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 fiscal year ended DECEMBER 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to __________
Commission file number 001-32395
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 19, 2006
1
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INDEX TO FINANCIAL STATEMENTS AND SCHEDULE CONOCOPHILLIPS SAVINGS PLAN
Page
----
Report of Independent Registered Public Accounting Firm.................. 3
Financial Statements
Statements of Net Assets Available for Benefits at December 31, 2005
and 2004 .......................................................... 4
Statement of Changes in Net Assets Available for Benefits for the Year
Ended December 31, 2005 ........................................... 5
Notes to Financial Statements ........................................ 6
Supplemental Schedule
Schedule of Assets (Held at End of Year) as of December 31, 2005,
Schedule H, Line 4i ............................................... 20
Exhibit Index ........................................................... 23
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2
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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 ConocoPhillips Savings Plan as of December 31, 2005 and 2004, and the related
statement of changes in net assets available for benefits for the year ended
December 31, 2005. These financial statements are the responsibility of the
Plan's management. 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. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
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, 2005 and 2004, and the changes in its net assets available for
benefits for the year ended December 31, 2005, 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 schedule of assets
(held at end of year) as of December 31, 2005, is presented for purposes of
additional analysis and is not a required part of the financial statements but
is 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. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is 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, 2006
3
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STATEMENTS OF NET ASSETS CONOCOPHILLIPS SAVINGS PLAN
AVAILABLE FOR BENEFITS
Thousands of Dollars
----------------------
At December 31 2005 2004
---------- ---------
ASSETS
Investments
Plan interest in Master Trusts
Stable Value Fund $1,977,059 1,998,674
ConocoPhillips Stock Fund 2,377,061 1,660,153
DuPont Stock Fund 146,941 217,803
Leveraged Stock Fund 929,748 721,791
Loan 2 Suspense 689,052 566,101
Insurance contract 8 10
Fidelity Low-Priced Stock Fund 131,373 146,214
Fidelity Magellan Fund 121,637 139,941
PIMCO Total Return Fund - Administrative Class 26,285 22,435
Vanguard Funds:
500 Index Fund 335,052 350,151
Asset Allocation Fund 10,233 10,406
Balanced Index Fund 28,146 25,298
Explorer Fund 90,817 90,776
Extended Market Index Fund 43,482 38,559
Growth Index Fund 15,508 14,354
Inflation-Protected Securities Fund 41,636 33,741
International Growth Fund 47,460 37,425
International Value Fund 82,361 51,758
LifeStrategy Conservative Growth Fund 15,938 14,066
LifeStrategy Growth Fund 30,149 26,241
LifeStrategy Income Fund 12,561 10,895
LifeStrategy Moderate Growth Fund 93,180 90,611
Long-Term Treasury Fund 39,788 19,086
Mid-Cap Index Fund 84,458 43,617
Morgan Growth Fund 23,039 20,938
Prime Money Market Fund 148,978 150,720
PRIMECAP Fund 227,896 240,918
Small-Cap Growth Index Fund 34,873 32,854
Small-Cap Value Index Fund 59,117 49,876
Total Bond Market Index Fund 81,494 77,159
Total International Stock Index Fund 40,585 25,688
Total Stock Market Index Fund 29,278 25,986
Value Index Fund 22,866 16,974
Wellington Fund 103,794 84,233
Windsor II Fund 130,000 106,804
Vanguard Prime Money Market - Loan 2 83 73
Loans to Plan participants 76,319 72,466
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Total Investments 8,348,255 7,234,795
Active Employee Deposits Receivable 442 860
Company Contributions Receivable 61 89
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Total Assets 8,348,758 7,235,744
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LIABILITIES
Securities Acquisition Loans 229,050 252,600
Interest Payable 797 498
--------------------------------------------------------------------------------
Total Liabilities 229,847 253,098
--------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $8,118,911 6,982,646
================================================================================
See Notes to Financial Statements.
4
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STATEMENT OF CHANGES IN NET CONOCOPHILLIPS SAVINGS PLAN
ASSETS AVAILABLE FOR BENEFITS
Thousands
Year Ended December 31, 2005 of Dollars
----------
ADDITIONS
Company Contributions
Company matching - cash $ 17,426
Basic allocation - stock 130,211
Active Employee Deposits 161,160
Rollovers 49,062
--------------------------------------------------------------------------------
357,859
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Investment Income (Loss)
Dividends and interest 106,753
Interest, participant loans 3,578
Plan interest in Master Trusts
Stable Value Fund 92,672
ConocoPhillips Stock Fund 626,579
DuPont Stock Fund (20,392)
Net appreciation in fair value of investments 480,197
--------------------------------------------------------------------------------
1,289,387
--------------------------------------------------------------------------------
Other Additions 1,563
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Total 1,648,809
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DEDUCTIONS
Distributions to participants or their beneficiaries 502,058
Interest expense 9,072
Administrative expenses 1,379
Other deductions 35
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Total 512,544
--------------------------------------------------------------------------------
NET INCREASE 1,136,265
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of Year 6,982,646
--------------------------------------------------------------------------------
End of Year $8,118,911
================================================================================
See Notes to Financial Statements.
5
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NOTES TO FINANCIAL STATEMENTS CONOCOPHILLIPS SAVINGS PLAN
NOTE 1--PLAN DESCRIPTION
The following description of the ConocoPhillips Savings Plan (Plan), provides
only general information. Participants should refer to the Plan document for a
more complete description of the Plan's provisions.
GENERAL
The Plan is a defined contribution, 401(k) profit sharing plan which includes a
Thrift Feature and a Stock Savings 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
Plan. The Thrift Plan became the Thrift Feature of the Plan, the LTSSP became
the Stock Savings Feature, and ConocoPhillips Company (Company) became the Plan
sponsor. On October 3, 2003, assets of the Thrift Plan for Employees of Conoco
Inc. (Conoco Thrift Plan) were merged into the Plan. Other Plan mergers that
occurred during the reporting period were not material in terms of the number of
participants involved and the impact to Plan provisions.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended (ERISA).
ELIGIBILITY
Generally, active employees of the Company and its subsidiaries on the direct
U.S. dollar payroll are eligible to participate in the Plan, except retail
marketing outlet employees and certain other employee classifications.
THRIFT FEATURE
An active employee may deposit between 1% and 30% of pay, as defined in the Plan
document (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 active employee
participant up to 1.25% of Pay. Thrift assets are invested in a variety of
investment funds; however, the DuPont Stock Fund and the Fidelity Low-Priced
Stock Fund are closed to new investment elections. Investments in the Thrift
Feature are participant-directed.
Active employees are eligible to make catch-up deposits to the Thrift Feature
beginning in the year they attain age 50. The active employee 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.
Elections to make catch-up deposits remain in effect until changed or revoked by
an
6
active employee.
STOCK SAVINGS FEATURE (SSF)
The SSF contains an Employee Stock Ownership Plan (ESOP). An active employee may
deposit 1% of Pay on a before-tax basis. SSF deposits are invested in the
ConocoPhillips Stock Fund. Based on the SSF deposits made by an active employee,
participants in the SSF receive semiannual allocations of ConocoPhillips common
stock (Company Stock) as of June 30 and December 31 of each year. The semiannual
allocation to participants is based on the ratio of the active employee's SSF
deposits to all participant SSF deposits 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. The
method for calculating a supplemental allocation is described in the Plan
document; however, such an allocation is rare and was not required in 2005.
Semiannual allocations and supplemental allocations are invested in the
ConocoPhillips Stock Fund and the Leveraged Stock Fund. Both the ConocoPhillips
Stock Fund and the Leveraged Stock Fund are invested solely in Company Stock and
have the same market value per share. The cost basis per share is different as
the ConocoPhillips Stock Fund has an average cost based on average purchase
price, and the Leveraged Stock Fund has a fixed cost based on the acquisition
loan cost per share. The ConocoPhillips Stock Fund contains shares of Company
Stock purchased with employee deposits, Company contributions, dividends
reinvested in participant accounts, and shares allocated to participant accounts
as a result of SSF allocations other than those purchased with the proceeds of
acquisition loans. The Leveraged Stock Fund primarily contains shares of Company
Stock that were purchased with the proceeds of acquisition loans and allocated
to participant accounts as a result of SSF allocations. Participants may direct
that their SSF deposits and Company allocations be exchanged from the
ConocoPhillips Stock Fund and the Leveraged Stock Fund into other investment
funds at any time.
The number of shares allocated on each semiannual allocation date is determined
by the Plan document. In 2005, there were 8,698 shares allocated for each 100
eligible employees. Shares used for the semiannual allocation came from financed
shares and shares held by ConocoPhillips in the Compensation and Benefits Trust
(CBT). In 2005, the Company used the CBT to contribute 2,250,727 shares of stock
to the Plan. The fair value of the CBT shares was approximately $130 million,
and these shares were invested in the ConocoPhillips Stock Fund.
The Plan is required to retain and use eligible dividends on Company Stock to
make payments on the loans it used to acquire Company Stock for the SSF. If the
Company does not elect to make a special
7
contribution and if eligible dividends to be allocated to participants' accounts
are used to make loan payments, participants receive a dividend replacement
allocation. The Plan used $17.4 million in dividends on allocated shares to make
loan payments and allocated 289,238 shares in dividend replacement allocations
to participants' accounts in 2005. The fair value of the allocated dividend
replacement shares was approximately $17 million, and these shares were invested
in the Leveraged Stock Fund.
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
semiannual allocation by contributing cash or by contributing Company Stock.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the active employee deposits,
Company contributions, if applicable, and Plan earnings, and charged with an
allocation of investment administrative expenses. Allocations are based on
participant earnings or account balances, as defined. The benefit to which a
participant is entitled is the benefit that could be provided from the
participant's vested account. The Vanguard Group, Inc. serves as recordkeeper.
VESTING
Participants are immediately vested in all amounts credited to their accounts in
all funds.
VOTING RIGHTS
As a beneficial owner of Company Stock, Plan participants and beneficiaries are
entitled to direct the trustee to vote the Company Stock attributable to their
accounts. An active employee participant on the voting valuation date may direct
the trustee to vote the non-directed and unallocated shares. Vanguard Fiduciary
Trust Company (Vanguard) serves as trustee.
DIVERSIFICATION
Generally, participants may make unlimited exchanges out of any investment fund
in any dollar amount, whole percentages or shares of their account to another
investment fund subject to the exchange rules in the Plan document. In addition,
using selected investment percentages, a participant may request a reallocation
of both the existing account and future contribution allocations or a
rebalancing of the participant's existing account.
8
SHARE ACCOUNTING METHOD FOR COMPANY STOCK
Any shares purchased or sold for the Plan on any business day are valued at the
Participant Transaction Price, which is calculated using a weighted-average
price of the Company Stock traded on that business day and any carryover impact
as described in the Plan document.
DISTRIBUTIONS
Total distributions from participant accounts can be made upon the occurrence of
specified events, including the attainment of age 59 1/2, death, disability, or
termination of employment. Partial distributions are permitted in cases of
specified financial hardship.
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 the Plan.
DIVIDEND PASS THROUGH
A participant can make an election to receive cash dividends from the
ConocoPhillips Stock Fund on a portion of that participant's 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 Company 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 can request a loan from their account in the Plan.
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 one time, one of which can be a home
loan. The maximum term of a home loan is 238 months, and the maximum term of a
general purpose loan is 58 months.
TRUST AGREEMENTS
The trust agreement with Vanguard provides for the administration of certain
assets in the Plan.
9
Additionally, there are three master trust agreements:
The ConocoPhillips Stock Fund Master Trust Agreement provides for the
administration of the ConocoPhillips Stock Fund. The trustee is Vanguard.
The Stable Value Fund is managed under the Stable Value Fund Master Trust
Agreement. The assets in this fund include investment contracts, money market
instruments, and units of a common collective trust. The trustee for the Stable
Value Fund is State Street Bank and Trust Company.
The DuPont Stock Fund Master Trust Agreement provides for the administration
of the DuPont Stock fund. The trustee is Vanguard.
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 the Company or its delegate. The Plan
Financial Administrator and the Plan Benefits Administrator are the persons who
occupy, respectively, the Company positions of Vice President and Treasurer, and
Manager Global Compensation and Benefits. 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 from assets of the Plan to the extent allowable by
law, unless 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. Distributions to participants or their beneficiaries are recorded
when paid.
On April 7, 2005, ConocoPhillips declared a two-for-one common stock split
effected in the form of a 100% stock dividend, payable June 1, 2005, to
stockholders of record as of May 16, 2005. All references to Company Stock in
the financial statements and accompanying notes are presented on an after-split
basis for all periods presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates that affect
the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
10
NOTE 3--SECURITIES ACQUISITION LOANS
The Plan borrowed $250 million (Loan 1) and $400 million (Loan 2) in 1988 and
1990, respectively, and purchased 28,673,836 and 28,318,584 shares of Company
Stock, respectively, from the bank borrowings. The financed shares are held in a
suspense account (currently Loan 2 Suspense) until allocated to eligible
participants based on the provisions of the Plan.
Loan 1 was fully repaid in June 1998 and all leveraged shares associated with
Loan 1 have been allocated to participant accounts.
Upon allocation to participants' accounts, the Loan 2 shares are transferred to
the Leveraged Stock Fund. The Plan released 906,647 Loan 2 suspense shares in
2005 for semiannual allocations to participants' accounts. The fair value of the
Loan 2 shares used in the semiannual allocations was approximately $52 million.
At December 31, 2005 and 2004, the market value of unallocated shares was $689
million and $566 million, respectively. There were no other unallocated assets
at December 31, 2005, and December 31, 2004.
Loan 2 extends through the year 2015. Due to loan prepayments, the first
required payment is currently scheduled to be in 2011.
The outstanding balance of Loan 2 at December 31, 2005, was $229 million and at
December 31, 2004 was $253 million. Loan 2 prepayments totaled $24 million in
2005. Loan 2 provides for variable interest rates. The rates were 4.78% and
2.84% at December 31, 2005 and 2004, respectively.
Loan 2 is guaranteed by ConocoPhillips and ConocoPhillips Company 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.
Under Loan 2, any participating bank in the syndicate of lenders may cease to
participate on December 4, 2009, by giving not less than 180 days' prior notice
to the Plan and the Company. 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, each bank participating in Loan 2 has the
optional right to terminate its participation in the loan. Under the above
conditions, such banks' rights and obligations under the loan agreement must be
purchased by ConocoPhillips if not transferred to another bank of
ConocoPhillips' choice.
11
NOTE 4--INVESTMENTS
VALUATION
Common stock and mutual fund securities are valued at fair value. Common stock
values are based on their quoted market prices. Mutual funds are valued using
quoted market prices which represent the net asset values of shares held by the
Plan at year-end. The Stable Value Fund is managed under the Stable Value Fund
Master Trust Agreement. The assets in this fund include investment contracts,
some of which are backed by units of common collective trusts, and money market
instruments. The investment contracts are fully benefit-responsive, and are
valued at contract value which represents contributions, plus interest credited,
less distributions and expenses. The money market instruments are valued at
amortized cost, which approximates fair value. The common collective trust is
valued at fair value as determined by the issuer based on the current values of
the underlying assets of such trust. Participant loans are valued at carrying
value, which approximates fair value. Purchases and sales of investments are
recorded on a trade date basis. Dividends are recorded on the ex-dividend date.
Interest income is recorded on the accrual 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 values
of investments will occur in the near term and that such changes could
materially affect participants' account balances and the amounts reported in the
Statements of Net Assets Available for Benefits.
NET APPRECIATION
During 2005, 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
----------
ConocoPhillips Common Stock $416,466
Mutual Funds 63,731
-------------------------------------------------------------------------------
$480,197
===============================================================================
NOTE 5--EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Through December 31, 2005, the ESOP portion of the Plan included the Leveraged
Stock Fund, Loan 2 Suspense, released shares pending allocation, and a portion
of the shares held in the ConocoPhillips Stock Fund (COP Stock ESOP - Master
Trust). The ESOP portion of the ConocoPhillips Stock Fund included those shares
relating to dividends on leveraged shares, certain Company contributions, and
annual sweeps of shares from non-ESOP sources to ESOP sources. Also included in
the ESOP is the cash account associated with Loan 2
12
Suspense (Vanguard Prime Money Market - Loan 2, or Vang Prime MM Loan 2). The
Loan 2 Suspense shares and cash are the only non-participant-directed
investments in the Plan, and the only unallocated assets in the Plan.
Information about the net assets and the significant components of the changes
in net assets relating to the ESOP portion of the Plan follows:
Thousands of Dollars
----------------------------------------------------------------------------------
DECEMBER 31, 2005 December 31, 2004
------------------------------------- -------------------------------------
ALLOCATED UNALLOCATED TOTAL Allocated Unallocated Total
---------- ----------- ---------- ---------- ----------- ----------
ASSETS
COP Stock ESOP -
Master Trust $1,694,568 $ -- $1,694,568 $1,259,262 $ -- $1,259,262
Leveraged Stock 929,748 -- 929,748 721,791 -- 721,791
Loan 2 Suspense -- 689,052 689,052 -- 566,101 566,101
Vang Prime MM Loan 2 -- 83 83 -- 73 73
-----------------------------------------------------------------------------------------------------------------
Total Assets 2,624,316 689,135 3,313,451 1,981,053 566,174 2,547,227
LIABILITIES
Securities Loan -- 229,050 229,050 -- 252,600 252,600
Interest Payable -- 797 797 -- 498 498
-----------------------------------------------------------------------------------------------------------------
Total Liabilities -- 229,847 229,847 -- 253,098 253,098
NET ASSETS AVAILABLE
FOR BENEFITS $2,624,316 $459,288 $3,083,604 $1,981,053 $313,076 $2,294,129
=================================================================================================================
Changes in Net Assets during Year Ended December 31, 2005:
THOUSANDS OF DOLLARS
-------------------------------------
ALLOCATED UNALLOCATED TOTAL
---------- ----------- ----------
Basic allocation - stock $ 130,211 $ -- $ 130,211
Allocation of 906,647 shares of
ConocoPhillips common stock, at market 52,398 -- 52,398
Dividends and interest 17,384 14,953 32,337
Interest in Master Trust - COP Stock ESOP 520,139 -- 520,139
Net appreciation in FV of investments 223,738 192,728 416,466
Other additions 1 1 2
-----------------------------------------------------------------------------------------------------------------
Total Additions 943,871 207,682 1,151,553
Distributions 138,022 -- 138,022
Allocation of 906,647 shares of
ConocoPhillips common stock, at market -- 52,398 52,398
Interest expense -- 9,072 9,072
Administrative expense 1,046 -- 1,046
Other deductions 1 -- 1
-----------------------------------------------------------------------------------------------------------------
Total Deductions 139,069 61,470 200,539
Intrafund & source transfers (161,539) -- (161,539)
-----------------------------------------------------------------------------------------------------------------
NET INCREASE 643,263 146,212 789,475
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of Year 1,981,053 313,076 2,294,129
-----------------------------------------------------------------------------------------------------------------
End of Year $2,624,316 $459,288 $3,083,604
=================================================================================================================
13
Effective January 1, 2006, the Plan was amended to include all remaining shares
of the ConocoPhillips Stock Fund in the ESOP; therefore, all Company Stock held
in the Plan is now part of the ESOP.
NOTE 6--TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated March 23, 2004, stating that the Plan, as amended and restated as of
October 3, 2003, is qualified under Section 401(a) of the Internal Revenue Code
(the Code) and, therefore, the related trust is exempt from taxation. Subsequent
to this determination by the Internal Revenue Service, the Plan was amended.
Once qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The Plan sponsor has taken the necessary steps to
bring the Plan's operations into compliance with the Code.
NOTE 7--PARTY-IN-INTEREST TRANSACTIONS
A large portion of the Plan's assets is 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. All of these types of transactions were exempt
from the prohibited transaction rules.
NOTE 8--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.
14
NOTE 9--RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits as of
December 31, 2005 and 2004, as reflected in these financial statements, to the
amounts reflected in the Plan's Form 5500:
Thousands of Dollars
----------------------
2005 2004
---------- ---------
Net assets available for benefits as
reported in the financial statements $8,118,911 6,982,646
Less: Defaulted loans identified
as deemed distributions for tax reporting -- (150)
-------------------------------------------------------------------------------
Net assets available for benefits
as reported in the Form 5500 $8,118,911 6,982,496
===============================================================================
The following is a reconciliation of distributions to participants or their
beneficiaries for the year ended December 31, 2005, as reflected in these
financial statements, to the amounts reflected in the Plan's Form 5500:
Thousands
of Dollars
----------
Year Ended December 31, 2005
Distributions to participants or their
beneficiaries reported in the
financial statements $502,058
Less: Amounts previously recognized as
deemed distributions for 5500 reporting (150)
-------------------------------------------------------------------------------
Total distributions as reported
in the Form 5500 $501,908
===============================================================================
NOTE 10--MASTER TRUSTS
Three investment options of the Plan are held in master trusts and administered
under master trust agreements. 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 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 was
approximately 99.9% as of December 31, 2005, and December 31, 2004.
The Stable Value Fund consists of guaranteed investment contracts (GICs),
separate account guaranteed investment contracts (SAGICs), synthetic contracts
(SYNs), a common collective trust (CCT), and
15
short-term investments and cash. The crediting interest rates for the Stable
Value Fund's investment contracts ranged from 3.46% to 7.12% as of December 31,
2005, and from 3.39% to 7.68% as of December 31, 2004. The fund's blended rate
of return was 4.73% for 2005 and 4.60% for 2004.
There are no reserves against contract value for credit risk of the contract
issuers or otherwise. The crediting rates for GICs are set at the time of
purchase and are fixed for the specified contract period. The crediting rates
for most SAGIC and SYN contracts are reset quarterly and are 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 Stable Value Fund values as of December 31, 2005, and December 31, 2004,
were as follows:
Thousands of Dollars
----------------------
2005 2004
---------- ---------
Stable Value Fund
At December 31
GICs $ 114,584 129,095
SAGICs 111,601 175,350
SYNs 1,668,294 1,604,147
--------------------------------------------------------------------------------
Assets at Contract Value 1,894,479 1,908,592
--------------------------------------------------------------------------------
CCT 70,350 67,612
Short-term investments and cash 13,918 24,349
--------------------------------------------------------------------------------
Assets at Fair Value 84,268 91,961
--------------------------------------------------------------------------------
End of Year $1,978,747 2,000,553
================================================================================
The estimated fair value of the GICs at December 31, 2005 and 2004, was
$115,449,323 and $133,962,202 respectively. The estimated fair value of the
SAGICs at December 31, 2005 and 2004, was $112,725,513 and $182,159,789
respectively. The fair values of the GICs and SAGICs are determined using a
discounted cash flow method. The estimated cash flow of each contract is
discounted using a yield curve interpolated from swap rates and is adjusted for
liquidity and credit quality.
The estimated fair value of the underlying assets of the synthetic guaranteed
investment contracts at December 31, 2005 and 2004, was $1,652,045,988 and
$1,627,937,906, respectively. The contract values of synthetic guaranteed
investment contracts were net of ($16,248,466) at December 31, 2005, and
($23,790,533) at December 31, 2004, related to wrapper contracts, which
guarantee the contract value of the synthetic guaranteed investment contracts
for participant initiated withdrawal events.
16
The significant components of the changes in net assets relating to the Stable
Value Fund are as follows:
Thousands
of Dollars
----------
Stable Value Fund
Year Ended December 31, 2005
Contributions $ 47,324
Interest and Dividend Income (net) 92,758
Asset Transfers In 367,873
Distributions (178,892)
Participant Loans (3,973)
Other Deductions (20)
Asset Transfers Out (346,876)
-------------------------------------------------------------------------------
Net Decrease (21,806)
Beginning of Year 2,000,553
-------------------------------------------------------------------------------
End of Year $1,978,747
===============================================================================
CONOCOPHILLIPS STOCK FUND
The ConocoPhillips Stock Fund is comprised of Company Stock held in a master
trust, the ConocoPhillips Stock Fund 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 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 was approximately 99.9% as of
December 31, 2005, and December 31, 2004.
The ConocoPhillips Stock Fund values as of December 31, 2005, and December 31,
2004, were as follows:
Thousands of Dollars
----------------------
2005 2004
---------- ---------
At December 31
ConocoPhillips Stock Fund $2,380,454 1,662,488
--------------------------------------------------------------------------------
End of Year $2,380,454 1,662,488
================================================================================
17
The significant components of the changes in net assets relating to the
ConocoPhillips Stock Fund are as follows:
Thousands
of Dollars
----------
ConocoPhillips Stock Fund
Year Ended December 31, 2005
Contributions $ 99,877
Dividend Income 46,694
Net Appreciation in Fair Value of
Company Stock 580,743
Asset Transfers In 651,202
Other Additions 15
Distributions (120,641)
Participant Loans (20,993)
Other Deductions (929)
Asset Transfers Out (518,002)
-------------------------------------------------------------------------------
Net Increase 717,966
Beginning of Year 1,662,488
-------------------------------------------------------------------------------
End of Year $2,380,454
===============================================================================
DUPONT STOCK FUND
The DuPont Stock Fund is comprised of DuPont stock held in a master trust, the
DuPont Stock Fund Master Trust. This investment option provided by the Plan is
also available to participants in the ConocoPhillips Store Savings Plan;
however, this option is closed to new investment elections. Each plan's
beneficial interest in the 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 was approximately 99.9% as of December 31, 2005, and December 31,
2004.
The DuPont Stock Fund values as of December 31, 2005, and December 31, 2004,
were as follows:
Thousands of Dollars
--------------------
2005 2004
-------- -------
At December 31
DuPont Stock Fund $147,012 217,907
-------------------------------------------------------------------------------
End of Year $147,012 217,907
===============================================================================
18
The significant components of the changes in net assets relating to the DuPont
Stock Fund are as follows:
Thousands
of Dollars
----------
DuPont Stock Fund
Year Ended December 31, 2005
Dividend Income $ 5,752
Other Additions 2
Distributions (12,644)
Net Depreciation in Fair Value of Stock (26,155)
Participant Loans (331)
Other Deductions (75)
Asset Transfers Out (37,444)
-------------------------------------------------------------------------------
Net Decrease (70,895)
Beginning of Year 217,907
-------------------------------------------------------------------------------
End of Year $147,012
===============================================================================
NOTE 11--SUBSEQUENT EVENTS
HURRICANE RELIEF CHANGES
Recent Federal legislation and regulatory guidance have eased the rules on Plan
distributions and loans to participants impacted by Hurricanes Katrina, Rita
and/or Wilma.
Participants may request Qualified Hurricane Distributions (QHDs), the aggregate
amount of which may not exceed $100,000. Participants can delay paying income
taxes on QHDs by requesting zero tax withholding and repaying the QHDs within
three years to have the money treated as a tax-free rollover.
A participant eligible for hurricane relief may request a Plan loan (or Plan
loans) in the amount of the lesser of $100,000 or 100% of the vested account
balance. Participants with a Plan loan(s) on or after the appropriate hurricane
effective dates can postpone or suspend any payments scheduled to be made on the
loan(s) through December 31, 2006. The original loan payoff date will be
extended by the period of the suspended loan repayments. When the payments
resume, they will be re-amortized to include the interest accrued during the
period they were suspended, and a new loan repayment amount and loan payoff date
will be calculated.
BURLINGTON RESOURCES ACQUISITION
On March 31, 2006, ConocoPhillips completed the acquisition of Burlington
Resources Inc., following approval of the merger by Burlington's stockholders.
The Company intends to merge the assets of the Burlington Resources Inc.
Retirement Savings Plan into the Plan effective January 1, 2007.
19
--------------------------------------------------------------------------------
SCHEDULE OF ASSETS (HELD AT END OF YEAR) CONOCOPHILLIPS SAVINGS PLAN
SCHEDULE H, LINE 4I EIN 73-0400345, PLAN 022
At December 31, 2005
(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* 15,980,535 SHARES, LEVERAGED
STOCK FUND $ ** $929,748
CONOCOPHILLIPS* 11,843,383 SHARES, LOAN 2
SUSPENSE 167,288 689,052
FIDELITY 3,216,771 UNITS, FIDELITY
INVESTMENTS LOW-PRICED STOCK FUND ** 131,373
FIDELITY 1,142,780 UNITS, FIDELITY
INVESTMENTS MAGELLAN FUND ** 121,637
PIMCO FUNDS 2,503,369 UNITS, PIMCO TOTAL
RETURN FUND -
ADMINISTRATIVE CLASS ** 26,285
--------------------------------------------------------------------------------
THE VANGUARD 2,915,520 UNITS, VANGUARD
GROUP* 500 INDEX FUND ** 335,052
404,002 UNITS, VANGUARD
ASSET ALLOCATION FUND ** 10,233
1,420,801 UNITS, VANGUARD
BALANCED INDEX FUND ** 28,146
1,209,125 UNITS, VANGUARD
EXPLORER FUND ** 90,817
1,269,176 UNITS, VANGUARD
EXTENDED MARKET INDEX FUND ** 43,482
563,097 UNITS, VANGUARD
GROWTH INDEX FUND ** 15,508
3,423,982 UNITS, VANGUARD
INFLATION-PROTECTED
SECURITIES FUND ** 41,636
2,260,014 UNITS, VANGUARD
INTERNATIONAL GROWTH FUND ** 47,460
20
--------------------------------------------------------------------------------
SCHEDULE OF ASSETS (HELD AT END OF YEAR) CONOCOPHILLIPS SAVINGS PLAN
SCHEDULE H, LINE 4I EIN 73-0400345, PLAN 022
At December 31, 2005
(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 2,365,333 UNITS, VANGUARD
GROUP* INTERNATIONAL VALUE FUND ** 82,361
1,028,941 UNITS, VANGUARD
LIFESTRATEGY CONSERVATIVE
GROWTH FUND ** 15,938
1,435,655 UNITS, VANGUARD
LIFESTRATEGY GROWTH FUND ** 30,149
931,130 UNITS, VANGUARD
LIFESTRATEGY INCOME FUND ** 12,561
5,044,937 UNITS, VANGUARD
LIFESTRATEGY MODERATE
GROWTH FUND ** 93,180
3,444,864 UNITS, VANGUARD
LONG-TERM TREASURY FUND ** 39,788
4,790,574 UNITS, VANGUARD
MID-CAP INDEX FUND ** 84,458
1,300,890 UNITS, VANGUARD
MORGAN GROWTH FUND ** 23,039
148,977,865 UNITS, VANGUARD
PRIME MONEY MARKET FUND ** 148,978
3,489,445 UNITS, VANGUARD
PRIMECAP FUND ** 227,896
2,122,518 UNITS, VANGUARD
SMALL-CAP GROWTH INDEX FUND ** 34,873
4,060,244 UNITS, VANGUARD
SMALL-CAP VALUE INDEX FUND ** 59,117
8,100,822 UNITS, VANGUARD
TOTAL BOND MARKET INDEX FUND ** 81,494
2,844,068 UNITS, VANGUARD
TOTAL INTERNATIONAL STOCK
INDEX FUND ** 40,585
21
--------------------------------------------------------------------------------
SCHEDULE OF ASSETS (HELD AT END OF YEAR) CONOCOPHILLIPS SAVINGS PLAN
SCHEDULE H, LINE 4I EIN 73-0400345, PLAN 022
At December 31, 2005
(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 GROUP* 975,930 UNITS, VANGUARD
TOTAL STOCK MARKET INDEX FUND ** 29,278
1,025,840 UNITS, VANGUARD
VALUE INDEX FUND ** 22,866
3,419,890 UNITS, VANGUARD
WELLINGTON FUND ** 103,794
4,149,394 UNITS, VANGUARD
WINDSOR II FUND ** 130,000
--------------------------------------------------------------------------------
PARTICIPANTS* LOANS TO PLAN PARTICIPANTS,
INTEREST RATES RANGING
FROM 4.00% TO 10.25% -- 76,319
--------------------------------------------------------------------------------
THE VANGUARD GROUP* VANGUARD PRIME MONEY MARKET -
LOAN 2 83 83
--------------------------------------------------------------------------------
TRAVELERS INSURANCE INSURANCE CONTRACT GR-1966A,
DEFERRED SETTLEMENT ACCOUNT ** 8
--------------------------------------------------------------------------------
$3,847,194
================================================================================
* Party-in-interest
** Historical cost information is not required for participant-directed
investments.
22
--------------------------------------------------------------------------------
EXHIBIT INDEX CONOCOPHILLIPS SAVINGS PLAN
EIN 73-0400345, PLAN 022
EXHIBIT
NUMBER DESCRIPTION
------- -----------
23 Consent of Independent Registered Public Accounting Firm
23