UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
Form
11-K
(X)
Annual
Report pursuant to Section 15(d) of The Securities Exchange Act of
1934.
For
the
fiscal year ended December 31, 2005.
or
(
) Transition
Report pursuant to Section 15(d) of The Securities Exchange Act of
1934.
For
the
transition period from ______________ to ___________.
Commission
file number 1-3492
A.
Full
title of the plan and the address of the plan, if different from that of the
issuer named below:
Brown
& Root, Inc.
Employees’
Retirement and Savings Plan
4100
Clinton Dr.
Building
3, Room 1018
Houston,
TX 77020
B.
Name
of
issuer of the securities held pursuant to the plan and the address of its
principal executive office:
Halliburton
Company
(a
Delaware Corporation)
75-2677995
140l
McKinney, Suite 2400
Houston,
Texas 77010
Telephone
Number - (713) 759-2600
Required
Information
The
following financial statements prepared in accordance with the financial
reporting requirements of the Employee Retirement Income Security Act of 1974,
signature and exhibits are filed for the Brown & Root, Inc. Employees’
Retirement and Savings Plan:
Financial
Statements and Supplemental Schedule
Reports
of Independent Registered Public Accounting Firms
Statements
of Net Assets Available for Benefits - December 31, 2005 and
2004
Statements
of Changes in Net Assets Available for Benefits -
Years
ended December 31, 2005 and 2004
Notes
to
Financial Statements - December 31, 2005 and 2004
Supplemental
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) -
December 31, 2005
Signature
Exhibit
Consent
of Melton & Melton, L.L.P. (Exhibit 23.1)
Consent
of KPMG LLP (Exhibit 23.2)
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Table
of Contents
|
Page
|
|
|
Reports
of Independent Registered Public Accounting Firms
|
1-2
|
|
Statements
of Net Assets Available for Benefits - December 31, 2005 and
2004
|
3
|
|
Statements
of Changes in Net Assets Available for Benefits -
|
|
|
Years
ended December 31, 2005 and 2004
|
4
|
|
Notes
to Financial Statements - December 31, 2005 and 2004
|
5-14
|
|
Supplemental
Schedule
|
|
|
Schedule
H, Line 4i - Schedule of Assets (Held at End of Year) - December
31,
2005
|
15
|
Schedules
not listed above are omitted because of the absence of conditions under which
they are required under the Department of Labor’s Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act
of
1974.
Report
of Independent Registered Public Accounting Firm
To: KBR
Benefits Committee
Halliburton
Company Audit Committee
We
have
audited the accompanying statement of net assets available for benefits of
the
Brown & Root, Inc. Employees’ Retirement and Savings Plan (the Plan) as of
December 31, 2005, and the related statement of changes in net assets available
for benefits for the year then ended. 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 audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform
an
audit of the Plan’s internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan’s
internal control over financial reporting. Accordingly, we express no such
opinion. An audit 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
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 as of
December 31, 2005, and the changes in its net assets available for benefits
for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.
Our
audit
was performed for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule H, line 4i - schedule
of
assets (held at end of year) as of December 31, 2005 is presented for the
purpose of additional analysis and is not a required part of the basic financial
statements but is supplementary information required by the Department of
Labor’s Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedule is the
responsibility of the Plan’s management. The supplemental schedule has been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, is fairly stated, in all material respects,
in
relation to the basic financial statements taken as a whole.
/s/
MELTON & MELTON, L.L.P.
Houston,
Texas
June
15,
2006
1
Report
of Independent Registered Public Accounting Firm
The
KBR
Benefits Committee:
We
have
audited the accompanying statement of net assets available for benefits of
the
Brown & Root, Inc. Employees’ Retirement and Savings Plan (the Plan) as of
December 31, 2004, and the related statement of changes in net assets available
for benefits for the year then ended. 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 audit.
We
conducted our audit 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. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides 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 as of
December 31, 2004 and the changes in its net assets available for benefits
for
the year then ended, in conformity with U.S. generally accepted accounting
principles.
/s/
KPMG,
LLP
Houston,
Texas
June 29,
2005
2
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Statements
of Net Assets Available for Benefits
December
31, 2005 and 2004
|
2005
|
2004
|
||||||
|
Assets:
|
|||||||
|
Investments,
at fair value -
|
|||||||
|
Plan
interest in Master Trust
|
$
|
530,536,571
|
$
|
550,263,395
|
|||
|
Cash
and cash equivalents
|
485,841
|
558,809
|
|||||
|
Receivables
-
|
|||||||
|
Company
contributions, net of forfeitures
|
-
|
770
|
|||||
|
Plan
participants’ contributions
|
40,581
|
77,478
|
|||||
|
Total
receivables
|
40,581
|
78,248
|
|||||
|
Net
assets available for Benefits
|
$
|
531,062,993
|
$
|
550,900,452
|
|||
See
accompanying notes to financial statements.
3
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Statements
of Changes in Net Assets Available for Benefits
Years
ended December 31, 2005 and 2004
|
2005
|
2004
|
||||||
|
Additions:
|
|||||||
|
Contributions:
|
|||||||
|
Company,
net of forfeitures
|
$
|
360,853
|
$
|
651,619
|
|||
|
Plan
participants
|
3,160,719
|
4,233,197
|
|||||
|
Rollovers
|
-
|
13,536
|
|||||
|
Investment
income, net:
|
|||||||
|
Plan
interest in Master Trust investment gain
|
37,001,851
|
43,830,114
|
|||||
|
Total
additions
|
40,523,423
|
48,728,466
|
|||||
|
Deductions:
|
|||||||
|
Benefits
paid to participants
|
(60,360,882
|
)
|
(69,024,865
|
)
|
|||
|
Total
deductions
|
(60,360,882
|
)
|
(69,024,865
|
)
|
|||
|
Net
decrease to net assets available for benefits
|
(19,837,459
|
)
|
(20,296,399
|
)
|
|||
|
Net
assets available for benefits, beginning of year
|
550,900,452
|
571,196,851
|
|||||
|
Net
assets available for benefits, end of year
|
$
|
531,062,993
|
$
|
550,900,452
|
|||
See
accompanying notes to financial statements.
4
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2005 and 2004
(1) Description
of the Plan
The
Brown
& Root, Inc. Employees’ Retirement and Savings Plan (the Plan) is a defined
contribution plan for certain qualified employees of certain subsidiaries of
Halliburton Company (Halliburton). The Plan is sponsored by Kellogg Brown &
Root, Inc. (KBR or the Company). The Plan was established in accordance with
Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended
(IRC) and is subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended (ERISA). The following description of the
Plan
provides only general information. Participants should refer to the plan
document or summary plan description for a more complete description of the
Plan’s provisions.
(a) Eligibility
Certain
employees of the Company are eligible for participation in the Plan upon their
first anniversary date of employment following completion of 1,000 hours of
credited service.
(b) Contributions
Participants
may elect to contribute to the tax deferred savings and/or after-tax features
of
the Plan through periodic payroll deductions. These contributions are limited
to
an aggregate of 50% of the participant’s eligible earnings up to $210,000 and
$205,000 for 2005 and 2004, respectively. The total amount of participant tax
deferred savings contribution is limited to $14,000 and $13,000 for 2005 and
2004, respectively. Any contributions in excess of these limits are
automatically made to the participant’s after-tax account. Additional
limitations are in place for highly compensated employees under the provisions
of the Plan.
Participants
who are age 50 or older before the close of the Plan year may elect to make
a
catch-up contribution, subject to certain limitations under the IRC ($4,000
and
$3,000 per participant in 2005 and 2004, respectively).
The
Company matches 50% of the tax deferred savings contributions (other than
catch-up contributions) that are not in excess of 4% of eligible earnings.
The
Company may make annual discretionary retirement allocation contributions,
based
on Company performance to participants, as defined by the Plan document.
Participants are not required to have contributed to the Plan to be eligible
for
such a contribution. The participant’s share of any discretionary retirement
allocation contribution is based on a percentage of their eligible pay for
the
Plan year to be determined in the subsequent year after company performance
results are recorded. For the Plan years 2005 and 2004, the Company did not
make
a discretionary retirement allocation contribution.
Employees
are permitted to roll over pre-tax and after-tax amounts with earnings held
in
other qualified plans or individual retirement accounts (IRAs) into the Plan,
as
specified in the Plan document.
5
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2005 and 2004
(c) Plan
Accounts
The
Company has entered into a master trust agreement known as the Halliburton
Company Employee Benefit Master Trust (the Master Trust). The Master Trust
was
established for the collective investment of certain defined contribution and
defined benefit plans sponsored by Halliburton or its affiliates. The Plan
maintains a clearing account, which invests in a short term investment fund
to
facilitate the payment of benefits and receipt of contributions to the
Plan.
(d) Investment
Elections and Transfers
Contributions
and participant account balances may be directed to one of twelve funds or
a
combination of funds. The assets of the funds are held in the Master Trust
(see
note 3). Participants may direct up to a maximum of 15 percent of their
contributions to the Halliburton Stock Fund (HSF).
The
Plan
allows participants to make daily transfers of their account balances among
the
funds. The amount of the transfer may be all or any portion of the participant’s
account balance. The Plan imposes a fifteen calendar-day waiting period on
transfers involving the Non-U.S. Equity Fund.
(e) Administration
The
Halliburton Company Benefits Committee (the Committee) controls and manages
the
operation and administration of the Plan. State Street Bank and Trust Company
(State Street or the Trustee) is the Plan’s trustee, and Hewitt Associates LLC
is the recordkeeper.
(f) Vesting
Participants’
contributions to their accounts and the earnings thereon are fully vested when
made or earned. Participants are fully vested in Company matching contributions
and the earnings thereon made subsequent to January 1, 2004 after 3 years of
service. Prior to January 1, 2004, participants were fully vested in Company
matching contributions and the earnings thereon. Participants have a vested
interest in the Company discretionary retirement allocation contribution account
based on years of service as follows:
|
Years
of service
|
Vested
percentage
|
|||
|
Less
than 3
|
0
|
%
|
||
|
At
least 3 but less than 4
|
20
|
%
|
||
|
At
least 4 but less than 5
|
50
|
%
|
||
|
At
least 5 but less than 6
|
60
|
%
|
||
|
At
least 6 but less than 7
|
80
|
%
|
||
|
7
or more
|
100
|
%
|
||
6
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2005 and 2004
The
nonvested portion of a participant’s account is forfeited at the end of the
fifth year following termination unless the participant is rehired within five
years of termination. Forfeitures are used to reduce Company contributions.
Forfeitures available as of December 31, 2005 and 2004 are $186,423 and $203,041
respectively. Forfeitures of $290,166 and $39,369 in 2005 and 2004,
respectively, were used to offset Company contributions.
(g) Distributions
Each
participant, or their designated beneficiary, may elect to receive a
distribution upon retirement, termination, disability, or death. Direct
rollovers to an IRA or other qualified plans are permitted. All distributions
are made in lump-sum amounts or in periodic installments, at the participant’s
election. Distributions from the HSF may be in the form of shares of stock
or
cash.
While
employed, a participant may make in-service withdrawals from their after-tax
accounts as defined in the Plan document. In-service withdrawals from their
tax-deferred savings are also permitted upon attainment of age 59-1/2 or proven
financial hardship, subject to limitations under the Plan.
(h) Investment
Earnings
Investment
earnings on participants’ accounts are allocated proportionately based on their
relative account balance in each investment fund.
(i) Halliburton
Stock Fund
The
HSF
is an Employee Stock Ownership Plan (ESOP). The ESOP is designed to comply
with
Section 4975(e)(7) of the IRC and Section 407(d)(6) of ERISA.
The
ESOP
has a dividend pass-through election whereby any cash dividends attributable
to
Halliburton Company common stock held by the ESOP are to be paid by Halliburton
directly to the Trustee.
Each
participant is entitled to exercise voting rights attributable to the
Halliburton Company common stock allocated to his or her account and is notified
by the Trustee prior to the time that such rights are to be exercised. The
Trustee is not permitted to vote any allocated shares for which instructions
have been given by a participant. The Trustee is required, however, to vote
at
its discretion all shares which have not been voted by Plan participants and
beneficiaries.
7
BROWN
& ROOT, INC
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2005 and 2004
(j) Plan
Termination
The
Board
of Directors of Halliburton may amend, modify, or terminate the Plan at any
time. No such termination is contemplated, but if it should occur, the accounts
of all participants would be immediately fully vested and paid in accordance
with the terms of the Plan.
(2) Significant
Accounting Policies
(a) Basis
of Accounting
The
accompanying financial statements are prepared using the accrual basis of
accounting.
(b) Valuation
of Investments
Cash
equivalents, derivative financial instruments, stock securities, mutual funds,
bonds and notes, and all other debt securities held within the Master Trust
are
presented at their quoted market value. Common/collective trust funds are stated
at the fair market value of the underlying securities. The Master Trust
considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.
The
Master Trust’s investment in pooled equity managers (the Pooled Fund) represents
the unitized values of certain pooled equity managers’ accounts on a combined
basis. Each equity manager’s account is valued daily. A unit price is calculated
for each equity manager by dividing the total value of the manager’s account by
the total number of units in existence for that manager. Net income and
realized/unrealized investment gains and losses by each manager are passed
through to the investment options through the managers’ unit price.
The
Fixed
Income Fund (“FIF”) within the Master Trust holds bank, insurance, and
investment contracts providing a fully benefit-responsive feature. These
investments are stated at contract value, which approximates fair value. Where
the Master Trust owns the underlying securities of asset-backed investment
contracts, the contracts are stated at fair market value of the underlying
securities plus an adjustment for the difference between fair market value
of
the underlying securities and contract value. Contract value represents the
principal balance of the investment plus accrued interest at the stated contract
rate, less payment received, and investment related and custody fees. The
weighted average crediting interest rates for these contracts was 5.40% and
4.89% as of December 31, 2005 and 2004, respectively, and the weighted average
return was 5.14% and 4.81% for the years ended December 31, 2005 and 2004,
respectively. In addition, the FIF holds a common/collective trust fund, which
also invests in investment contracts and asset-backed investment contracts.
The
return for the common/collective trust fund was 4.24% and 4.15% for the years
ended December 31, 2005 and 2004, respectively.
8
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2005 and 2004
The
Plan’s proportionate interest in the investments of the Master Trust is shown in
the statements of net assets available for benefits as Plan interest in the
Master Trust (see note 3).
(c) Securities
Transactions and Investment Income
The
Plan
records interest on cash and cash equivalents held outside of the Master Trust
as earned. Purchases and sales of securities held outside the Master Trust
are
recorded on the trade-date basis.
Purchases
and sales of securities in the Master Trust are recorded on the trade-date
basis. Realized gains (losses) on investments sold and unrealized appreciation
(depreciation) for investments of the Master Trust are combined and presented
as
plan interest in Master Trust investment gain in the statements of changes
in
net assets available for benefits.
In
addition, investment income of the Master Trust includes dividends, interest,
and other income. Interest income of the Master Trust investments is recorded
as
earned. Dividends on the Master Trust investments are recorded on the
ex-dividend date.
(d) Administrative
Expenses
The
Master Trust pays substantially all plan expenses on behalf of the Plan.
Generally, trustee fees, recordkeeping fees, audit fees, and investment
management fees are paid from Master Trust assets and are charged to the plans
participating in the Master Trust. Expenses related to the direct management
of
the Master Trust are shared on an equitable basis by the participating plans.
Expenses specifically related to an individual plan are charged to the assets
of
the Plan which incurred the charges. These expenses are shown as a component
of
Plan interest in Master Trust investment gain.
(e) Payment
of Benefits
Benefits
are recorded when paid.
(f) Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and changes therein, and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results could differ
from those estimates.
9
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2005 and 2004
(g) Risk
and Uncertainties
The
investments of the Master Trust are exposed to various risks, such as interest
rate, credit and overall market volatility. Due to the level of risk associated
with certain investment securities, it is reasonably possible that changes
in
the value of investment securities will occur in the near term.
(3) Investment
Assets Held in the Master Trust
Certain
assets of the Plan are combined with the assets of certain other benefit plans
of affiliated companies in the Master Trust. The assets of the Master Trust
are
segregated into twelve funds in which the plans may participate. The combination
of the plans’ assets is only for investment purposes and the plans continue to
be operated under their current plan documents, as amended.
The
following is a summary of net assets as of December 31, 2005 and 2004 and total
investment income for the years ended December 31, 2005 and 2004 of the Master
Trust and net appreciation by investment type for the years ended December
31,
2005 and 2004. The Plan’s interest in the Master Trust’s net assets for the
applicable periods is also presented.
10
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2005 and 2004
|
Net
Assets
|
2005
|
2004
|
|||||
|
Assets:
|
|||||||
|
Investments
-
|
|||||||
|
Cash
and equivalents
|
$
|
352,802,824
|
$
|
458,525,265
|
|||
|
Collateral
received for securities loaned
|
532,223,051
|
852,554,443
|
|||||
|
Asset-backed
investment contracts1
|
(22,852,041
|
)
|
(69,631,384
|
)
|
|||
|
U.S.
bonds and notes
|
1,842,615,949
|
1,117,724,990
|
|||||
|
Non-U.S.
bonds and notes
|
135,348,594
|
134,344,911
|
|||||
|
Halliburton
stock
|
378,905,599
|
269,079,667
|
|||||
|
Other
U.S. stock
|
1,031,147,338
|
1,068,028,335
|
|||||
|
Non-U.S.
stock
|
490,670,073
|
421,315,468
|
|||||
|
Common/collective
trust funds
|
644,633,745
|
615,633,563
|
|||||
|
Mutual
funds
|
228,964,981
|
218,989,628
|
|||||
|
Securities
loaned -
|
|||||||
|
U.S.
bonds and notes
|
362,491,919
|
713,031,601
|
|||||
|
Other
U.S. stock
|
127,777,298
|
102,130,145
|
|||||
|
Non-U.S.
stock
|
31,517,552
|
20,848,638
|
|||||
|
Total
investments
|
6,136,246,882
|
5,922,575,270
|
|||||
|
Receivables
-
|
|||||||
|
Receivables
for investments sold
|
133,665,454
|
73,853,181
|
|||||
|
Dividends
|
2,036,423
|
1,997,938
|
|||||
|
Interest
|
17,740,202
|
17,652,939
|
|||||
|
Other
|
180,485
|
512,330
|
|||||
|
Total
receivables
|
153,622,564
|
94,016,388
|
|||||
|
Total
assets
|
6,289,869,446
|
6,016,591,658
|
|||||
|
Liabilities:
|
|||||||
|
Payables
for investments purchased
|
523,408,403
|
271,752,305
|
|||||
|
Obligation
for collateral received for securities loaned
|
532,223,051
|
852,554,443
|
|||||
|
Other
payables
|
8,357,798
|
4,283,572
|
|||||
|
Total
liabilities
|
1,063,989,252
|
1,128,590,320
|
|||||
|
Net
Assets
|
$
|
5,225,880,194
|
$
|
4,888,001,338
|
|||
|
Plan’s
interest in Master Trust net assets
|
$
|
530,536,571
|
$
|
550,263,395
|
|||
|
Percentage
interest
|
10.15
|
%
|
11.26
|
%
|
|||
1
Represents
the difference between fair market value of the underlying security and the
contract value for certain investment contracts (see note 2b).
11
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2005 and 2004
|
Years
ended
|
|||||||
|
December
31,
|
|||||||
|
Total
Investment Income
|
2005
|
2004
|
|||||
|
Net
investment appreciation
|
$
|
311,605,507
|
$
|
340,320,988
|
|||
|
Investment
income
|
161,566,345
|
145,213,205
|
|||||
|
Expenses
|
(17,919,390
|
)
|
(16,425,180
|
)
|
|||
|
Total
investment income
|
$
|
455,252,462
|
$
|
469,109,013
|
|||
|
Years
ended
|
|||||||
|
December
31,
|
|||||||
|
Net
Appreciation (Depreciation) by Investment Type
|
2005
|
2004
|
|||||
|
Cash
and equivalents
|
$
|
1,491,469
|
$
|
(2,744
|
)
|
||
|
U.S.
bonds and notes
|
(6,440,446
|
)
|
3,162,224
|
||||
|
Non-U.S.
bonds and notes
|
(1,050,642
|
)
|
969,137
|
||||
|
Halliburton
stock
|
150,792,801
|
93,271,909
|
|||||
|
Other
U.S. stock
|
47,386,749
|
109,652,334
|
|||||
|
Non-U.S.
stock
|
84,671,119
|
55,207,118
|
|||||
|
Common/collective
trust funds
|
31,913,527
|
51,043,808
|
|||||
|
Mutual
funds
|
1,102,891
|
8,870,833
|
|||||
|
Other
investments
|
1,738,039
|
18,146,369
|
|||||
|
Total
appreciation
|
$
|
311,605,507
|
$
|
340,320,988
|
|||
12
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2005 and 2004
The
Master Trust makes use of several investment strategies involving limited use
of
derivative investments. The Master Trust’s management, as a matter of policy and
with risk management as their primary objective, monitors risk indicators such
as duration and counter-party credit risk, both for the derivatives themselves
and for the investment portfolios holding the derivatives. Investment managers
are allowed to use derivatives for strategies such as portfolio structuring,
return enhancement, and hedging against deterioration of investment holdings
from market and interest rate changes. Derivatives are also used as a hedge
against foreign currency fluctuations. The Investment Committee does not allow
investment managers for the Master Trust to use leveraging for any investment
purchase. Derivative investments are stated at estimated fair market values
as
determined by quoted market prices. Gains and losses on such investments are
included in net investment appreciation in the statements of changes in
participating plans’ net assets of the Master Trust.
Certain
investment managers of the Master Trust participate in a securities lending
program administered by State Street. The transfer of assets under State
Street’s securities lending program are secured borrowings with pledge of
collateral. The fair market value of the securities loaned as of December 31,
2005 and 2004 was $521,786,769 and $836,010,384, respectively. The cash and
non-cash collateral received for securities loaned as of December 31, 2005
and
2004 was $532,223,051 and $852,554,443, respectively. As of December 31, 2005
and 2004, none of the collateral received for securities loaned has been sold
or
repledged.
(4) Investments
The
following table represents the fair value of individual investment funds held
under the Master Trust which exceed 5% of the Plan’s net assets as of December
31, 2005 and 2004:
|
2005
|
2004
|
||||||
|
Participation
in Master Trust, at fair value:
|
|||||||
|
Fixed
Income Fund
|
$
|
249,768,506
|
$
|
268,000,009
|
|||
|
General
Investment Fund
|
196,830,787
|
203,898,984
|
|||||
|
Equity
Investment Fund
|
28,466,913
|
28,181,759
|
|||||
(5) Tax
Status
The
Internal Revenue Service (IRS) informed the Company by a letter dated August
24,
2004 that the Plan and related trust were designed in accordance with the
applicable provisions of the IRC. The Plan has been amended, however the plan
administrator believes that the Plan is currently designed and being operated
in
compliance with the applicable requirements of the IRC. Therefore, the plan
administrator believes that the Plan was qualified and the related trust was
tax-exempt as of December 31, 2005 and 2004.
13
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2005 and 2004
(6) Related-Party
Transactions
The
Plan,
through its participation in the Master Trust, may invest in investment
securities issued and or managed by the Trustee and asset managers.
Additionally, the Master Trust invests in Halliburton Company’s common stock
through the HSF. These entities are considered parties-in-interest to the Plan.
These transactions are covered by an exemption from the prohibited transaction
provisions of ERISA and the IRC.
(7) Subsequent
Events
Halliburton
plans to initiate the separation of KBR from Halliburton in 2006. In April
2006,
KBR filed a Registration Statement on form S-1 with the United States Securities
and Exchange Commission (SEC). The current plan is to affect an initial public
offering (IPO) of less than 20% of KBR stock. Any sale of KBR stock would be
registered under the Securities Act of 1933, and such shares of common stock
will only be offered and sold by means of prospectus. The effect on the Plan
is
not known at this time.
On
February 21, 2006, the KBR Benefits Committee was formed, assuming
responsibility for the Plan from the Halliburton Company Benefits
Committee.
14
BROWN
& ROOT, INC.
EMPLOYEES’
RETIREMENT AND SAVINGS PLAN
EIN:
76-0284788
PLAN
#:
250
Schedule
H, Line 4i - Schedule of Assets (Held at End of Year)
December
31, 2005
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|
|
Identity
of issue, borrower,
|
Current
|
||||
|
lessor,
or similar party
|
Description
of investment
|
Cost
|
value
|
||
|
*
|
Halliburton
Company
|
Investment
in net assets of Halliburton
|
|||
|
Employee
Benefit Master
|
Company
Employee Benefit Master Trust
|
**
|
$
|
530,536,571
|
|
|
Trust
|
* Column
(a) indicates each identified person/entity known to be a
party-in-interest.
** Cost
omitted for participant-directed investments.
15
Signature
Pursuant
to the requirements of the Securities Exchange Act of 1934, the KBR Benefits
Committee of the Brown & Root, Inc. Employees’ Retirement and Savings Plan
has duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: June
29, 2006
By:
/s/ Klaudia Brace
Klaudia
Brace, Chairperson of the
KBR
Benefits Committee
16
Exhibit
23.1
Consent
of Independent Registered Public Accounting Firm
KBR
Benefits Committee and
Halliburton
Company Audit Committee
We
consent to the incorporation by reference in the Registration Statement
No. 333-86080 on Form S-8 of Halliburton Company of our report dated
June 15, 2006, appearing in this Annual Report on Form 11-K of the
Brown & Root, Inc. Employees’ Retirement and Savings Plan for the year ended
December 31, 2005.
/s/
MELTON & MELTON, L.L.P.
Houston,
Texas
June 27,
2006
Exhibit
23.2
Consent
of Independent Registered Public Accounting Firm
The
KBR
Benefits Committee:
We
consent to the incorporation by reference in the Registration Statement
No. 333-86080 on Form S-8 of Halliburton Company of our report dated
June 29, 2005 with respect to the statement of net assets available for
benefits of Brown & Root, Inc. Employees’ Retirement and Savings Plan as of
December 31, 2004, and the related statement of changes in net assets
available for benefits for the year then ended, which report appears in the
December 31, 2005 Annual Report on Form 11-K of the Brown & Root,
Inc. Employees’ Retirement and Savings Plan.
/s/
KPMG,
LLP
Houston,
Texas
June 26,
2006