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, 2002
Or
[ ] Transition report pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------ --------------
Commission file number 1-8483
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, 2002 and 2001, and the results of its transactions for each
of the years then ended.
Page Number
Report of Independent Auditors 1
Financial Statements:
Statements of Net Assets Available for Benefits
at December 31, 2002 and 2001 2
Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 2002 and 2001 3
Notes to Financial Statements 4-8
Supplemental Schedules*:
Schedule of Assets Held for Investment Purposes
at December 31, 2002 9
Schedule of Reportable Transactions for
the year ended December 31, 2002 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 AUDITORS
To 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 the Unocal Savings Plan (the "Plan") at December 31, 2002 and 2001,
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 auditing standards generally accepted in the United States of
America, which require that we plan and perform the audits 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 for investment purposes at December 31, 2002 and reportable
transactions for the year ended December 31, 2002 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.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Los Angeles, California
June 6, 2003
-1-
Unocal Savings Plan
Statements of Net Assets Available for Benefits
December 31,
2002 2001
--------------------------------------------------------------------------------
Assets:
Investments at fair value $408,460,282 $485,383,654
Cash 504,396 773,306
------------------ ------------------
Total assets 408,964,678 486,156,960
------------------ ------------------
Net assets available for benefits $408,964,678 $486,156,960
================== ==================
See accompanying notes to financial statements.
-2-
Unocal Savings Plan
Statements of Changes in Net Assets Available for Benefits
Year Ended December 31,
2002 2001
--------------------------------------------------------------------------------
Additions:
Additions to (deductions from) net assets attributed to:
Investment income:
Net depreciation in
fair value of investments $ (76,270,236) $ (60,087,690)
Interest 1,129,642 2,123,253
Dividends 6,246,389 7,656,962
-------------- --------------
Total investment gain (loss) (68,894,205) (50,307,475)
Contributions:
Participant 21,914,732 18,047,217
Company 12,243,216 10,996,479
-------------- --------------
Total contributions 34,157,948 29,043,696
-------------- --------------
Total additions (deductions) (34,736,257) (21,263,779)
-------------- --------------
Deductions:
Deductions from net assets attributed to:
Participant withdrawals & distributions 42,448,925 53,385,593
Trustee fees and other expense 7,100 7,050
-------------- --------------
Total deductions 42,456,025 53,392,643
-------------- --------------
Net decrease (77,192,282) (74,656,422)
Net assets available for benefits:
Beginning of year 486,156,960 560,813,382
-------------- --------------
End of year $408,964,678 $486,156,960
============== ==============
See accompanying notes to financial statements.
-3-
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.
During 2002 and 2001, all Company contributions were initially invested in
common stock of Unocal and participant contributions were invested at the
discretion of the participants in a range of investment fund options and Unocal
common stock. During 2002 and 2001, participants were permitted to immediately
transfer Company contributions from Unocal common stock into any of the Plan
investment options. Most balances remain with the Trustee until withdrawn by
participants following termination of employment; however loans, hardship
withdrawals, and certain other withdrawals are permitted during employment. 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 booklet dated May 1, 2000 and the Addendum dated
January 1, 2001 constitute part of a prospectus covering securities that has
been registered under the Securities Act of 1933. The Savings Plan booklet and
Addendum constitute the Summary Plan Description of the Plan as of January 1,
2001. The Company has made certain plan changes that were allowed under the
Economic Growth and Tax Relief Reconciliation Act of 2001. Most of these changes
became effective January 1, 2002 and other changes were implemented by year-end
2002.
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 50 percent from 15 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 can not exceed 50 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.
-4-
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 the dividends 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.
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 but no more frequently than once per calendar month.
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.
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.
For 2002, the maximum employee pay eligible for benefit purposes under
a qualified plan was increased to $200,000 per year from $170,000 per year in
2001. 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 $11,000 for 2002 and 10,500 for
2001. Effective September 1, 2002, "catch-up"
-5-
contributions were added to the Plan that allowed employees who were at least
age 50 to contribute an additional pre-tax contribution of $1,000. 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.
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 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,
2002 and 2001. Investments in common trust funds are valued based on information
provided by the Plan's investment custodian. The financial statements of the
common trust funds are audited annually by
-6-
independent auditors. The value of the assets of the Plan are 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.
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) 2002 2001
-------------------------------------------------------------------------------
Unocal Common Stock (a)
5,530 and 5,937 shares, respectively $169,112,172 $214,155,029
Putnam S&P 500 Index Fund
3,027 and 3,014 shares, respectively 65,505,796 83,931,101
Putnam Money Market Fund
46,059 and 40,051 shares, respectively 46,058,612 40,050,878
George Putnam Fund of Boston
2,314 and 2,270 shares, respectively 34,319,318 38,062,917
Putnam New Opportunities Fund
954 and 1,042 shares, respectively 27,840,218 43,736,755
Putnam Voyager Fund
1,460 and 1,527 shares, respectively 19,049,466 27,127,733
(a) Includes both participant and nonparticipant-directed amounts.
The Plan's investments depreciated in value as follows:
December 31,
2002 2001
---------------------------------------------
Mutual funds $ (30,936,563) $(33,821,337)
Common or collective trusts (18,732,054) (11,661,112)
Common stock (26,601,619) (14,605,241)
---------------------- ------------------
$ (76,270,236) $(60,087,690)
====================== ==================
-7-
Nonparticipant-Directed Investments
The nonparticipant-directed investments and the significant components
of the changes in those net assets are as follows:
December 31,
2002 2001
-------------------------------------------------------------------------------
Assets:
Unocal common stock $ 72,279,976 $ 87,173,063
---------------------- ----------------------
Total assets 72,279,976 87,173,063
---------------------- ----------------------
Total nonparticipant-directed
net assets $ 72,279,976 $ 87,173,063
====================== ======================
Year Ended December 31,
2002 2001
-------------------------------------------------------------------------------
Changes in net assets:
Contributions $ 12,243,216 $ 10,996,479
Dividends 1,801,096 1,918,956
Net depreciation (11,204,331) (5,485,521)
Benefits paid to participants (5,036,405) (6,715,085)
Transfers to participant -
directed investments (12,696,663) (5,911,656)
---------------------- ----------------------
Net decrease $ (14,893,087) $ (5,196,827)
====================== ======================
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, 2002 and 2001, forfeited nonvested accounts totaled
$87,585 and $45,086, 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, 2002 and 2001.
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 $51,082 and
$83,335 for the years ended December 31, 2002 and 2001, respectively.
-8-
Unocal Savings Plan
Schedule of Assets Held for Investment Purposes***
At December 31, 2002
(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 $ 160,970,155 $ 169,112,172
5,530,156 shares
** Putnam Investments Putnam S&P 500 Index Fund 65,505,796
3,027,070 shares
** Putnam Investments George Putnam Fund of Boston 34,319,318
2,314,182 shares
** Putnam Investments The Putnam Bond Index Fund 12,683,087
971,884 shares
** Vanguard Group The Vanguard Windsor II Fund 11,892,613
571,760 shares
** Putnam Investments Putnam International Growth Fund 9,709,338
587,732 shares
** Putnam Investments Putnam Money Market Fund 46,058,612
46,058,612 shares
** Putnam Investments Putnam New Opportunities Mutual Fund 27,840,218
954,086 shares
** Putnam Investments Putnam Voyager Fund 19,049,466
1,459,729 shares
** Putnam Investments Vanguard Life Strategy Income Fund 1,578,474
128,123 shares
** Putnam Investments Vanguard Life Strategy Moderate Growth Fund 918,720
66,238 shares
** Putnam Investments Wells Fargo Small Cap Opportunities Fund 745,823
32,812 shares
** Putnam Investments PIMCO Renaissance Institutional Fund 577,998
39,346 shares
** Putnam Investments Royce Opportunity Fund 745,622
101,033 shares
** Putnam Investments Vanguard Life Strategy Growth Fund 489,449
34,084 shares
** Putnam Investments Vanguard Life Strategy Conservative Growth Fund 141,141
11,009 shares
** Putnam Investments Participant Loans (General loan term varies up to 5 years; 7,092,435
primary residence loan varies up to 15 years;
interest rate 5.5% to 8.75%)
-------------------
Total assets held for investment purposes $ 408,460,282
===================
* 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.
The Vanguard Windsor II Fund is also available through Putnam Investments.
*** 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, 2002
(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
Corrporation (2) Common Stock $45,700,760 $ 45,700,760 $ 45,700,760
(397 transactions)
Unocal
Corporation (2) Common Stock $ 59,311,213 51,429,059 $ 7,882,154
(696 transactions)
Putnam Money
Market Fund (3) Fund Shares $48,573,092 $ 48,573,092 $ 48,573,092
(611 transactions)
Putnam Money
Market Fund (3) Fund Shares $ 42,565,358 $ 42,565,358 $ -
(460 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.
(3) Trustee for the Plan 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 27, 2003 By: /s/Joe D. Cecil
--------------------------------
Joe D. Cecil
Unocal Savings Plan Committee Member
-11-
EXHIBIT INDEX
Exhibit 23 Consent of PricewaterhouseCoopers LLP
Exhibit 99 Certification Pursuant to 18 U.S.C. Section 1350
-12-