11-K 1 kl06074_11k.txt FORM 11-K ANNUAL REPORT 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, 2003 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, 2003 and 2002 Contents Report of Independent Registered Public Accounting Firm.............. 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 Registered Public Accounting Firm 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, 2003 and 2002, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance 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, 2003 and 2002, and the changes in its net assets available for plan benefits for the years then ended in conformity with U.S. generally accepted accounting principles. 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, 2003, 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. This supplemental schedule is the responsibility of the Plan sponsor'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 14, 2004 1 Lehman Brothers Savings Plan Statements of Net Assets Available for Plan Benefits December 31, 2003 2002 ----------------------- (in thousands) Assets Investments, at fair value $700,381 $539,931 Participant loans 7,507 6,733 Other receivables 2,122 2,753 ----------------------- Total assets 710,010 549,417 Liabilities Accrued and other liabilities 56 70 ----------------------- Net assets available for plan benefits $709,954 $549,347 ======================= See Notes to Financial Statements. 2 Lehman Brothers Savings Plan Statements of Changes in Net Assets Available for Plan Benefits Years Ended December 31, 2003 2002 ------------------------- (in thousands) Investment income: Interest and dividends $ 15,746 $ 13,933 Net realized and unrealized appreciation/ (depreciation) in fair value of investments 116,825 (86,345) ------------------------ 132,571 (72,412) Contributions: Employer 2,122 2,989 Participants 52,885 54,024 Rollovers 5,446 5,538 ------------------------ 60,453 62,551 Transfers in from other Plans: Lehman Brothers Bank FSB Employee 401(k) Plan -- 565 Administrative fees (334) (510) Participant withdrawals (32,083) (31,698) ------------------------ (32,417) (32,208) Net increase / (decrease) 160,607 (41,504) Net assets available for plan benefits, beginning of year 549,347 590,851 ------------------------ Net assets available for plan benefits, end of year $ 709,954 $ 549,347 ======================== See Notes to Financial Statements. 3 Lehman Brothers Savings Plan Notes to Financial Statements December 31, 2003 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 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 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. The Plan was amended, effective October 9, 2003, to provide past service credit to anyone employed by The Crossroads Group ("Crossroads") on October 8, 2003 who became an employee of Lehman Brothers on October 9, 2003. The Plan was amended, effective October 31, 2003, to provide past service credit to anyone employed by Neuberger Berman, Inc. ("Neuberger") on October 30, 2003 who became an employee of Lehman Brothers on October 31, 2003. The Lehman Brothers Bank FSB Employee 401(k) Plan (the "Bank Plan") was merged into the Plan, effective January 2, 2002. 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. 4 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2003 1. Description of the Plan (continued) Contributions (continued) 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 2003 and 2002 plan years, Company contributions were made in cash, which was invested in the Lehman Brothers Common Stock Fund. 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 $12,000 for 2003 and $11,000 for 2002. 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. Any participant that is at least 50 years old as of December 31 of any plan year may elect to contribute, on a pre-tax basis, between one and twenty-five percent of eligible compensation, as defined in the Plan document, as Catch-Up contributions. The maximum limitation for Catch-Up contributions was $2,000 for 2003 and $1,000 for 2002. 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. 5 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2003 1. Description of the Plan (continued) 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. The following table presents the fair value of investments held by the Plan at December 31, 2003 and 2002, respectively: December 31, 2003 2002 ----------------------- (in thousands) Investments, at fair value: Mutual Funds $403,440 $288,909 Stable Value Fund 157,882 149,507 Lehman Brothers Holdings Inc. Common Stock 100,655 70,887 American Express Company Common Stock 38,402 30,628 Self Directed Accounts 2 -- ----------------------- Total $700,381 $539,931 ======================= The following table presents the net appreciation / (depreciation) in fair value of investments held by the Plan at December 31, 2003 and 2002, respectively: Years Ended December 31, 2003 2002 ------------------------ (in thousands) Net appreciation/(depreciation) in fair value of investments: Mutual Funds $ 74,167 $(68,338) Lehman Brothers Holdings Inc. Common Stock 32,284 (17,835) American Express Company Common Stock 10,374 (172) ------------------------ Total $116,825 $(86,345) ======================== 6 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2003 1. Description of the Plan (continued) Investments (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 2003 and 2002: Funds Fair Value at December 31, 2003 2002 --------------------- (in thousands) Lehman Brothers Holdings Inc. Common Stock $100,655 $70,887 Vanguard Institutional Index 92,375 64,482 Fidelity Large-Cap Stock 76,340 61,129 Putnam International Equity A 37,427 28,843 American Express Company Common Stock Fund 38,402 30,628 Fidelity US Bond Index * 31,274 Bank of America, Contract #99-238 * 27,781 JP Morgan Chase Bank, Contract #4311429-T * 27,665 * - Investment was less than 5% of the net assets available for plan benefits 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 70-1/2 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, 2003 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 August 19, 2003, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan administrator believes the Plan 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. 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 percent. 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, 2003 and 2002, $694,980 and $406,614, 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, 2003 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 4.33% in 2003 and 5.05% in 2002. The Funds invested in deposits with insurance companies are guaranteed by the insurer as to principal 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 United States generally accepted accounting principles 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 2003 and 2002, the Plan was charged approximately $334,000 and $510,000 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, 2003 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 Neuberger Berman, LLC Pension Plan and the Neuberger Berman, LLC Profit Sharing Plan were merged into the Plan, effective June 14, 2004. 10 Lehman Brothers Savings Plan Schedule H, Line 4(i)--Schedule of Assets Held at End of Year December 31, 2003
Current Par Value/ Value Number of at December Shares 31, 2003 --------------------------------- Fixed Income Fund Bank of America: Contract #99-238 32,789,495 $ 32,789,495 ING Life Insurance and Annuity Co. Contract # 60014 34,198,516 34,198,516 JPMorgan Chase Bank Contract # 431429-T 33,992,503 33,992,503 Monumental Life Insurance Co. Contract # 568 FR 2,587,970 2,587,970 Contract # 498 TR 8,105,811 8,105,811 State Street Bank & Trust Contract # 101060 6,927,924 6,927,924 Contract # 103015 7,932,158 7,932,158 Contract # 103016 4,120,914 4,120,914 Transamerica Life Insurance Contract # 51499-0 672,830 672,830 UBS AG Contract # 5186 24,514,654 24,514,654 Fidelity Management Trust Co. (a) Contract # GDLE 2,039,651 2,039,651 ------------ 157,882,426 Stock Funds American Express Company Common Stock 3,735,556.603 38,401,522 Lehman Brothers Holdings Inc. Common Stock (a) 10,495,862.169 100,655,318 ------------ 139,056,840 Mutual Funds Fidelity Select Computers (a) 5,378.301 192,866 Fidelity Select Electronics (a) 34,279.565 1,435,971 Fidelity Equity Income (a) 82,868.392 4,122,703 Fidelity Select Software (a) 17,568.299 864,887 Fidelity Capital and Income (a) 3,614,042.021 29,129,179 Fidelity Select Biotech (a) 43,880.252 2,258,955 Fidelity Select Healthcare (a) 24,870.665 2,934,987 Fidelity Select Technology (a) 34,468.732 2,071,226 Fidelity Select Telecomm (a) 17,906.359 573,720 Fidelity Asset Manager (a) 1,316,020.277 20,740,480 Fidelity Low Price Stock (a) 636,446.656 22,262,904 Fidelity Aggressive Growth (a) -- -- Fidelity Large-Cap Stock (a) 5,500,014.045 76,340,195 Fidelity Freedom 2010 (a) 65,366.011 851,065 Fidelity Freedom 2020 (a) 182,564.058 2,376,984 Fidelity Freedom 2030 (a) 125,446.289 1,624,529 Fidelity Select Developing Comm (a) 12,967.689 215,134 Fidelity US Bond Index (a) 2,989,359.198 33,450,929
11 Lehman Brothers Savings Plan Schedule H, Line 4(i)--Schedule of Assets Held At End of Year (continued) December 31, 2003
Mutual Funds (continued) Fidelity Freedom 2040 (a) 98,566.338 $ 745,162 Pimco Emerging Co Is 160,448.394 3,626,134 Pimco TOT Return Adm 1,093,617.026 11,712,638 Drey Fndrs Discvry F 13,745.461 357,107 NB Genesis Trust (a) 162,859.673 6,030,694 Strong Opportunity 105,271.349 4,152,955 Templeton Dev Mkts A 118,905.036 1,782,387 Janus Adv Wrldwide I 40,837.457 1,077,700 Calamos Growth 336,206.806 15,055,341 Vanguard Institutional Index 907,593.507 92,374,867 LB 10 Uncommon Val (a) 1,505,536.477 17,238,393 Putnam International Equity A 1,811,562.235 37,426,876 MFS Value Fund A 89,298.911 1,816,340 Vanguard Tot Stk Mkt Adm 180,424.918 4,689,244 Hartford Cap App IA 31,971.005 1,435,721 TRP Mid Cap Value 121,497.640 2,471,262 -------------- 403,439,535 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 1,747 First Capital Holdings Corp. * 100 -- Access International Education Ltd. 80 8 Xebec * 700 -- -------------- 1,755 Total Investments before Loan Account 700,380,556 Loan Account 7,506,586 -------------- Total Investments $ 707,887,142 ==============
* 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 Chairperson Lehman Brothers Holdings Inc. Employee Benefit Plans Committee June 28, 2004 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 23 Consent of Independent Auditors