SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
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[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 ______________
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COMMISSION FILE NUMBER 1-7657
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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)
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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