SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE):
[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 0-28191
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
(FULL TITLE OF THE PLAN)
eSPEED, INC.
135 EAST 57TH STREET
NEW YORK, NEW YORK 10022
(NAME OF ISSUER OF THE SECURITIES HELD
PURSUANT TO THE PLAN AND THE ADDRESS OF
ITS PRINCIPAL EXECUTIVE OFFICE)
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Assets Available for Plan Benefits as of
December 31, 2002 and 2001 2
Statement of Changes in Assets Available for Plan Benefits
for the Year Ended December 31, 2002 3
Notes to Financial Statements 4-7
SUPPLEMENTAL SCHEDULE:
Form 5500, Schedule H, Part IV, Line 4i- Schedule of Assets
(Held at End of Year) as of December 31, 2002 8
SIGNATURE
EXHIBIT INDEX
INDEPENDENT AUDITORS' REPORT
To the Plan Administrator of the
eSpeed, Inc. Deferral Plan for Employees of
Cantor Fitzgerald, L.P. and its Affiliates
We have audited the accompanying statements of assets available for Plan
benefits of eSpeed, Inc. Deferral Plan for Employees of Cantor Fitzgerald, L.P.
and its Affiliates (the "Plan"), formerly the Cantor Fitzgerald Deferral Plan,
as of December 31, 2002 and 2001, and the related statement of changes in assets
available for Plan benefits for the year ended December 31, 2002. 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 of America. 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, such financial statements present fairly, in all material
respects, the assets available for Plan benefits of the Plan at December 31,
2002 and 2001, and the changes in assets available for Plan benefits for the
year ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule 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 schedule is the responsibility of
the Plan's management. Such supplemental schedule has been subjected to the
auditing procedures applied in our audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.
As discussed in Note 5 to the financial statements, the 2002 and 2001 financial
statements include securities valued at $21,351,667 (61% of net assets) and
$21,664,399 (47% of net assets), respectively, whose values have been estimated
by Wells Fargo, the trustee for the Plan in the absence of readily ascertainable
market values. We have examined the procedures used by the trustee in arriving
at its estimate of the value of such securities and have inspected underlying
documentation, including audited financial statements of each investment fund,
and in the circumstances, we believe that such procedures are reasonable and the
documentation appropriate. However, because of the inherent uncertainty of
valuation, those estimated values may differ significantly from the values that
would have been used had a ready market for the securities existed.
/s/ Deloitte & Touche LLP
New York, New York
June 23, 2003
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
STATEMENTS OF ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 2002 AND 2001
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2002 2001
ASSETS:
Investment securities (at fair value):
Wells Fargo Funds Treasury Plus Institutional Money Market Fund $15,446,989 $13,003,678
Wells Fargo Bank S&P Index 500 Fund 2,935,989 5,413,596
Janus Balanced Fund 2,598,299 4,252,407
Dreyfus Appreciation Fund 2,597,681 4,502,996
Janus Overseas Fund 2,312,050 5,547,836
Wells Fargo Funds S&P Mid Cap Index Fund 1,989,384 2,714,345
Fidelity Advisor Growth Opportunity Fund Class T 1,626,116 3,295,176
PIMCO Total Return Fund 1,544,624 2,106,398
Putnam New Opportunities Fund Class A 1,366,673 2,001,809
eSpeed Stock Fund - Matching 702,985 217,999
Franklin Small-Mid Cap Growth Fund Class A 541,903 1,008,574
Janus Enterprise Fund 504,677 1,012,354
Wells Fargo Bank Russell 2000 Index Fund (CIF) 276,320 314,782
Participant loans receivable 529,338 989,715
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Total investment securities 34,973,028 46,381,665
----------- -----------
Receivables:
Participant contributions - 18,358
Employer contributions 128,094 54,638
----------- -----------
Total receivables 128,094 72,996
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ASSETS AVAILABLE FOR PLAN BENEFITS $35,101,122 $46,454,661
=========== ===========
See accompanying notes to financial statements.
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eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2002
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ADDITIONS:
Participant contributions 3,845,774
Employer contributions 128,094
------------
Total additions 3,973,868
------------
DEDUCTIONS:
Investment loss:
Net depreciation in fair value of investments (2,668,767)
Interest and dividends 456,818
------------
Net investment loss (2,211,949)
------------
Distributions to participants (13,115,458)
------------
Total deductions (15,327,407)
------------
NET DECREASE IN ASSETS AVAILABLE FOR PLAN BENEFITS (11,353,539)
ASSETS AVAILABLE FOR PLAN BENEFITS, BEGINNING OF YEAR 46,454,661
------------
ASSETS AVAILABLE FOR PLAN BENEFITS, END OF YEAR $ 35,101,122
============
See accompanying notes to financial statements.
-3-
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF PLAN
The following description of the eSpeed, Inc. Deferral Plan for Employees
of Cantor Fitzgerald, L.P. and its Affiliates (the "Plan"), formerly the
Cantor Fitzgerald Deferral Plan, provides general information concerning
the Plan. Participants should refer to the Plan document for a more
complete description of the Plan's provisions.
GENERAL - The Plan is a defined contribution plan, which is subject to the
provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). The Plan is co-sponsored by Cantor Fitzgerald, L.P.
("CFLP") and eSpeed, Inc. ("eSpeed") (collectively referred to as the
"Company").
ELIGIBILITY - All full-time employees of CFLP and eSpeed, as well as their
participating domestic affiliates are eligible to participate in the Plan
upon hire and reaching the age of 21, except for non-resident aliens who
receive no earned income from U.S. sources. Eligibility begins the first
day of the following month after these requirements are met.
PARTICIPANT CONTRIBUTIONS - The maximum deferral amount under the Plan that
could be elected is the lower of 80% of salary or a certain statutory limit
($11,000 in 2002), which may be adjusted in future years for cost of living
adjustments pursuant to Internal Revenue Code section 402(g)(5). In
addition, there are other limitations set forth in the Internal Revenue
Code section 401(k), which the Plan must satisfy.
COMPANY CONTRIBUTIONS - The Plan allows eligible participants to invest in
eSpeed's Class A common stock (the eSpeed Stock Fund). In addition to the
election by the participants to contribute to the eSpeed Stock Fund, the
Company matches contributions to this fund annually with up to $3,000 of
eSpeed's Class A common stock per participant. In 2002, eSpeed
contributed 7,439 shares of its Class A common stock valued at $128,094
which are included in Employer contributions receivable at December 31,
2002.
VESTING - Participants are vested immediately in their contributions plus
actual earnings thereon. Vesting in the Company's contribution portion of
their accounts is based on years of continuous service. A participant is
100% vested after three years of credited service, one-third being earned
each year.
FORFEITURES - Participant contributions are non-forfeitable at all times.
Matching contributions are forfeitable in the event a participant
terminates before the participant's matching contribution account is fully
vested. The unvested portions are forfeited and applied first to restore
the forfeited accounts of rehired participants and second to such future
company contributions. At December 31, 2002 and December 31, 2001,
forfeited nonvested accounts totaled $429 and $1,104 respectively. These
accounts will be used to reduce future company contributions. During the
year ended December 31, 2002, no employer contributions were reduced from
forfeited nonvested accounts.
INVESTMENT OPTIONS - Participants direct the investment of their accounts
into the various investment options offered by the Plan.
-4-
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PARTICIPANT ACCOUNTS - The deferred portion of compensation is deposited by
the Company into the participant's separate account and is invested in the
fund(s) selected by the participant. The participants' accounts are
adjusted monthly to reflect income, loss and expenses of the fund(s) in
which the Plan's assets are invested.
DISTRIBUTIONS - Payment of benefits will begin as soon as practicable
following termination of service. Participants whose accounts exceed $5,000
may elect to defer receipt until a later date, but not later than the
April 1st following the calendar year in which the participant attains age
70 1/2.
LOANS TO PARTICIPANTS - Plan participants may borrow funds from the Plan in
amounts not exceeding the lesser of $50,000 (reduced by the highest
outstanding loan balance during the preceding period) or one-half of the
participant's account balance. Interest on outstanding loans is charged at
a fixed rate, as determined by the Plan administrator, which may not be
less than a commercial bank's prime rate on the first business day of the
month in which the loan is made. The principal amount borrowed must be
repaid within five years, unless the amounts borrowed are used to purchase
a primary residence. Participants are limited to having only two
outstanding loans at any one time.
PLAN TERMINATION - Although it has not expressed any intent to do so, the
Company has the right under the Plan to discontinue its sponsorship of the
Plan and to terminate the Plan at any time subject to the provisions of
ERISA. In the event the Plan is terminated, employees will become 100%
vested in their participant account.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The Plan's financial statements have been prepared
using accounting principles generally accepted in the United States of
America.
BENEFIT PAYMENTS TO PARTICIPANTS AND BENEFICIARIES - Benefits are recorded
when disbursed.
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities in the financial statements. Actual results could
differ materially from the estimates and assumptions used. Estimates that
are particularly susceptible to change include assumptions used in
determining the fair value of investments.
RISKS AND UNCERTAINTIES - The Plan provides for various investment options.
Investment securities are exposed to various risks such as interest rate,
market and credit risk. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that the risk
factors could materially affect participants' account balances and the
amount reported in the statement of assets available for Plan benefits and
changes therein.
-5-
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INVESTMENT VALUATION AND INCOME RECOGNITION - The Plan's investments are
stated at fair value. Shares of registered investment companies are valued
at quoted market prices, which represent the net asset value of shares held
by the Plan at year-end. The valuations for the non-marketable common
collective trusts and certain other funds have been estimated by Wells
Fargo, the Plan's trustee. Loan receivables are stated at contract value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on an accrual basis. Dividends are recorded on
the ex-dividend date. Dividends and interest received by the Plan are
reinvested into the respective funds.
INVESTMENT OPTIONS - All investment options are participant-directed.
RECLASSIFICATION - Certain amounts in the prior year financial statements
have been reclassified to conform to the current year presentation.
3. RELATED PARTY TRANSACTIONS
Certain officers and employees of the Company who are participants in the
Plan perform administrative services related to the operation,
recordkeeping, and financial reporting of the Plan. The Company, at its
option, pays these and other administrative expenses on behalf of the Plan.
The Plan would pay such expenses if the Company discontinued its practice
of paying them. No such officer or employee receives compensation from the
Plan.
In addition, some of the Plan's assets are invested in the Wells Fargo Bank
S&P Index 500 Fund, Wells Fargo Bank Russell 2000 Index Fund (CIF), Wells
Fargo Funds Treasury Plus Institutional Money Market Fund, and the Wells
Fargo Funds S&P Mid Cap Index Fund. These funds, as part of the Wells Fargo
Collective Investment Funds, are managed by Wells Fargo Bank, an affiliate
of Wells Fargo's Institutional Investments Group, the Plan's trustee,
custodian and recordkeeper. Although these transactions qualify as
party-in-interest transactions, they are specifically exempt in accordance
with U.S. Department of Labor Prohibited Transaction Exemptions.
4. INCOME TAX STATUS OF THE PLAN
The Internal Revenue Service has determined and informed the Company by
letter dated November 26, 2002 that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code ("IRC")
and, as such, is exempt from federal income taxes. The Plan has been
amended since receiving the latest determination letter. However, the Plan
Administrator and the Plan's tax counsel believe that the Plan is designed
and is currently being operated in compliance with the applicable
requirements of the IRC.
-6-
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENTS
The Plan had the following investments, which represented 5% or more of the
Plan's net assets at December 31, 2002 and 2001, respectively:
FAIR VALUE
2002 2001
*Wells Fargo Funds Treasury Plus Institutional Money Market Fund $15,446,989 $13,003,678
*Wells Fargo Bank S&P Index 500 Fund 2,935,989 5,413,596
Janus Balanced Fund 2,598,299 4,252,407
Dreyfus Appreciation Fund 2,597,681 4,502,996
Janus Overseas Fund 2,312,050 5,547,836
*Wells Fargo Funds S&P Mid Cap Index Fund 1,989,384 2,714,345
Fidelity Advisor Growth Opportunity Fund Class T 3,295,176
* Permitted party-in-interest as defined by ERISA
At December 31, 2002 and 2001, the Plan had investments valued at
$21,351,667 of (61% of net assets) and $21,664,399 (47% of net assets),
respectively, whose values have been estimated by Wells Fargo, the trustee
for the Plan in the absence of readily ascertainable market values. During
the year ended December 31, 2002, those investments depreciated in value by
$1,050,023.
During the year ended December 31, 2002, the Plan's investments (including
investments bought, sold and held) (depreciated) appreciated as follows:
NET CHANGE IN FAIR VALUE OF INVESTMENTS
Wells Fargo Funds Treasury Plus Institutional Money Market Fund $ (838)
Wells Fargo Bank S&P Index 500 Fund (957,980)
Janus Balanced Fund (273,875)
Dreyfus Appreciation Fund (662,686)
Janus Overseas Fund 671,048
Wells Fargo Funds S&P Mid Cap Index Fund (303,775)
Fidelity Advisor Growth Opportunity Fund Class T (638,862)
PIMCO Total Return Fund 34,798
Putnam New Opportunities Fund Class A (232,103)
eSpeed Stock Fund - Matching 283,118
Franklin Small-Mid Cap Growth Fund Class A (313,856)
Janus Enterprise Fund (203,208)
Wells Fargo Bank Russell 2000 Index Fund (CIF) (70,548)
-------------
$ (2,668,767)
=============
* * * * * *
-7-
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
FORM 5500, SCHEDULE H, PART IV, LINE 4i-
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2002
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DESCRIPTION UNITS VALUE
* Wells Fargo Funds Treasury Plus Institutional Money Market Fund 15,446,989 $ 15,446,989
* Wells Fargo Bank S&P Index 500 Fund 83,243 2,935,989
Janus Balanced Fund 145,319 2,598,299
Dreyfus Appreciation Fund 83,259 2,597,681
Janus Overseas Fund 151,213 2,312,050
* Wells Fargo Funds S&P Mid Cap Index Fund 62,344 1,989,384
Fidelity Advisor Growth Opportunity Fund Class T 73,281 1,626,116
PIMCO Total Return Fund 144,763 1,544,624
Putnam New Opportunities Fund Class A 48,072 1,366,673
* eSpeed Stock Fund - Matching 134,741 702,985
Franklin Small-Mid Cap Growth Fund Class A 24,688 541,903
Janus Enterprise Fund 21,990 504,677
* Wells Fargo Bank Russell 2000 Index Fund (CIF) 32,356 276,320
* Participant loans - 529,338
------------
TOTAL ASSETS HELD FOR INVESTMENT PURPOSES $ 34,973,028
============
* Permitted party-in-interest as defined by ERISA
-8-
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrator of the eSpeed, Inc. Deferral Plan for Employees of Cantor
Fitzgerald, L.P. and its Affiliates has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
By: /s/ Jeffrey M.Chertoff
-------------------------------------------
Name: Jeffrey M. Chertoff
Title: Member of the Investment Committee
of eSpeed, Inc. Deferral Plan for
Employees of Cantor Fitzgerald, L.P.
and its Affiliates
Date: June 27, 2003
-9-
EXHIBIT INDEX
Exhibit No. Description
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23 Consent of Deloitte & Touche LLP.
99 Certification by the Chief Executive Officer and Chief Financial
Officer relating to a Periodic Report Containing Financial
Statements.
-10-