of
the Plan. Brokerage fees, commissions, stock transfer taxes and
other charges and expenses incurred in connection with the
purchase or sale of securities, if any, are paid by the Plan, and
would be reflected as administrative expenses on the statement of
changes in net assets available for benefits. The cost of
administering the Plan is paid by the Company.
Note 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
accounting principles generally accepted in the United States
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 and
assumptions.
Note 3--Investments
Common stock of the Company is valued at the closing quoted
market price on the valuation date. The value of the insurance
contract is recorded at contract value, which approximates fair
value, and represents contributions, plus interest credited, less
distributions. The money market fund is valued at the current
redemption price determined by the Trustee.
9
Note 4--Tax Status
The Internal Revenue Service (IRS) determined on December 26,
1995, that the Plan is qualified under Section 401(a) of the
Internal Revenue Code of 1986 and the Trust is 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.
Note 5--Insurance Contract
The average yield and crediting interest rate of the Fixed
Investment Fund insurance contract was 6.20 percent in 2001 and
6.15 percent in 2000. The crediting interest rate, which is
determined by Travelers, is reset annually, with the new rate
going into effect on January 1 of each year. There is no
contractually guaranteed minimum interest rate and the contract
with Travelers does not provide a basis for determining the
crediting interest rate. The crediting interest rate for 2002
will be 5.60 percent.
Note 6--Distributions and Withdrawals
There was a substantial increase in distributions and withdrawals
in 2001, compared with historical averages. The increase was due
primarily to:
o Effective January 1, 2001, employees of certain former
Participating Employers (primarily Driscopipe) became Chevron
Phillips Chemical Company (CPChem) employees and were allowed a
one-time opportunity to transfer their account balances from the
Plan to a CPChem savings plan during the first quarter of 2001.
o Phillips Petroleum Company sold its coal and lignite
operations during the second-half of 2000, which led to the
termination of many of those employees and thus made them
eligible to withdraw their account balances during 2001.
Note 7--Party-In-Interest Transactions
The majority of the Plan's assets are invested in an insurance
contract with Travelers, qualifying transactions between the Plan
and Travelers as party-in-interest transactions. Certain of the
Plan's assets are invested in Phillips stock. As Phillips is the
Plan's sponsor, these transactions qualify as party-in-interest
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transactions. In addition, certain investments of the Plan are
in shares of a mutual fund managed by Vanguard. As Vanguard is
the Plan's trustee, these transactions also qualify as party-in-
interest transactions.
Note 8--Subsequent Event
On March 12, 2002, stockholders of Phillips and Conoco Inc.
approved a merger of the two companies to form ConocoPhillips.
The merger is conditioned upon, among other things, customary
regulatory clearances and is expected to close in the second half
of 2002. Under the terms of the merger agreement, each
outstanding Phillips share, including all those held by the
Retirement Savings Plan, will automatically be converted into a
share of the new ConocoPhillips common stock.
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Schedule of Assets (Held at End of Year) Retirement Savings Plan of
Schedule H, Line 4i Phillips Petroleum Company
EIN 73-0400345, Plan 010
At December 31, 2001
(a, b) Identity of (c) Description of investment
issue, borrower, including maturity date,
lessor, or similar rate of interest, collateral, (d) Historical (e) Current
party par or maturity value Cost Value
- -------------------- ------------------------------ -------------- -----------
The Travelers Group Annuity Contract
Insurance Company* GR-10462, deposit
administration fund $7,671,613 7,671,613
Phillips Petroleum 11,036 shares of common stock,
Company* $1.25 par value 219,108 665,030
Vanguard Fiduciary 3,088 units of participation
Trust Company* in the Vanguard Prime Money
Market Fund, $1.00 par value 3,088 3,088
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$7,893,809 8,339,731
====================================================================================
*Party-in-interest
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Schedule of Reportable Transactions Retirement Savings Plan of
Schedule H, Line 4j Phillips Petroleum Company
Series of Transactions in Excess EIN 73-0400345, Plan 010
of 5 Percent of Net Assets
(Category iii)
Year Ended December 31, 2001
(a, b) Identity of
party involved and (c) Value of (d) Value (i) Net gain
description of asset purchases* of sales* or (loss)
- ----------------------- ------------ --------- ------------
The Travelers Insurance
Company** $555,289 3,739,451 -
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*This is also the cost of purchases and current value of sales
at time of transaction.
**Party-in-interest
Columns (e) and (f) are not applicable.
There were no category (i), (ii) or (iv) reportable transactions
during 2001.
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Exhibit 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8, File No. 33-28669) pertaining to the
Retirement Savings Plan of Phillips Petroleum Company and in the
related Prospectus of our report dated June 19, 2002, with
respect to the financial statements and schedules of the
Retirement Savings Plan of Phillips Petroleum Company included in
this Annual Report (Form 11-K) for the year ended December 31,
2001.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Tulsa, Oklahoma
June 19, 2002