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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2002
MARSH & McLENNAN COMPANIES, INC.
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
(212) 345-5000
COMMISSION FILE NO. 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
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Common Stock New York Stock Exchange
(par value $1.00 per share) Chicago Stock Exchange
Preferred Stock Purchase Rights Pacific Exchange
London Stock Exchange
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. [ ].
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X]. No [_].
As of June 30, 2002, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $26,060,690,713.
As of February 28, 2003, there were outstanding 535,589,137 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, 2002 ............................................. Parts I and II
Notice of Annual Meeting of Stockholders and Proxy Statement
dated March 27, 2003 .......................................... Part III
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MARSH & McLENNAN COMPANIES, INC.
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ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2002
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PART I
ITEM 1. BUSINESS.
Marsh & McLennan Companies, Inc. ("MMC"), is a global professional
services firm with origins dating from 1871 in the United States. MMC is the
parent company of various subsidiaries and affiliates that provide 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 23 through 32 of the Annual Report to
Stockholders for the year ended December 31, 2002 (the "2002 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 in
the areas of:
o risk management and insurance broking,
o reinsurance broking and services, and
o related insurance services.
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, financial solutions and
insurance program management services are provided for businesses, public
entities, associations, professional services organizations and private clients
under the Marsh name. Reinsurance broking, catastrophe and financial modeling
services and related advisory functions are conducted for insurance and
reinsurance companies, principally under the Guy Carpenter name. 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.
MARSH INC. Marsh serves clients with risk and insurance services in
more than 100 countries in all principal regions of the world where insurance
business is done. These clients are
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engaged in essentially all of the major areas of manufacturing and services
found in the world economy. Business clients range from prominent 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 by Marsh's operating units 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. Risks addressed go beyond traditional
property-liability areas to include a widening range of exposures. 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, exposures related to mergers and acquisitions, the interruption of
revenue streams derived from leasing and credit operations, political risks and
various other financial, strategic and operating exposures.
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 client exposures, including 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, claims administration, and other insurance and risk related
services. In addition, financial solutions provided to clients include
asset-backed securitization, financial guarantees and other advanced techniques
for transferring risk into both the insurance and capital markets. Brokerage
services are also provided to unaffiliated brokers in certain areas.
Marsh operates principally through the offices of its subsidiaries and
affiliates in various countries around the world. In addition, correspondent
relationships are maintained with unaffiliated firms in certain countries.
Reinsurance services are provided to insurance and reinsurance
companies and other risk assumption entities by Guy Carpenter and its
subsidiaries and affiliates and primarily involve acting as a broker or
intermediary on all classes of reinsurance. Guy Carpenter's offices are located
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
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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 provides underwriting management services to insurers in the
United States, Canada and the United Kingdom, primarily for professional
liability coverages. These services are provided under various names apart from
Marsh.
Marsh's Affinity and Private Client Practices business unit provides
advice and program services to corporate, association and individual clients in
North America and Europe. Marsh Affinity provides associations with the design,
marketing, and administration of a variety of insurance-related products
purchased by the association members. Marsh Affinity offers services and
administration to corporations for employee voluntary payroll deduction programs
and insurance- and benefit-related programs. Marsh's Private Client Services
practice markets specialized risk and insurance programs to high net worth
individuals and family offices. Marsh Financial Services offers key-person and
executive benefit programs, as well as planning and wealth preservation
solutions for affluent individuals.
MMC CAPITAL, INC. MMC Capital 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 1994
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 industries. MMC Capital 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 MMC Capital's corporate parent
and other investors. In response to Marsh's client needs, MMC Capital helped
develop an additional source of insurance and reinsurance capacity after the
September 11, 2001 terrorist attacks through the formation of AXIS Capital
Holdings 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.
MMC Capital and its predecessor operations were instrumental in the
formation of several substantial insurance and reinsurance entities, including
ACE Ltd. and XL Capital Ltd. MMC Capital advises its immediate parent company,
Marsh & McLennan Risk Capital Holdings, Ltd., regarding the latter's investments
primarily in insurance and reinsurance entities and funds initiated by MMC
Capital.
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,
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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; placement service
revenue from 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 or depreciation that has been realized on sales of holdings in such
investments.
Revenue generated by risk and insurance services is fundamentally
derived from the value of the services provided to clients and insurance
markets. These revenues are 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 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 insurance, financial services and other industry-focused investments,
as well as income derived from investments made by MMC. Placement service
revenue 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.
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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 Trust and its subsidiaries. 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
both equity and fixed income investment products and services, invested
domestically and globally. These products and services, designed to meet varying
investment objectives, afford Putnam's clients the opportunity to allocate their
investment resources among various investment products as changing worldwide
economic and market conditions warrant.
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, 2002, there were 101 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 individuals,
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 and have established investment management firms. It may be
difficult for Putnam to establish businesses abroad whose profitability equals
that of its business in the U.S. where it is one of the market leaders.
In 2000, MMC entered into an agreement to purchase a minority
investment in the publicly traded common stock of Gruppo Bipop-Carire S.p.A.
("Bipop") as part of a new agreement that expanded the companies' existing joint
venture in Italy, and Putnam became the exclusive investment management partner
for Bipop's planned expansion into other parts of Western Europe. In 2002, Bipop
was merged with Banca di Roma, the combined businesses were reorganized and the
names of the successor companies were changed. As a result of these actions
Putnam's initial holding in Bipop is now comprised of common shares in Fineco
S.p.A. and Capitalia S.p.A.
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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 Lee, Putnam Capital in 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. Putnam is also an investor in
certain of those funds.
Assets managed by Putnam, on which management fees are earned,
aggregated approximately $251 billion and $315 billion as of December 31, 2002
and 2001, respectively, invested both domestically and globally. Average assets
under management were approximately $279 billion and $328 billion for 2002 and
2001, respectively. Mutual fund assets aggregated $164 billion at December 31,
2002 and $219 billion at December 31, 2001. Institutional account assets
aggregated $87 billion at December 31, 2002 and $96 billion at December 31,
2001. Assets held in equity securities at December 31, 2002 represented 73% of
assets under management, compared with 81% in 2001 and 85% in 2000, while
investments in fixed income products represented 27%, compared with 19% in 2001
and 15% in 2000. Assets from non-U.S. investors aggregated approximately $33
billion and $30 billion at December 31, 2002 and 2001, respectively.
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. 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), IRAs and other clients,
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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 RETAIL MANAGEMENT LIMITED PARTNERSHIP. Putnam Retail Management
Limited Partnership ("PRM"), a Putnam subsidiary and a registered broker dealer
and NASD 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 to investors 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.
In lieu of a front-end sales charge, all of the open-end Putnam Funds
have adopted distribution plans pursuant to Rule 12b-1 under the Investment
Company Act of 1940, pursuant to which Putnam funds are available to investors
with a contingent deferred sales charge. Under 12b-1 plans, the Putnam Funds
make payments to PRM to cover costs relating to distribution of the Putnam Funds
and services provided to shareholders. These payments enable PRM 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 PRM 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 12b-1 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's business and results of
operations. 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's business and results of operations.
COMPENSATION FOR SERVICES. 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 declined in 2002 for the third
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consecutive year after several years of substantial growth prior to 2000.
Furthermore, in 2002 the mutual fund industry had net redemptions in equity
funds for the first time in 14 years. The volatility in the equity markets
contributed to the decline in assets under management and, accordingly, to the
reduction of 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.
CONSULTING. Through Mercer Inc., 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:
o Retirement Services including retirement consulting, administration
and investment consulting;
o Health Care & Group Benefits consulting;
o Human Capital consulting including performance, measurement and
rewards, communication and human resource operations consulting;
o Management and Organizational Change consulting comprising strategy,
operations, organizational change, leadership and organizational
design; and
o Economic consulting.
Mercer Human Resource Consulting provides professional advice and
services to corporate, government and institutional clients 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 retirement, health care and group benefits and human capital programs,
policies and strategies. Under the Mercer Investment Consulting name, 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 $2.3
billion of retirement plan assets, representing the interests of about 85,000
participants. Mercer Human Resource Consulting also has a benefits
administration practice. In the U.S., Mercer Human Resource Consulting also
operates
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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 Risk, Finance and Insurance Consulting provides actuarial
consulting services to insurance companies, government entities and other
organizations on property-casualty, life and health care risks.
Mercer Management Consulting provides advice and assistance on issues
of business strategy and operational execution, 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 markets. Mercer Management Consulting also
assists its clients in the implementation of their strategies. Under the
Lippincott Mercer name, Mercer Management Consulting advises leading
corporations on issues relating to brand, corporate identity and image.
Mercer Delta Consulting, with offices in North America, Canada and
Europe, works with senior executives and chief executive officers of major
corporations and other institutions on organizational design and leadership of
organizational change.
National Economic Research Associates ("NERA") serves law firms,
corporations, trade associations and governmental agencies, 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.
COMPENSATION FOR SERVICES. The major component of Mercer's revenue is
fees paid by clients for advice and services. In addition, commission revenue is
received from insurance companies for the placement of individual and group
insurance contracts, primarily life, health and accident coverages. The
Australian retirement trust business charges asset-based fees on invested
assets. A relatively small amount of revenue is derived from brokerage
commissions in connection with a registered securities broker dealer.
Revenue in the consulting business is affected by, among other things,
economic conditions around the world, including changes in clients' industries
and markets. Furthermore, revenue is subject to the introduction of new products
and services, broad trends in employee demographics, the effect of government
policies and regulations, market valuations, 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.
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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,
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 laws and regulations vary from
location to location, 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 ("SEC"), and other federal, state and self regulatory
authorities and in the United Kingdom by the Financial Services Authority, 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.
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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 Financial Services 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 Resource
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 of 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.
11
MMC Capital competes with other organizations that set up private
equity funds to structure and manage investments in the insurance industry.
These organizations include insurance companies, brokers and from time to time,
other market participants.
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 Management
Consulting is a medium-sized 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 16 of the Notes to Consolidated Financial Statements on pages
51 and 52 of the 2002 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.
12
EMPLOYEES. As of December 31, 2002, MMC and its consolidated subsidiaries
employed about 59,500 people worldwide, of whom approximately 38,000 were
employed by subsidiaries providing risk and insurance services, approximately
5,600 were employed by subsidiaries providing investment management services,
approximately 15,300 were employed by subsidiaries providing consulting
services, and approximately 600 were employed by MMC.
EXECUTIVE OFFICERS OF MMC.
The executive officers of MMC are elected annually. For information
regarding executive officers who are also directors, see Item 10 below. As of
March 25, 2003, the following individuals also were executive officers of MMC:
Francis N. Bonsignore, age 56, is Senior Vice
President--Executive Resources & Development of MMC. He previously
served as Senior Vice President--Human Resources & Administration from
1990 through June 2001. Immediately prior thereto he was partner and
National Director--Human Resources for Price Waterhouse.
William L. Rosoff, age 56, is Senior Vice President and
General Counsel of MMC. Before joining MMC in 2000, 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.
John T. Sinnott, age 62, is Chairman of Marsh Inc. and was
Chief Executive Officer of Marsh from 1999 through 2002. Mr. Sinnott
joined MMC in 1963 and served as Vice Chairman and Chief Executive
Officer of J&H Marsh & McLennan, Inc. and as President and Chief
Executive Officer of Marsh & McLennan, Incorporated, the predecessors
of Marsh Inc. He has been a director of MMC since 1992. Mr. Sinnott is
retiring from MMC in July 2003 and will not be standing for re-election
as a director at this year's annual meeting.
Sandra S. Wijnberg, age 46, is Senior Vice President and Chief
Financial Officer of MMC. Before joining MMC in 2000, Ms. Wijnberg was
a Senior Vice President and Treasurer of Tricon Global Restaurants,
Inc. from 1997 through 1999. Prior thereto, Ms. Wijnberg spent three
years with PepsiCo., last serving as Senior Vice President and Chief
Financial Officer of its KFC Corporation division.
AVAILABLE INFORMATION.
MMC is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended. In accordance with the Exchange
Act, MMC files its annual reports on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K, and any amendments to such reports, with the
SEC. MMC makes these reports available free of charge through its web site,
www.mmc.com, as soon as reasonably practicable after they are filed with the
SEC.
13
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, MMC's
financial statements and other documents incorporated herein by reference and
other MMC filings with the SEC) 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 terrorist attacks 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 losses 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 services business
are changes in competitive conditions, movements in premium rate levels, the
continuation of challenging marketplace conditions for the transfer of
commercial risk and other changes in the global property and casualty insurance
markets, the impact of terrorist attacks, 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 public and private 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 impact of tax and other legislation and regulation in the jurisdictions
in which MMC operates. Future actual pension expense or credits with respect to
MMC's tax qualified defined benefit retirement plans will depend on plan
provisions, future investment performance, future assumptions and various other
factors related to the populations participating in the pension plans.
Descriptions of certain of these factors are included elsewhere in this Annual
Report and are 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.
14
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 anticipated
release of quarterly financial results and 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 earnings announcement. Investors can link to MMC
and its operating company websites through www.mmc.com.
ITEM 2. PROPERTIES.
MMC and its subsidiaries have major office locations in New York,
London and Boston, as well as other offices around the world.
MMC and certain of its subsidiaries, including Marsh USA Inc. and
Mercer Human Resource Consulting, Inc., as tenants in common, own a 69%
condominium interest covering approximately 1,120,000 square feet in a 44-story
building in midtown Manhattan in 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 leases an additional 276,000
square feet of space in its headquarters building. MMC and its subsidiaries
lease an additional 680,000 square feet in various locations around New York
City in support of its operations, including a lease covering approximately
420,000 rentable square feet in a building under construction in Hoboken, New
Jersey.
The principal offices of the Marsh subsidiaries in the UK currently are
located in the City of London in the Marsh Centre. This freehold building,
comprising 360,000 square feet, was sold by a subsidiary of MMC in 2001. The
office space in the Marsh Centre has been leased back on a temporary basis
pending the completion of a move to approximately 340,000 square feet of office
space in a new complex in London. Occupation of the new offices is expected to
be completed in April 2003. Marsh subsidiaries lease an additional 230,000
square feet of office space in and around London in support of their operations.
The principal offices of the Mercer subsidiaries in the UK currently comprise
approximately 200,000 square feet of leased space in and around London. Mercer
has entered into a lease covering approximately 140,000 rentable square feet in
a new building under construction in London.
The principal executive offices of the Putnam subsidiaries comprise
approximately 315,000 square feet of leased space located at One Post Office
Square, Boston, Massachusetts in Boston's financial district. Putnam leases an
additional approximately 890,000 square feet in various locations around the
Boston area for investor services and other activities in support of its
operations.
15
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 and its subsidiaries 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, 2002, settlements and
related costs previously paid amount to approximately $525 million, of which
approximately $200 million is due from or has been paid by insurers. A small
percentage of cases remain to be settled at December 31, 2002, and the remaining
payments are not expected to be material.
Although the ultimate outcome of the 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 or 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.
16
PART II
ITEM 5. MARKET FOR MMC'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information regarding dividends paid and the number of holders of MMC's
common stock set forth on page 54 of the 2002 Annual Report is incorporated
herein by reference.
MMC's common stock is listed on the New York, Chicago, Pacific and
London stock exchanges. The high and low stock prices* for our common stock for
each quarterly period in 2002 and 2001 are as follows:
-------------------------------------------------
2002 2001
-------------------------------------------------
Stock Price Range Stock Price Range
----------------- -----------------
High Low High Low
---- --- ---- ---
First Quarter $ 56.90 47.20 $ 59.03 42.63
Second Quarter $ 57.30 45.13 $ 55.90 40.15
Third Quarter $ 49.45 38.40 $ 51.40 39.70
Fourth Quarter $ 49.99 34.61 $ 55.50 47.18
-------------------------------------------------
$ 57.30 34.61 $ 59.03 39.70
- --------
* Stock prices have been restated for a two-for-one stock distribution of MMC
common stock, which was issued as a stock dividend on June 28, 2002.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data on page 55 of the 2002 Annual Report are
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information on pages 23 through 32 of the 2002 Annual Report is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information under the heading "Market Risk" on page 31 of the 2002
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 33 through 53 of the 2002 Annual Report and Selected
Quarterly Financial Data (Unaudited) on page 54 of the 2002 Annual Report are
incorporated herein by reference. Supplemental Notes to Consolidated Financial
Statements are included on page 35 hereof.
17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. None.
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 set forth under the
heading "Election of Directors" in our Notice of Annual Meeting of Stockholders
and Proxy Statement dated March 27, 2003 (the "2003 Proxy Statement").
The Executive Officers of MMC are Messrs. Cabiallavetta, Coster, Davis,
Greenberg, Groves and Lasser, with respect to whom information can be found
under the heading "Election of Directors" in the 2003 Proxy Statement, and
Messrs. Bonsignore, Rosoff, Sinnott and Ms. Wijnberg, with respect to whom
information is provided in Part I above under the heading "Executive Officers of
MMC".
The information set forth in the 2003 Proxy Statement in the section
"Information Regarding the Board of Directors" under "--Committees--The Audit
Committee" and "--Code of Ethics" is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information under the headings "Compensation of Executive
Officers", "Compensation Committee Report" and "Stock Performance Graph" in the
2003 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information under the heading "Stock Ownership of Management and
Certain Beneficial Owners" in the 2003 Proxy Statement is incorporated herein by
reference.
18
EQUITY COMPENSATION PLAN INFORMATION TABLE
The following table sets forth information as of December 31, 2002,
with respect to compensation plans under which equity securities of MMC are
authorized for issuance:
- --------------------------------------------------------------------------------
(c) NUMBER OF
SECURITIES
REMAINING
(a) NUMBER OF AVAILABLE FOR
SECURITIES TO BE (b) WEIGHTED- FUTURE ISSUANCE
ISSUED UPON AVERAGE EXERCISE UNDER EQUITY
EXERCISE OF PRICE OF COMPENSATION
OUTSTANDING OUTSTANDING PLANS (EXCLUDING
OPTIONS, OPTIONS, SECURITIES
WARRANTS AND WARRANTS AND REFLECTED IN
PLAN CATEGORY RIGHTS(1)(2) RIGHTS(2) COLUMN(a))(2)
- --------------------------------------------------------------------------------
Equity compensation 26,971,118 $31.3741 52,821,964 (3)
plan approved by
stockholders
- --------------------------------------------------------------------------------
Equity compensation 55,159,736 $45.3190 76,961,579 (4)
plans not approved
by stockholders
- --------------------------------------------------------------------------------
TOTAL 82,130,854 (5) $40.7396 129,783,543 (5)
- --------------------------------------------------------------------------------
- ----------
(1) This column reflects shares subject to unexercised options granted over the
last ten years under MMC's 2000 SENIOR EXECUTIVE INCENTIVE AND STOCK AWARD
PLAN, 1997 SENIOR EXECUTIVE INCENTIVE AND STOCK AWARD PLAN, 1992 INCENTIVE
AND STOCK AWARD PLAN, 2000 EMPLOYEE INCENTIVE AND STOCK AWARD PLAN and 1997
EMPLOYEE INCENTIVE AND STOCK AWARD PLAN. This column contains information
regarding stock options only; there are no warrants or stock appreciation
rights outstanding.
(2) The number of shares that may be issued at the close of current offering
periods under stock purchase plans, and the weighted-average exercise price
of such shares, is uncertain and is consequently not reflected in columns
(a) and (b). The number of shares to be purchased will depend on the amount
of contributions with interest accumulated under these plans as of the
close of the offering periods. The shares remaining available for future
issuance in column (c) includes any shares that may be acquired under all
current offering periods for these plans. See notes (3) and (4) below.
(3) Includes the following:
o 35,465,556 shares available for future awards under the 1999 EMPLOYEE
STOCK PURCHASE PLAN, a stock purchase plan qualified under Section 423
of the Internal Revenue Code. Employees may acquire shares at a
discounted purchase price at the end of a one-year offering period
with the proceeds of their contributions plus interest accumulated
during the offering period. The purchase price may be no less than 85%
of the lesser of the market price of the stock at the beginning or the
end of the offering period.
o 3,998,356 shares that may be issued to settle outstanding restricted
stock unit, deferred stock unit and deferred bonus unit awards and
other deferred compensation obligations.
o 12,266,900 shares available for future awards under the 2000 SENIOR
EXECUTIVE INCENTIVE AND STOCK AWARD Plan. Awards may consist of stock
options, stock appreciation rights, restricted stock, restricted stock
units, deferred stock units, deferred bonus units, dividend
equivalents, stock bonus, performance awards and other unit-based or
stock-based awards.
The number of shares that may be issued in the future under the STOCK
INVESTMENT SUPPLEMENTAL PLAN is uncertain and consequently is not
reflected. The STOCK INVESTMENT SUPPLEMENTAL PLAN is a nonqualified
deferred compensation plan providing benefits to employees whose benefits
are limited under the tax-qualified STOCK INVESTMENT PLAN, an employee
stock ownership plan with a 401(k) feature. The number of shares issued
under this
19
plan depends on participants' voluntary deferral elections, whether
deferrals are directed into share units or other notional investments and
the market value of a share.
(4) Includes the following:
o 14,162,885 shares available for future awards under the STOCK PURCHASE
PLAN FOR INTERNATIONAL EMPLOYEES, STOCK PURCHASE PLAN FOR FRENCH
EMPLOYEES, SAVE AS YOU EARN PLAN (U.K.), and IRISH SAVINGS RELATED
SHARE OPTION SCHEME 2001.
o 7,225,453 shares that may be issued to settle outstanding restricted
stock unit, deferred stock unit and deferred bonus unit awards under
the 2000 EMPLOYEE INCENTIVE AND STOCK AWARD PLAN and predecessor plans
and programs.
o 52,782,380 shares available for future awards under the 2000 EMPLOYEE
INCENTIVE AND STOCK AWARD PLAN. Awards may consist of stock options,
stock appreciation rights, restricted stock, restricted stock units,
deferred stock units, deferred bonus units, dividend equivalents,
stock bonus, performance awards and other unit-based or stock-based
awards.
o 231,709 shares available for future awards under the APPROVED SHARE
PARTICIPATION SCHEMES FOR MARSH & MCLENNAN IRELAND AND MERCER IRELAND.
Awards are made in restricted stock.
o 2,366,642 shares available for future awards, and 192,510 shares that
may be issued to settle outstanding awards, under the SPECIAL
SEVERANCE PAY PLAN. Awards consist of stock units and dividend
equivalents.
(5) MMC's Board of Directors has authorized the repurchase of common stock,
including an ongoing authorization to repurchase shares in connection with
awards granted under equity-based compensation plans, subject to market
conditions and other factors. Pursuant to that authorization, MMC
repurchased 24.2 million shares in 2002. See the "Liquidity and Capital
Resources" section of "Management's Discussion and Analysis of Financial
Condition and Results of Operations" referenced in Part II, Item 7 of this
report.
The material features of MMC's compensation plans that have not been
approved by stockholders and under which MMC shares are authorized for issuance
are described below. Any such material plans under which awards in MMC shares
may currently be granted are included as exhibits to this report.
o STOCK PURCHASE PLAN FOR INTERNATIONAL EMPLOYEES, STOCK PURCHASE PLAN
FOR FRENCH EMPLOYEES, SAVE AS YOU EARN PLAN (U.K.) AND IRISH SAVINGS
RELATED SHARE OPTION SCHEME. Eligible employees may elect to
contribute to these plans through regular payroll deductions over an
offering period which varies by plan from 1 to 5 years. At the end of
the offering period, participants may receive their contributions plus
interest and, in the case of the U.K. and Irish Plans, a 5% employer
contribution, in cash or use that amount to acquire shares of stock at
a discounted purchase price. Under the International and French Plans,
the purchase price may be no less than 85% of the lesser of the market
price of the stock at the beginning or end of the offering period,
while under the U.K. and Irish Plans, the purchase price may be no
less than 80% of the market price of the stock at the beginning of the
offering period.
o 2000 EMPLOYEE INCENTIVE AND STOCK AWARD PLAN AND PREDECESSOR PLANS AND
PROGRAMS. The terms of this plan and the 1997 Employee Incentive and
Stock Award Plan are described in Note 8 to the Consolidated Financial
Statements referenced in Part II, Item 8 of this report. In addition,
the Stock Bonus Award Program provided for the payment of up to 50% of
annual bonuses otherwise
20
payable in cash, in the form of deferred stock units or deferred bonus
units which are settled in shares. No future awards may be granted
under any predecessor plan or program.
o APPROVED SHARE PARTICIPATION SCHEMES FOR MARSH & MCLENNAN IRELAND AND
MERCER IRELAND. Eligible participants may elect to acquire shares of
restricted stock at market price by allocating their bonus, and in the
case of the Marsh & McLennan plan, up to 3% of their basic salary. The
acquired shares are held in trust and generally may not be transferred
for two years following their acquisition. The initial value of any
shares held in trust for more than five years is not subject to income
tax.
o SPECIAL SEVERANCE PAY PLAN. Under this plan, certain holders of
restricted stock or awards in lieu of restricted stock with at least
10 years of service will receive payment in shares upon forfeiture of
their award if their employment with MMC or one of its subsidiaries
terminates. The amount of such payment is based on years of service,
with the individual receiving up to a maximum of 90% of the value of
the restricted shares after 25 years of service and is subject to
execution of a non-solicitation agreement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information under the headings "Employment Agreement", "Directors
Compensation" and "Transactions with Management and Others; Other Information"
in the 2003 Proxy Statement is incorporated herein by reference.
ITEM 14. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Based on their evaluation, as of a date within 90 days of the filing of
this Annual Report on Form 10-K, MMC's Chief Executive Officer and Chief
Financial Officer have concluded that MMC's disclosure controls and procedures
(as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of
1934) are effective in timely alerting them to material information relating to
MMC required to be included in our reports filed under the Exchange Act.
(b) Changes in Internal Controls
There have been no significant changes in internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
21
ITEM 15. 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 33 through 53 of the 2002 Annual Report):
Consolidated Statements of Income for each of the three
years in the period ended December 31, 2002
Consolidated Balance Sheets as of December 31, 2002 and
2001
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 2002
Consolidated Statements of Stockholders' Equity and
Comprehensive Income for each of the three years in the
period ended December 31, 2002
Notes to Consolidated Financial Statements
Independent Auditors' Report
Supplemental Notes to Consolidated Financial Statements
Independent Auditors' Report
Other:
Selected Quarterly Financial Data and Supplemental
Information (Unaudited) for the three years ended December
31, 2002 (incorporated herein by reference to page 54 of
the 2002 Annual Report)
Five-Year Statistical Summary of Operations (incorporated
herein by reference to page 55 of the 2002 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) MMC's restated certificate of incorporation
(incorporated by reference to MMC's Annual Report
on Form 10-K for the year ended December 31, 1999)
22
(3.2) MMC'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 MMC'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
MMC'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 MMC and Harris Trust
Company of New York (incorporated by reference to
MMC's Registration Statement on Form 8-A/A filed on
January 27, 2000)
(4.4) Amendment No. 1 to Amended & Restated Rights
Agreement dated as of June 7, 2002, by and between
MMC and Harris Trust Company of New York
(incorporated by reference to MMC's Registration
Statement on Form 8-A/A filed on June 20, 2002)
(4.5) Indenture dated as of March 19, 2002 between MMC
and State Street Bank and Trust Company, as trustee
(incorporated by reference to MMC's Registration
Statement on Form S-4, Registration No. 333-87510)
(10.1) *Marsh & McLennan Companies, Inc. 2000 Senior
Executive Incentive and Stock Award Plan
(incorporated by reference to MMC's Annual Report
on Form 10-K for the year ended December 31, 1999)
(10.2 *Marsh & McLennan Companies Stock Investment
Supplemental Plan (incorporated by reference to
MMC'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 MMC's Annual Report
on Form 10-K for the year ended December 31, 1997)
- --------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 15(c) of Form 10-K.
23
(10.4) *Amendment to Marsh & McLennan Companies Stock
Investment Supplemental Plan dated November 20,
1997 (incorporated by reference to MMC'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 MMC'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 MMC'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
MMC'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 MMC'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 MMC'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 MMC's Annual Report on Form 10-K for
the year ended December 31, 1994)
(10.11) *Marsh & McLennan Companies, Inc. U.S. Employee
2002 Cash Bonus Award Voluntary Deferral Plan
(10.12) *Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan (incorporated by reference to
MMC'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
MMC's Annual Report on Form 10-K for the year ended
December 31, 1997)
- --------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 15(c) of Form 10-K.
24
(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 MMC'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 MMC'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 MMC'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 MMC'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 MMC's Quarterly
Report on Form 10-Q for the quarter ending June 30,
2001)
(10.19) *Renewal of Consulting Agreement between A.J.C.
Smith and MMC dated as of May 16, 2002,
(incorporated by reference to MMC's Quarterly
Report on Form 10-Q for the quarter ending June 30,
2002)
(10.20) *MMC Capital, Inc. Amended and Restated Deferred
Compensation and Profits Limited Partnership Plan
(incorporated by reference to MMC's Annual Report
on Form 10-K for the year ended December 31, 2001)
(10.21) *Marsh & McLennan Companies, Inc. 2000 Employee
Incentive and Stock Award Plan (incorporated by
reference to MMC's Annual Report on Form 10-K for
the year ended December 31, 2001)
(10.22) *Amended and Restated Limited Partnership Agreement
of Marsh & McLennan Affiliated Fund, L.P. dated
October 12, 1999 (incorporated by reference to
MMC's Annual Report on Form 10-K for the year ended
December 31, 2001)
- --------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 15(c) of Form 10-K.
25
(10.23) *Second Amended and Restated Limited Partnership
Agreement of Marsh & McLennan Capital Professionals
Fund, L.P. dated December 2, 1999 (incorporated by
reference to MMC's Annual Report on Form 10-K for
the year ended December 31, 2001)
(10.24) *Amended and Restated Limited Partnership Agreement
of Marsh & McLennan Capital Technology
Professionals Venture Fund, L.P. dated as of
December 2, 1999 (incorporated by reference to
MMC's Annual Report on Form 10-K for the year ended
December 31, 2001)
(10.25) *First Amended and Restated Limited Partnership
Agreement of MMC Capital Tech Professionals Fund
II, L.P. dated as of October 31, 2000 (incorporated
by reference to MMC's Annual Report on Form 10-K
for the year ended December 31, 2001)
(10.26) *First Amended and Restated Limited Partnership
Agreement of MMC Capital C&I Professionals Fund,
L.P. dated as of July 21, 2000 (incorporated by
reference to MMC's Annual Report on Form 10-K for
the year ended December 31, 2001)
(10.27) *Amended and Restated Limited Partnership Agreement
of Trident Capital II, L.P. dated December 2, 1999
(incorporated by reference to MMC's Annual Report
on Form 10-K for the year ended December 31, 2001)
(10.28) *Amended and Restated Limited Partnership Agreement
of Marsh & McLennan Capital Technology Venture GP,
L.P. dated December 2, 1999 (incorporated by
reference to MMC's Annual Report on Form 10-K for
the year ended December 31, 2001)
(10.29) *Amended and Restated Limited Partnership Agreement
of MMC Capital Tech GP II, L.P. dated as of August
22, 2000 (incorporated by reference to MMC's Annual
Report on Form 10-K for the year ended December 31,
2001)
(10.30) *Limited Partnership Agreement of Marsh & McLennan
Capital C&I GP, L.P. dated as of April 7, 2000
(incorporated by reference to MMC's Annual Report
on Form 10-K for the year ended December 31, 2001)
(10.31) *Limited Partnership Agreement of Marsh & McLennan
C&I Employees' Securities Company, L.P. dated as of
July 21, 2000 (incorporated by reference to MMC's
Annual Report on Form 10-K for the year ended
December 31, 2001)
- --------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 15(c) of Form 10-K.
26
(10.32) *Limited Liability Company Agreement of Putnam
Investments Employees' Securities Company I LLC
dated as of October 3, 2000 (incorporated by
reference to MMC's Annual Report on Form 10-K for
the year ended December 31, 2001)
(10.33) *Limited Liability Company Agreement of Putnam
Investments Employees' Securities Company II LLC
dated as of June 15, 2002 (incorporated by
reference to MMC's Annual Report on Form 10-K for
the year ended December 31, 2001)
(10.34) Form of Waiver dated June 24, 2002 of certain
provisions of the MMC Capital Long-Term Incentive
Plan executed by Messrs. Greenberg and Davis
(incorporated by reference to MMC's Quarterly
Report on Form 10-Q for the quarter ending June 30,
2002)
(10.35) Representative Fund Advisory Contract with each of
the Putnam Funds (incorporated by reference to
MMC's Quarterly Report on Form 10-Q for the quarter
ending June 30, 2002)
(12) Statement Re: Computation of Ratio of Earnings to
Fixed Charges
(13) Annual Report to Stockholders for the year ended
December 31, 2002, to be deemed filed only with
respect to those portions which are expressly
incorporated by reference
(14) Code of Ethics for Chief Executive and Senior
Financial Officers
(21) list of subsidiaries of MMC (as of 2/28/2003)
(23) independent auditors' consent
(24) powers of attorney
(b) No reports on Form 8-K were filed by MMC in the fiscal quarter
ended December 31, 2002
- --------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 15(c) of Form 10-K.
27
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 26th day of March, 2003 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 26th day of March, 2003.
/s/ Jeffrey W. Greenberg Peter Coster*
- --------------------------------------- ------------------------------------
Jeffrey W. Greenberg Peter Coster
Director, Chairman of the Board and Director
Chief Executive Officer
/s/ Sandra S. Wijnberg Charles A. Davis*
- --------------------------------------- ------------------------------------
Sandra S. Wijnberg Charles A. Davis
Senior Vice President and Director
Chief Financial Officer
/s/ Robert J. Rapport Robert F. Erburu*
- --------------------------------------- ------------------------------------
Robert J. Rapport Robert F. Erburu
Vice President and Controller Director
(Chief Accounting Officer)
Lewis W. Bernard * Oscar Fanjul*
- --------------------------------------- ------------------------------------
Lewis W. Bernard Oscar Fanjul
Director Director
Mathis Cabiallavetta* Ray J. Groves*
- --------------------------------------- ------------------------------------
Mathis Cabiallavetta Ray J. Groves
Director Director
28
Stephen R. Hardis* Morton O. Schapiro*
- --------------------------------------- -------------------------------------
Stephen R. Hardis Morton O. Schapiro
Director Director
Gwendolyn S. King* Adele Simmons*
- --------------------------------------- -------------------------------------
Gwendolyn S. King Adele Simmons
Director Director
The Rt. Hon. Lord Lang of Monkton, DL* John T. Sinnott*
- --------------------------------------- -------------------------------------
The Rt. Hon. Lord Lang of Monkton, DL John T. Sinnott
Director Director
Lawrence J. Lasser* A.J.C. Smith*
- --------------------------------------- -------------------------------------
Lawrence J. Lasser A.J.C. Smith
Director Director
David A. Olsen*
- ---------------------------------------
David A. Olsen
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 10-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
29
CERTIFICATIONS
I, Jeffrey W. Greenberg, certify that:
1. I have reviewed this annual report on Form 10-K of Marsh & McLennan
Companies, Inc. (the "registrant");
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
30
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 26, 2003 /s/ Jeffrey W. Greenberg
---------------- -------------------------------
Jeffrey W. Greenberg
Chief Executive Officer
31
I, Sandra S. Wijnberg, certify that:
1. I have reviewed this annual report on Form 10-K of Marsh & McLennan
Companies, Inc. (the "registrant");
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
32
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 26, 2003 /s/ Sandra S. Wijnberg
---------------- -----------------------------
Sandra S. Wijnberg
Chief Financial Officer
33
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, 2002 and 2001, 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, 2002, and have issued our report thereon dated February 28, 2003; such
financial statements and report are included in your 2002 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 15. 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.
As described in Notes 1 and 5 to the consolidated financial statements, the
Company changed its method of accounting for goodwill amortization to conform to
Statement of Financial Accounting Standards No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS.
DELOITTE & TOUCHE LLP
New York, New York
February 28, 2003
34
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Information concerning MMC's valuation accounts follows:
An analysis of the allowance for doubtful accounts for the three years
ended December 31, 2002 follows (in millions of dollars):
2002 2001 2000
---- ---- ----
Balance at beginning of year................... $139 $135 $132
Provision charged to operations................ 21 30 18
Accounts written-off, net of recoveries........ (44) (24) (9)
Effect of exchange rate changes................ 8 (2) (6)
---- ---- ----
Balance at end of year......................... $124 $139 $135
==== ==== ====
18. Accumulated amortization.
Accumulated amortization related to other intangible assets was $120
million and $85 million as of December 31, 2002 and 2001, respectively.
35