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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2001
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036-2774
(212) 345-5000
Commission file number 1-5998
State of Incorporation: Delaware
I.R.S. Employer Identification No. 36-2668272
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- -----------------------
Common Stock New York Stock Exchange
(par value $1.00 Chicago Stock Exchange
per share) Pacific Exchange
Preferred Stock London Stock Exchange
Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K ______.
As of February 28, 2002, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $29,294,123,578.
As of February 28, 2002, there were outstanding 274,482,439 shares of
common stock, par value $1.00 per share, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
(ONLY TO THE EXTENT SET FORTH IN THE PART INDICATED)
Annual Report to Stockholders for the
year ended December 31, 2001 ............................. Parts I, II and IV
Notice of Annual Meeting of Stockholders
and Proxy Statement dated March 29, 2002 ................. Part III
MARSH & McLENNAN COMPANIES, INC.
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ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2001
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PART I
ITEM 1. BUSINESS.
Marsh & McLennan Companies, Inc. ("MMC"), a professional services
organization with origins dating from 1871 in the United States, is a holding
company which, through its subsidiaries and affiliates, provides clients with
analysis, advice and transactional capabilities in the fields of risk and
insurance services, investment management and consulting.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 25 through 33 of the Annual Report to
Stockholders for the year ended December 31, 2001 (the "2001 Annual Report"),
which is incorporated herein by reference, for a discussion of MMC's revenues
and operating income by industry segment for each of the last three fiscal
years.
RISK AND INSURANCE SERVICES. MMC's risk and insurance services are
provided by its subsidiaries and their affiliates as broker, agent or consultant
for insureds, insurance underwriters and other brokers on a worldwide basis.
These services are provided by Marsh Inc., which delivers risk and insurance
services and solutions to clients through its various subsidiaries and
affiliates. Risk management, insurance broking and program management services
are provided for businesses, public entities, professional service
organizations, associations and private clients under the Marsh name. MMC
Enterprise Risk provides advanced risk consulting services and transactional
solutions on enterprise-wide issues, principally for large, complex
organizations. Reinsurance broking, catastrophe and financial modeling services
and related advisory functions are conducted for insurance and reinsurance
companies, principally under the Guy Carpenter name. Wholesale broking and
underwriting management services are performed for a wide range of clients under
various names. In addition, MMC Capital provides services principally in
connection with originating, structuring and managing insurance, financial
services and other industry-focused investments.
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MARSH INC. Marsh serves clients with risk and insurance services in more
than 100 countries in all major regions of the world where insurance business is
done. These clients are engaged in essentially all of the major areas of
manufacturing and services found in the world economy. Business clients range
from major worldwide corporations to mid-size and small businesses and
professional service organizations. Marsh's clientele also includes government
agencies, high-net-worth individuals, and consumers served through affinity
groups and employer-based programs.
The services provided include the identification, analysis, estimation,
mitigation, financing and transfer of risks that arise from client operations.
These risks relate to damage to property, various liability exposures, and other
factors that could result in financial loss, including large and complex risks
that require access to world insurance and financial markets. The risks
addressed by Marsh's operating units go beyond traditional property-liability
areas to include a widening range of exposures. Major examples of these risks
include employment practices liability, the launch and operation of rockets and
spacecraft, the development and operation of technology resources (such as
computers, communications networks and websites), the theft or loss of
intellectual property, copyright infringement, the remediation of environmental
pollution, merger and acquisition issues, the interruption of revenue streams
derived from leasing and credit operations, political risks and various other
financial, strategic and operating exposures.
To deal with client risks, Marsh's subsidiaries provide a broad spectrum
of services requiring expertise in multiple disciplines: risk identification,
estimation and mitigation; conducting negotiations and placement transactions
with the worldwide insurance and capital markets; gaining knowledge of specific
insurance product lines and technical aspects of client operations, industries
and fields of business; actuarial analysis; and understanding the regulatory and
legal environments of various countries.
Once client risks are identified, Marsh provides advice on addressing the
exposures. This includes structuring programs for retaining, mitigating,
financing, and transferring the risks in combinations that vary according to the
risk profiles, requirements and preferences of clients. Specific professional
functions provided in this process include loss-control services, the placement
of client risks with the worldwide insurance and capital markets (risk
transfer), the development of alternative risk financing methods, establishment
and management of specialized insurance companies owned by clients ("captive
insurance companies"); claims collection, injury management, and other insurance
and risk related services.
Marsh operates through offices in various countries around the world.
Correspondent relationships are maintained with unaffiliated firms in certain
countries.
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The provision of reinsurance services to insurance and reinsurance
companies and other risk assumption entities by Guy Carpenter and its
subsidiaries and affiliates primarily involves acting as a broker or
intermediary on all classes of reinsurance. Its offices are principally in North
and South America, Europe and Asia Pacific. The predominant lines addressed are
property and casualty. In addition, Guy Carpenter's reinsurance activities
include specialty lines such as professional liability, medical malpractice,
accident, life and health. Services include providing advice, placing coverages
with reinsurance markets, arranging risk-transfer financing with capital
markets, and furnishing related services such as actuarial, financial and
regulatory consulting, portfolio analysis, catastrophe modeling and claims
services. An insurance or reinsurance company may seek reinsurance or other
risk-transfer financing on all or a portion of the risks it insures.
Marsh's wholesale broking and underwriting management services are
organized within the Guy Carpenter management structure. These activities
provide services to insurers in the United States, Canada and the United
Kingdom, primarily for professional liability coverages, as well as wholesale
broking services in the United States and the United Kingdom for a broad range
of products on behalf of both affiliated and unaffiliated brokers. These
services are provided under various names apart from Marsh.
MMC Enterprise Risk, Inc. provides advanced risk consulting services and
transactional solutions on enterprise-wide issues, principally for large,
complex organizations.
Marsh's Affinity and Private Client Practices unit provides a diverse
range of services to clients in North America and also in Europe. Services
related to employee voluntary payroll deduction programs and the administration
of insurance- and benefit-related programs are provided for corporations and
employer coalitions. Specialized risk and insurance programs are delivered
directly to high-net-worth individuals. For associations, the unit designs,
markets and administers primarily life, health, accident, disability,
automobile, homeowners, professional liability and other insurance-related
products purchased by members of the associations.
As part of the acquisition of Sedgwick Group plc in 1998, MMC acquired
several insurance companies that were in run-off. MMC had disposed of
substantially all of these companies by the end of 2001.
MMC CAPITAL, INC. MMC Capital, Inc. ("MMCAP") is a private equity
investment firm that manages fund families focused on distinct industry sectors.
It is an advisor to The Trident Partnership L.P., a private investment
partnership formed in 1993 with capital commitments of $660 million, and Trident
II, L.P. formed in 1999 with $1.4 billion in capital commitments for investments
in insurance, financial services and related
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industries. MMCAP also is the advisor to two funds with aggregate capital
commitments of $330 million for investments in technology companies and to a
fund with capital commitments of $75 million for investments in communications
and information companies, primarily that support the financial services sector.
Investors in these funds include MMCAP's corporate parent and other investors.
In response to client needs, MMC Capital helped develop an additional source of
insurance and reinsurance capacity after the September 11th terrorist attacks
through the formation of AXIS Specialty Limited ("AXIS"). AXIS had an initial
capitalization of $1.6 billion, including investments by Trident II and MMC, and
began underwriting in Bermuda during the fourth quarter of 2001.
MMCAP and its predecessor operations were instrumental in the formation
of several substantial insurance and reinsurance entities, including ACE Ltd.
and XL Capital Ltd. MMCAP advises its immediate parent company, Marsh & McLennan
Risk Capital Holdings, Ltd., regarding the latter's ownership holdings in
certain insurance and reinsurance entities and funds, primarily ones initiated
by MMCAP.
As a result of the foregoing activities, subsidiaries and affiliates of
MMC may have direct or indirect investments in insurance and reinsurance
companies, including entities at Lloyd's, which are considered for client
placements by MMC's insurance and reinsurance brokerage businesses.
COMPENSATION FOR SERVICES. The revenue attributable to MMC's risk and
insurance services consists primarily of fees paid by clients; commissions and
fees paid by insurance and reinsurance companies; compensation for billing and
related services, in the form of interest income on funds held in a fiduciary
capacity for others, such as premiums and claims proceeds; contingent income for
services provided to insurers; and compensation for services provided in
connection with the organization, structuring and management of insurance,
financial services and other industry-focused investments, including fees and
dividends, as well as appreciation that has been realized on sales of holdings
in such entities.
Revenue generated by risk and insurance services is fundamentally derived
from the value of the services provided to clients and insurance markets. These
revenues may be affected by premium rate levels in the property and casualty and
employee benefits insurance markets and available insurance capacity, since
compensation is frequently related to the premiums paid by insureds. In many
cases, compensation may be negotiated in advance based upon the estimated value
of the services to be performed. Revenue is also affected by fluctuations in the
amount of risk retained by insurance and reinsurance clients themselves and by
insured values, the development of new products, markets and services, new and
lost business, merging of clients (including insurance companies that are
clients in the reinsurance intermediary business) and the volume of
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business from new and existing clients, as well as by the level of interest
realized on the investment of fiduciary funds.
Revenue and fees also may be received from originating, structuring and
managing investments in insurance, financial services and other industry-focused
investments, as well as income derived from investments made by MMC. Contingent
income for services provided includes payments or allowances by insurance
companies based upon such factors as the overall volume of business placed by
the broker with that insurer, the aggregate commissions paid by the insurer for
that business during specific periods, or the profitability or loss to the
insurer of the risks placed. This revenue reflects compensation for services
provided by brokers to the insurance market. These services include new product
development, the development and provision of technology, administration, and
the delivery of information on developments among broad client segments and the
insurance markets.
Revenues vary from quarter to quarter as a result of the timing of policy
renewals, the net effect of new and lost business, achievement of contingent
compensation thresholds, interest and foreign exchange rate fluctuations and the
realization of revenue from investments, whereas expenses tend to be more
uniform throughout the year.
Commission rates vary in amount depending upon the type of insurance or
reinsurance coverage provided, the particular insurer or reinsurer, the capacity
in which the broker acts and negotiations with clients. In some cases,
compensation for brokerage or advisory services is paid directly as a fee by the
client. Occasionally, commissions are shared with other brokers that have
participated in placing insurance or servicing insureds.
The investment of fiduciary funds, which generates compensation for
billing and related services, is governed by the applicable laws or regulations
of insurance authorities of the states in the United States and in other
jurisdictions in which MMC's subsidiaries do business. These laws and
regulations typically limit the type of investments that may be made with such
funds. The amount of funds invested and interest rates vary from time to time.
INVESTMENT MANAGEMENT. Investment management and related services are
provided by Putnam Investments, LLC and its subsidiaries ("Putnam"). Putnam has
been engaged in the investment management business since 1937, with its
principal offices in Boston, Massachusetts. Putnam also has offices in London
and Tokyo. Putnam provides individual and institutional investors with a broad
range of equity and fixed income investment products and services designed to
meet varying investment objectives and which afford its clients the opportunity
to allocate their investment resources among
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various investment products as changing worldwide economic and market conditions
warrant.
On January 2, 2001, Putnam Investments, Inc. participated in an internal
corporate reorganization pursuant to which it became a wholly-owned subsidiary
of Putnam Investments Trust, a newly formed Massachusetts business trust, and it
was merged into Putnam Investments, LLC. Putnam Investments, LLC is the
successor to Putnam Investments, Inc.
INVESTMENT MANAGEMENT SERVICES. Putnam's investment management services,
which are performed principally in the United States, include securities
investment advisory and management services consisting of investment research
and management, and accounting and related services for a group of publicly-held
investment companies. As of December 31, 2001, there were 123 such funds (the
"Putnam Funds") registered under the Investment Company Act of 1940, including
14 closed-end investment companies whose shares are traded on various major
domestic stock exchanges. A number of the open-end funds serve as funding
vehicles for variable insurance contracts. Investment management services are
also provided on a separately managed or commingled basis to corporate
profit-sharing and pension funds, state and other governmental and public
employee retirement funds, university endowment funds, charitable foundations,
collective investment vehicles (both U.S. and non-U.S.) and other domestic and
foreign institutional accounts.
The majority of Putnam's assets under management are derived from U.S.
individuals and institutions. In recent years Putnam has been expanding its
international client base on a selective basis through joint ventures and the
development of products such as offshore funds. Many international markets are
well developed with many established investment management firms. It may be
difficult for Putnam to establish businesses whose profitability equals that of
its business in the U.S. where it is one of the market leaders.
In 1995, Putnam entered into a joint venture for the distribution of
mutual funds in Italy with Gruppo BIPOP-Carire S.p.A., an Italian bank holding
company ("BIPOP"). In 2001, the joint venture was expanded to Germany, France,
Spain, Portugal and Switzerland. Pursuant to the original joint venture
agreement, Putnam purchased 20% of Cisalpina Gestioni, S.p.A., BIPOP's mutual
fund distribution company. As part of the expansion of the joint venture
agreement, Putnam purchased approximately 2% of the outstanding common stock of
BIPOP itself. Under the joint venture, Putnam manages all Cisalpina funds with
U.S. or international-equity investment mandates.
Putnam has a minority interest in Thomas H. Lee Partners ("THL"), a
private equity investment firm. In addition, Putnam and THL formed a joint
venture entity, TH
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Lee, Putnam Capital of which Putnam owns a 25% interest. THL and TH Lee, Putnam
Capital offer private equity and alternative investment funds for institutional
and high-net-worth investors.
Assets managed by Putnam, on which management fees are earned, aggregated
approximately $315 billion and $370 billion as of December 31, 2001 and 2000,
respectively, invested both domestically and globally. Mutual fund assets
aggregated $219 billion at December 31, 2001 and $269 billion at December 31,
2000. Assets held in equity securities at December 31, 2001 represented 79% of
assets under management, compared with 83% in 2000 and 82% in 1999, while
investments in fixed income products represented 21%, compared with 17% in 2000
and 18% in 1999. Assets under management averaged $328 billion in 2001.
Putnam's revenue is derived primarily from investment management and
12b-1 fees received from the Putnam Funds and investment management fees for
institutional accounts. Investment advisory revenues depend largely on the total
value and composition of assets under management. Assets under management and
revenue levels are particularly affected by fluctuations in domestic and
international stock and bond market prices, the composition of assets under
management and by the level of investments and withdrawals for current and new
fund shareholders and clients. U.S. equity markets were volatile throughout 2001
and 2000 and declined in each of those years after several years of substantial
growth prior to 2000. This volatility contributed to the decline in assets under
management and, accordingly, to the reduction in revenue recognized by Putnam. A
continued decline in general market levels will reduce future revenue. Items
affecting revenue also include, but are not limited to, actual and relative
investment performance, service to clients, the development and marketing of new
investment products, the relative attractiveness of the investment style under
prevailing market conditions, changes in the investment patterns of clients and
the ability to maintain investment management and administrative fees at
appropriate levels.
Revenue levels are sensitive to all of the factors above, but in
particular, to significant changes in bond and stock market valuations.
Fluctuations in the prices of stocks will have an effect on equity assets under
management and may influence the flow of monies to and from equity funds and
accounts. Fluctuations in interest rates and in the yield curve have a similar
effect on fixed income assets under management and may influence the flow of
monies to and from fixed-income funds and accounts. Putnam provides individual
and institutional investors with a broad range of both equity and fixed income
investment products and services, invested domestically and globally, designed
to meet varying investment objectives and which afford its clients the
opportunity to allocate their investment resources among various investment
products as changing worldwide economic and market conditions warrant.
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The investment management services provided to the Putnam Funds and
institutional accounts are performed pursuant to advisory contracts, which
provide for fees payable to the Putnam company that manages the account. The
amount of the fees varies depending on the individual mutual fund or account and
is usually based upon a sliding scale in relation to the level of assets under
management and, in certain instances, is also based on investment performance.
Such contracts automatically terminate in the event of their assignment,
generally may be terminated by either party without penalty and, as to contracts
with the Putnam Funds, continue in effect only so long as approved, at least
annually, by their shareholders or by the Putnam Funds' trustees, including a
majority who are not affiliated with Putnam. Amendments to fund advisory
contracts must be approved by fund shareholders. "Assignment" includes any
direct or indirect transfer of a controlling block of voting stock in Putnam or
MMC. The management of Putnam and the trustees of the funds regularly review the
fund fee structure in light of fund performance, the level and range of services
provided, industry conditions and other relevant factors. The termination of one
or more of these contracts could have a material adverse effect on Putnam's
results of operations.
PUTNAM FIDUCIARY TRUST COMPANY. A Putnam subsidiary, Putnam Fiduciary
Trust Company, a Massachusetts trust company, serves as transfer agent, dividend
disbursing agent, registrar and custodian for the Putnam Funds and provides
custody services to several external clients. Putnam Fiduciary Trust Company
receives compensation from the Putnam Funds for such services pursuant to
written investor servicing agreements which may be terminated by either party on
90 days' notice, and pursuant to written custody agreements which may be
terminated by either party on 30 days' notice. These contracts generally provide
for compensation on the basis of several factors, which vary with the type of
service being provided. Putnam Fiduciary Trust Company also provides mutual fund
accounting services, including maintenance of financial records, preparation of
financial statements and reports, daily valuation of portfolio securities and
computation of daily net asset values per share. In addition, Putnam Fiduciary
Trust Company provides administrative and trustee (or custodial) services
including participant accounting, plan administration and transfer agent
services for employee benefit plans (in particular defined contribution 401(k)
plans), IRA's and other clients for which it receives compensation pursuant to
service and trust or custodian contracts with plan sponsors and the Putnam
Funds. In the case of employee benefit plans, investment options are usually
selected by the plan sponsors and may include Putnam mutual funds and other
Putnam managed products, as well as employer stock and other non-Putnam
investments.
Putnam provides investor services through several separate facilities in
the Boston area.
PUTNAM RETAIL MANAGEMENT LIMITED PARTNERSHIP. Putnam Retail Management
Limited Partnership, a Putnam subsidiary and a registered broker dealer and NASD
8
member, acts as principal underwriter of the shares of the open-end Putnam
Funds, selling primarily through independent broker/dealers, financial planners
and financial institutions, including banks, and directly to certain large
401(k) plans and other institutional accounts. Shares of open-end funds are
generally sold at their respective net asset value per share plus a sales
charge, which varies depending on the individual fund and the amount and class
of shares purchased. In some cases the sales charge is assessed only if the
shares are redeemed within a stated time period. In accordance with certain
terms and conditions described in the prospectuses for such funds, certain
investors are eligible to purchase shares at net asset value or at reduced sales
charges, and investors may generally exchange their shares of a fund at net
asset value for shares of another Putnam Fund without the payment of additional
sales charges.
Commissions to selling dealers are typically paid at the time of the
purchase as a percentage of the amount invested. Essentially all Putnam Funds
are available with a contingent deferred sales charge in lieu of a front-end
load. The related prepaid dealer commissions initially paid by Putnam to
broker/dealers for distributing such funds can be recovered through charges and
fees received over a number of years.
All of the open-end Putnam Funds have adopted distribution plans pursuant
to Rule 12b-1 under the Investment Company Act of 1940 under which the Putnam
Funds make payments to Putnam Retail Management Limited Partnership, a Putnam
subsidiary, to cover costs relating to distribution of the Putnam Funds and
services provided to shareholders. These payments enable the Putnam subsidiary
to pay service fees and other continuing compensation to firms that provide
services to Putnam Fund shareholders and distribute shares of the Putnam Funds.
Some Rule 12b-1 fees are retained by Putnam Retail Management Limited
Partnership as compensation for the costs of distribution and other services
provided by Putnam to shareholders and for commissions advanced by Putnam at the
point of sale (and recovered through fees received over time) to firms that
distribute shares of the Putnam Funds. These distribution plans, and payments
made by the Putnam Funds thereunder, are subject to annual renewal by the
trustees of the Putnam Funds and to termination by vote of the shareholders of
the Putnam Funds or by vote of a majority of the Putnam Funds' trustees who are
not affiliated with Putnam. Failure of the Trustees to approve continuation of
the Rule 12b-1 plans for Class B (deferred sales charge) shares would have a
material adverse effect on Putnam. The Trustees also have the ability to reduce
the level of 12b-1 fees paid by a fund or to make other changes that would
reduce the amount of 12b-1 fees received by Putnam. Such changes could have a
material adverse effect on Putnam.
On January 2, 2001, Putnam Retail Management, Inc. participated in an
internal corporate reorganization pursuant to which it was converted to a
Massachusetts Limited Partnership, Putnam Retail Management Limited Partnership.
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CONSULTING. Through Mercer Consulting Group, Inc. ("Mercer"),
subsidiaries and affiliates of MMC, separately and in collaboration, provide
consulting and related services from locations around the world, primarily to
business organizations, in the areas of human resources and employee benefit
programs, including retirement, health care and compensation, as well as
communication and human resource strategy; investment consulting; general
management consulting, which comprises strategy, operations and marketing;
consulting on leadership, organizational change and organizational design; and
economic consulting and expert testimony.
William M. Mercer Companies, which will change its name to Mercer Human
Resource Consulting ("Mercer Human Resource Consulting"), through its
subsidiaries and affiliates, provides professional advice and services to
corporate, government and institutional clients from offices in more than 40
countries and territories in North and South America, Europe, Asia, Australia
and New Zealand. Consultants help organizations understand, develop, execute and
measure human resource, employee benefit, compensation and other programs,
policies and strategies. Through its investment consultants, the firm assists
trustees of pension funds and others in the selection of investment managers and
investment strategies. Mercer Human Resource Consulting also advises investment
managers on product design and positioning. In certain locations outside of the
United States, Mercer Human Resource Consulting advises individuals in the
investment and disposition of lump sum retirement benefits and other retirement
savings and offers a retirement trust service, incorporating plan
administration, trustee services and investment manager selection. The firm's
Australian retirement trust is responsible for $1.75 billion of retirement plan
assets, representing the interests of about 50,000 participants. Globally, its
benefits administration practice serves approximately 3,800 plans with about 3.8
million participants. In the U.S., Mercer Human Resources Consulting also
operates an NASD registered broker dealer in connection with its investment
consulting business to assist investment consulting clients in asset transitions
when a new investment manager is selected.
Mercer Management Consulting provides advice and assistance on issues of
business strategy, primarily to large corporations in North America, Europe and
Asia. Consultants help clients anticipate and realize future sources of value
growth based on insights into rapidly changing customer priorities, economics
and environments. Mercer Management Consulting also assists its clients in the
implementation of their strategies.
Mercer Delta Consulting, with offices in North America, Canada and
Europe, works with senior executives and CEOs of major corporations and other
institutions on organizational design and the leadership of organizational
change.
National Economic Research Associates ("NERA"), a firm of consulting
economists, serves law firms, corporations, trade associations and governmental
agencies,
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from offices in the United States, Europe, Asia and Australia. NERA provides
research and analysis of economic and financial issues arising in competition,
regulation, finance, public policy, litigation and management. NERA's auction
practice advises clients on the structuring and operation of large scale
auctions, such as telecommunications spectrum auctions. NERA also advises on
transfer pricing.
Under the Lippincott & Margulies name, Mercer advises leading
corporations on issues relating to brand, corporate identity and image.
The major component of Mercer's revenue is fees paid by clients for
advice and services. In a relatively small number of situations, fees are partly
contingent on the client having successful outcomes. In addition, commission
revenue is received from insurance companies for the placement of individual and
group insurance contracts, primarily life, health and accident coverages. A
relatively small amount of revenue is derived from brokerage commissions in
connection with a registered securities broker dealer, and in the form of equity
interests in clients of Mercer Management Consulting.
Revenue in the consulting business is derived from the value of the
advice and services provided to clients. It is affected by economic conditions
around the world, changes in clients' industries, including government
regulation, as well as new products and services, the broad trends in employee
demographics and in the management of large organizations, and interest and
foreign exchange rate fluctuations.
REGULATION. The activities of MMC are subject to licensing requirements
and extensive regulation under the laws of the United States and its various
states, territories and possessions, as well as laws of other countries in which
MMC's subsidiaries operate. These laws and regulations are primarily intended to
benefit clients and mutual fund investors.
MMC's three business segments depend on the validity of, and continued
good standing under, the licenses and approvals pursuant to which they operate,
as well as compliance with pertinent regulations. MMC therefore devotes
significant effort toward maintaining its licenses and to ensuring compliance
with a diverse and complex regulatory structure.
In all jurisdictions the applicable laws and regulations are subject to
amendment or interpretation by regulatory authorities. Generally, such
authorities are vested with relatively broad discretion to grant, renew and
revoke licenses and approvals, and to implement regulations. Licenses may be
denied or revoked for various reasons, including the violation of such
regulations, conviction of crimes and the like. Possible sanctions which may be
imposed include the suspension of individual employees, limitations on engaging
in a particular business for specified periods of time, revocation of licenses,
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censures, redress to clients and fines. In some instances, MMC follows practices
based on its interpretations, or those generally followed by the industry, of
laws or regulations, which may prove to be different from those of regulatory
authorities. Accordingly, the possibility exists that MMC may be precluded or
temporarily suspended from carrying on some or all of its activities or
otherwise fined or penalized in a given jurisdiction.
No assurances can be given that MMC's risk and insurance services,
investment management or consulting activities can continue to be conducted in
any given jurisdiction as they have been in the past.
RISK AND INSURANCE SERVICES. While the laws and regulations vary among
jurisdictions, every state of the United States and most foreign jurisdictions
require an insurance broker or agent (and in some cases a reinsurance broker or
intermediary) or insurance consultant, managing general agent or third party
administrator to have an individual and/or company license from a governmental
agency or self-regulatory organization. In addition, certain of MMC's risk and
insurance activities are also governed by investment, securities and futures
licensing and other regulatory authorities. A few jurisdictions issue licenses
only to individual residents or locally-owned business entities. In some of
these jurisdictions, if MMC has no licensed subsidiary, MMC may maintain
arrangements with residents or business entities licensed to act in such
jurisdiction. Also, in some jurisdictions, various insurance related taxes may
also be due either by clients directly or from the broker. In the latter case,
the broker customarily looks to the client for payment.
INVESTMENT MANAGEMENT. Putnam's securities investment management
activities are subject to regulation in the United States by the Securities and
Exchange Commission, and other federal, state and self regulatory authorities,
as well as in certain other countries in which it does business. Putnam's
officers, directors and employees may from time to time own securities, which
are also held by the Putnam Funds or institutional accounts. Putnam's internal
policies with respect to individual investments require prior clearance and
reporting of transactions and restrict certain transactions so as to reduce the
possibility of conflicts of interest.
To the extent that existing or future regulations affecting the sale of
Putnam fund shares or other investment products or their investment strategies,
cause or contribute to reduced sales of Putnam fund shares or investment
products or impair the investment performance of the Putnam Funds or such other
investment products, Putnam's aggregate assets under management and its revenues
might be adversely affected. Changes in regulations affecting the free movement
of international currencies might also adversely affect Putnam.
CONSULTING. Mercer's largest service area, retirement-related consulting,
is subject to pension law and financial regulation in many countries, including
regulation by the
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Investment Management Regulatory Organization and the Personal Investment
Authority in the UK. In addition, services related to brokerage activities,
merger and acquisition assistance, trustee services, investment matters
(including advice to individuals on the investment of personal pension assets)
and the placing of individual and group insurance contracts subject Mercer Human
Resources Consulting's subsidiaries to insurance, investment or securities
regulations and licensing in various jurisdictions.
COMPETITIVE CONDITIONS. Principal methods of competition in risk and
insurance services and consulting include the quality and types of services and
products that a broker or consultant provides its clients and their cost. Putnam
competes with other providers of investment products and services primarily on
the basis of the range of investment products offered, the investment
performance of such products, as well as the manner in which such products are
distributed, and the scope and quality of the shareholder and other services
provided. Sales of Putnam fund shares are also influenced by general securities
market conditions, government regulations, global economic conditions and
advertising and sales promotional efforts.
All these businesses also encounter strong competition from both public
corporations and private firms in attracting and retaining qualified employees.
RISK AND INSURANCE SERVICES. The combined insurance and reinsurance
broking services business of MMC is the largest of its type in the world.
MMC encounters strong competition in the risk and insurance services
business from other insurance brokerage firms which also operate on a nationwide
or worldwide basis, from a large number of regional and local firms in the
United States, the European Union and in other countries and regions, from
insurance and reinsurance companies that market and service their insurance
products without the assistance of brokers or agents and from other businesses,
including commercial and investment banks, accounting firms and consultants that
provide risk-related services and products.
Certain insureds and groups of insureds have established programs of self
insurance (including captive insurance companies), as a supplement or
alternative to third-party insurance, thereby reducing in some cases the need
for insurance placements. There are also many other providers of affinity group
and private client services including specialized firms, as well as insurance
companies and other institutions.
MMC Capital competes with other organizations that set up venture capital
funds to structure and manage investments in the insurance industry. These
organizations include insurance companies, brokers and from time to time, other
market participants.
13
INVESTMENT MANAGEMENT. Putnam Investments is one of the largest
investment management firms in the United States. The investment management
business is highly competitive. In addition to competition from firms already in
the investment management business, including public and private firms,
commercial banks, stock brokerage and investment banking firms, and insurance
companies, there is competition from other firms offering financial services and
other investment alternatives. Although Putnam Investments has expanded its
marketing and distribution outside the U.S., it competes in non-U.S. markets
with local and global firms, many of whom have much larger investment management
businesses in their respective non-U.S. markets.
Many securities dealers, whose large retail distribution systems play an
important role in the sale of shares in the Putnam Funds, also sponsor competing
proprietary mutual funds. To the extent that such securities dealers value the
ability to offer customers a broad selection of investment alternatives, they
will continue to sell independent funds, notwithstanding the availability of
proprietary products. However, to the extent that these firms limit or restrict
the sale of Putnam fund shares through their brokerage systems in favor of their
proprietary mutual funds, assets under management might decline and Putnam's
revenues might be adversely affected. In addition, a number of mutual fund
sponsors presently market their funds to the general public without sales
charges. Certain firms also offer passively managed funds such as index funds to
the general public.
CONSULTING. Mercer, one of the largest global consulting firms, is a
leader in many of its businesses. Mercer Human Resource Consulting is the
world's largest human resources consulting organization. Mercer Delta, NERA and
Lippincott & Margulies are also leaders in their respective industries. Mercer
Management Consulting is a medium size firm, respected in its various practice
areas.
MMC's consulting businesses face strong competition from other privately
and publicly held worldwide and national consulting companies, as well as
regional and local firms. Competitors include independent consulting firms and
consulting organizations affiliated with accounting, information systems,
technology and financial services firms, some of which provide administrative or
consulting services as an adjunct to other primary services. For most of the
services provided by Mercer, clients also have the option of handling these
issues internally without assistance from outside advisors.
SEGMENTATION OF ACTIVITY BY TYPE OF SERVICE AND GEOGRAPHIC AREA OF
OPERATION. Financial information relating to the types of services provided by
MMC and the geographic areas of its operations is incorporated herein by
reference to Note 15 of the Notes to Consolidated Financial Statements on pages
51 and 52 of the 2001 Annual Report. MMC's non-U.S. operations are subject to
the customary risks involved in doing business in other countries, including
currency fluctuations and exchange controls.
14
EMPLOYEES. As of December 31, 2001, MMC and its consolidated subsidiaries
employed about 57,800 people worldwide, of whom approximately 36,100 were
employed by subsidiaries providing risk and insurance services, approximately
5,800 were employed by subsidiaries providing investment management services,
approximately 15,400 were employed by subsidiaries providing consulting
services, and approximately 500 were employed by MMC.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS. MMC and its
subsidiaries and their representatives may from time to time make verbal or
written statements (including certain statements contained in this report and
MMC's financial statements and other documents incorporated herein by reference
or in other MMC filings with the Securities and Exchange Commission) relating to
future results, which are forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. Such statements may
include, without limitation, discussions concerning revenues, expenses,
earnings, cash flow, capital structure, financial losses and expected insurance
recoveries resulting from the September 11, 2001 attack on the World Trade
Center in New York City, as well as market and industry conditions, premium
rates, financial markets, interest rates, foreign exchange rates, contingencies
and matters relating to MMC's operations and income taxes. Such forward-looking
statements are based on available current market and industry materials,
experts' reports and opinions and long-term trends, as well as management's
expectations concerning future events impacting MMC. Forward-looking statements
by their very nature involve risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated by any
forward-looking statements contained or incorporated or referred to herein
include, in the case of MMC's risk and insurance services and consulting
businesses, the amount of actual insurance recoveries and financial loss from
the September 11 attack on the World Trade Center or other adverse consequences
from that incident. Other factors that should be considered in the case of MMC's
risk and insurance service business are changes in competitive conditions,
movements in premium rate levels, difficulty transferring commercial risk, and
other changes in the global property and casualty insurance markets, the impact
of terrorist attacks and natural catastrophes and mergers between client
organizations, including insurance and reinsurance companies. Factors to be
considered in the case of MMC's investment management business include changes
in worldwide and national equity and fixed income markets, actual and relative
investment performance, the level of sales and redemptions and the ability to
maintain investment management and administrative fees at appropriate levels;
and with respect to all of MMC's activities, changes in general worldwide and
national economic conditions, changes in the value of investments made in
individual companies and investment funds, fluctuations in foreign currencies,
actions of competitors or regulators, changes in interest rates or in the
ability to access financial markets, developments relating to claims, lawsuits
and contingencies, prospective and retrospective changes in the tax or
accounting treatment of MMC's operations and the
15
impact of tax and other legislation and regulation in the jurisdictions in which
MMC operates. A description of certain of these factors is included elsewhere in
this Annual Report and is incorporated herein by reference.
Forward-looking statements speak only as of the date on which they are
made, and MMC undertakes no obligation to update any forward-looking statement
to reflect events or circumstances after the date on which it is made or to
reflect the occurrence of unanticipated events.
MMC is committed to providing timely and materially accurate information
to the investing public, consistent with our legal and regulatory obligations.
To that end, MMC and its operating companies use their websites to convey
meaningful information about their businesses, including the posting of updates
of assets under management at Putnam. Monthly updates of assets under management
at Putnam will be posted on the first business day following the end of each
month, except at the end of March, June, September and December, when such
information will be released with MMC's quarterly earning announcement.
Investors can link to MMC and its operating company websites through
www.mmc.com.
ITEM 2. PROPERTIES.
MMC and certain of its subsidiaries, including Marsh USA Inc. and William
M. Mercer, Incorporated, as tenants in common, own a 69% condominium interest in
a 44-story building in the midtown Manhattan area of New York City, which serves
as their worldwide headquarters. MMC has a fixed rate nonrecourse mortgage note
agreement due in 2009 amounting to $200 million, bearing an interest rate of
9.8%, with the notes secured by MMC's interest in its worldwide headquarters. In
the event the mortgage is foreclosed following a default, MMC would be entitled
to remain in the space and would be obligated to pay rent sufficient to cover
interest on the notes or at fair market value if greater.
MMC subsidiaries had also occupied a combined total of fifteen floors in
the two towers of the World Trade Center, and as a result of the destruction of
the World Trade Center in the September 11, 2001 terrorist attacks, 295 MMC
colleagues were lost. Employees have been relocated to various sites in midtown
Manhattan and the New York metropolitan area. MMC has entered into a lease
covering approximately 300,000 rentable square feet in a building under
construction in Hoboken, New Jersey.
The principal offices of MMC's risk and insurance services subsidiaries
in the UK are located on the eastern side of the City of London in The Marsh
Centre. This freehold building, comprising 360,000 square feet containing
offices located around a central atrium, was sold by a subsidiary of MMC in
2001. The office space in the Marsh Centre
16
has been leased back on a temporary basis pending the lease of office space in a
new building under construction in London.
Putnam's principal executive offices comprise approximately 313,000
square feet of leased space located at One Post Office Square, Boston,
Massachusetts in Boston's financial district. Putnam leases an additional
850,000 square feet in various locations around the Boston area in support of
its operations.
The remaining business activities of MMC and its subsidiaries are
conducted principally in leased office space in cities throughout the world. In
general, no difficulty is anticipated in negotiating renewals as leases expire
or in finding other satisfactory space if the premises become unavailable. From
time to time, MMC may have unused space and may seek to sublet such space to
third parties, depending upon the demands for office space in the locations
involved.
ITEM 3. LEGAL PROCEEDINGS.
MMC and its subsidiaries are subject to various claims, lawsuits and
proceedings consisting principally of alleged errors and omissions in connection
with the placement of insurance or reinsurance and in rendering investment and
consulting services. Some of these matters seek damages, including punitive
damages, in amounts which could, if assessed, be significant. Insurance coverage
applicable to such matters includes elements of both risk retention and risk
transfer.
Sedgwick Group plc, since prior to its acquisition, has been engaged in a
review of previously undertaken personal pension plan business as required by
United Kingdom regulators to determine whether redress should be made to
customers. Other present and former subsidiaries of MMC are engaged in a
comparable review of their personal pension plan businesses, although the extent
of their activity in this area, and consequently their financial exposure, was
proportionally much less than Sedgwick. As of December 31, 2001, settlements and
related costs previously paid amount to approximately $465 million of which
approximately $140 million is due from or has been paid by insurers. The
remaining contingent exposure for pension redress and related costs is estimated
to be $160 million, essentially all of which is expected to be recovered from
insurers.
MMC's ultimate exposure from the United Kingdom Personal Investment
Authority review, as presently calculated and including Sedgwick, is subject to
a number of variable factors including, among others, the interest rate
established quarterly by the U.K. Personal Investment Authority for calculating
compensation, equity markets, and the precise scope, duration, and methodology
of the review as required by that Authority.
17
Putnam Investment Management LLC and Putnam Retail Management, Limited
Partnership, two indirect subsidiaries of MMC, as well as entities from
approximately two dozen other mutual fund companies were named as defendants in
an action entitled RICHARD NELSON, ET. AL. V. AIM ADVISORS, INC. ET. AL., Civ.
A. No. 01-CV-282, in the United States District Court for the Southern District
of Illinois. This purported nationwide class action allege that the distribution
and advisor fees paid by the various mutual funds from May 1, 1991 to the
present were unlawful and excessive, that each fund complex exercised a
controlling influence over statutorily independent directors of each fund and
that these fees were thus not properly approved. The complaint alleged that the
defendants' actions violated the Investment Company Act of 1940, as well as
common law fiduciary duties, and sought, among other things, actual and punitive
damages and declaratory relief. The Court, responding to motions by Putnam and
the other defendants, has ordered that the respective claims asserted against
the defendants be severed into separate actions and transferred to a more
convenient forum for each defendant. In Putnam's case, this transfer will be to
the United States District Court for the District of Massachusetts. MMC and the
Putnam subsidiaries believe that this action is without merit, and intend to
defend vigorously against this litigation.
Although the ultimate outcome of all matters referred to above cannot be
ascertained and liabilities in indeterminate amounts may be imposed on MMC and
its subsidiaries, on the basis of present information, it is the opinion of
MMC's management that the disposition or ultimate determination of these claims,
lawsuits and proceedings will not have a material adverse effect on MMC's
consolidated results of operations or its consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
18
PART II
ITEM 5. MARKET FOR MMC'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market and dividend information regarding MMC's common stock on page 54
of the 2001 Annual Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data on page 55 of the 2001 Annual Report are
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information on pages 25 through 33 of the 2001 Annual Report is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information under the heading "Market Risk" on pages 32 and 33 of the
2001 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements and the Independent Auditors'
Report thereto on pages 34 through 53 of the 2001 Annual Report and Selected
Quarterly Financial Data (Unaudited) on page 54 of the 2001 Annual Report are
incorporated herein by reference. Supplemental Notes to Consolidated Financial
Statements are included on page 30 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MMC.
Information as to the directors and nominees for the Board of Directors
of MMC is incorporated herein by reference to the material under the heading
"Election of Directors" in the Notice of Annual Meeting of Stockholders and
Proxy Statement dated March 29, 2002 (the "2002 Proxy Statement").
The executive officers of MMC as of March 22, 2002 are Messrs.
Cabiallavetta, Coster, Davis, Greenberg, Groves, Lasser and Sinnott, with
respect to whom information is incorporated herein by reference to the 2002
Proxy Statement, and:
Francis N. Bonsignore, age 55, was named Senior Vice
President-Executive Resources & Development of MMC in June 2001, having
previously served as Senior Vice President-Human Resources &
Administration since 1990. Immediately prior thereto he was partner and
National Director-Human Resources for Price Waterhouse.
William L. Rosoff, age 55, became Senior Vice President and
General Counsel of MMC in 2000. Before joining MMC, Mr. Rosoff was a
partner at the law firm of Davis Polk & Wardwell, having rejoined that
firm after serving two years as senior vice president and general counsel
of RJR Nabisco, Inc. Mr. Rosoff first joined Davis Polk & Wardwell in
1978 and became a partner in 1985.
Sandra S. Wijnberg, age 45, became Senior Vice President and Chief
Financial Officer of MMC in 2000. Before joining MMC, Ms. Wijnberg was a
senior vice president and treasurer of Tricon Global Restaurants, Inc.
from 1997 through 1999. Prior to that, Ms. Wijnberg spent three years
with PepsiCo., last serving as senior vice president and chief financial
officer of its KFC corporation division.
ITEM 11. EXECUTIVE COMPENSATION.
Information under the headings "Executive Compensation", "Compensation
Committee Report" and "Comparison of Cumulative Total Stockholder Return" in the
2002 Proxy Statement is incorporated herein by reference.
20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information under the heading "Security Ownership" in the 2002 Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information under the headings "Employment Agreements" "Directors
Compensation" and "Transactions with Management and Others; Other Information"
in the 2002 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. Consolidated Financial Statements (incorporated herein by
reference to pages 34 through 53 of the 2001 Annual
Report):
Consolidated Statements of Income for each of the
three years in the period ended December 31, 2001
Consolidated Balance Sheets as of December 31, 2001
and 2000
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31,
2001
Consolidated Statements of Stockholders' Equity and
Comprehensive Income for each of the three years in
the period ended December 31, 2001
Notes to Consolidated Financial Statements
Independent Auditors' Report
Supplemental Notes to Consolidated Financial Statements
Independent Auditors' Report
21
Other:
Selected Quarterly Financial Data and Supplemental
Information (Unaudited) for the three years ended
December 31, 2001 (incorporated herein by reference
to page 54 of the 2001 Annual Report) Five-Year
Statistical Summary of Operations (incorporated
herein by reference to page 55 of the 2001 Annual
Report)
2. All required Financial Statement Schedules are included in
the Consolidated Financial Statements, the Notes to
Consolidated Financial Statements or the Supplemental Notes
to Consolidated Financial Statements.
3. The following exhibits are filed as a part of this report:
(3.1) - the registrant's restated certificate of incorporation
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1999)
(3.2) - the registrant's by-laws
(4.1) - Indenture dated as of June 14, 1999 between MMC and State
Street Bank and Trust Company, as trustee (incorporated
by reference to the registrant's Registration Statement
on Form S-3, Registration No. 333-67543)
(4.2) - First Supplemental Indenture dated as of June 14, 1999
between MMC and State Street Bank and Trust Company, as
trustee (incorporated by reference to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1999)
(4.3) - Amended and Restated Rights Agreement dated as of January
20, 2000 between the registrant and Harris Trust Company
of New York (incorporated by reference to the
registrant's Registration Statement on Form 8-A/A filed
on January 27, 2000)
(10.1) * - Marsh & McLennan Companies, Inc. 2000 Senior Executive
Incentive and Stock Award Plan (incorporated by reference
to the registrant's Annual Report on Form 10-K for the
year ended December 31, 1999)
- ----------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
22
(10.2) * - Marsh & McLennan Companies Stock Investment
Supplemental Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year
ended December 31, 1994)
(10.3) * - Amendment to Marsh & McLennan Companies Stock
Investment Supplemental Plan dated June 16, 1997
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31,
1997)
(10.4) * - Amendment to Marsh & McLennan Companies Stock
Investment Supplemental Plan dated November 20, 1997
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31,
2000)
(10.5) * - Amendment to Marsh & McLennan Companies Stock
Investment Supplemental Plan dated January 1, 2000
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31,
2000)
(10.6) * - Marsh & McLennan Companies Special Severance Pay Plan
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31,
1996)
(10.7) * - Putnam Investments, Inc. Executive Deferred
Compensation Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year
ended December 31, 1994)
(10.8) * - Putnam Investments, LLC Executive Deferred Bonus Plan
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31,
2000)
(10.9) * - Marsh & McLennan Companies Supplemental Retirement
Plan (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December
31, 1992)
(10.10) * - Marsh & McLennan Companies Senior Management Incentive
Compensation Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year
ended December 31, 1994)
- ----------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
23
(10.11) * - Marsh & McLennan Companies, Inc. U.S. Employee 2001
Cash Bonus Award Voluntary Deferral Plan
(10.12) * - Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year
ended December 31, 1997)
(10.13) * - Employment Agreement between Lawrence J. Lasser and
Putnam Investments, Inc. effective as of December 31,
1997 (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December
31, 1997)
(10.14) * - First Amendment effective as of January 1, 2001 to the
Employment Agreement between Lawrence J. Lasser and
Putnam Investments, Inc. (incorporated by reference to
the registrant's Annual Report on Form 10-K for the
year ended December 31, 2000)
(10.15) * - Second Amendment effective as of March 22, 2001 to the
Employment Agreement between Lawrence J. Lasser and
Putnam Investments, LLC (incorporated by reference to
the registrant's Annual Report on Form 10-K for the
year ended December 31, 2000)
(10.16) * - MMC Capital, Inc. Amended and Restated Long Term
Incentive Plan dated as of March 19, 2001 (incorporated
by reference to the registrant's Annual Report on Form
10-K for the year ended December 31, 2000)
(10.17) * - Consulting Agreement between A.J.C. Smith and MMC
effective as of June 1, 2000 (incorporated by reference
to the registrant's Quarterly Report on Form 10-Q for
the quarter ending June 30, 2000)
(10.18) * - First Amendment dated as of May 24, 2001 to the
Consulting Agreement between A.J.C. Smith and MMC
(incorporated by reference to the registrant's
Quarterly Report on Form 10-Q for the quarter ending
June 30, 2001)
- ----------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
24
(10.19) * - Employment letter between Ray J. Groves and MMC dated
August 1, 2001 (incorporated by reference to the
registrant's Quarterly Report on Form 10-Q for the
quarter ending September 30, 2001)
(10.20) * - MMC Capital, Inc. Amended and Restated Deferred
Compensation and Profits Limited Partnership Plan
(10.21) * - Marsh & McLennan Companies, Inc. 2000 Employee
Incentive and Stock Award Plan
(10.22) * - Amended and Restated Limited Partnership Agreement of
Marsh & McLennan Affiliated Fund, L.P. dated October
12, 1999
(10.23) * - Second Amended and Restated Limited Partnership
Agreement of Marsh & McLennan Capital Professionals
Fund, L.P. dated December 2, 1999
(10.24) * - Amended and Restated Limited Partnership Agreement of
Marsh & McLennan Capital Technology Professionals
Venture Fund, L.P. dated as of December 2, 1999
(10.25) * - First Amended and Restated Limited Partnership
Agreement of MMC Capital Tech Professionals Fund II,
L.P. dated as of October 31, 2000
(10.26) * - First Amended and Restated Limited Partnership
Agreement of MMC Capital C&I Professionals Fund, L.P.
dated as of July 21, 2000
(10.27) * - Amended and Restated Limited Partnership Agreement of
Trident Capital II, L.P. dated December 2, 1999
(10.28) * - Amended and Restated Limited Partnership Agreement of
Marsh & McLennan Capital Technology Venture GP, L.P.
dated December 2, 1999
(10.29) * - Amended and Restated Limited Partnership Agreement of
MMC Capital Tech GP II, L.P. dated as of August 22,
2000
- ----------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
25
(10.30) * - Limited Partnership Agreement of Marsh & McLennan
Capital C&I GP, L.P. dated as of April 7, 2000
(10.31) * - Limited Partnership Agreement of Marsh & McLennan C&I
Employees' Securities Company, L.P. dated as of July
21, 2000 (10.32) * -Limited Liability Company Agreement
of Putnam Investments Employees' Securities Company I
LLC dated as of October 3, 2000
(10.33) * - Limited Liability Company Agreement of Putnam
Investments Employees' Securities Company II LLC dated
as of June 15, 2001
(12.1) - Statement Re: Computation of Ratio of Earnings to Fixed
Charges
(13) - Annual Report to Stockholders for the year ended
December 31, 2001, to be deemed filed only with respect
to those portions which are expressly incorporated by
reference
(21) - list of subsidiaries of the registrant (as of 2/28/2002)
(23) - independent auditors' consent
(24) - powers of attorney
(b) No reports on Form 8-K were filed by the registrant in
the fiscal quarter ended December 31, 2001
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
this 29th day of March, 2002 on its behalf by the undersigned, thereunto duly
authorized.
MARSH & McLENNAN COMPANIES, INC.
By /s/ JEFFREY W. GREENBERG
------------------------
Jeffrey W. Greenberg
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated this 29th day of March, 2002.
/s/ Jeffrey W. Greenberg Lewis W. Bernard *
- ----------------------------------------- -----------------------------------
Jeffrey W. Greenberg Lewis W. Bernard
Director, Chairman of the Board and Chief Director
Executive Officer
Mathis Cabiallavetta*
/s/ Sandra S. Wijnberg -----------------------------------
- ----------------------------------------- Mathis Cabiallavetta
Sandra S. Wijnberg Director
Senior Vice President and
Chief Financial Officer Peter Coster*
-----------------------------------
/s/ Robert J. Rapport Peter Coster
- ----------------------------------------- Director
Robert J. Rapport
Vice President and Controller
(Chief Accounting Officer)
27
Charles A. Davis* The Rt. Hon. Lord Lang of Monkton, DL*
- -------------------------------------- --------------------------------------
Charles A. Davis The Rt. Hon. Lord Lang of Monkton, DL
Director Director
Robert F. Erburu*
- -------------------------------------- Lawrence J. Lasser*
Robert F. Erburu --------------------------------------
Director Lawrence J. Lasser
Director
Oscar Fanjul*
- -------------------------------------- David A. Olsen*
Oscar Fanjul --------------------------------------
Director David A. Olsen
Director
Ray J. Groves*
- -------------------------------------- Adele Simmons*
Ray J. Groves --------------------------------------
Director Adele Simmons
Director
Stephen R. Hardis*
- -------------------------------------- John T. Sinnott*
Stephen R. Hardis --------------------------------------
Director John T. Sinnott
Director
Gwendolyn S. King*
- -------------------------------------- A.J.C. Smith*
Gwendolyn S. King --------------------------------------
Director A.J.C. Smith
Director
- ----------
* William L. Rosoff, pursuant to Powers of Attorney executed by each of the
individuals whose name is followed by an (*) and filed herewith, by signing his
name hereto does hereby sign and execute this Form l0-K of Marsh & McLennan
Companies, Inc. on behalf of such individual in the capacities in which the
names of each appear above.
/s/ WILLIAM L. ROSOFF
--------------------------------------
William L. Rosoff
28
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Marsh & McLennan Companies, Inc.:
We have audited the consolidated balance sheets of Marsh & McLennan Companies,
Inc. and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of income, stockholders' equity and comprehensive
income, and cash flows for each of the three years in the period ended December
31, 2001, and have issued our report thereon dated March 1, 2002; such financial
statements and report are included in your 2001 Annual Report to Stockholders
and are incorporated herein by reference. Our audits also included the
supplemental notes to the consolidated financial statements (the "Supplemental
Notes") listed in Item 14. These Supplemental Notes are the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such Supplemental Notes, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York
March 1, 2002
29
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Information concerning MMC's valuation accounts follows:
An analysis of the allowance for doubtful accounts for the three years ended
December 31, 2001 follows (in millions of dollars):
2001 2000 1999
----- ----- -----
Balance at beginning of year .................... $ 135 $ 132 $ 128
Provision charged to operations ................. 30 18 18
Accounts written-off, net of
recoveries .................................... (24) (9) (12)
Effect of exchange rate changes ................. (2) (6) (2)
----- ----- -----
Balance at end of year .......................... $ 139 $ 135 $ 132
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17. An analysis of intangible assets at December 31, 2001 and 2000 follows
(in millions of dollars):
2001 2000
------- -------
Goodwill ........................................ $ 5,890 $ 5,891
Other intangible assets ......................... 154 141
------- -------
Subtotal ...................................... 6,044 6,032
Less - accumulated amortization ................. (717) (556)
------- -------
Total .................................. $ 5,327 $ 5,476
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