The Phillips 66
Share Incentive Plan

EXPLANATORY BOOKLET

April 2003
(updated May 2012)

Contents

Page
1. / Introduction / 3
2. / Summary of how the Plan works / 5
3. / Eligibility / 6
4. / Shares of Common Stock / 8
5. / Partnership Shares / 9
6. / Matching Shares / 11
7. / Example / 12
8. / Free Shares / 13
9. / Dividend Shares / 14
10. / Your tax position / 15
11. / Selling or transferring your shares / 17
12. / Leaving the Phillips 66 Group of Companies / 20
13. / How is the Plan managed? / 22
14. / Glossary of terms / 23
Appendix A / 24

1. Introduction

Following the merger of Conoco Inc. and Phillips Petroleum Company, the Phillips Petroleum Company United Kingdom Limited Share Incentive Plan has been amended and is now called the Phillips 66 Share Incentive Plan.

The Plan aims to provide employees with a tax advantageous means of acquiring Shares in Phillips 66, thereby increasing their involvement with Phillips 66 and sharing in its future.

This booklet outlines the main aspects of the new Plan but is only a general guide. The Trust Deed and Rules is the formal document governing the Plan and sets out the rights and obligations of all participants. This document is available for inspection and if you wish to do this you should contact HR Connections in the first instance. In the event of any dispute, the Trust Deed and Rules will be binding on all concerned to the exclusion of any conflicting document, including this booklet.

Partnership Shares

Each month, you can contribute up to a maximum of £125 (or 10% of your Salary if that is lower) out of your pre-tax and pre-NIC pay. Your contributions will be used to buy Partnership Shares in Phillips 66 each month. If your contributions do not buy an exact whole number of Shares, a whole number of Shares plus a fractional Share entitlement will be allocated to you.

You can buy Partnership Shares on two different bases. Contributions up to 2.5% of Base Salary will be eligible for Company matching (Part 1). If this is below your personal £125 (or 10% of Salary if lower) monthly H.M. Revenue and Customs (HMRC)limit, you can buy additional Partnership Shares up to that limit but these will not be eligible for Company matching (Part 2). This is explained in more detail in Section 5 of this booklet.

Partnership Shares must normally be left in the Plan for five years to qualify for full income tax and NICs relief.

Matching Shares

For every Partnership Share you buy with up to 2.5% of your Base Salary, your employing Participating Company will pay for two extra Matching Shares for you.

Matching Shares must normally be left in the Plan for five years to qualify for full income tax and NICs relief.

Free Shares

Subject to satisfying legislative requirements, your employing Participating Company may buy a number of Free Shares for you dependent on the amount of any bonus award due to you under the Phillips 66 Variable Cash Incentive Programme. Free Shares are subject to an individual maximum of £3,000 worth per tax year.

You may choose not to receive these Free Shares. If so, you may receive a cash payment outside the Plan, at the discretion of your employing Participating Company subject to the usual income tax and NIC deductions.

Dividend Shares

Any dividends received on your Shares acquired through the Plan will be automatically re-invested to purchase additional shares, Dividend Shares, up to a maximum amount of £1,500 per tax year. Dividends in excess of this amount will be paid in cash. Dividend Shares are free of UK income tax after they have been held in the Plan for three years.

Financial warning

The Plan allows you to acquire Shares and to receive matching shares from your employing Participating Company.

It must always be remembered that the price of Shares can go down as well as up. The price of Shares can also be affected by factors other than the performance of Phillips 66, such as the US dollar/pound sterling exchange rate for UK shareholders. You should take care not to commit more than you can afford to the Plan. There is no guaranteed gain and the Plan involves a degree of risk.

This booklet should be read in conjunction with the Rules of the Plan. If there are any discrepancies between the two the latter shall take precedence. Any reference to taxation consequences in this booklet is for guidance only.

If you need further information on any aspect of the Plan, please contact HR Connections.

Please note that neither the Company nor the Trustees are authorised to give any taxation or investment advice on the Plan.

2. Summary of how the Plan works

Employee contributes a percentage of Salary up to £125 each month or 10% of Salary if lower / Your employing Participating Company provides 2 Shares for every Share bought with employee contributions up to 2.5% of Base Salary / Your employing Participating Company may provide Shares dependent on the amount of any bonus award due to you (see Section 1)
Partnership Shares / Matching Shares / Free Shares
Shares held in Plan
Partnership Shares / Matching Shares / Free Shares
May be sold or transferred at any time, but income tax and NIC will be payable under PAYE unless the Shares have been held in the Plan for at least five years.* / Must normally be kept in the Plan for three years from date of allocation. May then be sold or transferred. Income tax and NIC will be payable under PAYE unless the Shares have been held in the Plan for at least five years.* / Must normally be kept in the Plan for three years from date of allocation. May then be sold or transferred. Income tax and NIC will be payable under PAYE unless the Shares have been held in the Plan for at least five years.*
* Your Shares cease to be subject to the Plan when you leave employment in the Phillips 66 group of companies. If you leave under Special Circumstances (see Section 12), there is no income tax or NIC to pay on your Shares irrespective of the length of time they have been held in the Plan.

3. Eligibility

You can join the Plan and continue to participate if you are an employee of a Participating Company. Participation is voluntary. It is up to you if and when you join.

The following are currently Participating Companies:

ConocoPhillips Petroleum Company U.K. Limited

ConocoPhillips (U.K.) Limited

Conoco Limited

If you transfer to a subsidiary company of Phillips 66 that is not a Participating Company, you will not be eligible to receive further awards of Shares in the Plan. You will, however, be permitted to leave your existing shareholdings in the Plan for as long as you are employed by Phillips 66 or any worldwide subsidiary or joint venture company, collectively referred to in this booklet as the Phillips 66 Group of Companies. Dividends will continue to be invested in the Plan.

If you go on expatriate assignment you will normally be able to continue making contributions to the Plan provided that your employment contract remains with a Participating Company and subject to local securities laws and exchange control regulations. The Phillips 66 Share Incentive Plan is a UK tax approved plan. The equivalent tax relief is unlikely to apply overseas. However, the Company will not apply a TEF/Hypothetical Tax deduction to the portion of salary used to buy Partnership Shares.

If you return to live in the UK at a later date and sell or transfer shares from the Plan before they have been held for five years, you will not pay any UK income tax or NIC upon the sale or transfer of Shares awarded to you whilst you were resident abroad. However, it should be noted that if you also hold older Shares within the Plan that were allocated to you when you were based in the UK, these older Shares must be disposed of first even though they may give rise to a UK tax liability. The capital gains tax relief on Shares held within the Plan will apply in relation to your UK capital gains tax position.

Joining the Plan

You will receive a Partnership Share Agreement when you commence employment with a Participating Company. The Partnership Share Agreement constitutes your application to join the Plan.

Partnership and Matching Shares

If you wish to purchase Partnership Shares (and to be awarded Matching Shares), you must complete and sign a Partnership Share Agreement and return it to HR Connections in Warwick by the last day of the month. The first deduction from your pay will then be made in the following month.

Free Shares

The Company will determine each year whether and to what extent it is possible provide an allocation of Free Shares within the terms of the statutory requirements governing the allocation of Free Shares. If applicable, the procedure for allocating Free Shares will be communicated at that time.

The Agreement

The Partnership Share Agreement binds you to certain contractual undertakings that must be made to enable the Plan to qualify under the Finance Act 2000 and thus enable you to obtain certain tax benefits.

4. Shares of Common Stock

The ownership of corporations like Phillips 66 is divided into shares. These shares are owned by individuals, trusts and corporations - all called "shareholders."

Shareholders are the owners of Phillips 66, the size of each shareholder's participation depending on the number of shares owned. Each shareholder receives a part of
Phillips 66's profit when it is paid as a dividend.

Phillips 66 common stock is listed on the New York Stock Exchange. It may be bought and sold through stockbrokers throughout the world, who do of course charge a fee for their services.

Share prices vary according to whether people want to buy or sell them. They reflect a company's performance and future prospects. They are also sensitive to general economic circumstances, world political events and other factors outside the control of Phillips 66. Phillips 66’s Shares are quoted in US dollars; therefore their value to a UK shareholder is also affected by the exchange rate between the US dollar and the Pound sterling.

5. Partnership Shares

Level of employee contributions

Part 1

If you decide to participate in the Plan, you may choose to contribute up to 2.5% of your Base Salary each month to purchase Partnership Shares under Part 1. These contributions will be deducted directly from your pay before income tax and NIC and are subject to a maximum of £125 per month.

Partnership Shares purchased under Part 1 will be matched by the Participating Company in which you are employed on a two for one basis.

Part 2

If you wish, you may contribute an additional fixed sterling amount from your pre-tax Salary which, when added to your contribution under Part 1, does not exceed the HMRC maximum of £125 per month or 10% of your Salary (whichever is lower). These contributions will be also taken directly from your pay before income tax and NIC is deducted.

Partnership Shares purchased under Part 2 will not be matched by your employing Participating Company.

Contributions during periods of leave

During periods of leave of absence (e.g., maternity leave or long-term disability leave) you will be able to continue to contribute to the Plan up to 2.5% of your then reduced Base Salary under Part 1 to a maximum of £125 per month, whichever is lower.

If you wish, you will also be able to purchase additional Partnership Shares (unmatched) under Part 2 as long as the monthly contributions when added to Part 1 do not exceed £125 per month or 10% of your then reduced Salary (whichever is lower).

If you do not earn anything in a particular month, you will not be able to contribute to the Plan nor will you subsequently be able to make up any missed contributions.

Application of employee contributions

Your contributions are transferred to the Trustees who will use them to purchase Partnership Shares (Part 1 and/or Part 2 as applicable), including fractions of a Share, on your behalf. The purchase will, other than in exceptional circumstances, take place on the second business day of the month following deduction provided that day is a working day in both the US and the UK. This is called the “Acquisition Date.”

Before each Acquisition Date, the Trustees will calculate the number of Partnership Shares that can be bought out of your contributions. The Trustees obtain a Share price in Sterling, based on the current US dollar Share price converted at the prevailing exchange rate, and buy that number of Partnership Shares through the New York Stock Exchange. Your entire contribution will be invested each month on the Acquisition Date in whole Shares and fractions of a Share.

Changes in employee contributions

You may change your contribution level to either Part 1 and/or Part 2 by completing a Plan Change of Contribution form with the revised instructions and forwarding it to HR Connections in Warwick.

Cessation of employee contributions

If you wish to suspend your contributions you should indicate this on the Plan Change of Contribution form. If at some future date you decide you want to resume your contributions, you will have to complete another Partnership Share Agreement.

6. Matching Shares

Employer contribution

Your employing Participating Company will pay the Trustees the amount necessary to buy Matching Shares for each Partnership Share bought with your own contributions under Part 1 on a 2:1 ratio (including fractions of a Share). These Matching Shares are purchased at the same time and in the same manner as Partnership Shares.

There is no income tax or NICs charge on the receipt of Matching Shares. For your Matching Shares to remain free of income tax and NICs, you will normally have to leave them in the Plan for 5 years.

Holding period

Your Matching Shares must normally be held by the Trustees for a period of 3 years from each purchase date whilst you remain in employment with the Phillips 66 group. This is known as the “Holding Period.”

7. Example

For illustrative purposes, assume that an employee joining the Plan wishes to contribute the maximum amounts to both Part 1 and Part 2 and has the following salary package:

Base Salary:£25,450 per annum (£2,120 per month)

Salary:£30,000 per annum (£2,500 per month)

The maximum permitted contribution to the Plan is 10% of Salary, or £125 if lower. 10% of £2,500 is £250; therefore the lower limit of £125 per month applies.

Part 1:2.5% of £2,120 (Base Salary)= £53 per month

Part 2:£125 - £53 (Part 1)= £72 per month

The following example shows how Partnership and Matching Shares are purchased over a three-month period assuming a constant share price of £30:

Employee Contribution / Partnership Shares purchased / Matching Shares allocated / Total Shares
Part 1 / Part 2 / Part 1 / Part 2
Month 1 / £53.00 / £72.00 / 1.7666 / 2.4000 / 3.5332 / 7.6998
Month 2 / £53.00 / £72.00 / 1.7666 / 2.4000 / 3.5332 / 7.6998
Month 3 / £53.00 / £72.00 / 1.7666 / 2.4000 / 3.5332 / 7.6998
Total number of Shares / 5.2998 / 7.2000 / 10.5996 / 23.0994

8. Free Shares

If a bonus award is made under the Phillips 66 Variable Cash Incentive Programme and the terms of the award are compatible with the statutory rules on Free Shares, the Company may decide to make an allocation of Free Shares to eligible employees equal in value to a percentage of your annual salary. The total value of the Free Shares award must not exceed £3,000 per tax year.

Details of the procedure for allocating Free Shares and the rules governing the purchase and holding of these Shares will be communicated at the time that an award is determined.

9. Dividend Shares

Phillips 66 may declare a quarterly dividend which is payable to shareholders. A dividend is a share in the profits of Phillips 66 expressed as so many US cents per Share, and the Board of Directors of Phillips 66 determines the amount of the dividend.

Dividends may be paid on the Partnership, Matching, Free and Dividend Shares that are held for you in the Plan. The Trustees receive these net of the appropriate rate of US withholding tax (currently 15% for members resident in the UK).

Dividend reinvestment

The Trustees will automatically reinvest any dividends received on your Shares in order to purchase Dividend Shares through the Plan. Such Dividend Shares will themselves qualify for dividends enabling you to further increase your holding under the Plan.

Dividends reinvested in this way are still subject to United States withholding tax but are not subject to United Kingdom income tax. You should complete a W-8BEN form to ensure that US withholding tax is only deducted at 15% (or other appropriate rate for expatriate employees), rather than 30%.

Dividend Shares must, unless you cease to be employed by any of the Phillips 66 Group of Companies, be held by the Trustees for 3 years (the “Holding Period”) after which they may be sold or transferred free of income tax. NICs do not apply to dividends or Dividend Shares.

The maximum amount of net dividends that can be reinvested is £1,500 per tax year. Any dividends received in excess of this amount will be paid to you in cash, directly into your bank account.

If you leave the Phillips 66 Group of Companies, HMRC rules require that all your Shares come out of the Plan. For those Dividend Shares that come out of the Plan within three years of the date of allocation, you will be liable to pay UK income tax on the gross amount (i.e. the full amount of the dividend, before the US tax was deducted) of the dividend,out of which the net (post-US tax) amount was applied to acquire those Shares.Youwill be entitled to a credit for US tax withholding deducted when the dividends were originally received.(Note that it is important that the form W-8BEN is completed, because no credit will be allowed for any tax deducted over and above the amount that would have been deducted had that form been completed).

Based on current tax rules the credit for the US tax withholding would fully cover any UK tax liability for a basic rate taxpayer who would therefore have no additional UK income tax to pay. A higher rate taxpayer would have an additional liability. However, if you leave under any of the special circumstances described in Section 12, there is no extra income tax to pay on the Dividend Shares.

10. Your tax position