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, 2004
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
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Lehman Brothers Savings Plan
Years Ended December 31, 2004 and 2003
with Report of Independent Registered Public Accounting Firm
Lehman Brothers Savings Plan
Financial Statements
and Supplemental Schedule
Years Ended December 31, 2004 and 2003
Contents
Report of Independent Registered Public Accounting Firm..................... 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
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 benefits
of the Lehman Brothers Savings Plan (the "Plan") as of December 31, 2004 and
2003, and the related statements of changes in net assets available for benefits
for the years then ended. These financial statements are the responsibility of
the Plan sponsor'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 about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also 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.
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, 2004 and 2003, and the changes in its net assets available for
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, 2004, 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 23, 2005
1
Lehman Brothers Savings Plan
Statements of Net Assets Available for Benefits
December 31,
2004 2003
----------------------------
(in thousands)
Assets
Investments, at fair value $ 1,376,184 $ 700,381
Participant loans 9,733 7,507
Other receivables 3,168 2,122
----------------------------
Total assets 1,389,085 710,010
Liabilities
Accrued and other liabilities 169 56
----------------------------
Net assets available for benefits $ 1,388,916 $ 709,954
============================
See Notes to Financial Statements.
2
Lehman Brothers Savings Plan
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31,
2004 2003
---------------------------
(in thousands)
Investment income:
Interest and dividends $ 20,756 $ 15,746
Net realized and unrealized appreciation
in fair value of investments 158,394 116,825
--------------------------
179,150 132,571
Contributions:
Employer 3,751 2,122
Participants 69,351 52,885
Rollovers 11,201 5,446
--------------------------
84,303 60,453
Transfers in from other Plans:
Neuberger Berman Pension and Profit Sharing
Plans 472,248 --
--------------------------
472,248 --
Administrative fees (403) (334)
Participant withdrawals (56,336) (32,083)
--------------------------
(56,739) (32,417)
Net increase 678,962 160,607
Net assets available for benefits,
beginning of year 709,954 549,347
--------------------------
Net assets available for benefits, end of year $ 1,388,916 $ 709,954
==========================
See Notes to Financial Statements.
3
Lehman Brothers Savings Plan
Notes to Financial Statements (continued)
December 31, 2004
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
14, 2004. 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 Neuberger Berman, LLC Profit Sharing Plan and the Neuberger Berman, LLC
Pension Plan were merged into the Plan, effective June 14, 2004.
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 Lehman
Brothers Holdings Inc. Employee Benefit Plans Committee (the "Plan
Administrator").
Contributions
Upon enrollment, a participant may elect to contribute, on a pre-tax basis,
between one and fifty 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 2004 and 2003 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, 2004
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 $13,000 for 2004 and $12,000 for 2003. 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 who 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 $3,000 for 2004 and $2,000 for
2003.
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 the
Lehman Brothers Common Stock Fund ("Lehman 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, 2004
1. Description of the Plan (continued)
Investments (continued)
The following table presents the fair value of investments held
by the Plan at December 31, 2004 and 2003, respectively:
December 31,
2004 2003
-----------------------
(in thousands)
Investments, at fair value:
Mutual Funds $1,036,631 $ 403,440
Stable Value Fund 187,656 157,882
Lehman Brothers Holdings Inc. Common Stock 111,757 100,655
American Express Company Common Stock 40,138 38,402
Self Directed Accounts 2 2
-----------------------
Total $1,376,184 $ 700,381
=======================
The following table presents the net appreciation in fair value of investments
held by the Plan at December 31, 2004 and 2003, respectively:
Years Ended December 31,
2004 2003
-----------------------
(in thousands)
Net appreciation in fair value of investments:
Mutual Funds $ 138,628 $ 74,167
Lehman Brothers Holdings Inc. Common Stock 13,847 32,284
American Express Company Common Stock 5,919 10,374
-----------------------
Total $ 158,394 $ 116,825
=======================
6
Lehman Brothers Savings Plan
Notes to Financial Statements (continued)
December 31, 2004
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 benefits at the end of 2004 and
2003:
Funds Fair Value
at December 31,
2004 2003
--------------------------
(in thousands)
Neuberger Berman Value Equity $ 476,962 $ -
Lehman Brothers Holdings Inc. Common Stock 111,757 100,655
Vanguard Institutional Index 107,479 92,375
Fidelity Large-Cap Stock 77,185 76,340
Putnam International Equity A * 37,427
American Express Company Common Stock Fund * 38,402
* - Investment was less than 5% of the net assets available for 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, the
participant may receive his distribution in one or more payments at such time
and such amount as he elects from time to time, provided that partial
distributions must be at least $1,000 and distribution must in all events begin
after attainment of age 70-1/2. If a participant's account does not exceed
$5,000, payment will be made automatically after termination in an immediate
lump sum. 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, but the
beneficiary may elect instead to receive one or more payments over a period of
up to five years following death if the account exceeds $5,000.
7
Lehman Brothers Savings Plan
Notes to Financial Statements (continued)
December 31, 2004
1. Description of the Plan (continued)
Vesting
Plan participants are 100 percent vested in all amounts in their respective Plan
accounts.
Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the statements of net
assets available for benefits.
Income Tax Status
The Plan received a determination letter from the Internal Revenue Service 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 90 days following termination of employment to
repay the loan. Loans not repaid in that timeframe (or the grace period for
curing the default) 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, 2004 and 2003, $624,343 and $694,980, 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, 2004
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 are valued at cost plus
accrued interest, which approximate fair value. Deposits with insurance
companies in connection with contracts which are fully benefit-responsive, are
valued at cost plus accrued interest. Fair value of such contracts approximated
$190,665,000 and $163,534,000 as of December 31, 2004 and December 31, 2005,
respectively. Interest rates on such contracts reset on a quarterly basis and
yields averaged 4.30% and 4.82% for 2004 and 2003, respectively. As of December
31, 2004 and December 31, 2003, the crediting interest rates were 4.38% and
4.33%, respectively. The Funds' investments in such contracts are guaranteed by
the insurer as to principal plus interest. No valuation reserves were recorded
by the Plan in 2004 and 2003.
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
Fidelity Management Trust Company holds the investments of the Plan and performs
record keeping for the Plan. Except to the extent paid by the Company, all
expenses of the Plan are paid by the Plan. In 2004 and 2003, the Plan was
charged $403,370 and $335,784 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, 2004
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 on February 16, 2005 to discontinue the American Express
Stock Fund, effective January 31, 2007. Furthermore, the Plan was also amended
to make any direct transfer of assets from the American Express Stock Fund into
the Lehman Fund exempt from any Plan provision that limits transfers into the
Lehman Fund.
The Plan was amended on March 2, 2005 to provide past service credit to anyone
employed by SIB Mortgage Corp. on February 29, 2004 who became an employee of
the Company on March 1, 2004 and remained employed by a participating affiliate
of the Company on December 31, 2004.
The Plan was also amended on March 2, 2005 to provide past service credit to
anyone employed by CNL Commercial Finance, Inc. on December 17, 2004 who became
an employee of the Company on December 18, 2004.
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, 2004
Par Value/ Current Value
Number of at December
Shares 31, 2004
-----------------------------------
Stable Value Fund
Bank of America
Contract #04-009 39,823,147 39,823,147
ING Life Insurance and Annuity Co.
Contract # 60014 39,818,746 39,818,746
JPMorgan Chase Bank
Contract # 431429 39,821,065 39,821,065
State Street Bank & Trust
Contract # 104006 38,866,595 38,866,595
UBS AG
Contract # 5186 25,701,998 25,701,998
Fidelity Management Trust Co. (a)
Contract # GDLE 3,624,843 3,624,844
------------------
187,656,395
Stock Funds
American Express Company Common Stock 3,353,210.245 40,137,927
Lehman Brothers Holdings Inc. Common Stock (a) 10,234,173.864 111,757,179
------------------
151,895,106
Mutual Funds
Fidelity Select Computers (a) 9,227.836 324,358
Fidelity Select Electronics (a) 30,861.523 1,165,948
Fidelity Equity Income (a) 121,118.995 6,392,661
Fidelity Select Software (a) 21,302.126 1,117,723
Fidelity Capital and Income (a) 3,956,581.908 33,512,249
Fidelity Select Biotech (a) 52,926.338 3,051,203
Fidelity Select Healthcare (a) 36,030.594 4,615,159
Fidelity Select Technology (a) 45,775.372 2,755,220
Fidelity Select Telecomm (a) 23,790.745 884,302
Fidelity Asset Manager (a) 1,306,668.028 21,181,089
Fidelity Low Price Stock (a) 851,161.715 34,259,259
Fidelity Diversified International (a) 1,620,597.138 46,413,902
Fidelity Large-Cap Stock (a) 5,279,404.762 77,184,898
Fidelity Freedom 2010 (a) 101,384.743 1,380,860
Fidelity Freedom 2020 (a) 240,928.436 3,363,361
Fidelity Freedom 2030 (a) 209,922.693 2,955,712
Fidelity Select Developing Comm (a) 36,578.528 707,063
Fidelity US Bond Index (a) 3,042,953.417 33,898,501
11
EIN: #13-3216325
Plan #003
Lehman Brothers Savings Plan
Schedule H, Line 4(i)--Schedule of Assets Held At End of Year
(continued)
December 31, 2004
Par Value/ Current Value
Number of at December
Shares 31, 2004
-----------------------------
Mutual Funds (continued)
Fidelity Freedom 2040 (a) 210,255.363 $ 1,738,812
NB Partners Invt (a) 374,119.859 9,386,667
Pimco Emerging Co Is 265,537.280 6,152,499
Pimco TOT Return Adm 1,410,154.364 15,046,347
Drey Fndrs Discvry F 24,344.497 700,391
NB Genesis Trust (a) 0.000 0
NB Genesis Inv (a) 767,781.536 22,910,601
Strong Opportunity 0.000 0
Templeton Dev Mkts A 260,549.849 4,825,383
Janus Adv Wrldwide I 0.000 0
Calamos Growth 586,619.736 31,079,114
Vanguard Institutional Index 970,819.032 107,479,375
LB 10 Uncommon Val (a) 1,370,906.179 17,369,381
Putnam International Equity A 0.000 0
NB Fasciano Invt (a) 137,138.141 5,877,741
MFS Value Fund A 121,748.442 2,817,259
Vanguard Tot Stk Mkt Adm 342,727.088 9,860,258
Hartford Cap App IA 104,639.985 5,591,097
TRP Mid Cap Value 611,610.386 14,060,923
NB High Inc Bond Inv (a) 507,383.124 4,825,214
American Cap World G&I R4 113,420.006 3,840,401
Neuberger Focus Inv (a) 292,282.274 10,995,659
NB International Inv (a) 435,240.649 7,921,380
NB Socially Responsible Inv (a) 92,632.942 2,027,735
NB Value Equity (a) 10,597,262.060 476,961,571
------------------
1,036,631,276
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 1,788
First Capital Holdings Corp. * 100 -
Access International Education Ltd. 80 8
Xebec * 700 -
------------------
1,796
Total Investments before Loan Account 1,376,184,573
------------------
Loan Account 9,732,630
------------------
Total Investments $ 1,385,917,203
==================
* 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, 2005
13
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
23 Consent of Independent Auditors
14