Report & accounts 2002 in full - Unilever

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28 Analysis of net funds/(debt) € million € million € million € million € million € million Acquisitions/ disposals Other 1 January Cash (excl. cash & non-cash Currency 31 December 2002 flow overdrafts) changes movements 2002 Cash on call and in hand 1 576 (46) 72 1 602 Overdrafts (400) 95 28 (277) Borrowings due within one year (10 879) 5 649 7 (4 579) 568 (9 234) Borrowings due after one year (14 221) (3 049) (64) 5 346 1 055 (10 933) Current investments 439 189 (1) 700 (101) 1 226 Cash on deposit 286 403 – – (39) 650 Net funds/(debt) (23 199) 3 241 (58) 1 467 1 583 (16 966) Other non-cash changes include profits and losses on disposal and adjustments to realisable value of current investments; exchange gains and losses on inter-company borrowings and related derivatives; and the reclassification of long-term borrowings falling due within one year at the balance sheet date. 29 Equity-based compensation plans 49 2 600 As at 31 December 2002, the Group had a number of equity-based compensation plans: (i) All-Employee Option Plans Local All-Employee Option Plans have been set up in 16 countries to enhance employee involvement with Unilever and its performance by providing a potential financial benefit linked to the Unilever share price. There are no individual performance targets to be met. The plans permit participation by all permanent employees in the country where the relevant plan applies. (ii) Executive Option Plans The Executive Option Plans were introduced in 1985 to reward key employees throughout the world for their contribution to the enhancement of the Group’s longer-term future and their commitment to the Group over a sustained period. The grant is dependent on performance of the Group and the individual. (iii) The Share Matching Plans If managers invest part of their annual bonus in Unilever shares, the Company will match this with the same number of shares on the condition that they keep all shares for an agreed number of years and will still be employed by Unilever on the vesting date. (iv) The TSR Long-Term Incentive Plan This plan was introduced in 2001 and depending on the TSR ranking (see page 40 and 41) of Unilever in comparison with its peer group it will potentially award top executives on the vesting date three years later with a number of Unilever shares. (v) The Restricted Share Plan Restricted shares are awarded to a select number of executives for special performance. After the agreed number of years the awards will vest provided they are still employed by Unilever at that time. (vi) The North American Performance Share Plan A long-term incentive plan for North American managers awarding Unilever shares if company and personal performance targets are met over a three-year period. Unilever will not grant share options in total in respect of Executive Option Plans of more than 5% of its issued ordinary capital, and for all Plans together, of more than 10% of its issued ordinary capital. The Board does not apportion these limits to each plan separately. In recent years we have met the obligations under our share option and award plans by purchasing shares in advance and transferring them, in return for the grant price, to directors and employees as the options are exercised. Unilever Annual Report & Accounts and Form 20-F 2002 Notes to the consolidated accounts 103 Unilever Group 592 Financial Statements
104 Notes to the consolidated accounts Unilever Group 29 Equity-based compensation plans continued The Group applies accounting policies based on Netherlands law and UK GAAP which are consistent with APB Opinion 25 and related interpretations in accounting for these plans. Accordingly, the Group has recognised the following compensation costs: €86 million in 2002, €46 million in 2001 and €6 million in 2000. Had the Group accounted for options under the requirement of SFAS 123, the impact on reported results would have been as follows: € million € million € million 2002 2001 2000 Net profit as reported 2 129 1 838 1 105 Add back actual compensation costs recognised 86 46 6 Less pro forma compensation cost under SFAS 123 (a) (185) (106) (57) Pro forma net profit under SFAS 123 2 030 1 778 1 054 Unilever Annual Report & Accounts and Form 20-F 2002 Euros per €0.51 Euro cents per 1.4p 2002 2001 2000 2002 2001 2000 Actual earnings per share 2.14 1.82 1.07 32.05 27.27 16.08 Pro forma earnings per share 2.04 1.76 1.02 30.53 26.36 15.32 Actual diluted earnings per share 2.07 1.77 1.05 31.10 26.54 15.69 Pro forma diluted earnings per share 1.97 1.71 1.00 29.62 25.65 14.94 (a) Included in this amount is €2 million (2001: nil; 2000: nil) relating to the HLL Executive Option Plan in India. See also under Executive Option Plans on page 106. The remaining disclosures required by SFAS 123, including a description of the method and significant assumptions used to estimate the fair values of options and the weighted-average information, are given below for each type of plan, on a combined basis. (i) All-Employee Option Plans Unilever has All-Employee Plans in 16 countries, which can be grouped together as follows: (a) Plans which follow a standard framework: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden and Switzerland. (b) Other plans: North America, South Africa and United Kingdom. Group (a): The standard framework for these countries means, in principle, an annual grant of options over NV shares, at the same grant date, exercise price (the market price on the grant date) and grant size (including part-time employees pro rata) and with the same eligibility criteria (all permanent employees in a country). There are no vesting conditions other than being continuously employed by a Group company until the vesting date. Group (b): The UK and South Africa plans annually offer options over PLC shares, combined with a compulsory (UK) or optional (South Africa) savings plan. The exercise price is the market price at date of grant, except that prior to 2000 the exercise price of the UK plan was set at either 80% or 90% of the market price with the discount being amortised to remuneration cost over the vesting period. The North American plan is a share purchase offering, with a compulsory savings plan, under which up to 10% of the salary of eligible employees is withheld. At the end of the period employees can use the savings to buy NV New York shares at a discount of 10%. This discount is amortised to remuneration cost over the vesting period. The maximum number of shares made available under the plan is 8.9 million. Until 2001 the plan had an offering period of two years; the 2002 plan one year. The table below summarises the main country-specific differences between the plans applicable in 2002: Maximum term Vesting period Country (year of introduction) Years Years Exercise period Remarks Austria (2001) 5 3 24 months Belgium (2001) 5 4 12 months Denmark (2001) 5 3 24 months Finland (2001) 5 3 24 months On 3rd, 4th or 5th anniversary France (2000) 5.5 5 6 months Germany (2000) 5 3 24 months Ireland (2002) 5 3 24 months Italy (2001) 5 3 24 months Netherlands (1995) 5 0 5 years Keep shares during the first 3 years after grant Portugal (2001) 3.5 3 6 months Spain (2001) 5 3 24 months Sweden (2001) 5 5 1 day Partly convertible bonds Switzerland (2001) 5 3 24 months UK (1985) 5.5 5 6 months Sharesave plan South Africa (2001) 3.5 3 6 months Optional sharesave plan North America (1995) 1 1 1 day Purchase plan
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Report & accounts 2002 in full - Unilever

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