-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EpaFTix7Iur8lqBoHUgcmXfk64C10uYWXVEjhue8JsElvknqlXCIrmi7H0lfRr/x 1ZKvfBsbkeZWKT9IEWW59w== 0000078214-97-000011.txt : 19970630 0000078214-97-000011.hdr.sgml : 19970630 ACCESSION NUMBER: 0000078214-97-000011 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970627 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHILLIPS PETROLEUM CO CENTRAL INDEX KEY: 0000078214 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 730400345 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-00720 FILM NUMBER: 97631886 BUSINESS ADDRESS: STREET 1: PHILLIPS BUILDING STREET 2: 800 PLAZA OFFICE BUILDING CITY: BARTLESVILLE STATE: OK ZIP: 74004 BUSINESS PHONE: 9186616600 10-K405/A 1 FORM 10-K/A Amendment No. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 ---------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- ---------------- Commission file number 1-720 ------------------------------------------- Phillips Petroleum Company (Exact name of registrant as specified in its charter) Delaware 73-0400345 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Phillips Building, Bartlesville, Oklahoma 74004 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 918-661-6600 - ----------------------------------------------------------------- Filing Additional Exhibits Item 14 - Exhibits - ------------------ The registrant is filing with this Amendment No. 1 Annual Reports on Form 11-K for the Thrift Plan of Phillips Petroleum Company, the Long-Term Stock Savings Plan of Phillips Petroleum Company and the Retirement Savings Plan of Phillips Petroleum Company. 1 PHILLIPS PETROLEUM COMPANY INDEX TO EXHIBITS Exhibit Number Description - ------- ----------- 3(i) Restated Certificate of Incorporation, as filed with the State of Delaware July 17, 1989 (incorporated by reference to Exhibit 3(i) to Annual Report on Form 10-K for the year ended December 31, 1995). (ii) Bylaws of Phillips Petroleum Company, as amended effective December 9, 1996.* 4(a) Indenture dated as of September 15, 1990, between Phillips Petroleum Company and First Trust National Association (formerly Continental Bank, National Association), relating to the 9 1/2% Notes due 1997 and the 9 3/8% Notes due 2011.* (b) Indenture dated as of September 15, 1990, as supplemented by Supplemental Indenture No. 1 dated May 23, 1991, between Phillips Petroleum Company and First Trust National Association (formerly Continental Bank, National Association), relating to the 9.18% Notes due September 15, 2021; the 9% Notes due 2001; the 8.86% Notes due May 15, 2022; the 8.49% Notes due January 1, 2023; the 7.92% Notes due April 15, 2023; the 7.20% Notes due November 1, 2023; and the 6.65% Notes due March 1, 2003 (incorporated by reference to Exhibit 4(d) to Annual Report on Form 10-K for the year ended December 31, 1991). (c) Preferred Share Purchase Rights as described in the Rights Agreement dated as of July 10, 1989, between Phillips Petroleum Company and Chemical Bank (formerly Manufacturers Hanover Trust Company) (incorporated by reference to Exhibit 4(c) to Annual Report on Form 10-K for the year ended December 31, 1995). (d) Amendment dated May 16, 1990, to the Rights Agreement dated July 10, 1989, between Phillips Petroleum Company and Chemical Bank (formerly Manufacturers Hanover Trust Company).* 2 PHILLIPS PETROLEUM COMPANY INDEX TO EXHIBITS (Continued) Exhibit Number Description - ------- ----------- The company incurred during 1996 certain long-term debt not registered pursuant to the Securities Exchange Act of 1934. No instrument with respect to such debt is being filed since the total amount of the securities authorized under any such instrument did not exceed 10 percent of the total assets of the company on a consolidated basis. The company hereby agrees to furnish to the Securities and Exchange Commission upon its request a copy of such instrument defining the rights of the holders of such debt. Material Contracts 10(a) Agreement dated December 23, 1984, among Mesa Partners and related entities and Phillips Petroleum Company and the schedules, annexes and exhibit thereto (incorporated by reference to Exhibit 10(a) to Annual Report on Form 10-K for the year ended December 31, 1995). (b) Letter Agreement dated December 23, 1984, among Mesa Partners and related entities and Phillips Petroleum Company (incorporated by reference to Exhibit 10(b) to Annual Report on Form 10-K for the year ended December 31, 1995). (c) Trust Agreement dated December 12, 1995, between Phillips Petroleum Company and Vanguard Fiduciary Trust Company, as Trustee of the Phillips Petroleum Company Compensation and Benefits Arrangements Stock Trust (incorporated by reference to Exhibit 10(c) to Annual Report on Form 10-K for the year ended December 31, 1995). Management Contracts and Compensatory Plans or Arrangements (d) 1986 Stock Plan of Phillips Petroleum Company (Incorporated by reference to Exhibit 10(d) to Annual Report on Form 10-K for the year ended December 31, 1992). 3 PHILLIPS PETROLEUM COMPANY INDEX TO EXHIBITS (Continued) Exhibit Number Description - ------- ----------- 10(e) 1990 Stock Plan of Phillips Petroleum Company (incorporated by reference to Exhibit 10(e) to Annual Report on Form 10-K for the year ended December 31, 1995). (f) Annual Incentive Compensation Plan of Phillips Petroleum Company (incorporated by reference to Exhibit 10(f) to Annual Report on Form 10-K for the year ended December 31, 1992). (g) Incentive Compensation Plan of Phillips Petroleum Company (incorporated by reference to Exhibit 10(g) to Annual Report on Form 10-K for the year ended December 31, 1994). (h) Principal Corporate Officers Supplemental Retirement Plan of Phillips Petroleum Company (incorporated by reference to Exhibit 10(h) to Annual Report on Form 10-K for the year ended December 31, 1995). (i) Phillips Petroleum Company Supplemental Executive Retirement Plan.* (j) Key Employee Deferred Compensation Plan of Phillips Petroleum Company.* (k) Non-Employee Director Retirement Plan of Phillips Petroleum Company (incorporated by reference to Exhibit 10(k) to Annual Report on Form 10-K for the year ended December 31, 1995). (l) Omnibus Securities Plan of Phillips Petroleum Company.* (m) Deferred Compensation Plan for Non-Employee Directors of Phillips Petroleum Company (incorporated by reference to Exhibit 10(m) to Annual Report on Form 10-K for the year ended December 31, 1995). (n) Key Employee Missed Credited Service Retirement Plan of Phillips Petroleum Company.* 4 PHILLIPS PETROLEUM COMPANY INDEX TO EXHIBITS (Continued) Exhibit Number Description - ------- ----------- 12 Computation of Ratio of Earnings to Fixed Charges.* 21 List of Subsidiaries of Phillips Petroleum Company.* 23 Consent of Independent Auditors.* 27 Financial Data Schedule.* 99(a) Form 11-K, Annual Report, of the Thrift Plan of Phillips Petroleum Company for the fiscal year ended December 31, 1996. (b) Form 11-K, Annual Report, of the Long-Term Stock Savings Plan of Phillips Petroleum Company for the fiscal year ended December 31, 1996. (c) Form 11-K, Annual Report, of the Retirement Savings Plan of Phillips Petroleum Company for the fiscal year ended December 31, 1996. *Filed with the original Annual Report on Form 10-K for the year ended December 31, 1996. Copies of the exhibits listed in this Index to Exhibits are available upon request for a fee of $3.00 per document. Such request should be addressed to: Secretary Phillips Petroleum Company 1234 Adams Building Bartlesville, OK 74004 5 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. PHILLIPS PETROLEUM COMPANY /s/ Jacqueline K. Wagner ----------------------------- Jacqueline K. Wagner Vice President and Controller (Chief Accounting and Duly Authorized Officer) June 25, 1997 6 EX-99 2 Exhibit 99(a) 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, 1996 ------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------- --------- Commission file number 33-50134 -------------------------------- THRIFT 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 Thrift 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 Thrift Plan Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. THRIFT PLAN OF PHILLIPS PETROLEUM COMPANY /s/ Jacqueline K. Wagner --------------------------------- Jacqueline K. Wagner Member Thrift Plan Committee June 25, 1997 1 - ----------------------------------------------------------------- Index To Financial Statements Thrift Plan Of Phillips And Schedules Petroleum Company Page Report of Independent Auditors .............................. 3 Financial Statements Statements of Net Assets Available for Benefits at December 31, 1996 and 1995 Total Plan ............................................ 4 Fund A (Bond Index Fund) .............................. 6 Funds B and C (Phillips Stock Fund) ................... 8 Fund D (Investment Contracts Fund)--Deposit Administration Account .............................. 10 Fund D (Investment Contracts Fund)--Deferred Settlement Account .................................. 12 Fund E (S&P 500 Fund) ................................. 14 Fund F (Money Market Fund) ............................ 16 Loan Fund ............................................. 18 Temporary Investment Fund ............................. 20 Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 1996, 1995 and 1994 Total Plan ............................................ 5 Fund A (Bond Index Fund) .............................. 7 Funds B and C (Phillips Stock Fund) ................... 9 Fund D (Investment Contracts Fund)--Deposit Administration Account .............................. 11 Fund D (Investment Contracts Fund)--Deferred Settlement Account .................................. 13 Fund E (S&P 500 Fund) ................................. 15 Fund F (Money Market Fund) ............................ 17 Loan Fund ............................................. 19 Temporary Investment Fund.............................. 21 Notes to Financial Statements ............................. 22 Supplemental Schedules Schedule of Assets Held for Investment Purposes at December 31, 1996, Line 27(a) ........................ 32 Schedule of Reportable Transactions for the Year Ended December 31, 1996, Line 27(d)--Series of Transactions ......................................... 33 Schedule of Reportable Transactions for the Year Ended December 31, 1996, Line 27(d)--Individual Transactions ............................................ 34 2 - ----------------------------------------------------------------- Report Of Independent Auditors The Thrift Plan Committee Thrift Plan of Phillips Petroleum Company We have audited the accompanying statement of net assets available for benefits of the Thrift Plan of Phillips Petroleum Company (Plan) as of December 31, 1996 and 1995, and the related statement of changes in net assets available for benefits for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Thrift 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 generally accepted auditing standards. 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, 1996 and 1995, and the changes in its net assets available for benefits for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1996, and reportable transactions for the year ended December 31, 1996, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the basic financial statements. The fund information presented on pages 6 through 21 listed in the accompanying index to financial statements and schedules is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Ernst & Young LLP Tulsa, Oklahoma ERNST & YOUNG LLP June 25, 1997 3 - ----------------------------------------------------------------- Statement Of Net Assets Thrift Plan Of Phillips Available For Benefits Petroleum Company Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Phillips Petroleum Company common stock $ 797,584 704,705 Insurance contracts 155,955 285,462 Vanguard Money Market Reserves- Prime Portfolio 158,914 - Vanguard Index Trust 500 Portfolio 114,578 - Vanguard Bond Index-Total Bond Market Portfolio 74,837 - BT Pyramid Government Securities Cash Fund - 9,356 BT Pyramid Large Capitalization Equity Index Fund - 71,911 Barclays Global Investors Government/Corporate Bond Index Fund E - 74,816 BT Pyramid Discretionary Cash Fund - 66,264 Loans to Plan participants 21,024 18,868 - ----------------------------------------------------------------- 1,322,892 1,231,382 Cash - 1 Contributions Receivable 694 568 Employee Deposits Receivable 104 204 Loan Repayments Receivable 106 73 Dividends Receivable 55 - Interest Receivable - 1,446 Securities Sold - 1,241 - ----------------------------------------------------------------- Total Assets 1,323,851 1,234,915 - ----------------------------------------------------------------- Net Assets Available for Benefits $1,323,851 1,234,915 ================================================================= See Notes to Financial Statements. 4 - ----------------------------------------------------------------- Statement Of Changes In Net Thrift Plan Of Phillips Assets Available For Benefits Petroleum Company Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Contributions and Deposits Company contributions Matching $ 5,604 5,742 5,854 Before-tax deposits 18,840 17,601 17,313 Employee deposits 15,697 15,865 16,429 - ----------------------------------------------------------------- 40,141 39,208 39,596 - ----------------------------------------------------------------- Investment Income Dividends 33,925 24,471 24,213 Interest Participant loans 1,355 1,179 919 Other 18,911 30,530 33,492 Net appreciation 209,634 60,994 82,085 - ----------------------------------------------------------------- 263,825 117,174 140,709 - ----------------------------------------------------------------- Total Additions 303,966 156,382 180,305 - ----------------------------------------------------------------- Deductions Distributions to Participants or Their Beneficiaries Cash 167,282 109,754 123,967 Phillips Petroleum Company common stock 47,426 39,221 45,868 Forfeitures - 12 2 Administrative Expense 316 404 452 Interest Expense 6 19 43 - ----------------------------------------------------------------- Total Deductions 215,030 149,410 170,332 - ----------------------------------------------------------------- Net Increase 88,936 6,972 9,973 Net Assets Available for Benefits Beginning of Year 1,234,915 1,227,943 1,217,970 - ----------------------------------------------------------------- End of Year $1,323,851 1,234,915 1,227,943 ================================================================= See Notes to Financial Statements. 5 - ----------------------------------------------------------------- Statement Of Net Assets Thrift Plan Of Phillips Available For Benefits Petroleum Company FUND A (Bond Index Fund) Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Vanguard Bond Index-Total Bond Market Portfolio $74,837 - Barclays Global Investors Government/Corporate Bond Index Fund E - 74,816 Due from Temporary Investment Fund 116 107 Cash - 1 - ----------------------------------------------------------------- Total Assets 74,953 74,924 - ----------------------------------------------------------------- Net Assets Available for Benefits $74,953 74,924 ================================================================= Number of Units 7,617,326 6,156,676 Unit Value $9.8398 12.1696 - ----------------------------------------------------------------- See Notes to Financial Statements. 6 - ----------------------------------------------------------------- Statement Of Changes In Net Thrift Plan Of Phillips Assets Available For Benefits Petroleum Company FUND A (Bond Index Fund) Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Investment Income Interest $ 1 2 2 Dividends 3,191 - - Net appreciation (depreciation) (1,157) 12,772 (3,127) - ----------------------------------------------------------------- 2,035 12,774 (3,125) Allocation of Deposits and Earnings from Temporary Investment Fund 1,132 1,117 1,333 - ----------------------------------------------------------------- Total Additions 3,167 13,891 (1,792) - ----------------------------------------------------------------- Deductions Cash Distributions to Participants or Their Beneficiaries 9,268 7,591 9,561 Administrative Expense 73 68 124 - ----------------------------------------------------------------- Total Deductions 9,341 7,659 9,685 - ----------------------------------------------------------------- Interfund Transfers 6,203 (2,142) (8,410) - ----------------------------------------------------------------- Net Increase (Decrease) 29 4,090 (19,887) Net Assets Available for Benefits Beginning of Year 74,924 70,834 90,721 - ----------------------------------------------------------------- End of Year $74,953 74,924 70,834 ================================================================= See Notes to Financial Statements. 7 - ----------------------------------------------------------------- Statement Of Net Assets Thrift Plan Of Phillips Available For Benefits Petroleum Company FUNDS B and C (Phillips Stock Fund) Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Phillips Petroleum Company common stock $797,584 704,705 Vanguard Money Market Reserves- Prime Portfolio 993 - BT Pyramid Government Securities Cash Fund - 6,020 - ----------------------------------------------------------------- 798,577 710,725 Due from Temporary Investment Fund 2,826 2,523 Contributions Receivable 487 452 Interest Receivable - 54 Securities Sold - 1,241 - ----------------------------------------------------------------- Total Assets 801,890 714,995 - ----------------------------------------------------------------- Net Assets Available for Benefits $801,890 714,995 ================================================================= Number of Units 8,246,509 9,510,541 Unit Value $97.2399 75.1792 - ----------------------------------------------------------------- See Notes to Financial Statements. 8 - ----------------------------------------------------------------- Statement Of Changes In Net Thrift Plan Of Phillips Assets Available For Benefits Petroleum Company FUNDS B and C (Phillips Stock Fund) Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Investment Income Dividends $ 23,461 24,471 24,213 Interest 324 702 434 Net appreciation 193,528 29,404 84,226 - ----------------------------------------------------------------- 217,313 54,577 108,873 Matching Company Contributions 5,604 5,742 5,854 Allocation of Deposits and Earnings from Temporary Investment Fund 26,976 26,050 25,932 - ----------------------------------------------------------------- Total Additions 249,893 86,369 140,659 - ----------------------------------------------------------------- Deductions Distributions to Participants or Their Beneficiaries Cash 42,452 30,076 42,687 Phillips Petroleum Company common stock 47,426 39,221 45,868 Forfeitures - 12 2 Administrative Expense 109 122 119 Interest Expense 6 19 43 - ----------------------------------------------------------------- Total Deductions 89,993 69,450 88,719 - ----------------------------------------------------------------- Interfund Transfers (73,005) 5,337 (11,161) - ----------------------------------------------------------------- Net Increase 86,895 22,256 40,779 Net Assets Available for Benefits Beginning of Year 714,995 692,739 651,960 - ----------------------------------------------------------------- End of Year $801,890 714,995 692,739 ================================================================= See Notes to Financial Statements. 9 - ----------------------------------------------------------------- Statement Of Net Assets Thrift Plan Of Phillips Available For Benefits Petroleum Company FUND D (Investment Contracts Fund) DEPOSIT ADMINISTRATION ACCOUNT Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Insurance contracts Travelers Insurance Company, Group Annuity Contract GR-15505 $ - 127,316 Continental Assurance Company, Group Annuity, Contract GP-12692 67,098 67,946 Group Annuity, Contract GP-12787 23,656 23,537 Provident National Assurance, Group Annuity, Contract GC-05048 64,731 66,060 - ----------------------------------------------------------------- 155,485 284,859 Interest Receivable - 1,041 - ----------------------------------------------------------------- Total Assets 155,485 285,900 - ----------------------------------------------------------------- Net Assets Available for Benefits $155,485 285,900 ================================================================= Number of Units (A) (A) Unit Values (A) (A) - ----------------------------------------------------------------- (A) See Note 6. See Notes to Financial Statements. 10 - ----------------------------------------------------------------- Statement Of Changes In Net Thrift Plan Of Phillips Assets Available For Benefits Petroleum Company FUND D (Investment Contracts Fund) DEPOSIT ADMINISTRATION ACCOUNT Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Investment Income Interest $ 17,140 25,576 30,956 - ----------------------------------------------------------------- Total Additions 17,140 25,576 30,956 - ----------------------------------------------------------------- Deductions Cash Distributions to Participants or Their Beneficiaries 60,681 52,263 51,376 Administrative Expense 28 75 97 - ----------------------------------------------------------------- Total Deductions 60,709 52,338 51,473 - ----------------------------------------------------------------- Interfund Transfers (86,846) (20,541) (48,168) - ----------------------------------------------------------------- Net Decrease (130,415) (47,303) (68,685) Net Assets Available for Benefits Beginning of Year 285,900 333,203 401,888 - ----------------------------------------------------------------- End of Year $ 155,485 285,900 333,203 ================================================================= See Notes to Financial Statements. 11 - ----------------------------------------------------------------- Statement Of Net Assets Thrift Plan Of Phillips Available For Benefits Petroleum Company FUND D (Investment Contracts Fund) DEFERRED SETTLEMENT ACCOUNT Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Insurance contract $470 603 - ----------------------------------------------------------------- Total Assets 470 603 - ----------------------------------------------------------------- Net Assets Available for Benefits $470 603 ================================================================= See Notes to Financial Statements. 12 - ----------------------------------------------------------------- Statement Of Changes In Net Thrift Plan Of Phillips Assets Available For Benefits Petroleum Company FUND D (Investment Contracts Fund) DEFERRED SETTLEMENT ACCOUNT Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Investment Income Interest $ 44 66 118 - ----------------------------------------------------------------- Total Additions 44 66 118 - ----------------------------------------------------------------- Deductions Cash Distributions to Participants or Their Beneficiaries 177 307 507 - ----------------------------------------------------------------- Total Deductions 177 307 507 - ----------------------------------------------------------------- Net Decrease (133) (241) (389) Net Assets Available for Benefits Beginning of Year 603 844 1,233 - ----------------------------------------------------------------- End of Year $ 470 603 844 ================================================================= See Notes to Financial Statements. 13 - ----------------------------------------------------------------- Statement Of Net Assets Thrift Plan Of Phillips Available For Benefits Petroleum Company FUND E (S&P 500 Fund) Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Vanguard Index Trust 500 Portfolio $114,578 - BT Pyramid Large Capitalization Equity Index Fund - 71,911 Due From Temporary Investment Fund 457 358 - ----------------------------------------------------------------- Total Assets 115,035 72,269 - ----------------------------------------------------------------- Net Assets Available for Benefits $115,035 72,269 ================================================================= Number of Units 1,663,309 46,684,257 Unit Value $69.1603 1.5480 - ----------------------------------------------------------------- See Notes to Financial Statements. 14 - ----------------------------------------------------------------- Statement Of Changes In Net Thrift Plan Of Phillips Assets Available For Benefits Petroleum Company FUND E (S&P 500 Fund) Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Investment Income Dividends $ 2,035 - - Net appreciation 17,263 18,818 986 - ----------------------------------------------------------------- 19,298 18,818 986 Allocation of Deposits and Earnings from Temporary Investment Fund 4,185 3,698 3,818 - ----------------------------------------------------------------- Total Additions 23,483 22,516 4,804 - ----------------------------------------------------------------- Deductions Cash Distributions to Participants or Their Beneficiaries 10,320 5,377 3,928 Administrative Expense 39 23 73 - ----------------------------------------------------------------- Total Deductions 10,359 5,400 4,001 - ----------------------------------------------------------------- Interfund Transfers 29,642 3,292 13,118 - ----------------------------------------------------------------- Net Increase 42,766 20,408 13,921 Net Assets Available for Benefits Beginning of Year 72,269 51,861 37,940 - ----------------------------------------------------------------- End of Year $115,035 72,269 51,861 ================================================================= See Notes to Financial Statements. 15 - ----------------------------------------------------------------- Statement Of Net Assets Thrift Plan Of Phillips Available For Benefits Petroleum Company FUND F (Money Market Fund) Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Vanguard Money Market Reserves- Prime Portfolio $154,203 - BT Pyramid Discretionary Cash Fund - 66,264 Due from Temporary Investment Fund 238 259 Interest Receivable - 337 - ----------------------------------------------------------------- Total Assets 154,441 66,860 - ----------------------------------------------------------------- Net Assets Available for Benefits $154,441 66,860 ================================================================= Number of Units 154,440,044 59,671,680 Unit Value $1.000 1.1205 - ----------------------------------------------------------------- See Notes to Financial Statements. 16 - ----------------------------------------------------------------- Statement Of Changes In Net Thrift Plan Of Phillips Assets Available For Benefits Petroleum Company FUND F (Money Market Fund) Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Investment Income Dividends $ 5,094 - - Interest 1,336 4,015 1,867 Allocation of Deposits and Earnings from Temporary Investment Fund 2,454 2,770 2,773 - ----------------------------------------------------------------- Total Additions 8,884 6,785 4,640 - ----------------------------------------------------------------- Deductions Cash Distributions to Participants or Their Beneficiaries 43,654 13,420 15,426 Administrative Expense 67 116 39 - ----------------------------------------------------------------- Total Deductions 43,721 13,536 15,465 - ----------------------------------------------------------------- Interfund Transfers 122,418 13,290 51,075 - ----------------------------------------------------------------- Net Increase 87,581 6,539 40,250 Net Assets Available for Benefits Beginning of Year 66,860 60,321 20,071 - ----------------------------------------------------------------- End of Year $154,441 66,860 60,321 ================================================================= See Notes to Financial Statements. 17 - ----------------------------------------------------------------- Statement Of Net Assets Thrift Plan Of Phillips Available For Benefits Petroleum Company LOAN FUND Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Loans to participants $21,024 18,868 Due from Temporary Investment Fund 553 496 - ----------------------------------------------------------------- Total Assets 21,577 19,364 - ----------------------------------------------------------------- Net Assets Available for Benefits $21,577 19,364 ================================================================= See Notes to Financial Statements. 18 - ----------------------------------------------------------------- Statement Of Changes In Net Thrift Plan Of Phillips Assets Available For Benefits Petroleum Company LOAN FUND Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Interest--Participant Loans $ 1,355 1,179 919 - ----------------------------------------------------------------- Deductions Cash Distributions to Participants or Their Beneficiaries 730 720 482 Loan Repayments from Plan Participants 9,368 7,867 5,934 - ----------------------------------------------------------------- Total Deductions 10,098 8,587 6,416 - ----------------------------------------------------------------- Interfund Transfers 10,956 8,631 9,481 - ----------------------------------------------------------------- Net Increase 2,213 1,223 3,984 Net Assets Available for Benefits Beginning of Year 19,364 18,141 14,157 - ----------------------------------------------------------------- End of Year $21,577 19,364 18,141 ================================================================= See Notes to Financial Statements. 19 - ----------------------------------------------------------------- Statement Of Net Assets Thrift Plan Of Phillips Available For Benefits Petroleum Company TEMPORARY INVESTMENT FUND Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Vanguard Money Market Reserves- Prime Portfolio $3,718 - BT Pyramid Government Securities Cash Fund - 3,336 Contributions Receivable 207 116 Employee Deposits Receivable 104 204 Loan Repayments Receivable 106 73 Dividends Receivable 55 - Interest Receivable - 14 - ----------------------------------------------------------------- Total Assets 4,190 3,743 - ----------------------------------------------------------------- Liabilities Due to Fund A 116 107 Due to Fund B 2,826 2,523 Due to Fund E 457 358 Due to Fund F 238 259 Due to Loan Fund 553 496 - ----------------------------------------------------------------- Total Liabilities 4,190 3,743 - ----------------------------------------------------------------- Net Assets Available for Benefits $ - - ================================================================= See Notes to Financial Statements. 20 - ----------------------------------------------------------------- Statement Of Changes In Net Thrift Plan Of Phillips Assets Available For Benefits Petroleum Company TEMPORARY INVESTMENT FUND Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Contributions and Deposits Company contributions-- before-tax deposits $18,840 17,601 17,313 Employee deposits 15,697 15,865 16,429 Loan repayments from Plan participants 9,368 7,867 5,934 - ----------------------------------------------------------------- 43,905 41,333 39,676 Investment Income Dividends 147 - - Interest 63 169 115 - ----------------------------------------------------------------- Total Additions 44,115 41,502 39,791 - ----------------------------------------------------------------- Deductions Allocation of Deposits and Earnings 34,747 33,635 33,856 - ----------------------------------------------------------------- Interfund Transfers (9,368) (7,867) (5,935) Net Increase - - - Net Assets Available for Benefits Beginning of Year - - - - ----------------------------------------------------------------- End of Year $ - - - ================================================================= See Notes to Financial Statements. 21 - ----------------------------------------------------------------- Notes To Financial Statements Thrift Plan Of Phillips Petroleum Company Note 1--Plan Description The following description of the Thrift 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 available to certain employees of Phillips Petroleum Company and participating subsidiaries (Company). Generally, any person on the direct U.S. dollar payroll of the Company is eligible to participate. Non-managerial retail outlet marketing employees and certain other employee classifications are not eligible. Effective at the close of business on December 31, 1995, the Trustee for Funds B and C, which were invested primarily in common stock of the Company, was changed from Bankers Trust Company (Bankers) to Vanguard Fiduciary Trust Company (Vanguard). Bankers continued to serve as custodian for those funds until June 28, 1996, when Vanguard became custodian. Effective July 1, 1996, Vanguard began providing recordkeeping, participant accounting, and tax reporting services for the Plan, and became Trustee for all funds except Fund D. Effective June 1, 1996, Phillips Petroleum Company became contractholder for all Fund D insurance contracts. This change in contractholder did not affect participant benefits. Vanguard does provide recordkeeping services for Fund D as part of the recordkeeping services provided to the Plan. Funds A, E, F and the Temporary Investment Fund were transferred to Vanguard for investment management effective May 1, 1996. With Vanguard as Trustee, participants are permitted to make transfers between investment funds on any valuation date (each day the New York Stock Exchange is open for business). Before the change of Trustee, transfers between investment funds were permitted only on a monthly basis. Under the new trust agreement with Vanguard, assets of Fund A, also known as the Vanguard Bond Index - Total Bond Market Portfolio Fund (Bond Index Fund), formerly invested in the Wells Fargo Government/Corporate Bond Index Fund E, managed by Barclays Global Investors (BGI), are now invested in the Vanguard Bond Index - Total Bond Market Portfolio. Assets of Funds B and C are now invested in the Phillips Stock Fund which is a single investment fund consisting of two separate accounts. The Phillips Stock Fund is invested only in the common stock of the Company and holds cash reserves as determined by the Trustee. Assets of Fund D, also known as the Investment Contracts Fund, are invested in contracts guaranteed by insurance companies as to both principal and interest. Fund D consists of the Deposit Administration Account and the Deferred Settlement Account. 22 Assets of Fund E, also known as the Vanguard Index Trust 500 Portfolio Fund (S&P 500 Fund), formerly invested in the Bankers Trust Pyramid Large Capitalization Equity Index Fund, are now invested in the Vanguard Index Trust 500 Portfolio. Assets of Fund F, also known as the Vanguard Money Market Reserves - Prime Portfolio Fund (Money Market Fund), formerly invested in the Bankers Trust Discretionary Cash Fund, are now invested in the Vanguard Money Market Reserves - Prime Portfolio. Assets of the Temporary Investment Fund, formerly invested in the Bankers Trust Pyramid Government Securities Cash Fund, are now invested in the Vanguard Money Market Reserves - Prime Portfolio. Vanguard reports all mutual fund investment income as dividends. These dividends may be any type of income, including interest. The income is divided by the total number of units held in each mutual fund. Then the additional units are credited by Vanguard to the investment funds of the Plan. This differs from Bankers and BGI where interest was earned on cash accounts and share values of the commingled funds would increase as a result of income earned, increasing Plan per-unit amounts, not the number of units in the investment funds. Hence, unit values in 1996 did not fluctuate as much as they did in earlier years. Because of this change in method and the fact that the funds were invested in new investment vehicles at Vanguard, the number of units and the unit values in the statements for Funds A, E, and F are not comparable for 1996 and 1995. The dividends reported for the Phillips Stock Fund are the dividends on Company stock, as they have been reported historically. Participants may have up to 15 percent of their pay deposited in the Plan each month. The first 5 percent is designated as regular deposits with any excess being designated as supplemental deposits. Deposits may be further designated by a participant as before-tax or after-tax deposits. Before-tax deposits are made by the Company on behalf of a participant who has elected the before-tax feature of the Plan, voluntarily reducing his salary by a corresponding amount. Total deposit amounts and allocation of deposits between after-tax and before-tax accounts are subject to limitations imposed by the Internal Revenue Code. Participants may change their investment direction and deposit rate semiannually during designated enrollment periods. Employee deposits may be suspended in certain circumstances. The Company contributes an amount equal to 25 percent of an employee's regular deposits made to the Phillips Stock Fund-- Fund B account and 15 percent of regular deposits made to any other investment fund. 23 Employee and before-tax deposits and loan repayments are first placed into the Temporary Investment Fund and remain there until the valuation date on or about the 20th day of the following month. Employee and before-tax deposits are paid into the respective investment funds in accordance with the allocation directions of participants. Loan repayments are transferred to the Loan Fund and then are generally allocated to Funds A, B, E or F based on a participant's regular deposits investment allocation, except that funds borrowed from Fund C are repaid only to Fund C. Interest earned on deposits and loan repayments while in the Temporary Investment Fund are credited quarterly in the same manner to each participant who still maintains an account in the Plan and who made deposits or loan repayments during the quarter. The allocation of earnings shall be made to each Participant in the proportion to which his deposits or loan repayments bears to all deposits or loan repayments during the period for which such interest was earned. Employee deposits and earnings are paid into Funds A, B, E or F as directed by the participant. After June 30, 1993, Fund D (investment contracts which guarantee repayment of principal invested and a fixed rate of interest) no longer accepted deposits. Company matching contributions are invested in the Phillips Stock Fund--Fund C account. The Loan Fund is used to record transactions resulting from loans made to active employees against their accounts. Except for the Temporary Investment Fund and the Loan Fund, the interests of participants in each fund are represented by units allocated to them. Effective July 1, 1996 (when Vanguard became Trustee), the Plan provides for daily transfers among funds; however, plan participants may not direct transfers to Fund C, the Loan Fund, or the Temporary Investment Fund. A participant may make unlimited transfers of any dollar amount, whole percentages or mutual fund shares to or from Investment Funds A, E or F on any valuation date. A participant may direct the transfer of any dollar amount, whole percentages or units of the Phillips Stock Fund to or from his Fund B account to or from Funds A, E, or F on any valuation date. The participant must wait 10 calendar days to make another transfer involving Fund B. Transfers to Fund D were permitted only in certain circumstances until June 15, 1993, but transfers were not allowed out of Fund D after January 15, 1993. Effective July 1, 1995, a participant is vested at all times with respect to his deposits and his interest in Company contributions. Upon a Participant's termination of employment, prior to July 1, 1995, that portion of his interest in the Plan resulting from contributions that were not vested at termination were forfeited. Forfeitures arising from non-vested withdrawals were used to reduce future Company contributions. 24 Prior to January 1, 1996, generally a participant could, as of any valuation date, withdraw any portion of his vested interest in his after-tax account. Effective January 1, 1996, Company contributions made after December 31, 1995, may not be withdrawn until 24 months after they are contributed unless the participant has been in the Plan for at least five years or becomes eligible to withdraw, for reasons other than a specified financial hardship, his interest in the before-tax account. A participant may not withdraw his interest in his before-tax account unless he is at least age 59 1/2, experiences a specified financial hardship, becomes totally and permanently disabled, or separates from service. Upon death of a participant, the beneficiary may withdraw the participant's before-tax account balance. Distributions occur upon separation from service, but may be deferred. For a participant who retires or becomes totally disabled, distribution will be deferred to a date not later than the first valuation date of February of the year after the year age 70 1/2 is attained. If the participant dies, distribution to a surviving spouse beneficiary will be deferred to the first valuation date of the second month preceding the month in which the participant would have attained age 70 1/2. This deferral is revocable by the participant or the surviving spouse. Distributions to non-spouse beneficiaries may be deferred approximately five years. Distributions are based on the valuation of the participant's interest in the trust fund. Available forms of distribution are: (a) from Funds A, D, E or F in cash; (b) from Funds B and C in whole shares of common stock and/or cash; (c) with respect to a participant who retires under a Company retirement plan or a beneficiary spouse of a participant in the event of an active employee participant's death, in the form of an irrevocable non-transferable monthly annuity purchased with a specified dollar amount of the participant's interest in the Plan; and (d) with respect to a participant who retired under a Company retirement plan before July 1, 1992, and who timely elected a deferred settlement option--monthly, quarterly or annual payments irrevocably elected from his interest in Fund D--commencing at retirement with, at the participant's direction, a designated life-interest beneficiary to receive any unpaid scheduled payments following the participant's death. 25 A participant may elect a direct rollover of the taxable portion of most distributions to an Individual Retirement Account or another tax-qualified plan. The taxable portion of any such distribution that is not rolled over directly will be subject to 20 percent federal withholding. The Plan is administered by a Thrift Plan Committee, the members of which are appointed by the Board of Directors of Phillips Petroleum Company. The Plan Financial Administrator and Plan Benefits Administrator are the persons who occupy, respectively, the Phillips Petroleum Company 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. The Plan pays all reasonable expenses necessary for the operation of the Plan, unless such expenses are paid by the Company. The Company pays only the Trustee's recordkeeping and accounting fees and the class year contract administration fees of .15 percent of the funds invested in the insured contracts in Fund D. The Company intends to continue the Plan indefinitely, but reserves the right to amend or terminate it at any time. In the event of termination of the Plan, participants and beneficiaries of deceased participants will receive, within a reasonable time, any funds in their accounts as of the date of the termination. Note 2--Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and assumptions. Note 3--Investments All securities are valued at their quoted market price or, with respect to units of participation in commingled funds, redemption value. Insurance contracts are valued pursuant to their terms; the value, which approximates fair value, represents fund deposits plus interest credited, less distributions. Participant loans are valued at cost, which approximates fair value. 26 Note 4--Contributions Receivable Contributions receivable at December 31 included the following: Thousands of Dollars -------------------- 1996 1995 -------------------- Receivable from the Company for Matching contributions $487 452 Before-tax deposits 207 116 - ----------------------------------------------------------------- $694 568 ================================================================= Note 5--Insurance Contracts A breakdown of the average yields and crediting interest rates for the insurance contracts by Class Year included in Fund D follows: Crediting Average Interest Yield Rate Class ----------- ----------- Year Identity of Issue Contract Description 1996 1995 1996 1995 - ----- --------------------- ---------------------- ------------------------- 1992 Continental Assurance Group Annuity Contract Company (CNA) GP-12787, deposit administration account 7.33% 7.38 7.35 7.35 1991 Continental Assurance Group Annuity Contract Company GP-12692, deposit administration account 8.33* 8.26* 8.30* 8.30* Provident National Group Annuity Contract Assurance (PNA) GC-027-05048, deposit administration account 8.33* 8.26* 8.30* 8.30* 1990 Travelers Insurance Group Annuity Contract Company GR-15505, deposit administration account - 9.11 - 9.10 - ----------------------------------------------------------------------------- *The average yields and crediting interest rates for the 1991 Class Year are the combined yields for Group Annuity Contracts GP-12692 and GC-027-05048. The crediting interest rates, determined by each insurance company, are guaranteed over their respective six-year contract terms. However, the effective rates of interest for each contract year may be different. The contracts may be discontinued as of any date the Plan has failed to qualify, or continue to qualify, under Section 401(a) of the Internal Revenue Code of 1986 as amended, or if the Plan is terminated. Also, the Company may discontinue the contracts by giving written notice. 27 The final year of the Travelers Insurance Company Group Annuity Contract GR-15505 terminated July 1, 1996, and the balance, approximately $86.5 million, was transferred from Fund D to Fund F, causing the net assets available for benefits in Fund F to more than double between year-ends 1995 and 1996. Note 6--Class Year Accounts A breakdown of Fund D (Investment Contracts Fund)--Deposit Administration Account by Class Year at December 31 follows: Thousands of Dollars ------------ Net Assets Available Number Unit for Benefits of Units Values -------------------------------------- 1996 - ---- 1992 $ 23,656 10,259,372 2.3058 1991 131,829 44,731,562 2.9471 1990 - - - - ----------------------------------------------------------------- $155,485 ================================================================= 1995 - ---- 1992 $ 23,622 10,995,307 2.1484 1991 134,496 49,438,453 2.7205 1990 127,782 36,686,402 3.4831 - ----------------------------------------------------------------- $285,900 ================================================================= Note 7--Loan Fund Since July 1, 1993, the Plan has allowed loans to active employees or parties-in-interest from their accounts. The minimum loan is $1,000, and generally the maximum is the lesser of $50,000 or half a participant's vested account. The loans may extend for up to 60 months (180 months for a home loan) with a rate of interest equal to the national prime lending rate, as determined on the last valuation date of the previous month. No more than one home loan and two regular loans may be outstanding at any given time. Loan payments and interest are repaid to the borrowing participant's accounts through the Loan Fund, which records the outstanding loans and related transactions. Generally, repayments are allocated to Funds A, B, E or F based on a participant's regular deposits investment direction, except that funds borrowed from Fund C are repaid only to Fund C. For the periods ended December 31, the total of loans made by fund of origin, principal repaid, and aggregate outstanding loan balances were: 28 Thousands of Dollars --------------------------------------------- Fund A B C D E F Total --------------------------------------------- Period ended December 31, 1996 - ----------------- Loans Outstanding at December 31, 1995 $18,868 Participant Loans $396 8,137 179 311 841 1,035 10,899 Principal Repaid 108 6,560 173 - 244 928 8,013 Distributions to Participants 730 - ----------------------------------------------------------------- Loans Outstanding at December 31, 1996 $21,024 ================================================================= Period ended December 31, 1995 - ----------------- Loans Outstanding at December 31, 1994 $17,837 Participant Loans $549 5,588 963 513 350 480 8,443 Principal Repaid 95 5,917 231 - 181 268 6,692 Distributions to Participants 720 - ----------------------------------------------------------------- Loans Outstanding at December 31, 1995 $18,868 ================================================================= 29 Note 8--Allocation of Deposits and Earnings from Temporary Investment Fund Allocation of deposits and earnings from the Temporary Investment Fund to other investment funds represents the allocation of employee deposits and before-tax contributions made first to the Temporary Investment Fund, with related earnings thereon. A breakdown of the allocation for each of the periods follows: Thousands of Dollars ------------------------------------ Fund A Fund B Fund E Fund F ------------------------------------ December 31, 1996 - ----------------- Employee deposits $ 602 11,721 1,848 1,526 Before-tax contributions 525 15,146 2,293 876 Interest and dividends 5 109 44 52 - ----------------------------------------------------------------- $1,132 26,976 4,185 2,454 ================================================================= December 31, 1995 - ----------------- Employee deposits $ 610 11,770 1,755 1,730 Before-tax contributions 504 14,268 1,864 965 Interest 3 12 79 75 - ----------------------------------------------------------------- $1,117 26,050 3,698 2,770 ================================================================= December 31, 1994 - ----------------- Employee deposits $ 746 11,983 1,926 1,774 Before-tax contributions 584 13,932 1,841 956 Interest 3 17 51 43 - ----------------------------------------------------------------- $1,333 25,932 3,818 2,773 ================================================================= Note 9--Credit Facility Effective July 14, 1993, the Plan established a 364-day $50 million revolving credit facility with NationsBank of Texas, N.A., for the purpose of financing net Funds B and C distributions, participant loans from the Plan, or transfers of participants' interests to other funds of the Plan. The interest rate may not exceed the Eurodollar interbank offered rate plus .25 percent. Effective June 17, 1994, this credit facility was reduced to $25 million. The Plan Trustee requested that the credit facility be renewed for this reduced amount for an additional year. On July 12, 1995, the credit facility was renewed for another year, but at December 31, 1995, no portion of this credit facility was outstanding. In 1995, the Department of Labor issued the Company a Prohibited Transaction Exemption allowing the Plan to replace its existing bank credit facility with a new $25 million credit agreement between Phillips Petroleum Company and the Thrift Plan of Phillips Petroleum Company and Trust, effective March 15, 1996. 30 The agreement is used for the same purposes as the bank credit facility, which was canceled. The agreement requires no commitment fee. Borrowings are non-interest bearing, without recourse, and must be repaid within 31 days. There was no balance outstanding under this agreement at December 31, 1996. Note 10--Transactions with Parties-in-Interest During 1996, 1995 and 1994, the Plan received $23,461,000, $24,471,000 and $24,213,000, respectively, in common stock dividends from the Company. Fees paid for legal, accounting, and other services rendered by parties-in-interest were based on customary and reasonable rates for such services. Note 11--Tax Status The Internal Revenue Service (IRS) determined on November 30, 1995, that the Plan, as amended through June 23, 1994, 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. 31 - ----------------------------------------------------------------------------- Schedule of Assets Held Thrift Plan Of Phillips for Investment Purposes Petroleum Company Line 27a EIN 73-0400345, Plan No. 002 At December 31, 1996 Description of investment Identity of issue, including maturity date, borrower, lessor, rate of interest, collateral, Historical Current or similar party par or maturity value Cost Value - --------------------- -------------------------------- ---------- -------- Phillips Petroleum Common stock, $1.25 par value, Company* 18,024,498 shares $309,627 797,584 - ----------------------------------------------------------------------------- The Vanguard Group* 1,656,699.834 units, Vanguard Index Trust 500 Portfolio 103,118 114,578 7,605,516.349 units, Vanguard Bond Index-Total Bond Market Portfolio 73,758 74,837 158,913,872.72 units, Vanguard Money Market Reserves-Prime Portfolio 158,914 158,914 - ----------------------------------------------------------------------------- 335,790 348,329 - ----------------------------------------------------------------------------- Thrift Plan of Loans to Plan participants at Phillips Petroleum 6% - 9% Company - 21,024 - ----------------------------------------------------------------------------- Travelers Insurance Group Annuity Contract GR-1966A, Company* deferred settlement account 470 470 Continental Assurance Group Annuity Contract GP-12692, Company* deposit administration account 67,098 67,098 Group Annuity Contract GP-12787, deposit administration account 23,656 23,656 Provident National Group Annuity Contract Assurance Company* GC-027-05048, deposit administration account 64,731 64,731 - ----------------------------------------------------------------------------- 155,955 155,955 - ----------------------------------------------------------------------------- $801,372 1,322,892 ============================================================================= *Party-in-interest 32 - -------------------------------------------------------------------------------- Schedule of Reportable Transactions Thrift Plan of Phillips Line 27d Petroleum Company Series of Transactions EIN 73-0400345, Plan 022 Year Ended December 31, 1996 Total Total number of number Gain or purchases of sales (loss) as a Identity of party during during result of involved and the plan the plan Value of Value trans- description of asset year year purchases* of Sales* actions - ---------------------- --------- -------- ----------- ----------- ----------- Bankers Trust Company, BT Pyramid Government Securities Cash Fund 113 95 $98,655,366 108,012,028 - Phillips Petroleum Company, Common Stock 22 39 19,761,791 72,605,820 43,333,166 Bankers Trust Company, BT Pyramid Discretionary Cash Fund 23 20 29,095,652 95,359,823 - Bankers Trust Company, BT Pyramid Large Capitalization Equity Index Fund 8 5 14,760,597 91,757,478 24,003,456 BZW Barclays Global Investors, Government/Corporate Bond Index Fund E 5 8 4,075,754 76,630,698 11,527,496 The Vanguard Group, Vanguard Money Market Reserves-Prime Portfolio 266 212 274,844,939 114,387,265 - The Vanguard Group, Vanguard Bond Index- Total Bond Market Portfolio 98 94 82,807,478 9,073,129 23,194 The Vanguard Group, Vanguard Index Trust 500 Portfolio 99 91 113,581,032 11,196,834 733,363 - -------------------------------------------------------------------------------- *This is also the current value at time of transaction. 33 - ------------------------------------------------------------------------------ Schedule of Reportable Transactions Thrift Plan of Phillips Line 27d Petroleum Company Individual Transactions EIN 73-0400345, Plan 022 Year Ended December 31, 1996 Identity of party involved and Current description Selling Purchase Cost of value Net gain/ of asset price price Expenses asset of asset (loss) - ------------- ---------- -------- -------- ----------- ---------- ---------- Bankers Trust Company, BT Pyramid Large Capital- ization Equity Index Fund $1,478.495 Net $67,280,791 91,111,338 23,830,547 Bankers Trust Company, BT Pyramid Discret- ionary Cash Fund 1.00 Net 91,059,544 91,059,544 - BZW Barclays Global Investors, Government/ Corporate Bond Index Fund E 12.060 Net 62,600,288 73,605,416 11,005,128 The Vanguard Group, Van- guard Bond Index-Total Bond Market Portfolio 9.69 Net 73,605,416 73,605,416 - The Vanguard Group, Van- guard Money Market Reserves- Prime Portfolio* 1.00 Net 91,432,292 91,432,292 - The Vanguard Group, Van- guard Money Market Reserves- Prime Portfolio** 1.00 Net 86,547,675 86,547,675 - The Vanguard Group, Van- guard Index Trust 500 Portfolio 61.31 Net 91,095,800 91,095,800 - - ------------------------------------------------------------------------------ *Initial purchase May 1, 1996, resulting from transfer of the assets of Fund F from Bankers Trust to Vanguard. **The Travelers Company Group Annuity Contract GR-15505 terminated July 1, 1996, and the balance was transferred to Fund F. 34 Exhibit 1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8, File No. 33-50134) pertaining to the Thrift Plan of Phillips Petroleum Company and in the related Prospectus of our report dated June 25, 1997, with respect to the financial statements and schedules of the Thrift Plan of Phillips Petroleum Company included in this Annual Report (Form 11-K) for the year ended December 31, 1996. /s/ Ernst & Young LLP ERNST & YOUNG LLP Tulsa, Oklahoma June 25, 1997 EX-99 3 Exhibit 99(b) 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, 1996 ------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------- --------- Commission file number 33-50283 -------------------------------- LONG-TERM STOCK 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 Long-Term Stock Savings Plan of Phillips Petroleum Company, filed as 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 Long-Term Stock Savings Plan Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. LONG-TERM STOCK SAVINGS PLAN OF PHILLIPS PETROLEUM COMPANY /s/ Jacqueline K. Wagner ----------------------------- Jacqueline K. Wagner Member Long-Term Stock Savings Plan Committee June 25, 1997 1 - ----------------------------------------------------------------- Index To Financial Statements Long-Term Stock Savings Plan And Schedules Of Phillips Petroleum Company Page Report of Independent Auditors ............................. 3 Financial Statements Statements of Net Assets Available for Benefits at December 31, 1996 and 1995 Total Plan ........................................... 4 Fund EP .............................................. 6 Fund K ............................................... 8 Fund L ............................................... 10 Temporary Fund ....................................... 12 Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 1996, 1995 and 1994 Total Plan ........................................... 5 Fund EP .............................................. 7 Fund K ............................................... 9 Fund L ............................................... 11 Temporary Fund ....................................... 13 Notes to Financial Statements ............................ 14 Supplemental Schedules Schedule of Assets Held for Investment Purposes at December 31, 1996, Line 27a ............................ 19 Schedule of Reportable Transactions for the Year Ended December 31, 1996, Line 27d ............................ 20 2 - ------------------------------------------------------------------ Report Of Independent Auditors The Long-Term Stock Savings Plan Committee Long-Term Stock Savings Plan of Phillips Petroleum Company We have audited the accompanying statement of net assets available for benefits of the Long-Term Stock Savings Plan of Phillips Petroleum Company (Plan) as of December 31, 1996 and 1995, and the related statement of changes in net assets available for benefits for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Long-Term Stock 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 generally accepted auditing standards. 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, 1996 and 1995, and the changes in its net assets available for benefits for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1996, and reportable transactions for the year ended December 31, 1996, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the basic financial statements. The fund information presented on pages 6 through 13 listed in the accompanying index to financial statements and schedules is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Ernst & Young LLP Tulsa, Oklahoma ERNST & YOUNG LLP June 25, 1997 3 - ----------------------------------------------------------------- Statement Of Net Assets Long-Term Stock Savings Plan Available For Benefits Of Phillips Petroleum Company Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Common stock $1,371,686 1,095,085 Money market fund 1,682 5,139 - ----------------------------------------------------------------- 1,373,368 1,100,224 Cash 1,082 - Company Contributions Receivable Funds for debt service 2,037 172 Before-tax deposits 33 34 Interest Receivable 24 43 - ----------------------------------------------------------------- Total Assets 1,376,544 1,100,473 - ----------------------------------------------------------------- Liabilities Securities Acquisition Loans 450,850 476,450 Interest Payable 2,165 2,371 Securities Purchased - 245 Administrative Expenses Payable 155 97 - ----------------------------------------------------------------- Total Liabilities 453,170 479,163 - ----------------------------------------------------------------- Net Assets Available for Benefits $ 923,374 621,310 ================================================================= See Notes to Financial Statements. 4 - ------------------------------------------------------------------- Statement Of Changes In Net Long-Term Stock Savings Plan Assets Available For Benefits Of Phillips Petroleum Company Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Company Contributions Funds for debt service $ 15,578 20,828 11,797 Basic allocation requirements 58 - 56 Before-tax deposits 5,773 5,832 5,988 - ------------------------------------------------------------------- 21,409 26,660 17,841 - ------------------------------------------------------------------- Investment Income Dividends 39,237 38,854 37,527 Interest 358 437 337 Net appreciation 318,207 44,821 126,928 - ------------------------------------------------------------------- 357,802 84,112 164,792 - ------------------------------------------------------------------- Total Additions 379,211 110,772 182,633 - ------------------------------------------------------------------- Deductions Distributions to Participants or Their Beneficiaries 50,310 37,845 41,725 Interest Expense 26,779 30,754 23,965 Administrative Expense 58 93 100 - ------------------------------------------------------------------- Total Deductions 77,147 68,692 65,790 - ------------------------------------------------------------------- Net Increase 302,064 42,080 116,843 Net Assets Available for Benefits Beginning of Year 621,310 579,230 462,387 - ------------------------------------------------------------------- End of Year $923,374 621,310 579,230 =================================================================== See Notes to Financial Statements. 5 - ----------------------------------------------------------------- Statement Of Net Assets Long-Term Stock Savings Plan Available For Benefits Of Phillips Petroleum Company FUND EP Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Common stock $217,193 180,975 Money market fund 351 9 - ----------------------------------------------------------------- 217,544 180,984 Interest Receivable 2 3 - ----------------------------------------------------------------- Total Assets 217,546 180,987 - ----------------------------------------------------------------- Liabilities Administrative Expenses Payable 155 97 - ----------------------------------------------------------------- Total Liabilities 155 97 - ----------------------------------------------------------------- Net Assets Available for Benefits $217,391 180,890 ================================================================= Number of Units 27,811,188 30,014,306 Unit Value $7.8167 6.0268 - ----------------------------------------------------------------- See Notes to Financial Statements. 6 - ------------------------------------------------------------------- Statement Of Changes In Net Long-Term Stock Savings Plan Assets Available For Benefits Of Phillips Petroleum Company FUND EP Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Investment Income Dividends $ 6,280 6,480 6,465 Interest 15 7 3 Net appreciation 51,183 7,528 22,230 - ------------------------------------------------------------------- Total Additions 57,478 14,015 28,698 - ------------------------------------------------------------------- Deductions Distributions to Participants or Their Beneficiaries 20,919 16,051 16,244 Administrative Expense 58 93 100 - ------------------------------------------------------------------- Total Deductions 20,977 16,144 16,344 - ------------------------------------------------------------------- Net Increase (Decrease) 36,501 (2,129) 12,354 Net Assets Available for Benefits Beginning of Year 180,890 183,019 170,665 - ------------------------------------------------------------------- End of Year $217,391 180,890 183,019 =================================================================== See Notes to Financial Statements. 7 - ----------------------------------------------------------------- Statement Of Net Assets Long-Term Stock Savings Plan Available For Benefits Of Phillips Petroleum Company FUND K Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Common stock $64,354 46,526 Money market fund 167 430 - ----------------------------------------------------------------- 64,521 46,956 Due from Temporary Fund 635 493 Interest Receivable 1 3 - ----------------------------------------------------------------- Total Assets 65,157 47,452 - ----------------------------------------------------------------- Liabilities Securities Purchased - 245 - ----------------------------------------------------------------- Total Liabilities - 245 - ----------------------------------------------------------------- Net Assets Available for Benefits $65,157 47,207 ================================================================= Number of Units 34,574,082 32,392,783 Unit Value $1.8846 1.4573 - ----------------------------------------------------------------- See Notes to Financial Statements. 8 - ------------------------------------------------------------------- Statement Of Changes In Net Long-Term Stock Savings Plan Assets Available For Benefits Of Phillips Petroleum Company FUND K Thousands of Dollars --------------------------------- Years Ended December 31 1996 1995 1994 --------------------------------- Additions Allocation of Deposits and Earnings from Temporary Fund $ 5,804 5,856 6,005 - ------------------------------------------------------------------- Investment Income Dividends 1,741 1,534 1,295 Interest 20 22 16 Net appreciation 13,924 1,703 4,280 - ------------------------------------------------------------------- 15,685 3,259 5,591 - ------------------------------------------------------------------- Total Additions 21,489 9,115 11,596 - ------------------------------------------------------------------- Deductions Distributions to Participants or Their Beneficiaries 3,539 2,767 3,452 - ------------------------------------------------------------------- Net Increase 17,950 6,348 8,144 Net Assets Available for Benefits Beginning of Year 47,207 40,859 32,715 - ------------------------------------------------------------------- End of Year $65,157 47,207 40,859 =================================================================== See Notes to Financial Statements. 9 - ----------------------------------------------------------------- Statement Of Net Assets Long-Term Stock Savings Plan Available For Benefits Of Phillips Petroleum Company FUND L Thousands of Dollars ------------------------ At December 31 1996 1995 ------------------------ Assets Investments Common stock $1,090,139 867,584 Money market fund 562 4,243 - ----------------------------------------------------------------- 1,090,701 871,827 Cash 1,082 - Company Contributions Receivable Funds for debt service 2,037 172 Interest Receivable 21 35 - ----------------------------------------------------------------- Total Assets* 1,093,841 872,034 - ----------------------------------------------------------------- Liabilities Securities Acquisition Loans 450,850 476,450 Interest Payable 2,165 2,371 - ----------------------------------------------------------------- Total Liabilities 453,015 478,821 - ----------------------------------------------------------------- Net Assets Available for Benefits $ 640,826 393,213 ================================================================= Number of Units 175,944,066 157,715,845 Unit Value** $2.5317 1.9514 - ----------------------------------------------------------------- See Notes to Financial Statements. *The amount of total assets that was not allocated to participants at December 31, 1996 and 1995, was $648,408 thousand and $564,275 thousand, respectively. **Unit value calculated on assets allocated to participants only. 10 - ------------------------------------------------------------------- Statement Of Changes In Net Long-Term Stock Savings Plan Assets Available For Benefits Of Phillips Petroleum Company FUND L Thousands of Dollars ---------------------------------- Years Ended December 31 1996 1995 1994 ---------------------------------- Additions Company Contributions Funds for debt service $ 15,578 20,828 11,797 Basic allocation requirements 58 - 56 - ------------------------------------------------------------------- 15,636 20,828 11,853 - ------------------------------------------------------------------- Investment Income Dividends 31,216 30,840 29,767 Interest 292 384 301 Net appreciation 253,100 35,590 100,418 - ------------------------------------------------------------------- 284,608 66,814 130,486 - ------------------------------------------------------------------- Total Additions 300,244 87,642 142,339 - ------------------------------------------------------------------- Deductions Distributions to Participants or Their Beneficiaries 25,852 19,027 22,029 Interest Expense 26,779 30,754 23,965 - ------------------------------------------------------------------- Total Deductions 52,631 49,781 45,994 - ------------------------------------------------------------------- Net Increase 247,613 37,861 96,345 Net Assets Available for Benefits Beginning of Year 393,213 355,352 259,007 - ------------------------------------------------------------------- End of Year $640,826 393,213 355,352 =================================================================== See Notes to Financial Statements. 11 - ----------------------------------------------------------------- Statement Of Net Assets Long-Term Stock Savings Plan Available For Benefits Of Phillips Petroleum Company TEMPORARY FUND Thousands of Dollars -------------------- At December 31 1996 1995 -------------------- Assets Investments Money market fund $602 457 Company Contributions Receivable Before-tax deposits 33 34 Interest Receivable - 2 - ----------------------------------------------------------------- Total Assets 635 493 - ----------------------------------------------------------------- Liabilities Due to Fund K 635 493 - ----------------------------------------------------------------- Total Liabilities 635 493 - ----------------------------------------------------------------- Net Assets Available for Benefits $ - - ================================================================= See Notes to Financial Statements. 12 - ------------------------------------------------------------------- Statement Of Changes In Net Long-Term Stock Savings Plan Assets Available For Benefits Of Phillips Petroleum Company TEMPORARY FUND Thousands of Dollars -------------------------------- Years Ended December 31 1996 1995 1994 -------------------------------- Additions Company Contributions Before-tax deposits $5,773 5,832 5,988 Investment Income Interest 31 24 17 - ------------------------------------------------------------------- Total Additions 5,804 5,856 6,005 - ------------------------------------------------------------------- Deductions Allocation of Deposits and Earnings to Fund K 5,804 5,856 6,005 - ------------------------------------------------------------------- Net Increase - - - Net Assets Available for Benefits Beginning of Year - - - - ------------------------------------------------------------------- End of Year $ - - - =================================================================== See Notes to Financial Statements. 13 - ---------------------------------------------------------------- Notes To Financial Statements Long-Term Stock Savings Plan Of Phillips Petroleum Company Note 1--Plan Description The following description of the Long-Term Stock Savings Plan of Phillips Petroleum Company (Plan) is subject to and qualified by the more complete information appearing in the Plan document. The Plan became effective July 1, 1988, and is a defined contribution stock bonus plan available to certain employees of Phillips Petroleum Company and participating subsidiaries (Company). Generally, any person on the U.S. direct dollar payroll of the Company is eligible to participate, except non-managerial retail marketing outlet employees and certain other employee classifications. Prior to December 31, 1995, the Company had a trust agreement with Bankers Trust Company, 280 Park Avenue, New York, New York 10017 (Trustee). Effective at the close of business on December 31, 1995, the Trustee was changed to Vanguard Fiduciary Trust Company. Plan investments are held by the Trustee in the Temporary Fund, Fund K (also known as the Employee Stock Fund), Fund L (also known as the Employer Stock Fund) and Fund EP (also known as the EP Stock Fund). Temporary Fund investments consist of specified short-term securities. Funds K, L and EP are invested primarily in common stock of Phillips Petroleum Company (Phillips Stock). Fund L consists of Phillips Stock purchased with the proceeds of the loans described in Note 3 or with certain Company contributions. The Phillips Stock will be allocated to Fund L accounts of eligible participants. The Plan provides for three types of stock allocations: semiannual basic allocations, dividend replacement allocations and supplemental allocations. A basic allocation is made as of June 30 and December 31 of each year. Prior to 1999, 716,846 shares of stock will be divided among or "allocated to" the Fund L accounts of eligible participants as of each June 30 and December 31. After 1998 and through 2005, the number of shares to be allocated semiannually will be 477,876. In December 1995, the Company extended the LTSSP to the year 2015. Without the extension, allocations of stock to employees would have been completed in 2005 or before. The new extension will require additional shares to be delivered to the LTSSP. 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 3,877 shares for each 100 employees eligible to make 14 deposits as of the preceding allocation date. The LTSSP is eligible to receive shares from the Company's Compensation and Benefits Trust, also established in December 1995. A participant's semiannual basic allocation is based on the ratio of the participant's Fund K before-tax deposits to all eligible participants' before-tax deposits for the allocation period. If the Company does not elect to make a special contribution and if eligible dividends from participants' Fund L or Fund EP accounts are used to make loan payments, participants will receive a dividend replacement allocation. The Plan used $16.1 million, $14.5 million and $12.7 million in dividends on allocated shares to make loan payments and allocated 402,774 shares, 431,613 shares and 399,586 shares in dividend replacement allocations to participants' Fund L and Fund EP accounts in 1996, 1995 and 1994, respectively. A supplemental allocation is made each year-end if all shares released for allocation, based on loan payment provisions, have not been allocated. The Company makes contributions to the Plan which, when aggregated with the Plan's dividends from Fund L, certain dividends from Fund EP and certain interest earnings from Fund L, equal the amount necessary to enable the Plan to make its regularly scheduled payments of principal and interest due on its loans. The Company may also elect to make contributions to the Plan, as an alternative to utilizing the dividends from shares in Fund EP or allocated shares in Fund L. Finally, the Company may 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 Phillips Stock from the Compensation and Benefits Trust. Eligible employees may elect to have their salaries reduced and before-tax deposits made by the Company on their behalf equal to one percent of pay. These deposits are first placed into the Temporary Fund and remain there until the valuation date on or about the 20th day of the following month, and then are transferred into the employee's Fund K account. Interest earned on deposits while in the Temporary Fund are credited quarterly in the same manner to each participant who still maintains an account in the Plan and who made deposits during the quarter. The interest of participants in each fund is represented by units allocated to them. Assets of the Employee Stock Ownership Plan of Phillips Petroleum Company (ESOP) and the Payroll Stock Ownership Plan of Phillips Petroleum Company (PAYSOP), which were merged into the Plan on July 1, 1988, are held in Fund EP. 15 Participants are always vested in their deposits and amounts credited to their accounts. Total withdrawals from Funds K, L and EP may be made upon the occurrence of specified events, including attainment of age 59 1/2 (after December 31, 1998, for Funds EP and L) or separation from service. Partial withdrawals are permitted in cases of specified financial hardship and certain other cases. For a participant who retires or becomes totally disabled, unless a request for withdrawal is made as of any earlier date, distribution will be deferred to a date not later than the first valuation date of February of the year after the year age 70 1/2 is attained. If the participant dies, distribution to a surviving spouse beneficiary will be deferred to the first valuation date of the second month preceding the month in which the participant would have attained age 70 1/2. This deferral is revocable by the participant or the surviving spouse. Distributions to non-spouse beneficiaries may be deferred approximately five years. A participant may elect a direct rollover of the taxable portion of most distributions to an Individual Retirement Account or another tax-qualified plan. The taxable portion of any such distribution that is not rolled over directly will be subject to 20 percent federal withholding. The Plan is administered by the Long-Term Stock Savings Plan Committee, the members of which are appointed by the Board of Directors of Phillips Petroleum Company. Members of the Committee serve without compensation, but are reimbursed by the Company for necessary expenditures incurred in the discharge of their duties. Administrative expenses of the Plan will be paid by the Trustee from assets of the Plan to the extent allowable by law, unless paid by the Company. In 1996, 1995 and 1994, the Trustee made cash payments of $0, $95,844 and $100,000, respectively, for reimbursement of administrative expenses to Phillips from Fund EP. Plan administrative expenses of approximately $200,000, $400,000 and $402,000 were paid by Phillips to the Trustee in 1996, 1995 and 1994, respectively. Note 2--Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 16 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 Phillips Petroleum Company (Phillips), respectively. The shares are held in a Fund L suspense account until allocated to eligible participants based on the provisions of the Plan. At December 31, 1996 and 1995, the market value of unallocated shares was $645 million and $560 million, respectively. The Loans are guaranteed by Phillips. They are being repaid through contributions made by the Company, dividends on unallocated and allocated shares, and earnings on the short-term investment of dividends. Loan 1 During 1994, the Plan signed a $131 million term loan agreement that was used to refinance the outstanding notes payable issued in 1988. The notes were redeemed on May 16, 1994. The new term loan requires repayment in annual installments through the year 1998, matching the maturities of the refinanced notes, but at a reduced cost. Principal payments totaling $26 million were made on Loan 1 in both 1996 and 1995. The outstanding balance of Loan 1 at December 31, 1996, was $54 million. Loan 1 provides for variable interest rates. The rates were 4.98 percent and 4.88 percent at December 31, 1996 and 1995, respectively. Loan 2 Loan 2 was amended late in 1995 to extend its term from 15 to 25 years. Loan 2 is a bank loan, requiring repayment in annual installments beginning in 2005, through the year 2015. Any participating bank in the syndicate of lenders may cease to participate on November 30, 2001, by giving not less than 180 days prior notice to the Plan and Phillips. Also, each bank participating in the loan has the optional right, if the current directors of Phillips 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 obligations under the loan agreement must be purchased by Phillips if not transferred to another bank of Phillips' choice. The Company amended Loan 2, effective May 30, 1997, to extend the date that any participating bank in the syndicate of lenders may cease to participate from November 30, 2001, to December 5, 2004. The outstanding balance of Loan 2 at December 31, 1996, was $397 million. Loan 2 provides for variable interest rates. The rates were 5.775 percent and 6.20 percent at December 31, 1996 and 1995, respectively. 17 Note 4--Investments Phillips Stock is valued at fair value, using the New York Stock Exchange closing quoted market price. For money market funds, cost and market value are the same. Note 5--Tax Status The Internal Revenue Service (IRS) determined on January 16, 1996, 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. 18 - ------------------------------------------------------------------------------ Schedule of Assets Held for Long-Term Stock Savings Plan Of Investment Purposes Phillips Petroleum Company Line 27a EIN 73-0400345, Plan 022 At December 31, 1996 Description of investment Thousands of Dollars Identity of issue, including maturity date, ---------------------- borrower, lessor, rate of interest, collateral, Historical Current or similar party par or maturity value Cost Value - ------------------ -------------------------------- ---------- --------- Phillips Petroleum 30,998,548 shares of common Company* stock, $1.25 par value $677,867 1,371,686 Vanguard Fiduciary 1,682,186 units of participation Trust Company* in the Vanguard Money Market Reserves-Prime Portfolio, $1.00 par value 1,682 1,682 - ------------------------------------------------------------------------------ $679,549 1,373,368 ============================================================================== *Party-in-interest 19 - ------------------------------------------------------------------------------ Schedule of Reportable Transactions Long-Term Stock Savings Plan of Line 27d Phillips Petroleum Company EIN 73-0400345, Plan 022 Year Ended December 31, 1996 Thousands of Dollars Total Total -------------------------------- number of number of Gain or Identity of party purchases sales Value (loss) as a involved and during the during the Value of of result of description of asset plan year plan year purchases* Sales* transactions - -------------------- ---------- ---------- ---------- ------ ------------ Bankers Trust Company General Employee Benefit Trust, BT Pyramid Government Securities Cash Fund 94 93 $27,489 32,627 - Vanguard Fiduciary Trust Company, Vanguard Money Market Reserves- Prime Portfolio 138 126 31,972 30,290 - - ------------------------------------------------------------------------------ *This is also the current value at time of transaction. 20 Exhibit 1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8, File No. 33-50283) pertaining to the Long- Term Stock Savings Plan of Phillips Petroleum Company and in the related Prospectus of our report dated June 25, 1997, with respect to the financial statements and schedules of the Long-Term Stock Savings Plan of Phillips Petroleum Company included in this Annual Report (Form 11-K) for the year ended December 31, 1996. /s/ Ernst & Young LLP ERNST & YOUNG LLP Tulsa, Oklahoma June 25, 1997 EX-99 4 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, 1996 ------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------- --------- Commission file number 33-28669 -------------------------------- 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/ Jacqueline K. Wagner --------------------------------- Jacqueline K. Wagner Member Retirement Savings Plan Committee June 25, 1997 1 - ----------------------------------------------------------------- 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, 1996 ................................... 4 Statement of Net Assets Available for Benefits at December 31, 1995 ................................... 5 Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 1996 ................... 6 Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 1995 ................... 7 Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 1994 ................... 8 Notes to Financial Statements ............................ 9 Supplemental Schedules Schedule of Assets Held for Investment Purposes at December 31, 1996, Line 27a ............................ 13 Schedule of Reportable Transactions for the Year Ended December 31, 1996, Line 27d ............................ 14 2 - ----------------------------------------------------------------- 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, 1996 and 1995, and the related statements of changes in net assets available for benefits for each of the three years in the period ended December 31, 1996. 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 generally accepted auditing standards. 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, 1996 and 1995, and the changes in its net assets available for benefits for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1996, and reportable transactions for the year ended December 31, 1996, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the basic financial statements. The fund information in the statement of net assets available for benefits and the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Ernst & Young LLP ERNST & YOUNG LLP Tulsa, Oklahoma June 25, 1997 3 - ----------------------------------------------------------------- Statement Of Net Assets Retirement Savings Plan Of Available For Benefits Phillips Petroleum Company At December 31, 1996 Fixed Investment Stock Total Fund Fund ----------------------------------- Assets Investments Insurance contract $ 9,801,586 9,801,586 - Common stock 791,898 - 791,898 Money market fund 12,499 - 12,499 - ----------------------------------------------------------------- 10,605,983 9,801,586 804,397 Interest Receivable 80 - 80 Employer Contributions Receivable 75,880 75,880 - - ----------------------------------------------------------------- Total Assets 10,681,943 9,877,466 804,477 - ----------------------------------------------------------------- Net Assets Available for Benefits $10,681,943 9,877,466 804,477 ================================================================= Number of Units 2,332,746 129,469 Unit Values $4.2343 6.2137 - ----------------------------------------------------------------- See Notes to Financial Statements. 4 - -------------------------------------------------------------------- Statement Of Net Assets Retirement Savings Plan Of Available For Benefits Phillips Petroleum Company At December 31, 1995 Fixed Temporary Investment Stock Investment Total Fund Fund Fund -------------------------------------------- Assets Investments Insurance contract $ 9,850,414 9,850,414 - - Common stock 624,146 - 624,146 - Money market fund 19,619 - 8,615 11,004 - -------------------------------------------------------------------- 10,494,179 9,850,414 632,761 11,004 Interest Receivable 86 - 38 48 Employee Deposits Receivable 10,290 - - 10,290 Employer Contributions Receivable 28,011 28,011 - - Interfund Receivable (Payable) - 20,168 1,174 (21,342) - -------------------------------------------------------------------- Total Assets 10,532,566 9,898,593 633,973 - - -------------------------------------------------------------------- Liabilities Other Payables 36,470 36,470 - - - -------------------------------------------------------------------- Total Liabilities 36,470 36,470 - - - -------------------------------------------------------------------- Net Assets Available for Benefits $10,496,096 9,862,123 633,973 - ==================================================================== Number of Units 2,479,731 135,882 Unit Values $3.9771 4.6656 - -------------------------------------------------------------------- See Notes to Financial Statements. 5 - --------------------------------------------------------------------- Statement Of Changes In Net Retirement Savings Plan Of Assets Available For Benefits Phillips Petroleum Company Year Ended December 31, 1996 Fixed Temporary Investment Stock Investment Total Fund Fund Fund --------------------------------------------- Additions Participating Employer Contributions $ 418,159 418,159 - - - --------------------------------------------------------------------- Investment Income Interest 628,693 628,198 459 36 Dividends 22,751 - 22,751 - Net appreciation of common stock 182,474 - 182,474 - - --------------------------------------------------------------------- 833,918 628,198 205,684 36 - --------------------------------------------------------------------- Total Additions 1,252,077 1,046,357 205,684 36 - --------------------------------------------------------------------- Deductions Withdrawals and Distributions 1,059,430 1,032,212 27,218 - Forfeitures 6,800 6,800 - - - --------------------------------------------------------------------- Total Deductions 1,066,230 1,039,012 27,218 - - --------------------------------------------------------------------- Allocation of Deposits and Earnings - 30 6 (36) - --------------------------------------------------------------------- Interfund Transfers - 7,968 (7,968) - - --------------------------------------------------------------------- Net Increase 185,847 15,343 170,504 - Net Assets Available for Benefits Beginning of Year 10,496,096 9,862,123 633,973 - - --------------------------------------------------------------------- End of Year $10,681,943 9,877,466 804,477 - ===================================================================== See Notes to Financial Statements. 6 - ---------------------------------------------------------------------- Statement Of Changes In Net Retirement Savings Plan Of Assets Available For Benefits Phillips Petroleum Company Year Ended December 31, 1995 Fixed Temporary Investment Stock Investment Total Fund Fund Fund -------------------------------------------- Additions Contributions and Deposits Participating Employer contributions $ 316,258 316,258 - - Employee deposits 128,135 - - 128,135 - ---------------------------------------------------------------------- 444,393 316,258 - 128,135 - ---------------------------------------------------------------------- Investment Income Interest 639,370 638,561 379 430 Dividends 21,759 - 21,759 - Net appreciation of common stock 28,022 - 28,022 - - ---------------------------------------------------------------------- 689,151 638,561 50,160 430 - ---------------------------------------------------------------------- Total Additions 1,133,544 954,819 50,160 128,565 - ---------------------------------------------------------------------- Deductions Withdrawals and Distributions 1,309,461 1,309,461 - - Forfeitures 6,820 6,820 - - - ---------------------------------------------------------------------- Total Deductions 1,316,281 1,316,281 - - - ---------------------------------------------------------------------- Allocation of Deposits and Earnings - 122,754 5,811 (128,565) - ---------------------------------------------------------------------- Interfund Transfers - 23,633 (23,633) - - ---------------------------------------------------------------------- Net Increase (Decrease) (182,737) (215,075) 32,338 - Net Assets Available for Benefits Beginning of Year 10,678,833 10,077,198 601,635 - - ---------------------------------------------------------------------- End of Year $10,496,096 9,862,123 633,973 - ====================================================================== See Notes to Financial Statements. 7 - ---------------------------------------------------------------------- Statement Of Changes In Net Retirement Savings Plan Of Assets Available For Benefits Phillips Petroleum Company Year Ended December 31, 1994 Fixed Temporary Investment Stock Investment Total Fund Fund Fund -------------------------------------------- Additions Contributions and Deposits Participating Employer contributions $ 283,224 283,224 - - Employee deposits 118,472 - - 118,472 - ---------------------------------------------------------------------- 401,696 283,224 - 118,472 - ---------------------------------------------------------------------- Investment Income Interest 683,550 683,081 186 283 Dividends 20,727 - 20,727 - Net appreciation of common stock 70,999 - 70,999 - - ---------------------------------------------------------------------- 775,276 683,081 91,912 283 - ---------------------------------------------------------------------- Total Additions 1,176,972 966,305 91,912 118,755 - ---------------------------------------------------------------------- Deductions Withdrawals and Distributions 2,380,787 2,380,787 - - Forfeitures 3,125 3,125 - - - ---------------------------------------------------------------------- Total Deductions 2,383,912 2,383,912 - - - ---------------------------------------------------------------------- Allocation of Deposits and Earnings - 113,788 4,967 (118,755) - ---------------------------------------------------------------------- Interfund Transfers - 41,419 (41,419) - - ---------------------------------------------------------------------- Net Increase (Decrease) (1,206,940) (1,262,400) 55,460 - Net Assets Available for Benefits Beginning of Year 11,885,773 11,339,598 546,175 - - ---------------------------------------------------------------------- End of Year $10,678,833 10,077,198 601,635 - ====================================================================== See Notes to Financial Statements. 8 - ----------------------------------------------------------------- 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 was known as the Retirement Savings Plan of Phillips Petroleum Company Subsidiaries until December 7, 1994. The Plan is a defined contribution plan sponsored by Phillips Petroleum Company (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 three-year period ending December 31, 1996, Phillips Driscopipe (with respect to hourly employees only), a division of the Company, was the only Participating Employer. Other subsidiaries or divisions having present or former employees holding interests in the Plan are Catalyst Resources, Inc. (sold March 30, 1994), Drilling Specialties Company, Phillips Coal Company, and Phillips Uranium Corporation (now liquidated). 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. Prior to January 1, 1996, a participant could make after-tax deposits, in whole percentages, ranging from 1 to 10 percent of his regular monthly earnings. A participant could elect to change his deposit rate once each six months. Effective January 1, 1996, employees were no longer permitted to make deposits into the Plan. Instead, on that same date the currently participating employees became eligible to participate in the Thrift Plan of Phillips Petroleum Company. The Participating Employer or Company continues to make contributions to this Plan. Contributions were placed in a Trust fund administered by WestStar Bank, Bartlesville, Oklahoma (Trustee) prior to the close of business on February 28, 1996, when the Trustee was changed to Vanguard Fiduciary Trust Company. Prior to the Trustee change, the Trust fund consisted of the Stock Fund, the Fixed Investment Fund and the Temporary Investment Fund. 9 Investments for each fund are as follows: Stock Fund (common stock of the Company); Fixed Investment Fund (an insurance contract with The Travelers Insurance Company (Travelers) under which Travelers guarantees repayment of the principal paid to it and a minimum effective rate of interest thereon) and Temporary Investment Fund (specified short-term securities). Effective with the change in Trustee, the Company became contractholder of the insurance contract with Travelers for the Fixed Fund, thus excluding the Fixed Fund from the Trust. This change in contractholder does not affect participant benefits. The interests of participants in each fund are represented by units allocated to them. Unit values reflected in the accompanying statements are based on aggregate fund values and aggregate units. Prior to January 1, 1996, participant deposits were placed first in the Temporary Investment Fund for about 30 days. Deposits and earnings thereon were then paid into the Stock Fund or the Fixed Investment Fund as directed by the participant. Participants could direct that their deposits be invested entirely in either the Stock Fund or Fixed Investment Fund or allocated between the two funds in multiples of 10 percent. No investment directions may be made with respect to Participating Employer contributions, all of which are invested only in the Fixed Investment Fund. Investment directions could be changed once each year. 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. 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 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 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 separation from service or retirement. 10 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 may postpone distribution until no later than the February valuation date following the year of attainment of age 70 1/2. 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 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 are paid by the Plan. The cost of administering the Plan is paid by the Company. Note 2--Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. 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, which approximates fair value, represents contributions, plus interest credited, less distributions. The money market fund is valued at the current redemption price determined by the Trustee. 11 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 of the Fixed Fund insurance contract was 6.66 percent and 6.60 percent in 1996 and 1995, respectively. The crediting interest rate of the insurance contract was 6.60 percent for 1996 and 6.55 percent for 1995. The crediting interest rate, 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. 12 - ------------------------------------------------------------------------------ Schedule of Assets Held Retirement Savings Plan of For Investment Purposes Phillips Petroleum Company Line 27a EIN 73-0400345, Plan 010 At December 31, 1996 Description of investment Identity of issue, including maturity date, borrower, lessor, rate of interest, collateral, Historical Current or similar party par or maturity value Cost Value - -------------------- ------------------------------ ----------- ---------- The Travelers Group Annuity Contract Insurance Company* GR-10462, deposit administration fund $ 9,801,586 9,801,586 Phillips Petroleum 17,896 shares of common stock, Company* $1.25 par value 311,282 791,898 Vanguard Fiduciary 12,499 units of participation Trust Company* in the Vanguard Money Market Reserves-Prime Portfolio, $1.00 par value 12,499 12,499 - ------------------------------------------------------------------------------ $10,125,367 10,605,983 ============================================================================== *Party-in-interest 13 - ------------------------------------------------------------------------------ Schedule of Reportable Transactions Retirement Savings Plan of Line 27d Phillips Petroleum Company EIN 73-0400345, Plan 010 Year Ended December 31, 1996 Total Total number of number of Identify of party purchases sales Gain or involved and during during (loss) as a description of the plan the plan Value of Value result of asset year year purchases* of sales* transactions - ------------------- --------- --------- ---------- --------- ------------ The Travelers Insurance Company 178 59 $1,019,853 1,068,681 - - ------------------------------------------------------------------------------ *This is also the current value at time of transaction. 14 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 25, 1997, 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, 1996. /s/ Ernst & Young LLP ERNST & YOUNG LLP Tulsa, Oklahoma June 25, 1997 -----END PRIVACY-ENHANCED MESSAGE-----