SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No fee required, effective October 7, 1996] |
For the fiscal year ended December 31, 2002
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No fee required] |
For the transition period from to
Commission file number 0-14376
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
ORACLE CORPORATION
401(k) SAVINGS AND INVESTMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
ORACLE CORPORATION
500 Oracle Parkway
Redwood City, CA 94065
Oracle Corporation
401(k) Savings and Investment Plan
Financial Statements and Supplemental Schedule
As of December 31, 2002 and 2001 and for the year ended December 31, 2002
| 1 | ||
| Financial Statements: |
||
| 2 | ||
| 3 | ||
| 4 | ||
| Supplemental Schedule: |
||
| Schedule H, Line 4(i) – Schedule of Assets (Held At End of Year) |
11 | |
Report of Independent Auditors
To the participants and Plan Administrative Committee of the
Oracle Corporation 401(k) Savings and Investment Plan
We have audited the accompanying statements of net assets available for benefits of the Oracle Corporation 401(k) Savings and Investment Plan as of December 31, 2002 and 2001, and the related statement of changes in net assets available for benefits for the year ended December 31, 2002. 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 in accordance with auditing standards generally accepted in the 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 audits provide 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 at December 31, 2002 and 2001, and the changes in its net assets available for benefits for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2002, is presented for purposes of additional analysis and is not a required part of the 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 audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements, taken as a whole.
/s/ ERNST & YOUNG LLP
San Francisco, California
May 23, 2003
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Oracle Corporation
401(k) Savings and Investment Plan
Statements of Net Assets Available for Benefits
As of December 31, 2002 and 2001
| December 31, | ||||||
| 2002 |
2001 | |||||
| Assets |
||||||
| Investments, at fair value |
$ | 1,229,272,726 | $ | 1,370,437,888 | ||
| Cash |
397,622 | — | ||||
| Contributions receivable: |
||||||
| Participants |
3,054,691 | 2,541,281 | ||||
| Employer |
1,634,249 | 1,703,139 | ||||
| Total contributions receivable |
4,688,940 | 4,244,420 | ||||
| Total assets |
1,234,359,288 | 1,374,682,308 | ||||
| Liabilities |
||||||
| Excess deferrals due to participants |
15,862 | 22,951 | ||||
| Amounts due to broker for securities sold |
36,456 | 670,424 | ||||
| Total liabilities |
52,318 | 693,375 | ||||
| Net assets available for benefits |
$ | 1,234,306,970 | $ | 1,373,988,933 | ||
See accompanying notes to financial statements.
2
Oracle Corporation
401(k) Savings and Investment Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2002
| Additions |
||||
| Interest and dividends |
$ | 12,528,349 | ||
| Contributions: |
||||
| Participants |
130,559,777 | |||
| Employer |
45,774,735 | |||
| Rollovers |
5,664,815 | |||
| Total contributions |
181,999,327 | |||
| Total additions |
194,527,676 | |||
| Deductions |
||||
| Benefits paid directly to participants |
77,535,643 | |||
| Net depreciation in fair value of investments |
256,580,881 | |||
| Administrative expenses |
93,115 | |||
| Total deductions |
334,209,639 | |||
| Net decrease |
(139,681,963 | ) | ||
| Net assets available for benefits at beginning of year |
1,373,988,933 | |||
| Net assets available for benefits at end of year |
$ | 1,234,306,970 | ||
See accompanying notes to financial statements.
3
Oracle Corporation
401(k) Savings and Investment Plan
December 31, 2002
1. Description of the Plan
The following description of the Oracle Corporation 401(k) Savings and Investment Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.
General
Oracle Corporation (the Company) established the Plan, effective January 1, 1986, as a defined contribution plan. The Plan was established for the purpose of providing retirement benefits for the employees of the Company. The Plan is intended to qualify as a profit sharing plan under Section 401(a) of the Internal Revenue Code of 1986 (the Code) with a salary reduction feature qualified under Section 401(k) of the Code. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
The Plan is administered by the 401(k) Benefits Committee, appointed by the Board of Directors or Chief Financial Officer. Fidelity Investments Institutional Operations Company, Inc. is used as the recordkeeper to maintain the individual accounts of each Plan participant.
Eligibility
All employees regularly scheduled to work a minimum of 20 hours per week or 1,000 hours in a Plan year on the domestic payroll of the Company and its subsidiaries that have adopted the Plan are eligible to participate in the Plan as of the first day of each calendar month following completion of one hour of service with the Company. However, the following employees or classes of employees are not eligible to participate: (i) employees whose compensation and conditions of employment are subject to determination by collective bargaining; (ii) employees who are non-resident aliens and who received no earned income from the Company; (iii) employees employed in third-party temporary status; (iv) employees of employment agencies; and (v) persons who are not classified as employees for tax purposes.
Contributions
Each year, participants may contribute up to 20% of their eligible compensation, as defined by the Plan document, plus the amount of any unused flex credits. Annual participant contribution amounts are limited to $11,000 for the year ended December 31, 2002 ($12,000 for participants 50 years old and older), as determined by the Internal Revenue Service (IRS). The Company matches 50% of an active participant’s salary deferrals up to a maximum deferral of 6% of compensation for the pay period, with maximum aggregate matching of $5,100 in any calendar year. The Company has the right, under the Plan, to discontinue or modify its matching contributions at any time. Participants may also contribute amounts representing distributions from other qualified plans.
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Oracle Corporation
401(k) Savings and Investment Plan
Notes to Financial Statements (continued)
December 31, 2002
1. Description of the Plan (continued)
Investment Options
Participants direct the investment of their contributions and the Company’s contributions into various investment options offered by the Plan. The Plan currently offers investments in the Company’s common stock, mutual funds, and Brokerage Link. Brokerage Link balances consist of mutual fund options offered by the Plan, as well as other registered investment companies or common stock.
Participant Accounts
Each participant’s account is credited with the participant’s and Company’s contributions and allocations of plan earnings. All amounts in participant accounts are participant-directed.
Vesting
All elective contributions made by participants and earnings on those contributions are 100% vested at all times. Participants’ vesting in Company matching contributions is based on years of service. Participants are 25% vested after one year of service, and vest an additional 25% each year, becoming 100% vested after four years of service.
Participants forfeit the nonvested portion of their accounts in the Plan upon termination of employment with the Company. Forfeited balances of terminated participants’ nonvested accounts may be used in the Company’s discretion to reduce its matching contribution obligations for the Plan year in which the forfeiture arose or in the succeeding Plan years or to correct misallocations due to administrative error. The amounts of unallocated forfeitures related to the nonvested accounts at December 31, 2002 and 2001 were $9,702,981 and $7,438,584, respectively. In 2002, the Company used $2,983 of forfeitures to offset Company matching contributions.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 and up to a maximum of $50,000 or 50% of their vested account balance, whichever is less. Loan terms may not exceed five years unless the loan is used to purchase a participant’s principal residence, in which case the repayment terms may not exceed ten years. The loans are secured by the balance in the participant’s account and bear interest at a rate commensurate with local prevailing lending rates determined by the 401(k) Benefits Committee. Principal and interest is paid ratably through payroll deductions.
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Oracle Corporation
401(k) Savings and Investment Plan
Notes to Financial Statements (continued)
December 31, 2002
1. Description of the Plan (continued)
Payment of Benefits
Upon termination of service, death, disability, or normal or early retirement, participants may elect to receive a lump-sum amount equal to the vested value of their account or may waive receipt of a lump-sum benefit and elect to receive monthly installments. If the participant’s account is valued at $5,000 or less, the amount is distributed in a lump sum. Distributions of investments in the Company’s common stock may be taken in the form of common stock. Hardship withdrawals are permitted if certain criteria are met.
Administrative Expenses
Administrative expenses are borne by the Company, except for fees related to administration of participant loans and Brokerage Link, which are deducted from the participants’ applicable accounts.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right, under the Plan, to terminate the Plan, subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts.
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements of the Plan are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.
Investment Valuation and Income Recognition
The Plan’s investments are stated at fair value. The shares of registered investment companies are valued at quoted market prices. Investments in common/collective trusts are valued based upon the quoted redemption value of units at year-end. The money market funds are valued at cost plus accrued interest, which approximates fair value. Common stocks, including the Company’s common stock, are traded on a national securities exchange and are valued at the last reported sales price on the last day of the Plan year. The participant loans are valued at their outstanding balances, which approximate fair value.
6
Oracle Corporation
401(k) Savings and Investment Plan
Notes to Financial Statements (continued)
December 31, 2002
2. Summary of Significant Accounting Policies (continued)
Investment Valuation and Income Recognition (continued)
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
The Oracle Stock Fund (the Fund) is tracked on a unitized basis. The Fund consists of Oracle common stock and Fidelity Institutional Money Market Fund sufficient to meet the Fund’s daily cash needs. Unitizing the Fund allows for daily trades. The value of a unit reflects the combined market value of Oracle common stock and the cash investments held by the Fund. At December 31, 2002, 4,723,680 units were outstanding with a value of $75.56 per unit (4,624,267 units were outstanding with a value of $96.24 per unit at December 31, 2001).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying footnotes. Actual results could differ from those estimates.
Risks and Uncertainties
The Plan provides for various investment options in common stock, registered investment companies (mutual funds), and short-term investments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risk. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits and participant account balances.
3. Investments
The fair values of individual investments that represent 5% or more of the Plan’s net assets available for benefits at December 31, 2002 and 2001 are as follows:
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Oracle Corporation
401(k) Savings and Investment Plan
Notes to Financial Statements (continued)
December 31, 2002
3. Investments (continued)
| December 31, | ||||||
| 2002 |
2001 | |||||
| Oracle Corporation Common Stock |
$ | 353,048,652 | $ | 440,091,860 | ||
| Fidelity Contrafund |
88,639,578 | 96,836,445 | ||||
| Fidelity Growth Company Fund |
78,224,072 | 113,079,401 | ||||
| Fidelity Growth and Income Fund |
85,872,951 | 102,694,128 | ||||
| Fidelity Magellan Fund |
104,100,737 | 129,975,777 | ||||
| Fidelity Retirement Money Market Fund |
91,817,655 | 85,865,295 | ||||
For the year ended December 31, 2002, the Plan’s investments (including investments purchased and sold, as well as held during the year) appreciated (depreciated) in fair value as determined by quoted market prices as follows:
| Net Realized and Unrealized Appreciation (Depreciation) in Fair Value of Investments |
||||
| Common stock |
$ | (91,653,906 | ) | |
| Shares of registered investment companies |
(164,929,051 | ) | ||
| Preferred stock |
510 | |||
| Limited partnership |
235 | |||
| Government debt |
1,331 | |||
| $ | (256,580,881 | ) | ||
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service, dated May 4, 1995, stating that the Plan is qualified under Section 401(a) of the Code, and therefore, the related trust is exempt from taxation. Subsequent to the issuance of the determination letter, the Plan was amended and restated. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The 401(k) Benefits Committee believes the Plan, as amended and restated, is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt.
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Oracle Corporation
401(k) Savings and Investment Plan
Notes to Financial Statements (continued)
December 31, 2002
5. Party-in-Interest Transactions
Transactions in shares of the Company’s common stock qualify as party-in-interest transactions under the provisions of ERISA. During 2002, the Plan made purchases of approximately $68,577,320, and sales of approximately $64,739,690, of the Company’s common stock.
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Oracle Corporation
401(k) Savings and Investment Plan
EIN 94-2871189, Plan #001
Schedule H, Line 4(i) – Schedule of Assets (Held at End of Year)
December 31, 2002
| (a) |
(b) Identity of Issue, Borrower, |
(c) Description of Investment, Including |
(e) Current Value | ||||
| Registered investment companies: | |||||||
| Berger Mid Cap Value Fund | 451,421 shares | $ | 6,640,405 | ||||
| Credit Suisse Capital Appreciation Fund | 848,515 shares | 10,309,453 | |||||
| Dreyfus Founders Discovery Fund F | 108,902 shares | 2,073,499 | |||||
| * |
Fidelity Balanced Fund | 2,867,041 shares | 38,102,974 | ||||
| * |
Fidelity Contrafund | 2,296,362 shares | 88,639,578 | ||||
| * |
Fidelity Disciplined Equity Fund | 1,172,526 shares | 21,070,284 | ||||
| * |
Fidelity Equity-Income Fund | 882,794 shares | 35,020,428 | ||||
| * |
Fidelity Freedom Income Fund | 90,483 shares | 959,117 | ||||
| * |
Fidelity Freedom 2000 Fund | 42,041 shares | 462,876 | ||||
| * |
Fidelity Freedom 2010 Fund | 202,732 shares | 2,319,252 | ||||
| * |
Fidelity Freedom 2020 Fund | 962,410 shares | 10,240,040 | ||||
| * |
Fidelity Freedom 2030 Fund | 292,969 shares | 2,999,999 | ||||
| * |
Fidelity Freedom 2040 Fund | 123,383 shares | 723,025 | ||||
| * |
Fidelity Growth and Income Fund | 2,833,156 shares | 85,872,951 | ||||
| * |
Fidelity Growth Company Fund | 2,208,472 shares | 78,224,072 | ||||
| * |
Fidelity Intermediate Bond Fund | 5,038,066 shares | 54,058,443 | ||||
| * |
Fidelity International Growth and Income Fund | 1,360,040 shares | 22,875,876 | ||||
| * |
Fidelity Low-Priced Stock Fund | 1,679,632 shares | 42,276,340 | ||||
| * |
Fidelity Magellan Fund | 1,318,398 shares | 104,100,737 | ||||
| * |
Fidelity OTC Portfolio | 512,750 shares | 12,259,842 | ||||
| * |
Fidelity Pacific Basin Fund | 543,287 shares | 6,932,340 | ||||
| * |
Fidelity Worldwide Fund | 696,791 shares | 8,277,878 | ||||
| Janus Worldwide Fund | 1,318,100 shares | 42,350,557 | |||||
| Spartan Extended Market Index Fund | 161,549 shares | 3,106,586 | |||||
| Spartan US Equity Index Fund | 1,095,939 shares | 34,138,505 | |||||
| Templeton Developing Markets Fund | 332,432 shares | 3,324,319 | |||||
| Westcore Small Cap Opportunity Fund | 350 shares | 7,795 | |||||
| 717,367,171 | |||||||
| Assets in Brokerage Link accounts | Various investments, |
5,796,949 | |||||
| * |
Oracle Corporation Common Stock | 32,689,690 shares | 353,048,652 | ||||
| Money market funds: | |||||||
| * |
Fidelity Retirement Money Market Fund | 91,817,655 shares | 91,817,655 | ||||
| * |
Fidelity Institutional Money Market Fund | 3,475,337 shares | 3,475,337 | ||||
| 95,292,992 | |||||||
| Common/collective trust funds: | |||||||
| * |
Fidelity Managed Income Portfolio | 41,424,707 shares | 41,424,707 | ||||
| * |
Participant loans | 5.68% –11.5%, maturing through 2012 | 16,342,255 | ||||
| Total investments | $ | 1,229,272,726 | |||||
| * | Indicates a party-in-interest to the Plan. |
Column (d), cost, has been omitted, as all investments are participant-directed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the persons who administer the employee benefit plan have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: June 27, 2003
| ORACLE CORPORATION 401(K) SAVINGS AND INVESTMENT PLAN | ||
| /s/ PETER W. SHOTT | ||
| Peter W. Shott Director of Benefits, Oracle Corporation |
INDEX TO EXHIBITS
| Exhibit Number |
Description | |
| 23.1 |
Consent of Ernst & Young LLP, Independent Auditors | |
| 99.1 |
Certification of Lawrence J. Ellison, Chairman and Chief Executive Officer of Oracle Corporation, pursuant to 18 U.S.C. Section 1350 | |
| 99.2 |
Certification of Jeffrey O. Henley, Executive Vice President and Chief Financial Officer of Oracle Corporation, pursuant to 18 U.S.C. Section 1350 | |
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