UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(Mark One)
[X] Annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2004
Or
[ ] Transition report pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 1-8483
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
UNOCAL SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the Plan and the address of
its principal executive office:
Unocal Corporation,
2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245
INDEX TO FINANCIAL STATEMENTS OF THE UNOCAL SAVINGS PLAN
The following financial statements reflect the status of the Unocal
Savings Plan as of December 31, 2004 and 2003, and the results of its
transactions for each of the years then ended.
Page Number
Report of Independent Registered Public Accounting Firm 1
Financial Statements:
Statements of Net Assets Available for Benefits
at December 31, 2004 and 2003 2
Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 2004 and 2003 3
Notes to Financial Statements 4-9
Supplemental Schedules*:
Schedule of Assets (Held at End of Year) 10
Schedule of Reportable Transactions for
the year ended December 31, 2004 11
Signature 12
Exhibit Index 13
* Supplemental schedules required by the Employee Retirement Income Security Act
of 1974 that are omitted are not applicable to the Unocal Savings Plan.
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of the Unocal Savings Plan:
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Unocal Savings Plan (the "Plan") at December 31, 2004 and 2003, and the
changes in net assets available for benefits for the years then ended in
conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
(held at end of year) and reportable transactions as of and for the year ended
December 31, 2004 are presented for the purpose of additional analysis and are
not a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to the auditing
procedures applied in the 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/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Los Angeles, California
June 24, 2005
-1-
Unocal Savings Plan
Statements of Net Assets Available for Benefits
December 31,
2004 2003
--------------------------------------------------------------------------------
Assets:
Investments at fair value $ 541,258,393 $ 488,461,290
Cash 344,805 1,470,472
------------- -------------
Total assets 541,603,198 489,931,762
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Net assets available for benefits $541,603,198 $489,931,762
============= ==============
See accompanying notes to financial statements.
-2-
Unocal Savings Plan
Statements of Changes in Net Assets Available for Benefits
Year Ended December 31,
2004 2003
--------------------------------------------------------------------------------
Additions:
Additions to net assets attributed to:
Investment income:
Net appreciation
in fair value of investments $ 52,240,663 $ 79,474,860
Interest 931,031 714,532
Dividends 8,578,162 6,612,079
------------- ------------
Total investment income 61,749,856 86,801,471
------------- ------------
Contributions:
Participants' 30,821,418 22,899,570
Employer's 12,630,971 12,610,053
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Total contributions 43,452,389 35,509,623
------------- ------------
Total additions 105,202,245 122,311,094
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Deductions:
Deductions from net assets attributed to:
Benefits paid to participants 53,510,189 41,336,310
Administrative expenses 20,620 7,700
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Total deductions 53,530,809 41,344,010
------------- ------------
Net increase 51,671,436 80,967,084
Net assets available for benefits:
Beginning of year 489,931,762 408,964,678
------------- ------------
End of year $541,603,198 $489,931,762
============= ============
See accompanying notes to financial statements.
-3-
UNOCAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Description of the Plan
General
-------
Unocal Corporation ("Unocal" or the "Company") was incorporated in
Delaware on March 18, 1983, as the parent of Union Oil Company of California
which is the sponsor of the Unocal Savings Plan (the "Plan"). The Plan provides
for participants' voluntary pre-tax and/or after-tax contributions. The Plan
also provides for Company matching contributions of participants' pretax
contributions. Putnam Fiduciary Trust Company is the trustee ("Trustee") of the
Plan and invests funds contributed by the Company and participants as directed
by participants. The Plan is subject to certain provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA") as a defined contribution plan.
The Plan booklets dated August 2002, January 1, 2001, and May
1, 2000, constitute part of a prospectus covering securities that have been
registered under the Securities Act of 1933. The Plan booklets constitute the
Summary Plan Description of the Plan.
Participation
-------------
Regular, full-time employees are eligible to participate in the Plan
immediately upon employment by the Company. Part-time and temporary employees
are eligible to participate following the first service year in which they
complete at least 1,000 hours of service.
Contributions
-------------
Participant Contributions -- Participant contributions are voluntary
and can be all pre-tax, all after-tax, or a combination of both. A participant's
total annual pre-tax contribution limit is 75 percent of the participant's
annual base pay. The pre-tax contributions are also known as "401(k)
contributions". A participant's contributions shall not exceed the maximum
amount allowed by law. A participant's after-tax contribution limit is 15
percent of base pay. The total pre-tax contributions and after-tax contributions
cannot exceed 75 percent of base pay.
Company Matching Contributions -- The Company matches employee pre-tax
401(k) contributions on a dollar for dollar basis, up to six percent of the
contributing participant's base pay.
At its discretion, the Company directs the Trustee to purchase shares
attributable to Company matching contributions either on the open market or by
private purchases directly from the Company. During 2004, all purchases were on
the open market.
Participant Accounts
--------------------
Each participant's account is credited with the contributions and the
respective net investment earnings or losses of the individual funds as governed
by the participant's investment selection.
Vesting
-------
Participants are always 100 percent vested in participant contributions
and in the dividends and interest on those contributions. Vesting in the Company
contributions portion of participants' accounts and the dividends thereon is
based on years of vesting service. Participants are 100 percent vested in
Company contributions and dividends thereon after two years of vesting service.
Special vesting rules also apply to certain participants depending on the date
of and reason for termination of employment. Effective January 1, 2005, all
persons who were employees on or after that date were immediately vested in
Company contributions.
-4-
Payment of Benefits
-------------------
Following termination of employment, participants may elect to receive
their account balance or defer their distribution until a later date chosen by
the participant, but not beyond April 1 of the year following attainment of age
70-1/2.
Following termination of employment, participants may receive partial
withdrawals if they have attained age 55.
The Plan also allows in-service distributions of participant after-tax
contributions. The Plan also allows hardship withdrawals, subject to applicable
legal limitations.
Rollovers into the Plan
-----------------------
The Plan will accept rollovers from the Unocal Retirement Plan and
other employers' qualified plans, subject to certain restrictions.
Loans
-----
All employees who are participants of the Plan and have a sufficient
balance in their employee pre-tax contributions account are eligible to apply
for a loan. Members borrow against their own pre-tax account balance and all
payments of principal and interest are credited back to their account. Loan
types available are "any reason" (except investment in registered securities);
"home purchase" (for purchase of a primary residence only); and loans "forced"
by a hardship withdrawal request. Repayment periods range from 1 to 15 years
depending on the type of loan. The Unocal Savings Plan Loan and Hardship
Withdrawal Committee determines the interest rate for loans based on appropriate
market rates and applicable federal regulations. Participants are allowed to
have no more than two loans at a time, with the loan amount(s) subject to the
limits established by federal law.
Federal Income Tax Status
-------------------------
The Company obtained its latest determination letter on October 2,
2002, from the Internal Revenue Service, in which the Internal Revenue Service
stated that the Plan, as then designed, was in compliance with the applicable
requirements of the Internal Revenue Code (the "Code"). The Plan has been
amended since receiving the determination letter. However, the plan
administrator and the Plan's tax counsel believe that the Plan is currently
designed and being operated in compliance with the applicable requirements of
the Code. Therefore, no provision for income taxes has been included in the
Plan's financial statements.
The maximum employee pay eligible for benefit purposes under a
qualified plan was $205,000 per year for 2004. If an employee's pay
exceeded $205,000, only the first $205,000 of pay was eligible for calculating
employee and Company contributions.
Federal regulations place an annual dollar limit on the amount of
employee pre-tax contributions. The limit was $13,000 for 2004 and $12,000 for
2003. "Catch-up" contributions allow employees who were at least age 50 to
contribute an additional pre-tax contribution of $3,000. These limits are
subject to adjustment in future years, in accordance with federal regulations.
If pre-tax contributions reach the annual limit before year-end, they are
suspended for the balance of the year. The Company matching contributions are
also suspended if the annual limit is reached before year-end.
Withdrawals from the Plan are generally subject to federal income tax.
Also, in-service withdrawals and withdrawals following termination of employment
prior to retirement may be subject to a 10 percent federal income tax penalty.
Retiring employees and former employees who are at least age 55 may make a
withdrawal from their plan account without a tax penalty.
-5-
Plan Amendment or Termination
-----------------------------
The Company expects to continue the Plan indefinitely, but as future
conditions cannot be foreseen, the Company may at any time or from time to time
amend or terminate the Plan in whole or in part. In the event of termination,
participants become fully vested in their individual accounts, and the net
assets of the Plan must be allocated among the participants and beneficiaries of
the Plan in the order provided by ERISA. The Company has no present intent to
discontinue the Company matching contributions or to terminate the Plan.
NOTE 2 - Summary of Significant Accounting Policies
Basis of Accounting
-------------------
The accompanying financial statements are prepared on the accrual basis
of accounting in conformity with accounting principles generally accepted in the
United States of America. In addition, the following accounting policies are
applied:
a. Purchases and sales of Unocal common stock:
During normal trading by participants, the Trustee will aggregate all
participant directed stock trades throughout the day into batches and
will go to market to execute the transactions in each batch up to nine
times per day.
During abnormal conditions or heavy trading by participants, the
Trustee may not be able to execute and complete participant directed
trades on the same day without affecting the share price. The Trustee
is authorized, at its discretion, to buy or sell a portion of the
trades during the next day or days. Participants receive the market
price for all purchases or sales calculated for the batch in which
their shares are included.
b. Dividend income is recorded on the ex-dividend date.
c. Interest income is recorded as earned on the accrual basis.
d. Benefits are recorded when paid.
The Plan presents in the statement of changes in net assets available
for benefits the net appreciation (depreciation) in the fair value of its
investments which consists of the realized gains or losses and the unrealized
appreciation (depreciation) on those investments.
Valuation of Investments
------------------------
The Plan's investments are stated at fair value. Shares of registered
investment companies are valued at the net asset value of shares held by the
Plan at year-end. The Unocal common stock is valued at the closing price as
reported for the New York Stock Exchange Composite Transactions at December 31,
2004 and 2003. Investments in common trust funds are valued based on information
provided by the Plan's investment custodian at fair value.
Use of Estimates in Preparation of the Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
Plan's management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts of
additions to and deductions from net assets during the reporting periods. Actual
results could differ from those estimates.
-6-
Risks and Uncertainties
-----------------------
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term, and that such changes could materially affect
participants' account balances and the amounts reported in the statement of net
assets available for benefits.
NOTE 3 - Investments
The following table presents investments that represent 5 percent or
more of the Plan's net assets available for benefits:
December 31,
Shares in thousands 2004 2003
--------------------------------------------------------------------------------
Unocal Common Stock (a)
3,601 and 4,866 shares, respectively $ 155,712,297 $ 179,222,190
Putnam S&P 500 Index Fund
2,932 and 2,972 shares, respectively 90,091,878 82,568,954
Putnam Money Market Fund
60,096 and 48,431 shares, respectively 60,095,673 48,431,431
George Putnam Fund of Boston
2,019 and 2,094 shares, respectively 36,559,392 35,638,217
Putnam New Opportunities Fund
682 and 892 shares, respectively 29,227,358 34,617,322
(a) Includes both participant and nonparticipant-directed amounts.
The Plan's investments appreciated as follows:
December 31,
2004 2003
------------------------------------
Mutual funds $ 16,040,895 $ 28,247,163
Common or collective trusts 9,118,976 18,551,173
Common stock 27,080,792 32,676,524
------------- -------------
$ 52,240,663 $ 79,474,860
============= =============
-7-
Nonparticipant-Directed Investments
-----------------------------------
The nonparticipant-directed investments and the significant components
of the changes in those net assets are as follows:
December 31,
2004 2003
--------------------------------------------------------------------------------
Assets:
Unocal common stock $ 72,050,039 $ 80,643,140
------------ ------------
Total assets 72,050,039 80,643,140
------------ ------------
Total nonparticipant-directed
net assets $ 72,050,039 $ 80,643,140
============ ============
Year Ended December 31,
2004 2003
--------------------------------------------------------------------------------
Changes in net assets:
Contributions $ 12,630,971 $ 12,610,053
Dividends 1,553,146 1,935,664
Net appreciation 12,547,251 14,912,862
Benefits paid to participants (5,812,577) (4,997,021)
Transfers to participant
- directed investments (29,511,892) (16,098,394)
------------- -------------
Net increase (decrease) $ (8,593,101) $ 8,363,164
============= =============
The Company matches employee pre-tax 401(k) contributions on a dollar for dollar
basis, up to six percent of the contributing participant's base pay in Unocal
stock. Once the Company purchases the shares attributable to its matching
contributions, the participant has the option to sell and transfer that portion
out of Unocal common stock into any other investment offered in the Plan.
NOTE 4 - Forfeitures by Members
Company contributions and earnings thereon under the Plan were
forfeited by employees whose employment terminated before vesting was attained.
However, if an employee is re-employed by the Company and performs an hour of
service within five years after the date of termination of employment, the
forfeited shares will be restored to the employee's Plan account. Amounts
forfeited are used to restore previously forfeited accounts when necessary.
Remaining amounts forfeited are used to offset future Company contributions to
participant accounts.
At December 31, 2004 and 2003, forfeited nonvested accounts totaled
$66,063 and $102,930, respectively.
NOTE 5 - Parties-in-interest
Certain of the Plan's investments are shares of mutual funds managed by
the Trustee, as defined by the Plan Agreement. Therefore, these transactions
qualify as party-in-interest transactions for which a statutory exemption
exists. Fees paid by the Plan for investment management services are included in
the net asset value of the shares of the mutual funds; other fees paid by the
Plan are disclosed on the face of the statement of changes in net assets
available for benefits for the years ended December 31, 2004 and 2003.
-8-
The Company, who also qualifies as a party-in-interest, absorbed
certain administrative expenses of the Plan. Such transactions with the Company
qualify for a statutory exemption. The Company did not pay any such expenses in
2004. Total expenses paid by the Company were $37,361 for the year ended
December 31, 2003.
NOTE 6 - Subsequent Events
On April 4, 2005, Unocal entered into a merger agreement with Chevron
Corporation ("Chevron") and Blue Merger Sub Inc., a direct wholly-owned
subsidiary of Chevron. The merger agreement provides that, upon the terms and
subject to the conditions set forth in the merger agreement, Unocal will merge
with and into Blue Merger Sub, with Blue Merger Sub continuing as the surviving
corporation and a wholly-owned subsidiary of Chevron. In the merger, Unocal
stockholders may elect to receive either 1.03 shares of Chevron stock, $65 in
cash or a combination of $16.25 in cash and 0.7725 of a share of Chevron common
stock for each share of Unocal common stock; however, the all-stock and all-cash
elections will be subject to proration to preserve the overall mix of 0.7725 of
a share of Chevron common stock and $16.25 in cash for all outstanding shares of
Unocal common stock taken together.
Consummation of the merger is subject to customary conditions,
including approvals by Unocal stockholders and certain regulatory agencies, such
as the U.S. Federal Trade Commission ("FTC"). The FTC has notified Chevron and
Unocal that Chevron's plans to acquire Unocal have been accepted by the FTC for
public comment.
On June 22, 2005, Unocal received a proposal from CNOOC Limited, an
affiliate of China National Offshore Oil Company, to acquire all outstanding
shares of Unocal for $67 per share in cash. Unocal intends to evaluate the CNOOC
proposal in a manner consistent with the Unocal board's fiduciary duties and its
obligations under the Chevron agreement. There can be no assurance that the
proposal would result in a definitive agreement with CNOOC.
For additional information regarding the pending acquisition, refer to
Unocal's current reports on Form 8-K, as amended, filed with the SEC on April 4,
April 7, June 9, June 10, June 23 and June 24, 2005, and any subsequent current
or periodic reports that may be filed by Unocal with the Securities and Exchange
Commission in connection with the pending merger transaction. Please also refer
to the Form S-4 registration statement filed by Chevron and the proxy statement
that will be filed by Unocal, in each case with the Securities and Exchange
Commission in connection with the pending merger transaction.
-9-
Unocal Savings Plan
Schedule of Assets (Held at End of Year)***
At December 31, 2004
(a) (b) (c) (d) (e)
Identity of Issuer, Description of Investment,
Borrower, Lessor Including Maturity Date, Rate of
or Similar Party Interest, Collateral, Par, or Maturity Value Cost Current Value
------------------------------------------------------------------------------------------------------------------------------------
* Unocal Corporation Unocal Corporation Common Stock $ 106,623,103 $ 155,712,297
3,601,117 shares
** Putnam Investments Putnam S&P 500 Index Fund 90,091,878
2,931,724 shares
** Putnam Investments Putnam Money Market Fund & Money Market Fund-SDB 60,095,673
60,095,673 shares
** Putnam Investments George Putnam Fund of Boston 36,559,392
2,018,741 shares
** Putnam Investments Putnam New Opportunities Fund 29,227,358
682,404 shares
Vanguard Group Vanguard Windsor II Fund 24,376,246
446,861 shares
** Putnam Investments Putnam Voyager Fund 20,058,258
1,170,260 shares
** Putnam Investments Putnam International Equity Fund 15,043,520
631,815 shares
** Putnam Investments Putnam Bond Index Fund 12,706,857
905,047 shares
Royce Funds Royce Opportunity Fund 15,920,924
1,193,473 shares
Allianz Funds Allianz OCC Renaissance Fund 12,467,029
460,038 shares
Wells Fargo Funds Wells Fargo Small Cap Opportunities Fund 19,513,804
585,122 shares
Vanguard Group Vanguard Life Strategy Moderate Growth Fund 11,584,065
646,793 shares
Vanguard Group Vanguard Life Strategy Growth Fund 8,121,254
405,252 shares
Vanguard Group Vanguard Life Strategy Income Fund 7,462,277
551,536 shares
Vanguard Group Vanguard Life Strategy Conservative Growth Fund 3,799,184
248,964 shares
** Putnam Investments Brokerage Securities 10,753,735
10,753,735 shares
** Putnam Investments Participant Loans (General loan term varies up to 5 years; primary 7,764,642
residence loan varies up to 15 years; interest rate 5.5% to 8.75%)
-------------------
Total assets held for investment purposes $ 541,258,393
===================
* Sponsor and employer and, therefore, a party-in-interest for which a statutory exemption exists.
** Trustee for the Plan and, therefore, a party-in-interest for which a statutory exemption exists.
*** Under ERISA, an asset held for investment purposes is any asset held by the Plan on the last day of the Plan's
fiscal year or acquired at any time during the Plan's fiscal year and disposed of at any time before the last day
of the Plan's fiscal year, with certain exceptions.
-10-
UNOCAL SAVINGS PLAN
Schedule of Reportable Transactions (1)
Year Ended December 31, 2004
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Identity of Description of Assets Expense Current Value of
Party (including Interest Rate Purchase Selling Lease Incurred With Cost Asset on
Involved And Maturity in Case of a loan) Price Price Rental Transaction of Asset Transaction Date Net Gain
------------------------------------------------------------------------------------------------------------------------------------
Unocal
Corporation (2) Common Stock $ 26,456,017 $ 26,456,017 $ 26,456,017
(318 transactions)
Unocal
Corporation (2) Common Stock $ 77,046,701 60,272,512 $16,774,189
(733 transactions)
(1) Under ERISA, a reportable transaction is defined as a transaction or series of transactions during the Plan year that involves
more than 5 percent of the fair value of the Plan's net assets at the beginning of the Plan year, with certain exceptions.
(2) Sponsor and employer and, therefore, a party-in-interest for which a statutory exemption exists.
-11-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Committee appointed by the Board of Directors of the Company to administer the
Plan has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNOCAL SAVINGS PLAN
Date: June 29, 2005 By: /s/ John A. Briffett
--------------------
John A. Briffett
Unocal Savings Plan Committee Member
-12-
EXHIBIT INDEX
Exhibit 23 Consent of PricewaterhouseCoopers LLP
-13-