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 [NO FEE REQUIRED]
For the fiscal year ended December 31, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 INDEX TO FINANCIAL STATEMENTS
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, 2001 and 2000 2
Statement of Changes in Assets Available for Plan Benefits
for the Year Ended December 31, 2001 3
Notes to Financial Statements 4-8
SUPPLEMENTAL SCHEDULES AS OF AND FOR THE
YEAR ENDED DECEMBER 31, 2001:
Schedule of Assets Held for Investment Purposes 9
Schedule of Nonexempt Transactions 10
[Letterhead of Deloitte & Touche LLP]
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, 2001 and 2000, and the related statement of changes in assets
available for Plan benefits for the year ended December 31, 2001. 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,
2001 and 2000, and the changes in assets available for Plan benefits for the
year ended December 31, 2001, 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 schedules of Assets Held
for Investment Purposes and Nonexempt Transactions are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are 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. These schedules are the responsibility
of the Plan's management. Such supplemental schedules have been subjected to the
auditing procedures applied in our audits of the basic financial statements and,
in our opinion, are 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 2001 and 2000 financial
statements include securities valued at $21,664,399 (47% of net assets) and
$23,895,284 (41% 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
June 21, 2002
New York, New York
1
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
STATEMENTS OF ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 2001 AND 2000
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2001 2000
ASSETS:
Investment securities (at fair value):
Wells Fargo Treasury Plus Inst. Money Market Fund $ 13,003,678 $13,013,875
Janus Overseas Fund 5,547,836 7,581,851
Wells Fargo S&P 500 Stock Fund 5,413,596 7,782,718
Dreyfus Appreciation Fund 4,502,996 5,826,202
Janus Balanced Fund 4,252,407 5,181,221
Fidelity Advisor Growth Opportunity Fund 3,295,176 5,105,561
Wells Fargo S&P MidCap Stock Fund 2,714,345 3,062,667
PIMCO Total Return Fund 2,106,398 1,543,766
Putnam New Opportunities Fund 2,001,809 2,550,776
Janus Enterprise Fund 1,012,354 1,696,366
Franklin Small Cap Growth Fund 1,008,574 1,312,986
WF Russell 2000 Index Fund 314,782 36,023
eSpeed Stock Fund - Matching 217,999 -
Participant loans receivable 989,715 1,650,433
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Total investment securities 46,381,665 56,344,445
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Receivables:
Participant contributions 18,358 1,075,138
Employer contributions 54,638 220,432
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Total receivables 72,996 1,295,570
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ASSETS AVAILABLE FOR PLAN BENEFITS $ 46,454,661 $57,640,015
============= ===========
See accompanying notes to financial statements.
2
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, 2001
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ADDITIONS:
Net depreciation in fair value of investments $(6,088,578)
Interest and dividend income 1,000,392
Participant contributions 5,958,158
Employer contributions 54,638
------
Net additions 924,610
DEDUCTIONS -
Distributions to participants 12,109,964
----------
NET DECREASE IN ASSETS AVAILABLE FOR BENEFITS (11,185,354)
ASSETS AVAILABLE FOR PLAN BENEFITS, BEGINNING OF YEAR 57,640,015
----------
ASSETS AVAILABLE FOR PLAN BENEFITS, END OF YEAR $46,454,661
===========
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
YEARS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2000
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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).
ELIGIBILITY - All full-time employees of CFLP and eSpeed, as well as their
participating domestic affiliates (collectively referred to as the
Company) are eligible to participate in the Plan upon hire and reaching
the age of 21, except for non-resident aliens and those 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 20% of salary or a certain statutory
limit ($10,500 in 2001), 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. Deferrals exceeding the
limit will be refunded to the participants. There were no deferrals in
excess of Internal Revenue Code limitations related to the 2001 Plan year.
COMPANY CONTRIBUTIONS - In December 2000, the Plan was amended to allow
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 the Company's Class A common stock
per participant. In 2002, eSpeed contributed 5,814 shares of its Class A
common stock valued at $54,638 which are included in Employer
contributions receivable at December 31, 2001.
FORFEITURES - Participant contributions are non-forfeitable at all times.
Matching contributions are forfeitable in the event a participant
terminates before the participants matching contribution account is fully
vested. The unvested portions are forfeited and applied to such future
matching contributions at the discretion of the Company.
INVESTMENT OPTIONS - Participants direct the investment of their
contributions into the various investment options offered by the Plan.
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.
4
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.
PAYMENTS OF BENEFITS UPON TERMINATION OF SERVICE - Payment of benefits
will begin as soon as practicable following normal retirement age (59 1/2)
or disability. Participants 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.
DISTRIBUTIONS - For reason other than retirement, death or disability, the
participant's account balance will be distributed as soon as practicable
after termination. If a participant's account balance is more than $3,500,
no distribution will be made prior to normal retirement age without the
participant's written consent.
LOANS TO PARTICIPANTS - Plan Participants may borrow funds from the Plan
in amounts not exceeding the lesser of $50,000 or one-half of the
participants 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. Effective April 1, 2000, participants requesting new
loans are limited to having only two outstanding loans at any one time. At
December 31, 2001 and 2000, there were no loans in default.
PLAN TERMINATION - Although it has not expressed any intent to do so, the
Company is free to discontinue its sponsorship of the Plan and 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 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
INVESTMENT VALUATION - 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. Investments that do not have readily ascertainable market values
have been estimated by Wells Fargo, the trustee for the Plan. 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. The
Plan administrator made certain changes to the investment options
available in 2001. The fund choices for 2001 available to the participants
under the Plan includes the eSpeed Stock Fund - Matching. The following
descriptions have been extracted from the individual funds' prospectuses.
Each individual fund's prospectus contains a more complete description.
The Wells Fargo Treasury Plus Inst. Money Market Fund seeks current
income, while preserving capital and liquidity. The fund invests
primarily in obligations including repurchase agreements, issued or
guaranteed by the U.S. Treasury.
The Wells Fargo S&P 500 Stock Fund seeks to provide total returns
comparable to the returns of the S&P 500 Stock Index by investing in
the same stocks and in substantially the same percentages as the S&P
500 Index.
The Janus Overseas Fund normally invests at least 65% of its total
assets in securities of issuers from at least five different
countries, excluding the United States. Although the fund intends to
invest substantially all of its assets in securities of issuers
located outside the United States, it may at times invest in U.S.
issuers and it may at times invest all of its assets in fewer than
five countries and even a single country.
The Dreyfus Appreciation Fund invests mainly in common stocks of
domestic and foreign issuers and debt securities of foreign
governments. The fund focuses on "blue-chip" companies with total
market values of more than $5 billion.
The Janus Balanced Fund invests 40-60% of its assets in securities
selected primarily for their growth potential and 40-60% of its
assets in securities selected primarily for their income potential.
This fund normally invests at least 25% of its assets in
fixed-income securities.
The Fidelity Advisor Growth Opportunity Fund invests primarily in
common stocks and securities convertible into common stocks. The
fund strives to maintain a 30% to 60% core of traditional growth
stocks. Around this core of growth stocks are undervalued
securities, cyclicals, foreign securities and bonds.
The Wells Fargo S&P MidCap Stock Fund seeks to provide total returns
comparable to the returns of the S&P MidCap 400 Index by investing
in the same stocks and in substantially the same percentages as the
S&P MidCap 400 Index.
The Putnam New Opportunities Fund invests in companies in industry
groups that may offer above-average growth potential over the next
three to five years. The portfolio ranges from small, rapidly
growing companies to larger well-established firms, as well as newer
issues.
The Janus Enterprise Fund invests primarily in common stocks
selected for their growth potential, and normally invests at least
50% of its equity assets in medium-sized companies.
6
The PIMCO Total Return Fund invests primarily in corporate bonds,
U.S. government securities, mortgage-backed securities, and money
market instruments with an average duration between three and six
years.
The Franklin Small Cap Growth Fund invests primarily in equity
securities of companies demonstrating accelerating growth,
increasing profitability, or above-average growth or growth
potential as compared with the overall economy.
The WF Russell 2000 Index Fund seeks to approximate as closely as
practicable the total return, before deduction of fees and expenses,
of the Russell 2000 Index. The fund is an index fund that invests in
the equity securities of companies that comprise the Russell 2000
Index. The index is designed to measure the aggregate performance of
the stocks of mid-sized U.S. companies.
The eSpeed Stock Fund invests in eSpeed's Class A common stock which
is publically traded on the NASDAQ under the symbol ESPD.
RELATED PARTY TRANSACTIONS AND EXPENSES - Certain officers and employees
of CFLP 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.
In addition, some of the Plan's assets are invested in the Wells Fargo S&P
500 Stock Fund, Wells Fargo Treasury Plus Inst. Money Fund, and the Wells
Fargo S&P MidCap Stock 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.
RECLASSIFICATION - Certain amounts in the prior year financial statements
have been reclassified to conform to the current year presentation.
3. SEPTEMBER 11 EVENTS
On September 11, 2001, the Company's principal place of business at One
World Trade Center was destroyed and the Company lost in the aggregate 658
employees. As a result, distribution to participants in 2001 were
significantly in excess of those in 2000 or to be expected in future
years.
4. TAX STATUS OF THE PLAN
The Internal Revenue Service has determined and informed Cantor
Fitzgerald, L.P. by letter dated July 8, 1995 that the Plan and related
trust are designed in accordance with applicable sections of the Internal
Revenue Code ("IRC"). The Plan has been amended since receiving such
determination letter. However, the Plan Administrator believes that the
Plan is designed and is currently being operated in compliance with the
applicable requirements of the IRC.
7
5. INVESTMENTS
The Plan had the following investments, which represented 5% or more of
the Plan's net assets at December 31, 2001 and 2000, respectively:
FAIR VALUE
2001 2000
Wells Fargo Treasury Plus Inst. Money Market Fund* $13,003,678 $13,013,875
Janus Overseas Fund 5,547,836 7,581,851
Wells Fargo S&P 500 Stock Fund* 5,413,596 7,782,718
Dreyfus Appreciation Fund 4,502,996 5,826,202
Janus Balanced Fund 4,252,407 5,181,221
Fidelity Advisor Growth Opportunity Fund 3,295,176 5,105,561
* Permitted party-in-interest as defined by ERISA
At December 31, 2001 and 2000, the Plan had investments valued at
$21,664,399 (47% of net assets) and $23,895,284 (41% 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, 2001, those investments depreciated in value
by $1,380,423.
6. NONEXEMPT TRANSACTIONS
Certain nonexempt transactions between the Plan and the Company have been
identified and are listed in the respective supplemental schedule.
* * * * * *
8
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
Cantor Fitzgerald, L.P. and its Affiliates
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 2001
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DESCRIPTION UNITS VALUE
* Wells Fargo Treasury Plus Inst. Money Market Fund 13,003,678 $ 13,003,678
Janus Overseas Fund 273,292 5,547,836
* Wells Fargo S&P 500 Stock Fund 119,347 5,413,596
Dreyfus Appreciation Fund 118,438 4,502,996
Janus Balanced Fund 216,628 4,252,407
Fidelity Advisor Growth Opportunity Fund 114,575 3,295,176
* Wells Fargo S&P MidCap Stock Fund 72,383 2,714,345
PIMCO Total Return Fund 201,376 2,106,398
Putnam New Opportunities Fund 48,848 2,001,809
Janus Enterprise Fund 31,636 1,012,354
Franklin Small Cap Growth Fund 32,357 1,008,574
* WF Russell 2000 Index Fund 29,255 314,782
* eSpeed Stock Fund - Matching 81,878 217,999
* Participant loans - 989,715
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TOTAL ASSETS HELD FOR INVESTMENT PURPOSES $46,381,665
===========
* Permitted Party-in-interest as defined by ERISA
9
eSPEED, INC. DEFERRAL PLAN FOR EMPLOYEES OF
CANTOR FITZGERALD, L.P. AND ITS AFFILIATES
SCHEDULE OF NONEXEMPT TRANSACTIONS
YEAR ENDED DECEMBER 31, 2001
-------------------------------------------------------------------------------
DESCRIPTION OF
TRANSACTIONS,
INCLUDING
MATURITY, DATE,
RELATIONSHIP TO RATE OF INTEREST
PLAN EMPLOYER OR COLLATERAL INTEREST
IDENTITY OF OTHER PARTY-IN- AND PAR ON AMOUNT INCURRED
PARTY INVOLVED INTEREST MATURITY VALUE LOANED ON LOAN
-------------- -------- -------------- ------ -------
Lending of money from the
Plan to the employer
(contributions not timely
remitted to the Plan), as
follows:
Cantor Fitzgerald, L.P. Sponsor Deemed loan dated $ 187,320 $69
January 23, 2001, matured
January 25, 2001, at interest
based on the Company's
incremental borrowing rate
(due to delays in transmitting
contributions to the Plan Custodian)
10
SIGNATURE
---------
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: Administrative Committee of eSpeed, Inc. Deferral Plan
for Employees of Cantor Fitzgerald, L.P.
and its Affiliates, as Plan Administrator
By: /s/ Jeffrey Chertoff
-------------------------------------
Name: Jeffrey Chertoff
Title: Member of the Administrative Committee of
eSpeed, Inc. Deferral Plan for Employees of Cantor Fitzgerald, L.P.
and its Affiliates, as Plan Administrator
Date: June 28, 2002
EXHIBIT INDEX
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Exhibit No. Description
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23 Consent of Deloitte & Touche LLP.