11-K 1 kl06070_11k.txt FORM 11-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 11-K ---------- |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 1-7657 ----------------------------- A. Full title of the plan and the address of the plan, if different from that of the issuer named below: LEHMAN BROTHERS SAVINGS PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: LEHMAN BROTHERS HOLDINGS INC. 745 Seventh Avenue NEW YORK, NY 10019 Lehman Brothers Savings Plan Financial Statements and Supplemental Schedule Years Ended December 31, 2002 and 2001 Contents Report of Independent Auditors.............................................. 1 Financial Statements Statements of Net Assets Available for Plan Benefits........................ 2 Statements of Changes in Net Assets Available for Plan Benefits............. 3 Notes to Financial Statements............................................... 4 Supplemental Schedule Schedule H, Line 4(i)--Schedule of Assets Held at End of Year............... 11 Report of Independent Auditors Employee Benefit Plans Committee Lehman Brothers Holdings Inc. We have audited the accompanying statements of net assets available for plan benefits of the Lehman Brothers Savings Plan (the "Plan") as of December 31, 2002 and 2001, and the related statements of changes in net assets available for plan benefits for the years then ended. 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 plan benefits of the Plan at December 31, 2002 and 2001, and the changes in its net assets available for plan benefits for the years then ended 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 the purpose 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. This 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 June 10, 2003 1 Lehman Brothers Savings Plan Statements of Net Assets Available for Plan Benefits December 31, 2002 2001 ------------------------ (in thousands) Assets Investments, at fair value $539,931 $582,217 Cash and short-term investments -- 27 Participant loans 6,733 6,487 Other receivables 2,753 2,120 ------------------------ Total assets 549,417 590,851 Liabilities Accrued and other liabilities 70 -- ------------------------ Net assets available for plan benefits $549,347 $590,851 ======================== See Notes to Financial Statements. 2 Lehman Brothers Savings Plan Statements of Changes in Net Assets Available for Plan Benefits Years Ended December 31, 2002 2001 ------------------------ (in thousands) Investment income (loss): Interest and dividends $ 13,933 $ 13,485 Net realized and unrealized depreciation in fair value of investments (86,345) (83,964) ----------------------- (72,412) (70,479) Contributions: Employer 2,989 2,120 Participants 54,024 49,695 Rollovers 5,538 7,472 ----------------------- 62,551 59,287 Transfers in from other Plans: E.F. Hutton & Company Inc. Universal Savings Account Plan -- 3,976 Lehman Brothers Savings Plan for Former Employees of E.F. Hutton & Company Inc. -- 7,663 Lehman Brothers Bank FSB Employee 401(k) Plan 565 -- ----------------------- Total Transfers in from other Plans 565 11,639 Administrative fees (510) (279) Participant withdrawals (31,698) (25,022) ----------------------- (32,208) (25,301) Net decrease (41,504) (24,854) Net assets available for plan benefits, beginning of year 590,851 615,705 ----------------------- Net assets available for plan benefits, end of year $ 549,347 $ 590,851 ======================= See Notes to Financial Statements. 3 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2002 1. Description of the Plan General The Lehman Brothers Savings Plan (the "Plan") is a defined contribution plan. The Plan became effective January 1, 1984 and was most recently amended and restated on June 28, 2002. Under the terms of the Plan, qualified employees of Lehman Brothers Holdings Inc. ("Lehman") and its participating subsidiaries (collectively, the "Company") are eligible to participate in the Plan as soon as administratively possible following their date of employment. The Lehman Brothers Bank FSB Employee 401(k) Plan (the "Bank Plan") was merged into the Plan, effective January 2, 2002. The E.F. Hutton and Company Inc. Universal Savings Account Plan (the "USA Plan") and the Lehman Brothers Savings Plan for Former Employees of E.F. Hutton & Company Inc. (the "Former Employees Plan") were merged into the Plan on June 20, 2001. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). A complete description of the Plan is contained in the Plan document available to all participants from the Plan Administrator. Contributions Upon enrollment, a participant may elect to contribute, on a pre-tax basis, between one and twenty-five percent of eligible compensation, as defined in the Plan document. The Company may make a contribution, in Lehman stock or cash, on behalf of eligible participants who have 12 months of service and are employees on the last day of the Plan year. The amount of the contribution, if any, will be determined by the Company's Board of Directors. If a Company contribution is made it will be allocated as follows: 1. Participants with annual compensation below $37,800 per year, who are not Investment Representatives, Investment Representative Trainees, Branch Managers, or Institutional Salespeople, will receive a Company contribution of $400 plus a matching contribution of 100 percent of the first $600 of their pre-tax contributions. 2. Participants with annual compensation between $37,800 and $100,000 per year will receive a matching contribution of up to 100 percent of the first $1,000 of their pre-tax contributions, only if there are funds remaining after contributions are made for the participants making less than $37,800 per year. 3. Company contributions are not made for participants with annual compensation in excess of $100,000 per year. For the 2002 and 2001 plan years, Company contributions were made in cash which was invested in the Lehman Brothers Common Stock Fund. 4 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2002 1. Description of the Plan (continued) Participant's pre-tax contributions are not subject to tax until distribution. The Internal Revenue Code of 1986, as amended (the "Code"), provides that pre-tax contributions (and any elective deferrals to other plans containing a cash or deferred arrangement) will be included in a participant's gross income to the extent such contributions exceed the statutory limitation. The maximum limitation amount was $11,000 for 2002 and $10,500 for 2001. The Company's contributions on behalf of a participant, as well as the income and appreciation on amounts invested in the Plan, are also not subject to tax until distributed. As allowed under the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"), the Plan was amended to allow participants to contribute Catch-Up contributions, as defined in EGTRRA, to the Plan. The Plan has been amended, effective January 1, 2002, to allow participants who are age 50 or over as of the end of the Plan Year to make additional pre-tax contributions, known as catch-up contributions. Section 414(v) of the Act limits catch-up contributions to a specific dollar amount. The maximum catch-up contribution for 2002 was $1,000 Rollover contributions represent contributions to the Plan of certain assets previously held on behalf of participants by other qualified plans. Valuation of Participant Accounts Separate accounts are maintained for each participant whereby the participant's account is credited for contributions and credited or charged, as appropriate, for investment experience. Participant accounts are also charged for withdrawals and loans. The periodic allocation of investment experience is based upon the participant's beneficial interest in each of the investment funds on the valuation date. Investments Investment of contributions among the investment funds can be made in increments of 1%, with a maximum of 50% of contributions permitted to be invested in Lehman Brothers Common Stock Fund. Participants can elect to change their contribution rate and investment direction of new contributions on a daily basis. Participants may also elect to transfer existing fund balances among investment funds on a daily basis. 5 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2002 1. Description of the Plan (continued) The following table presents the fair value of investments held by the Plan at December 31, 2002 and 2001, respectively: December 31, 2002 2001 ------------------------ (in thousands) Investments, at fair value: Mutual Funds $288,909 $324,368 Stable Value Fund 149,507 130,147 Lehman Brothers Holdings Inc. Common Stock 70,887 92,397 American Express Company Common Stock 30,628 35,305 ------------------------ Total $539,931 $582,217 ======================== The following table presents the net depreciation in fair value of investments held by the Plan at December 31, 2002 and 2001, respectively: Years Ended December 31, 2002 2001 ------------------------ (in thousands) Net (depreciation) in fair value of investments: Mutual Funds $(68,338) $(64,184) Lehman Brothers Holdings Inc. Common Stock (17,835) (248) American Express Company Common Stock (172) (19,532) ------------------------ Total $(86,345) $(83,964) ======================== 6 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2002 1. Description of the Plan (continued) The following is a schedule of investments held in excess of 5% of the net assets available for plan benefits at the end of 2002 and 2001: Funds Fair Value at December 31, 2002 2001 --------------------- (in thousands) Lehman Brothers Common Stock Fund $70,887 $92,397 Vanguard Institutional Index Fund 64,482 78,621 Fidelity Large-Cap Stock Fund 61,129 82,699 Fidelity US Bond Index 31,274 -- American Express Company Common Stock Fund 30,628 35,305 Putnam International Growth Fund 28,843 34,446 Bank of America, Contract #99-238 27,781 -- JPMorgan Chase Bank, Contract #4311429-T 27,665 -- Benefits A participant may elect, after attaining the age of 59-1/2, to withdraw all or a portion of the value of their accounts, provided that each withdrawal is at least $1,000 (or is 100% of the value of their account if less than $1,000). Withdrawals by actively employed participants, before the age of 59-1/2, are permitted for pre-tax contributions and pre-1989 earnings thereon, only after meeting specified financial hardship criteria and after obtaining approval from the Employee Benefit Plans Committee of the Company. Participants can elect to withdraw all or a portion of their rollover contributions made to the Plan. Although hardship and rollover withdrawals are allowed, a participant may be subject to an additional 10% tax imposed by the Code. If a participant's employment with the Company terminates for a reason other than death, any distributions made before age 59-1/2 must be paid to the participant in the form of a lump-sum payment. However, if the balance in a participant's account exceeds $5,000, payment will not be made before age 65 without prior consent. Upon death, the balance in the participant's account is paid to the designated beneficiary (as provided by the Plan) in a lump-sum payment. 7 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2002 1. Description of the Plan (continued) Vesting Plan participants are 100 percent vested in all amounts in their respective Plan accounts. Income Tax Status The Plan received a determination letter from the Internal Revenue Service ("IRS") dated February 14, 1995, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. The Plan has been amended and restated in its entirety subsequent to the receipt of the determination letter. During 2002, Lehman filed a restated Plan with the IRS. The Restated Plan incorporates all amendments enacted through January 11, 2002 and any further changes deemed necessary or advisable to comply with changes in applicable law. The Plan expects to receive a new determination letter from the IRS once the restatement is accepted. Participant Loans Receivable Participants may borrow from their plan accounts a minimum of $1,000 up to a maximum of $50,000 or 50% of their vested account balance, whichever is less. Loan terms range from 1 year to 5 years or up to 10 years for the purchase of a primary residence as long as documentation is provided. The loans are secured by one half of the balance in the participant's accounts and bear interest at the rate of prime plus one. Principal and interest are paid ratably through biweekly, semi-monthly or monthly payroll deductions, depending on the frequency with which the employee is paid. Participants who terminate with outstanding loan balances have until the end of the quarter following the quarter in which they terminate to pay the balance of their loan in full, in one lump sum payment. Loans not repaid in that timeframe will be reported as taxable distributions. Outstanding loan balances will also be treated as taxable distributions for those participants who request a distribution of their account prior to repaying their loan. For the years ended December 31, 2002 and 2001, $406,614 and $154,015, respectively, in outstanding loan balances have been reported as taxable distributions to participants. 8 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2002 2. Summary of Significant Accounting Policies Valuation of Investments Investments in mutual funds are valued at the quoted redemption prices on the last business day of the Plan year. Investments in the common stock of American Express and the Company are valued at the quoted market price on the last business day of the Plan year. Short-term investments and deposits with insurance companies in connection with contracts are valued at cost plus accrued interest, which approximate fair value. Interest rates on deposits with insurance companies were 5.05% in 2002 and 6.05% in 2001. The Funds invested in deposits with insurance companies are guaranteed by the insurer as to principle plus interest. Unpriced securities are generally not traded on any public exchange and are valued at $0. Purchase and sales of securities are reflected on a trade-date basis. Dividend and Interest Income Dividend income is recorded on the ex-dividend date. Income from other investments is recorded on the accrual basis. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 3. Third Party Administrative Fees Except to the extent paid by the Company, all expenses of the Plan are paid by the Plan. In 2002 and 2001, the Plan was charged $510,625 and $279,002 for third party administrative expenses incurred during the respective years. The Company paid all expenses not directly relating to the administration of the Plan. 9 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2002 4. Plan Termination While it has not expressed any intent to do so, the Company has the right to terminate the Plan at any time subject to the provisions set forth in ERISA and the Code. 5. Subsequent Events The Plan was amended, effective February 1, 2003, to provide past service credit to anyone employed by Lincoln Capital Management, LLC ("Lincoln") on January 31, 2003 who became an employee of Lehman Brothers on February 1, 2003. 10 Supplemental Schedule EIN: #13-3216325 Plan #003 Lehman Brothers Savings Plan Schedule H, Line 4(i)--Schedule of Assets Held at End of Year December 31, 2002
Par Value/ Current Value Number of at December 31, Shares 2002 ----------------------------------- Fixed Income Fund Bank of America: Contract #99-238 27,780,520 $ 27,780,520 Continental Assurance Co. Contract # 63205001 15,141,537 15,141,537 ING Life Insurance and Annuity Co. Contract # 60014 16,955,857 16,955,857 JPMorgan Chase Bank Contract # 431429-T 27,664,651 27,664,651 Monumental Life Insurance Co. Contract # 568 FR 7,266,189 7,266,189 Contract # 498 TR 9,018,908 9,018,908 New York Life Insurance Co. Contract # 30727 2,663,073 2,663,073 State Street Bank & Trust Contract # 101060 13,542,901 13,542,901 Transamerica Life Insurance Contract # 51499-0 1,269,251 1,269,251 UBS AG Contract # 5085 22,833,553 22,833,553 Fidelity Management Trust Co. (a) Contract # GDLE 5,370,967 5,370,967 ------------- 149,507,407 Stock Funds American Express Company Common Stock (a) 4,035,252.032 30,627,563 Lehman Brothers Holdings Inc. Common Stock - cost, $38,599,982 (a) 10,707,942.655 70,886,580 ------------- 101,514,143 Mutual Funds Fidelity Select Computers (a) 2,726.889 60,101 Fidelity Select Electronics (a) 20,927.715 510,008 Fidelity Equity Income (a) 48,101.226 1,908,176 Fidelity Select Software (a) 10,773.456 392,800 Fidelity Capital and Income (a) 3,204,133.924 20,121,961 Fidelity Select Biotech (a) 29,830.017 1,155,317 Fidelity Select Healthcare (a) 12,814.476 1,306,820 Fidelity Select Technology (a) 21,063.506 794,094 Fidelity Select Telecomm (a) 9,732.929 248,871 Fidelity Asset Manager (a) 1,253,893.968 17,303,737 Fidelity Low Price Stock (a) 507,675.072 12,778,182 Fidelity Aggressive Growth (a) 722,472.325 8,084,465 Fidelity Large-Cap Stock (a) 5,482,421.469 61,128,999 Fidelity Freedom 2010 (a) 40,482.659 463,122 Fidelity Freedom 2020 (a) 126,477.869 1,345,725 Fidelity Freedom 2030 (a) 64,393.306 659,387 Fidelity Select Developing Comm (a) 6,376.588 62,937 Fidelity US Bond Index (a) 2,782,420.601 31,274,408
11 EIN: #13-3216325 Plan #003 Lehman Brothers Savings Plan Schedule H, Line 4(i)--Schedule of Assets Held At End of Year December 31, 2002 Fidelity Freedom 2040 (a) 53,443.101 $ 313,177 Pimco Emerging Co Is 88,961.780 1,409,155 Pimco TOT Return Adm 935,570.977 9,982,542 Drey Fndrs Discvry F 13,240.043 252,090 NB Genesis Trust 94,952.747 2,671,970 Strong Opportunity 90,274.574 2,590,880 Templeton Dev Mkts A 50,828.022 508,280 Janus Adv Wrldwide I 27,599.577 596,427 Vanguard Inst Index 801,518.818 64,482,189 LB 10 Uncommon Val (a) 4,195,283.886 14,054,201 Putnam Intl Growth A 1,757,659.617 28,843,194 MFS Value Fund A 59,168.149 977,458 Vanguard Tot Stk Mkt Adm 99,367.499 1,993,904 Hartford Cap App IA 9,836.090 311,811 TRP Mid Cap Value 21,413.562 321,203 ------------- 288,907,591 Self Directed Accounts Monte Carlo Corp. * 1,000 -- Omnimax Inc. * 2,000 -- Paratech International Inc. * 4,000 -- Buscemi's Intl Inc/New * 20 -- Westmore Intl Inc. * 500 -- Strips-Tint-05/15/2008 2,000 1,697 First Capital Holdings Corp. * 100 -- Access International Education Ltd. 80 8 Xebec * 700 -- ------------- 1,705 Total Investments before Loan Account 539,930,846 Loan Account (interest rate ranges from 5.25% to 11.50%) 6,733,026 ------------- Total Investments $ 546,663,872 =============
* Unpriced Securities, valued at zero (a) Indicates party-in-interest to the Plan 12 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Lehman Brothers Holdings Inc. Employee Benefit Plans Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. LEHMAN BROTHERS SAVINGS PLAN By: /s/ Wendy M. Uvino --------------------------------- Wendy M. Uvino Lehman Brothers Holdings Inc. Employee Benefit Plans Committee June 27, 2003 13 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 23 Consent of Independent Auditors 99.01 Statement of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.02 Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 14