GSK Annual Report 2002

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118 GlaxoSmithKline Notes to the financial statements 33 Employee costs continued If the FRS 17 valuation basis had been applied in the financial statements instead of the SSAP 24 valuation basis, the effect on the profit and loss account reserve after taking account of deferred tax would have been as follows: 2001 2002 (restated) £m £m £m £m Profit and loss account reserve per balance sheet 2,946 3,811 Pension liability under FRS 17 (1,262) (457) Pension liability under SSAP 24 per balance sheet (39) (185) (1,223) (272) Post-retirement healthcare schemes under FRS 17 (545) (519) Post-retirement healthcare schemes provision per balance sheet (378) (388) (167) (131) Profit and loss account reserve including pension and post-retirement healthcare liability 1,556 3,408 34 Employee share schemes The company operates share option schemes, whereby options are granted to employees to acquire shares or ADSs in GlaxoSmithKline plc at the grant price, and share award schemes, whereby awards are granted to employees to acquire shares or ADSs in GlaxoSmithKline plc at no cost, subject to the achievement of performance targets. The details given below relate to schemes operated by GlaxoSmithKline in 2002 and 2001 and separately by Glaxo Wellcome and SmithKline Beecham up to the date of the merger, which became schemes of GlaxoSmithKline on the merger. Each Glaxo Wellcome option outstanding at the date of the merger was converted into one GlaxoSmithKline option. Each SmithKline Beecham share option was converted into 0.4552 of a GlaxoSmithKline share option and each SmithKline Beecham ADS option was converted into 1.138 GlaxoSmithKline ADS options, with corresponding adjustments to the grant price. GlaxoSmithKline share option schemes The company operates share option schemes and savings-related share option schemes. Grants under share option schemes are normally exercisable between three and ten years from the date of grant. Grants under savings-related share option schemes are normally exercisable after three years’ saving. Options under the share option schemes are normally granted at the market price ruling at the date of grant. In accordance with UK practice, the majority of options under the savings-related share option schemes are granted at a price 20 per cent below the market price ruling at the date of grant. Options outstanding at 31st December 2002 Share option schemes – shares Weighted Share option schemes – ADSs Weighted Savings-related share option schemes Weighted Number exercise Number exercise Number exercise (000) price (000) price (000) price At 27th December 2000: Converted from GW options 106,748 £13.87 – – 8,397 £12.34 Converted from SB options 35,122 £12.81 37,962 $44.10 – – Options exercised (4,275) £11.18 – – (62) £11.17 Options cancelled – – – – (59) £13.41 At 31st December 2000 137,595 £13.68 37,962 $44.10 8,276 £12.34 Options granted 67,763 £17.98 42,034 $51.82 4,443 £14.12 Options exercised (21,332) £10.36 (4,705) $13.06 (3,075) £8.48 Options cancelled (4,090) £14.68 (1,466) $52.40 (1,444) £15.90 At 31st December 2001 179,936 £15.67 73,825 $50.31 8,200 £14.13 Options granted 33,454 £11.91 22,991 $37.57 9,793 £9.16 Options exercised (8,857) £10.55 (1,504) $21.75 (398) £14.04 Options cancelled (7,061) £17.53 (4,435) $54.69 (4,607) £14.41 At 31st December 2002 197,472 £15.20 90,877 $47.34 12,988 £10.29 Range of exercise prices £3.61 – £19.77 $11.68 – $61.35 £9.16 – £16.48 In order to encourage employees to convert options, excluding savings-related share options, held over Glaxo Wellcome or SmithKline Beecham shares or ADSs into those over GlaxoSmithKline shares or ADSs, a programme was established to give an additional cash benefit of ten per cent of the exercise price of the original option provided that the employee does not voluntarily leave the Group for two years from the date of the merger and does not exercise the option before the earlier of six months from the expiry date of the original option and two years from the date of the merger. The cash benefit will also be paid if the options expire unexercised if the market price is below the exercise price on the date of expiry.
34 Employee share schemes continued Notes to the financial statements GlaxoSmithKline 119 Options outstanding at 31st December 2002 Share option schemes – shares Share option schemes – ADSs Savings-related share option schemes Weighted Latest Weighted Latest Weighted Latest Number exercise exercise Number exercise exercise Number exercise exercise Year of grant (000) price date (000) price date (000) price date 1993 587 £5.17 01.12.03 167 $12.94 24.11.03 – – – 1994 3,879 £5.10 22.11.04 1,385 $14.67 22.11.04 – – – 1995 5,633 £7.13 21.11.05 1,037 $21.73 15.11.05 – – – 1996 6,261 £8.40 01.12.06 1,465 $27.65 21.11.06 – – – 1997 10,773 £11.63 13.11.07 5,166 $40.32 13.11.07 – – – 1998 20,894 £16.94 23.11.08 7,410 $54.28 23.11.08 1 £14.29 01.01.03 1999 24,104 £18.13 03.12.09 9,957 $60.14 24.11.09 2,226 £13.27 31.05.03 2000 28,403 £14.87 11.09.10 542 $58.30 09.08.10 259 £16.48 31.05.04 2001 63,545 £18.09 28.11.11 40,803 $51.82 28.11.11 720 £14.12 31.05.05 2002 33,393 £11.90 03.12.12 22,945 $37.54 03.12.12 9,782 £9.16 31.05.06 Total 197,472 £15.20 90,877 $47.34 12,988 £10.29 All of the above options are exercisable, except 27,923,000 options over shares granted in 2000, all options over shares and ADSs granted in 2001 and 2002 and the savings-related share options granted in 2000, 2001 and 2002. There has been no change in the effective exercise price of any outstanding options during the year. No further options were granted between 31st December 2002 and 3rd March 2003. Options exercisable Share option Share option Savings-related schemes – shares schemes – ADSs share option schemes Weighted Weighted Weighted Number exercise Number exercise Number exercise (000) price (000) price (000) price At 31st December 2000 106,805 £13.36 37,962 $44.10 2,358 £6.73 At 31st December 2001 85,601 £14.10 32,373 $48.36 289 £14.29 At 31st December 2002 72,611 £14.33 27,129 $48.89 2,227 £13.27 GlaxoSmithKline share award schemes The Group operates a Performance Share Plan whereby awards are granted to Directors and senior staff at no cost. The percentage of each award that vests is based upon the performance of the Group over a three year measurement period. The performance conditions consist of two parts, each of which applies to 50 per cent of the award. The first part of the condition compares GlaxoSmithKline’s Total Shareholder Return (TSR) over the period with the TSR of companies in the UK FTSE 100 Index over the same period. The second part of the performance condition compares GlaxoSmithKline’s earnings per share growth to the increase in the UK Retail Prices Index over the three year performance period. Shares ADSs Number of shares and ADSs issuable Number (000) Number (000) At 27th December 2000 Converted from Glaxo Wellcome awards 2,111 – Converted from SmithKline Beecham awards 1,623 1,386 Awards exercised (243) – At 31st December 2000 3,491 1,386 Awards granted 1,778 1,042 Awards exercised (2,016) (598) Awards cancelled (72) (70) At 31st December 2001 3,181 1,760 Awards granted 863 477 Awards exercised (728) (197) Awards cancelled (152) (97) At 31st December 2002 3,164 1,943 Of the above awards 29,000 relating to shares and nil relating to ADSs were exercisable at 31st December 2002.
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Do more, feel better, live longer T
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The Annual Report was approved by t
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Joint statement by the Chairman and
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04 GlaxoSmithKline Joint statement
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Products - Pharmaceuticals Descript
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Additionally, GlaxoSmithKline marke
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Competition - Consumer Healthcare T
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Operating activities Marketing and
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Description of business GlaxoSmithK
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Description of business GlaxoSmithK
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Product approvals Country/Region Pr
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As part of GlaxoSmithKline’s majo
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Operating resources Intellectual pr
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Compensation philosophy and program
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Access to healthcare in the develop
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GlaxoSmithKline gave unrestricted g
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Corporate governance This section d
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Corporate Executive Team (CET) JP G
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The Annual General Meeting takes pl
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Research and development Safety of
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Remuneration report GlaxoSmithKline
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The majority of the competitor pane
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Performance graph 100 90 80 70 60 N
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Non-Executive Directors Non-Executi
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Non-Executive Directors’ share ar
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Incentive plans Remuneration report
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Operating and financial review and
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2002 Year World economy The world
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Pharmaceutical sales by therapeutic
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Consumer Healthcare sales 2002 2001
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Earnings 2001 2002 (restated) CER%
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Contractual obligations and commitm
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Funding, maturity and counterparty
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Stricter regulatory controls also h
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Page 71 and 72: Latin America reported eight per ce
Page 73 and 74: Selected financial data UK/US GAAP
Page 75 and 76: Financial statements GlaxoSmithKlin
Page 77 and 78: Independent Auditors’ report to t
Page 79 and 80: Consolidated statement of profit an
Page 81 and 82: Consolidated statement of cash flow
Page 83 and 84: Company balance sheet at 31st Decem
Page 85 and 86: 2 Accounting policies Consolidation
Page 87 and 88: 2 Accounting policies continued Sto
Page 89 and 90: 6 Segment information continued Not
Page 91 and 92: 7 Merger items, restructuring costs
Page 93 and 94: Notes to the financial statements G
Page 95 and 96: 13 Earnings per share Notes to the
Page 99 and 100: 19 Equity investments Notes to the
Page 105 and 106: 30 Legal proceedings The Group is i
Page 107 and 108: 30 Legal proceedings continued In F
Page 109 and 110: 30 Legal proceedings continued In 2
Page 111 and 112: 31 Acquisitions and disposals conti
Page 113 and 114: 32 Financial instruments and relate
Page 115 and 116: 32 Financial instruments and relate
Page 117 and 118: 33 Employee costs continued Notes t
Page 119: 33 Employee costs continued Notes t
Page 123 and 124: 34 Employee share schemes continued
Page 125 and 126: 37 Reconciliation to US accounting
Page 141 and 142: 38 Principal Group companies Notes
Page 143 and 144: 38 Principal Group companies contin
Page 145 and 146: Financial record GlaxoSmithKline 14
Page 153 and 154: Investor information GlaxoSmithKlin
Page 155 and 156: Shareholder information Ordinary sh
Page 157 and 158: Share capital GlaxoSmithKline 155 A
Page 159 and 160: Cross reference to Form 20-F GlaxoS
Page 161 and 162: Index A Access to healthcare 27 Acc
Page 163: Contact details INTERNET Informatio
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GSK Annual Report 2002

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