EXHIBIT 99.3
NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2002 AND 2001
NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
CONTENTS
DECEMBER 31, 2002 AND 2001
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PAGE(S)
REPORT OF INDEPENDENT AUDITORS......................................... 1
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits........................ 2
Statements of Changes in Net Assets Available for Benefits............. 3
Notes to Financial Statements.......................................... 4-9
SUPPLEMENTAL SCHEDULE*
Schedule H, Line 4i - Schedule of Assets (Held At End of Year)
(Schedule I)...........................................................10
* Other schedules required by 29 CFR 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure under ERISA have been
omitted since they are not applicable.
REPORT OF INDEPENDENT AUDITORS
To the Participants and the Employee
Benefits Committee of the
Noble Drilling Corporation 401(k) Savings Plan
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 Noble Drilling Corporation 401(k) 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 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, 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 Schedule of Assets (Held
At End of Year) is presented for the purpose of additional analysis and is not a
required part of the basic 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. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
PricewaterhouseCoopers LLP
Houston, Texas
June 20, 2003
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NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2002 AND 2001
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2002 2001
ASSETS
Investments, at fair value
Noble Corporation ordinary shares $ 17,923,576 $ 20,675,808
Collective investment fund 8,881,409 5,117,258
Mutual funds 18,340,692 15,332,069
Contributions receivable
Participants 420,831 422,475
Employer 223,980 229,324
Dividends and interest receivable 13,587 8,186
Participant loans 2,557,004 1,943,576
Loan interest receivable 13,313 13,268
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48,374,392 43,741,964
LIABILITIES
Trust fees payable 22,232 15,706
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Net assets available for benefits $ 48,352,160 $ 43,726,258
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The accompanying notes are an integral part of these financial statements.
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NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2002 AND 2001
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2002 2001
ADDITIONS ATTRIBUTED TO
Interest and dividend income $ 578,457 $ 502,014
Net depreciation on investments (2,359,006) (6,022,036)
Contributions
Participants 6,165,717 5,725,917
Employer 2,819,887 2,626,777
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Total additions 7,205,055 2,832,672
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DEDUCTIONS ATTRIBUTED TO
Withdrawals (2,498,395) (2,175,522)
Administrative and investment expenses (212,192) (206,832)
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Total deductions (2,710,587) (2,382,354)
Net increase in net assets available for
benefits before rollovers from other plans 4,494,468 450,318
Rollovers from other plans 131,434 267,036
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Net increase in net assets available for
benefits 4,625,902 717,354
Net assets available for benefits,
beginning of year 43,726,258 43,008,904
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Net assets available for benefits,
end of year $ 48,352,160 $ 43,726,258
============== ==============
The accompanying notes are an integral part of these financial statements.
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NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
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1. DESCRIPTION OF PLAN
The following brief description of the provisions of the Noble Drilling
Corporation 401(k) Savings Plan (the "Plan") is provided for general
information purposes only. Participants should refer to the plan
document for a more complete description of the Plan's provisions.
CORPORATE RESTRUCTURING
On April 30, 2002, Noble Drilling Corporation ("Noble Drilling")
underwent a reorganization whereby all the outstanding shares of Noble
Drilling were exchanged for shares of Noble Corporation (the
"Company"), a Cayman Islands exempted company limited by shares. In
such reorganization, Noble Drilling became an indirect wholly owned
subsidiary of the Company. Noble Drilling continued as the sponsor of
the Plan.
GENERAL
Noble Drilling established the Noble Drilling Corporation Thrift Plan
(the "Thrift Plan") effective January 1, 1986. Prior to October 1,
1985, Noble Drilling was a wholly owned subsidiary of Noble Affiliates,
Inc. ("NAI"). Effective as of that date, Noble Drilling was
recapitalized, and its common stock was distributed to the stockholders
of NAI in a tax-free spin-off. Noble Drilling's employees had
participated in the NAI Thrift and Profit Sharing Plan (the "NAI Plan")
prior to October 1, 1985, and continued to participate in the NAI Plan
through December 31, 1985. Participants in the NAI Plan carried over
certain service, eligibility and vesting benefits upon entering the
Plan.
The Plan is a defined contribution plan. All domestic and expatriate
employees are eligible to enroll in the Plan upon beginning active
service. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and is
administered by Noble Drilling Corporation Employee Benefits Committee,
whose members are appointed by the Company's Board of Directors.
Charles Schwab Trust Company, Inc. is the Plan Trustee and Milliman USA
is the Plan's recordkeeper. Under the terms of the Plan, the Trustee,
on behalf of the Plan, acquires, holds and disposes of securities,
including the ordinary shares of the Company owned by the Plan.
CONTRIBUTIONS
Participants may contribute on a pre-tax basis up to 19 percent (up to
a limit of $11,000 and $10,500 for 2002 and 2001, respectively) of
their basic compensation to the Plan, excluding contributions rolled
over from other plans.
The Plan provides for the following amounts of employer matching
contributions based on the participant's years of vesting service:
PERCENTAGE OF MATCHING CONTRIBUTION LIMITED
PARTICIPANT'S PARTICIPANT'S CONTRIBUTION TO THE FOLLOWING
YEARS OF VESTING MATCHED BY PERCENTAGE OF PARTICIPANT'S
SERVICE THE COMPANY ELIGIBLE COMPENSATION
Less than 15 70% 6%
15 or more 100% 6%
4
NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
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The Plan provides that matching contributions are made in the form of
cash or the Company's ordinary shares. Pass-through voting rights for
ordinary shares of the Company are credited to a participant's account,
whether or not vested.
VESTING
A participant's contributions are 100 percent vested at all times.
Participants' vesting in the Company's matching contributions made for
periods prior to January 1, 2002, is as follows:
YEARS OF VESTING SERVICE PERCENTAGE VESTED
Less than 5 years 0%
5 years or more 100%
Participants' vesting in the Company's matching contribution made for
periods after December 31, 2001, is as follows:
YEARS OF VESTING SERVICE PERCENTAGE VESTED
Less than 3 years 0%
3 years or more 100%
Also, a participant becomes fully vested in the Company's matching
contributions, regardless of years of service, if employment is
terminated due to normal retirement, total disability or death.
In May 1996, in connection with the 1994 acquisition of Chiles Offshore
Corporation by Noble Drilling, the net assets available for benefits of
the Chiles Offshore Corporation 401(k) Plan ("Chiles") were merged into
the Plan. Chiles participants became vested in the Company's
contributions and the related earnings of such contributions after
attainment of the years of vesting service specified below:
VESTED AND NONFORFEITABLE
YEARS OF VESTING PERCENTAGE OF EMPLOYER'S
SERVICE CONTRIBUTION INTO THE PLAN
1 20%
2 40%
3 60%
4 80%
5 100%
In general, a participant will be deemed to have completed a "year of
vesting service" for each calendar year during which the participant
completes at least 1,000 hours of service.
TERMINATION
The Company reserves the right to amend or terminate the Plan, subject
to the provisions of ERISA. Upon notice of termination or permanent
suspension of contributions, the accounts of all participants affected
thereby will become fully vested and, in the event of termination,
distributed in accordance with the provisions of the Plan.
LOANS
A participant has the ability to borrow funds from his or her vested
pre-tax, after-tax and rollover amounts. A loan is secured by the
participant's account balance and bears interest at a fixed rate of
prime plus 1 percent. Interest rates on loans outstanding at December
31, 2002, ranged from 5.25 percent to 10.5 percent. A participant may
borrow a maximum amount equal to the lesser of (i) 50 percent of that
participant's vested account balance under the Plan or (ii) $50,000,
reduced
5
NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
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by the excess, if any, of the highest outstanding loan balance
outstanding in the previous year over the loan balance currently
outstanding. The loans are repayable within five years unless used to
acquire a principal residence, subject to the approval of the Employee
Benefits Committee. Repayment of the principal and interest of a loan
is invested according to the participant's current investment
directions for future pre-tax contributions to the Plan. Upon leaving
the Company, the Plan participant has 90 days to repay the outstanding
loan balance via a lump sum payment. In the event the loan is not paid
within that time period, the loan balance will be in default and become
taxable to the participant.
During 2002 and 2001, $1,450,446 and $1,060,810, respectively, in new
loans were made to participants.
WITHDRAWALS
Withdrawals are permitted in the event of termination of employment,
retirement, permanent disability, death or financial hardship, as
defined in the Plan. In-service withdrawals may be made from a
participant's after-tax contribution or rollover account. Additionally,
vested participants may make in-service withdrawals from Noble
Drilling's matching account.
PARTICIPANT ACCOUNTS
Separate accounts are maintained for each participant. Participant
accounts are credited with pre-tax contributions, after-tax
contributions, rollover contributions, the Company's matching
contributions and an allocation of investment earnings and losses.
Furthermore, participant accounts are adjusted for withdrawals and
transfers among investment options, if any.
Participants have an option as to the manner in which their
contributions are invested. Separate funds are maintained and
participants may direct their investments in one (1) percent
increments. A brief description of the Plan's investment options
follows. For a detailed description of investment options and risk
profiles, refer to the respective fund's prospectus.
FUND INVESTMENTS
Morley Institutional Guaranteed investment contracts, bank
Investors' Fund ("Morley") investment contracts and money-market
instruments.
PIMCO Total Return United States government securities,
Institutional Shares ("PIMCO") corporate bonds, mortgage related
securities and money-market
instruments.
Alliance Growth & Income Common stocks and convertible
Class A Fund ("Alliance") securities.
Columbia Balanced Fund Common stocks of medium-sized
("Columbia") established and growth companies.
Vanguard Index 500 Fund Common stocks of companies included in
("Vanguard") Standard & Poor's 500 index.
Janus Fund ("Janus") Common stocks of large established
domestic companies.
6
NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
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FUND INVESTMENTS
Turner Midcap Growth Fund Common stocks of medium-sized growth
("Turner") companies.
Brandywine Fund Common stocks of small to medium-
("Brandywine") sized companies that are expected to
demonstrate growth in earnings and
revenue.
Franklin Small Cap Growth I Common stocks of small-sized growth
Class A Fund ("Franklin") companies.
Janus Overseas Fund Common stocks and debt securities of
("Janus Overseas") companies and governments outside
the United States.
Fund ND Noble Corporation ordinary shares
Unallocated forfeitures are maintained in the Fund ND and the Morley
Fund. Unallocated forfeitures are segregated from all other participant
records. Unallocated forfeitures of $350,566 and $219,562 at December
31, 2002 and 2001, respectively, may be used to reduce future Company
matching contributions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Plan's financial statements are prepared on the accrual basis of
accounting in conformity with accounting principles generally accepted
in the United States of America.
INVESTMENTS
Investments traded on national securities exchanges are valued at
closing prices on the last business day of the year; investments traded
on the over-the-counter market are valued at an average of the last
reported bid and ask prices. The cost of investments sold is determined
on the basis of average cost. Shares in the collective investment fund
are valued at the fair value of the fund's underlying net assets as
determined by the quoted closing price for those securities for which
market quotations are available or, with respect to other assets, fair
value as determined in good faith by the fund manager. Investments in
mutual funds are valued on the basis of net asset value as reported by
the respective mutual fund companies.
Purchases and sales of securities are reflected on a trade-date basis.
Dividend income is recorded on the ex-dividend date. Income from other
investments is recorded as earned on an accrual basis.
The Plan presents in the Statements of Changes in Net Assets Available
for Benefits the net depreciation in the fair value of its investments,
which consists of the net realized gains or losses and the unrealized
appreciation (depreciation) on those investments.
EXPENSES
Plan administration expenses are paid by the Plan, unless paid by the
Company, at the Company's sole discretion. For the years ended December
31, 2002 and 2001, administrative expenses of $212,192 and $206,832,
respectively, were paid by the Plan.
7
NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
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WITHDRAWAL DISTRIBUTIONS
Withdrawal distributions are recorded when paid.
USE OF ESTIMATES
The preparation of the Plan's financial statements in conformity with
accounting principles generally accepted in the United States of
America requires the Plan administrator to make estimates and
assumptions that affect the reported amounts of net assets available
for benefits at the date of the financial statements and the changes in
net assets available for benefits during the reporting period, and when
applicable, disclosure of contingent assets and liabilities at the date
of the financial statements. Actual results could differ from those
estimates.
CONCENTRATIONS OF CREDIT RISK
Certain financial instruments potentially subject the Plan to
concentrations of credit risk. These financial instruments consist of
Noble Corporation ordinary shares and various mutual funds and
collective instruments. The Plan does not obtain or require collateral
for these instruments. Changes in the economic environment have a
direct impact on the market value of these instruments. It is
reasonably possible that changes in the economic environment will occur
in the near term and that such changes will have a material effect on
the market value of the instruments included in the Plan.
3. TAX STATUS
The Plan obtained its latest determination letter on February 27, 2003,
in which the Internal Revenue Service ("IRS") stated that the Plan, as
then designed, was in compliance with the applicable requirements of
the Internal Revenue Code (the "Code"). There have been no amendments
since the Plan's latest determination from the IRS.
4. RELATED PARTIES
The Trustee is authorized to invest in securities under its control.
Transactions resulting in Plan assets being transferred to, or used by,
a related party are prohibited under ERISA unless a specific exemption
exists. As of December 31, 2002 and 2001, and for the years then ended,
there were no transactions with any party-in-interest as defined by
ERISA for which there was not a specific exemption.
5. INVESTMENTS
The following presents investments that represent 5 percent or more of
the Plan's net assets at December 31, 2002 and 2001:
2002 2001
Noble Corporation ordinary shares, 508,954
and 608,869 shares, respectively $ 17,923,576 $ 20,675,808
Morley Institutional Investors' Fund, 352,334
and 210,262 shares, respectively 8,881,409 5,117,258
Vanguard Index 500 Fund, 59,162 and 50,274
shares, respectively 4,798,258 5,326,859
PIMCO Total Return Institutional shares,
355,806 and 206,025 shares, respectively 3,855,073 2,149,368*
Columbia Balanced Fund, 168,717 and 122,034
shares, respectively 2,955,077 2,522,352
Brandywine Fund, 151,956 and 120,109 shares,
respectively 2,773,692 2,805,139
Participant loans 2,557,004 1,943,576*
* Did not represent 5 percent or more of the Plan's net assets.
8
NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
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During 2002 and 2001, the Plan's investments (including gains and
losses on investments bought and sold, as well as held during the year)
appreciated (depreciated) in value as follows for the years ended
December 31, 2002 and 2001:
2002 2001
Noble Corporation ordinary shares $ 913,109 $ (4,049,836)
Mutual funds (3,695,594) (2,283,806)
Collective investment fund 423,479 311,606
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$ (2,359,006) $ (6,022,036)
============== ==============
As of December 31, 2002 and 2001, the Plan held no nonparticipant
directed investments.
9
NOBLE DRILLING CORPORATION 401(K) SAVINGS PLAN
SCHEDULE H, LINE 4I - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2002 SCHEDULE I
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(C) DESCRIPTION
-----------------------------------------
NUMBER OF (E)
(B) SHARES/UNITS (D) CURRENT
(A) IDENTITY OF ISSUE ASSET TYPE OF INTEREST COST VALUE
* Noble Corporation Ordinary shares 508,964 $ 14,429,875 $ 17,923,576
Morley Institutional
Investors' Fund Collective investment fund 352,334 8,190,768 8,881,409
Vanguard Index 500 Fund Mutual fund 59,162 6,337,468 4,798,258
Brandywine Fund Mutual fund 151,956 4,238,434 2,773,692
PIMCO Total Return
Institutional Shares Mutual fund 355,806 3,763,230 3,855,073
* Participant loans Loans, interest rates
ranging from 5.25% - 10.5% 2,557,004 2,557,004
Alliance Growth & Income
Class A Fund Mutual fund 384,834 1,269,327 999,375
Columbia Balanced Fund Mutual fund 168,717 3,680,102 2,955,077
Franklin Small Cap Growth I
Class A Fund Mutual fund 20,097 532,271 439,446
Janus Fund Mutual fund 49,980 1,295,906 890,290
Janus Overseas Fund Mutual fund 61,728 1,409,982 942,606
Turner Midcap Growth Fund Mutual fund 46,959 908,403 686,875
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Total assets held for investment purposes $ 48,612,770 $ 47,702,681
============= =============
* Indicates party-in-interest transaction, for which a statutory exemption
exists.
10