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, 2003
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, 2003 and 2002, 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, 2003 and 2002 2
Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 2003 and 2002 3
Notes to Financial Statements 4-8
Supplemental Schedules*:
Schedule of Assets (Held at End of Year) 9
Schedule of Reportable Transactions for
the year ended December 31, 2003 10
Signature 11
Exhibit Index 12
* 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 Participants and the Unocal Savings Plan Committee:
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 Unocal Savings Plan (the "Plan") at December 31, 2003 and December
31, 2002, 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 for the year ended
December 31, 2003 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.
PricewaterhouseCoopers LLP
Los Angeles, California
June 18, 2004
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Unocal Savings Plan
Statements of Net Assets Available for Benefits
December 31,
2003 2002
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Assets:
Investments at fair value $ 488,461,290 $ 408,460,282
Cash 1,470,472 504,396
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Total assets 489,931,762 408,964,678
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Net assets available for benefits $489,931,762 $408,964,678
================== ==================
See accompanying notes to financial statements.
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Unocal Savings Plan
Statements of Changes in Net Assets Available for Benefits
Year Ended December 31,
2003 2002
--------------------------------------------------------------------------------
Additions:
Additions to (deductions from)
net assets attributed to:
Investment income (loss):
Net appreciation (depreciation)
in fair value of investments $ 79,474,860 $ (76,270,236)
Interest 714,532 1,129,642
Dividends 6,612,079 6,246,389
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Total investment gain (loss) 86,801,471 (68,894,205)
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Contributions:
Participant 22,899,570 21,914,732
Company 12,610,053 12,243,216
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Total contributions 35,509,623 34,157,948
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Total additions (deductions) 122,311,094 (34,736,257)
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Deductions:
Deductions from net assets attributed to:
Participant withdrawals and distributions 41,336,310 42,448,925
Trustee fees and other expense 7,700 7,100
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Total deductions 41,344,010 42,456,025
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Net increase (decrease) 80,967,084 (77,192,282)
Net assets available for benefits:
Beginning of year 408,964,678 486,156,960
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End of year $489,931,762 $ 408,964,678
============= ==============
See accompanying notes to financial statements.
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UNOCAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Description of the Plan
General
-------
Unocal Corporation ("Unocal") was incorporated in Delaware on March 18,
1983, as the parent of Union Oil Company of California. The Unocal Savings Plan
(the "Plan") provides for Union Oil Company of California (the "Company")
matching contributions and for participants' voluntary pre-tax and/or after-tax
contributions. Putnam Fiduciary Trust Company is the trustee ("Trustee") of the
Plan and invests funds contributed by the Company and participants to the Plan.
The Plan is subject to certain provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") as a defined contribution plan.
The Savings Plan booklets dated August 2002, January 1, 2001, and May
1, 2000, constitute part of a prospectus covering securities that has been
registered under the Securities Act of 1933. The Savings 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 was raised to 75 percent from 50 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.
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.
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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 and after age 55, participants may
receive partial withdrawals.
Rollovers into the Plan
-----------------------
The Plan will accept rollovers from 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 $200,000 per year for 2003. If an employee's pay exceeded
$200,000, only the first $200,000 of base 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 $12,000 for 2003 and $11,000 for
2002. "Catch-up" contributions allow employees who were at least age 50 to
contribute an additional pre-tax contribution of $2,000. 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 collect all
participant directed stock trades throughout the day and will execute
and complete one or more buy and sell trades 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. Prices received from each day's
trading will be averaged to ensure that all participants requesting
trades will be treated equitably.
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,
2003 and 2002. Investments in common trust funds are valued based on information
provided by the Plan's investment custodian. The value of the assets of the Plan
is subject to the variations in the market. The fair value of the investments
and net assets available for benefits could be materially affected by a change
in market conditions.
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 (000s) 2003 2002
--------------------------------------------------------------------------------
Unocal Common Stock (a)
4,866 and 5,530 shares, respectively $ 179,222,190 $ 169,112,172
Putnam S&P 500 Index Fund
2,972 and 3,027 shares, respectively 82,568,954 65,505,796
Putnam Money Market Fund
48,431 and 46,059 shares, respectively 48,431,431 46,058,612
George Putnam Fund of Boston
2,094 and 2,314 shares, respectively 35,638,217 34,319,318
Putnam New Opportunities Fund
892 and 954 shares, respectively 34,617,322 27,840,218
(a) Includes both participant and nonparticipant-directed amounts.
The Plan's investments appreciated or (depreciated) as follows:
December 31,
2003 2002
--------------------------------------------------------------------------------
Mutual funds $ 28,247,163 $ (30,936,563)
Common or collective trusts 18,551,173 (18,732,054)
Common stock 32,676,524 (26,601,619)
-------------- --------------
$ 79,474,860 $ (76,270,236)
============== ==============
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Nonparticipant-Directed Investments
-----------------------------------
The nonparticipant-directed investments and the significant components
of the changes in those net assets are as follows:
December 31,
2003 2002
--------------------------------------------------------------------------------
Assets:
Unocal common stock $ 80,643,140 $ 72,279,976
-------------- --------------
Total assets 80,643,140 72,279,976
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Total nonparticipant-directed net assets $ 80,643,140 $ 72,279,976
============== ==============
Year Ended December 31,
2003 2002
--------------------------------------------------------------------------------
Changes in net assets:
Contributions $ 12,610,053 $ 12,243,216
Dividends 1,935,664 1,801,096
Net appreciation (depreciation) 14,912,862 (11,204,331)
Benefits paid to participants (4,997,021) (5,036,405)
Transfers to participant-directed
investments (16,098,394) (12,696,663)
-------------- --------------
Net increase (decrease) $ 8,363,164 $ (14,893,087)
============== ==============
NOTE 4 - Forfeitures by Members
Company contributions and earnings thereon under the Plan are forfeited
by employees whose employment is terminated before vesting is 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 will
be used to restore previously forfeited accounts when necessary. Remaining
amounts forfeited will then be used to offset future Company contributions to
participant accounts.
At December 31, 2003 and 2002, forfeited nonvested accounts totaled
$102,930 and $87,585, 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, 2003 and 2002.
The Company, who also qualifies as a party-in-interest, absorbs certain
administrative expenses of the Plan. Such transactions with the Company qualify
for a statutory exemption. Total expenses paid by the Company were $37,361 and
$51,082 for the years ended December 31, 2003 and 2002, respectively.
-8-
Unocal Savings Plan
Schedule of Assets (Held at End of Year)***
At December 31, 2003
(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 $ 140,439,598 $ 179,222,190
4,866,201 shares
** Putnam Investments Putnam S&P 500 Index Fund 82,568,954
2,972,245 shares
** Putnam Investments Putnam Money Market Fund 48,431,431
48,431,431 shares
** Putnam Investments George Putnam Fund of Boston 35,638,217
2,093,902 shares
** Putnam Investments Putnam New Opportunities Mutual Fund 34,617,322
891,969 shares
** Putnam Investments Putnam Voyager Fund 22,411,049
1,374,068 shares
Vanguard Group The Vanguard Windsor II Fund 16,628,276
353,643 shares
** Putnam Investments Putnam International Growth Fund 13,003,414
625,766 shares
** Putnam Investments The Putnam Bond Index Fund 10,674,840
790,729 shares
Royce Funds Royce Opportunity Fund 8,759,015
720,314 shares
PIMCO Funds PIMCO Renaissance Institutional Fund 7,472,167
319,733 shares
Wells Fargo Funds Wells Fargo Small Cap Opportunities Fund 6,003,756
199,130 shares
Vanguard Group Vanguard Life Strategy Moderate Growth Fund 4,894,892
294,695 shares
Vanguard Group Vanguard Life Strategy Income Fund 4,836,479
366,400 shares
Vanguard Group Vanguard Life Strategy Growth Fund 4,182,255
230,300 shares
Vanguard Group Vanguard Life Strategy Conservative Growth Fund 2,166,102
148,975 shares
** Putnam Investments Participant Loans (General loan term varies up to 5 years; primary 6,950,931
residence loan varies up to 15 years; interest rate 5.5% to 8.75%)
-------------------
Total assets held for investment purposes $ 488,461,290
===================
* 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.
-9-
UNOCAL SAVINGS PLAN
Schedule of Reportable Transactions (1)
December 31, 2003
(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 $ 28,451,034 $ 28,451,034 $ 28,451,034
(349 transactions)
Unocal
Corporation (2) Common Stock $ 51,017,542 48,981,913 $ 2,035,629
(707 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.
-10-
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 28, 2004 By: /s/Joe D. Cecil
--------------------------------
Joe D. Cecil
Unocal Savings Plan Committee Member
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EXHIBIT INDEX
Exhibit 23 Consent of PricewaterhouseCoopers LLP
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