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UNITED STATES
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, 2003
Commission File No. 1-5998
MARSH & MCLENNAN COMPANIES, INC.
(Exact name of Registrant as Specified in Its Charter)
Delaware 36-2668272
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1166 Avenue of the Americas
New York, New York 10036-2774
(Address of Principal Executive Offices; Zip Code)
Registrant's telephone number, including area code: (212) 345-5000
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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 .
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As of June 30, 2003, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $27,487,418,346.
As of February 27, 2004, there were outstanding 524,540,040 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, 2003 . . . . . . . . . . . . . . . Parts I, II and IV
Notice and Proxy Statement for the 2004 Annual Meeting of Stockholders to
be filed within 120 days after December 31, 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, 2003
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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 21 through 29 of the Annual Report to
Stockholders for the year ended December 31, 2003 (the "2003 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 and wholesale broking services are performed for a wide range of
clients under various names. Claims and associated productivity services are
provided by Sedgwick Claims Management Services. 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 principal regions of the world where insurance
business is conducted. These clients are 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 individuals 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 client 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 those 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.
Guy Carpenter, its subsidiaries and affiliates provide reinsurance
services to insurance and reinsurance companies and other risk assumption
entities. Acting mainly as a broker or intermediary on all classes of
reinsurance, Guy Carpenter principally addresses the property and
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casualty lines. Guy Carpenter's reinsurance activities also include specialty
lines such as professional liability, medical malpractice, agriculture, marine,
accident & health, life & annuity, and alternative risk transfer. Guy
Carpenter's 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, claims and run-off
services. An insurance or reinsurance company client may seek reinsurance or
other risk-transfer financing on all or a portion of the risks it insures. Guy
Carpenter's offices are located principally in North and South America, Europe
and Asia Pacific.
Marsh's Affinity and Private Client Practices business unit provides
advice and program services to corporate and association clients globally and to
individual clients in the United States. Marsh's Affinity practice provides
associations with the design, marketing, and administration of a variety of
insurance-related products purchased by the association members. The Affinity
practice 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's
Financial Services practice offers key-person and executive benefit programs, as
well as planning and wealth preservation solutions for affluent individuals.
Marsh provides underwriting management services to insurers in the
United States, Canada and the United Kingdom, primarily for professional
liability coverages. Marsh also provides wholesale broking services, consisting
of specialized placement services for affiliated and unaffiliated brokers, in
the United States and United Kingdom. These services are provided under various
names apart from Marsh.
Sedgwick Claims Management Services, a majority-owned subsidiary of
Marsh, is a leading provider of various claims and productivity management
solutions to North American clients. It provides various claims administration
and related services principally for workers' compensation, employers'
liability, general liability, automobile liability, and short and long term
disability claims.
MMC CAPITAL, INC. MMC Capital is a private equity firm that manages
investments and committed capital of more than $2 billion. MMC Capital invests
primarily in industries where MMC possesses specialized knowledge. During the
past ten years, MMC Capital has targeted investments in the insurance and
financial services industries as the investment manager of the Trident Funds,
which consist of The Trident Partnership formed in 1994, Trident II formed in
1999 and Trident III formed in 2003. Investors in these funds include MMC
Capital's corporate parent and third-party investors.
MMC Capital's investment activities date back to the mid 1980's when
MMC was instrumental in sponsoring several Bermuda-based insurance and
reinsurance companies, including ACE Limited, XL Capital Ltd., Centre
Reinsurance Holdings Limited and Mid Ocean Limited. More recently, MMC Capital
helped to develop an additional source of insurance and
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reinsurance capacity after the September 11, 2001 terrorist attacks through the
formation of AXIS Capital Holdings Limited.
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 premiums held in a fiduciary
capacity for others; market service fees 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 recognized on 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. Market services revenue
is derived from agreements that Marsh has with most of its principal insurance
markets. Under these agreements, Marsh is paid for services provided to the
markets, including: access to a global distribution network that fosters revenue
generation and operating efficiencies; intellectual capital in the form of new
products, solutions and general information on emerging developments in the
insurance marketplace; the development and provision of technology systems and
services that create efficiencies in doing business; and a wide range of
administrative services. Payments under market service agreements are based upon
such factors as the overall volume, growth, and in limited cases profitability,
of the total business placed by Marsh with a given insurer.
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, clients
pay Marsh fees for brokerage or advisory
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services. 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 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, 2003, 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.
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
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actions Putnam's initial holding in Bipop is now comprised of common shares in
FinecoGroup S.p.A. and Capitalia S.p.A.
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 $240 billion and $251 billion as of December 31, 2003
and 2002, respectively, invested both domestically and globally. Average assets
under management were approximately $258 billion and $279 billion for 2003 and
2002, respectively. Mutual fund assets aggregated $163 billion at December 31,
2003 and $164 billion at December 31, 2002. Institutional account assets
aggregated $77 billion at December 31, 2003 and $87 billion at December 31,
2002. Assets held in equity securities at December 31, 2003 represented 72% of
assets under management, compared with 73% in 2002 and 81% in 2001, while
investments in fixed income products represented 28%, compared with 27% in 2002
and 19% in 2001. Assets from non-U.S. investors aggregated approximately $39
billion and $33 billion at December 31, 2003 and 2002, 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. A reduction in
management fees payable under these contracts and/or 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
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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,
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 member of the National Association of Securities Dealers ("NASD"), 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.
All open-end Putnam Funds other than a money market fund have adopted
and put in place distribution plans pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Pursuant to these distribution plans, the Putnam Funds make
payments to PRM to cover costs relating to distribution of the Putnam Funds and
services provided to shareholders at rates that differ by class of shares. 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
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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 increased in 2003 after three consecutive years
of decline. Assets under management have also been, and may in the future
continue to be, adversely affected by increased redemptions in response to
events giving rise to the administrative proceedings by the Securities and
Exchange Commission ("SEC") and the Massachusetts Secretary of the Commonwealth.
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 historic 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 HR technology & 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 Investment 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. As of
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December 31, 2003, retirement plan assets invested through the firm's Australian
retirement trust totaled $4.8 billion, representing the interests of about
110,000 participants. Mercer Human Resource Consulting also has a benefits
administration practice. In the U.S., Mercer Human Resource 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 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. In April 2003,
Mercer Management Consulting merged its financial services strategy and risk and
actuarial consulting units with Oliver, Wyman & Company to form Mercer Oliver
Wyman. Under the Mercer Oliver Wyman name, Mercer Management Consulting provides
risk and strategy consulting, primarily to financial services clients, as well
as actuarial consulting services to insurance companies, government entities and
other organizations. Under the Lippincott Mercer name, Mercer Management
Consulting advises leading corporations on issues relating to brand, corporate
identity and image.
Mercer Delta Organizational 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
investment consulting practice primarily receives compensation based on fees for
service and sometimes is compensated based on assets under management. 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.
9
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 similar matters. 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 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.
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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 or regulatory actions
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, the provision of 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 subjects Mercer Human
Resource Consulting 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, the manner in which such products are distributed,
the scope and quality of the shareholder and other services provided, and its
general reputation in the marketplace. 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
11
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 private
equity funds to structure and manage investments in the insurance industry.
These organizations include insurance companies, brokers and 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. In the fourth quarter of 2003 Putnam's
competitive position was, and it may continue to be, adversely affected by the
events that gave rise to the administrative proceedings brought by the SEC and
the Massachusetts Secretary of the Commonwealth. The management team at Putnam
is committed to restoring Putnam's reputation for reliability and integrity. Any
further damage to Putnam's reputation could have a material adverse effect on
Putnam.
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.
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.
12
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 2003 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.
EMPLOYEES. As of December 31, 2003 MMC and its consolidated subsidiaries
employed about 60,500 people worldwide, of whom approximately 38,700 were
employed by subsidiaries providing risk and insurance services, approximately
5,300 were employed by subsidiaries providing investment management services,
approximately 15,900 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 10, 2004, the following individuals also were executive officers of MMC:
Francis N. Bonsignore, age 57, 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 a partner and
national director, human resources for Price Waterhouse.
Charles E. Haldeman, age 55, is president, chief executive
officer and co-head of Investments of Putnam Investments. Mr. Haldeman
joined Putnam in October 2002 as senior managing director and co-head
of Investments. He was named president and chief executive officer in
November 2003. Before joining Putnam, Mr. Haldeman was president and
chief executive officer of Delaware Investments from 2000 to 2002,
president and chief operating officer of United Asset Management
Corporation from 1998 to 2000, and a partner and director of Cooke &
Bieler, Inc. from 1974 to 1998.
William L. Rosoff, age 57, 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.
Sandra S. Wijnberg, age 47, 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. Prior to joining
PepsiCo., Ms. Wijnberg was a principal at Morgan Stanley & Company.
13
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.
MMC also posts on its web site the following documents with respect to
corporate governance:
o Guidelines for Corporate Governance;
o Code of Business Conduct and Ethics;
o Procedures for addressing complaints and concerns of employees and
others; and
o the charters of the Audit Committee, Compensation Committee and
Directors & Governance Committee of the Board of Directors.
All of the above documents are available in printed form to any MMC stockholder
upon request.
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 other MMC filings
with the SEC and in our reports to stockholders) 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, pension funding, financial losses and expected insurance
recoveries resulting from the September 11, 2001 attack on the World Trade
Center in New York City, and the adverse consequences arising from the
market-timing issues at Putnam, including fines and restitution, 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 difficult conditions for the transfer of commercial risk and
other changes in the global property and casualty insurance markets, natural
catastrophes, mergers between client organizations, and insurance or reinsurance
company insolvencies. Factors to be considered in the case of MMC's investment
management business include changes in worldwide and national equity and fixed
14
income markets, actual and relative investment performance, the level of sales
and redemptions, and the ability to maintain investment management and
administrative fees at historic levels; and with respect to all of MMC's
activities, changes in general worldwide and national economic conditions, the
impact of terrorist attacks, 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 impact of tax and other
legislation and regulation in the jurisdictions in which MMC operates.
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 anticipated release of
quarterly financial results and the posting of updates of assets under
management at Putnam. Monthly updates of total assets under management at Putnam
will be posted to the MMC website the first business day following the end of
each month. Putnam posts mutual fund and performance data to its website
regularly. Assets for most Putnam retail mutual funds are posted approximately
two weeks after each month-end. Mutual fund net asset value (NAV) is posted
daily. Historical performance and Lipper rankings are also provided. 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 240,000
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 in Hoboken, New Jersey.
The principal offices of the Marsh subsidiaries in the UK currently are
located in the City of London in Tower Place, comprising 354,000 square feet
under a long term lease. Marsh subsidiaries lease an additional 160,000 square
feet of office space in and around London in
15
support of their operations. The principal offices of the Mercer subsidiaries in
the UK comprise approximately 200,000 square feet of leased space in and around
London. Mercer also has entered into a lease covering approximately 150,000
rentable square feet in a new building close to Tower Place.
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.
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.
PUTNAM MATTERS
REGULATORY MATTERS. On October 28, 2003, the SEC commenced a civil
administrative and cease and desist proceeding against Putnam under the
Investment Advisors Act of 1940 and the Investment Company Act of 1940. On
November 13, 2003, pursuant to an agreement with Putnam, the SEC entered an
order making findings, which Putnam neither admitted nor denied, of certain
facts and concluded that Putnam violated the Investment Advisors Act of 1940 and
the Investment Company Act of 1940. The order imposed partial relief, including
final censure, remedial undertakings, and a cease and desist order. The SEC's
order found that since 1998 at least six Putnam investment management
professionals engaged in excessive short-term trading of Putnam mutual funds in
their personal accounts. The order also found that four of these employees
engaged in trading in funds over which they had investment decision making
responsibilities and access to non-public information regarding their funds'
portfolios. The SEC further found that Putnam failed to disclose this
potentially self-dealing securities trading to the boards or shareholders of the
mutual funds it manages, failed to take adequate steps to detect and deter such
trading activity through internal controls and failed in its supervision of
these investment management professionals. Under the terms of the order, Putnam
has agreed to a number of remedial actions, including new employee trading
restrictions, enhanced employee trading compliance, oversight by an independent
third party and the SEC of the calculation of the amount of restitution to be
made by Putnam for losses attributable to excessive short-term trading by Putnam
employees, the retention of an independent compliance consultant, the
undertaking of periodic compliance reviews, and certification of compliance with
the SEC. The order also contemplates civil monetary penalties to be determined
at a later date. Putnam has also undertaken to make appropriate restitution for
losses to any of Putnam's funds resulting from improper market timing activities
by Putnam employees.
16
In a separate action, the SEC is seeking an injunction against two of
the six investment management employees. All six such employees have been
removed from investment management responsibilities at Putnam.
On October 28, 2003, the Massachusetts Secretary of the Commonwealth
commenced a civil administrative proceeding against Putnam and two of its
employees alleging violations of the state's securities law anti-fraud
provisions. These violations are alleged to be based on material misstatements
in Putnam mutual fund prospectuses because Putnam allegedly permitted fund
managers to engage in activities contrary to Putnam's stated policy against
market timing and short-term trading. Putnam is also alleged to have breached
its fiduciary duty to Putnam fund shareholders by allowing such employee
conduct. In addition, the Massachusetts action alleges that Putnam permitted
certain non-employee shareholders of Putnam funds to engage in excessive market
timing activities in violation of policies allegedly disclosed by Putnam in its
mutual fund prospectuses. The Massachusetts action seeks to have Putnam
permanently cease and desist from violating the Massachusetts securities law,
and to pay restitution to the funds and administrative fines in an undetermined
amount.
Additionally, Putnam has received document subpoenas and/or requests
for information from the United States Attorney in Boston, the Florida
Department of Financial Services, the Office of the Attorney General for the
State of New York, Offices of the Secretary of State and the State Auditor for
the State of West Virginia, the NASD and the Boston office of the U.S.
Department of Labor inquiring into, among other things, matters that are the
subject of the SEC and Massachusetts actions.
Putnam has also received subpoenas from the SEC's Philadelphia office,
seeking documents relating to Putnam's directed brokerage practices and the SEC
has interviewed, and taken testimony from, a number of Putnam employees relating
to revenue sharing practices. In addition, Putnam has received a request for
information from the SEC's Chicago office and the NASD regarding revenue sharing
arrangements.
Putnam is fully cooperating with the regulatory authorities.
In the fourth quarter of 2003, Putnam recorded net costs of $24 million
related to these proceedings, which included the estimated potential restitution
to the Putnam Funds, and compliance, legal and communication expenses. Putnam's
partial settlement with the SEC includes civil penalties not yet determined, and
therefore, no provision has been made for such penalties.
SECURITIES LITIGATION. As of March 4, 2004, MMC and Putnam have
received complaints in approximately 70 civil actions based on allegations of
market timing activities. These actions have been filed in federal court in New
York, Massachusetts, California, Illinois, Connecticut, and Delaware, and in
state court in New York, Massachusetts, California, Illinois, Vermont, Kansas,
and North Carolina. These civil actions are as follows:
17
Ten purported securities class actions (the "MMC Class Action
Complaints") have been filed in United States District Court for the Southern
District of New York on behalf of a class of purchasers of MMC stock during the
period from January, 2000 to November, 2003. The MMC Class Action Complaints
allege, among other things, that MMC failed to disclose certain market timing
activities at Putnam which, when disclosed, resulted in a drop in the market
price of MMC's shares. The MMC Class Action Complaints also name as defendants
certain officers and directors of MMC. The MMC Class Action Complaints assert
claims under Sections 10(b) and 20(a) of the Exchange Act.
Three shareholder derivative actions have been filed against members of
MMC's Board of Directors, and MMC as a nominal defendant. In these actions, the
plaintiffs purport to state common law claims based on, among other things, the
Board's alleged failure to prevent the alleged market timing from occurring. Two
of the MMC derivative complaints were filed in the United States District Court
for the Southern District of New York and one was filed in the Supreme Court for
the State of New York.
MMC and/or Putnam have been named in 56 additional actions brought by
investors in Putnam funds claiming damages to themselves or the Putnam funds as
a result of various market timing activities. These actions have been brought
either individually (the "Individual Complaints"), derivatively (the "Putnam
Derivative Complaints"), or on behalf of a putative class (the "Putnam Class
Action Complaints"). The Individual Complaints, the Putnam Class Action
Complaints (which also name as defendants certain Putnam funds and certain
Putnam employees) and the Putnam Derivative Action Complaints (which also name
as defendants certain Putnam officers and employees and certain trustees of the
Putnam funds), allege violations of the federal securities and investment
advisory laws and state law. At this time, seven of these cases are pending in
various state courts. Putnam has also been named as a defendant in one suit in
its capacity as a sub-advisor to a non-Putnam fund.
MMC and Putnam moved before the Judicial Panel on Multidistrict
Litigation (the "MDL Panel") to consolidate the federal matters before a single
judge. On February 20, 2004, the MDL Panel issued an order transferring many of
the cases against MMC and Putnam, along with those against other mutual fund
complexes, to the United States District Court for the District of Maryland for
coordinated pretrial proceedings. In most of the federal cases, either by
agreement of the parties or order of the court, MMC and Putnam are not required
to respond until after amended complaints have been filed in the consolidated
actions.
Putnam has agreed to indemnify the Putnam funds for any liabilities
arising from market timing activities, including those that could arise in the
securities litigations, and MMC has agreed to guarantee Putnam's obligations in
that regard.
ERISA LITIGATION. MMC, Putnam, and various of their officers, directors
and employees have been named as defendants in three purported class actions
asserting claims under ERISA (the "ERISA Actions"). The ERISA Actions, which
have been brought by participants in MMC's Stock Investment Plan and Putnam's
Profit Sharing Retirement Plan (collectively, the "Plans"), allege, among other
things, that, in view of the market timing trading activity that was allegedly
18
allowed to occur at Putnam, the defendants knew or should have known that the
investment of the Plans' funds in MMC's stock and Putnam's mutual fund shares
was imprudent and that the defendants breached their fiduciary duties to the
Plans' participants in making these investments. The three ERISA Actions were
filed in federal court for the Southern District of New York.
The complaints in the above-referenced matters seek monetary damages
and other forms of relief. At the present time, MMC's management is unable to
estimate the impact that the outcome of the foregoing proceedings may have on
MMC's consolidated results of operations or financial position or cash flows.
EMPLOYMENT DISPUTE. Lawrence J. Lasser, former President and CEO of
Putnam, has initiated an arbitration proceeding against MMC. The arbitration
will determine whether and to what extent Mr. Lasser is owed any money under his
employment arrangements with Putnam.
OTHER LITIGATION
MMC and its subsidiaries are subject to various other 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 that could, if assessed, be significant.
Insurance coverage applicable to such matters includes elements of both risk
retention and risk transfer.
Although the ultimate outcome of these other matters and the employment
dispute 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, proceedings or reviews should not have a material
adverse effect on MMC's consolidated financial position or cash flows, but may
be material to MMC's operating results in any particular period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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 2003 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 2003 and 2002 are as follows:
19
------------------------------------------------------------
2003 2002
------------------------------------------------------------
STOCK PRICE RANGE STOCK PRICE RANGE*
----------------- ------------------
HIGH LOW HIGH LOW
First Quarter $ 49.50 38.27 $ 56.90 47.20
Second Quarter $ 54.97 42.27 $ 57.30 45.13
Third Quarter $ 53.98 47.50 $ 49.45 38.40
Fourth Quarter $ 49.48 41.75 $ 49.99 34.61
------------------------------------------------------------
$ 54.97 38.27 $ 57.30 34.61
- --------------------
* 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 2003 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 21 through 29 of the 2003 Annual Report is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information under the heading "Market Risk" on pages 27 to 28 of
the 2003 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 30 through 53 of the 2003 Annual Report and Selected
Quarterly Financial Data (Unaudited) on page 54 of the 2003 Annual Report are
incorporated herein by reference. A supplemental note to the Consolidated
Financial Statements is included on the last page of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. None.
ITEM 9A. CONTROLS AND PROCEDURES.
CONTROLS AND PROCEDURES. Based on their evaluation, as of the end of
the period for the filing of this Form 10-K, the Company's chief executive
officer and chief financial officer have concluded that the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e)
20
or 15d-15(e) under the Securities Exchange Act of 1934) are effective in timely
alerting them to material information relating to the Company required to be
included in our reports filed under the Exchange Act.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. There have been
no changes in the Company's internal controls over financial reporting during
the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
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 and Proxy Statement for the 2004
Annual Meeting of Stockholders to be filed within 120 days after December 31,
2003 (the "2004 Proxy Statement").
The Executive Officers of MMC are Messrs. Cabiallavetta, Coster, Davis,
Greenberg and Groves, with respect to whom information can be found under the
heading "Election of Directors" in the 2004 Proxy Statement, and Messrs.
Bonsignore, Haldeman, Rosoff 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 2004 Proxy Statement in the section
"Information Regarding the Board of Directors" under "--Committees--The Audit
Committee" and "--Codes of Business Conduct and Ethics" is incorporated herein
by reference.
The information set forth in the 2004 Proxy Statement in the section
"Transactions with Management and Others; Other Information" under "Section
16(a) Beneficial Ownership Reporting Compliance" is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information under the headings "Information Regarding the Board of
Directors-Directors' Compensation", "Compensation of Executive Officers",
"Compensation
21
Committee Report" and "Stock Performance Graph" in the 2004 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 2004 Proxy Statement is incorporated herein by
reference.
EQUITY COMPENSATION PLAN INFORMATION TABLE
The following table sets forth information as of December 31, 2003,
with respect to compensation plans under which equity securities of MMC are
authorized for issuance:
- ------------------------------------------------------------------------------------------------------------------
(a) NUMBER OF SECURITIES (b) WEIGHTED-AVERAGE (c) NUMBER OF SECURITIES
TO BE ISSUED UPON EXERCISE EXERCISE PRICE OF REMAINING AVAILABLE FOR
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, FUTURE ISSUANCE UNDER
WARRANTS AND RIGHTS(1)(2) WARRANTS AND RIGHTS(2) EQUITY COMPENSATION PLANS
(EXCLUDING SECURITIES
REFLECTED IN COLUMN (a))(2)
PLAN CATEGORY
- ------------------------------------------------------------------------------------------------------------------
Equity compensation plans 25,658,542 $35.7467 48,031,258 (3)
approved by stockholders
- ------------------------------------------------------------------------------------------------------------------
Equity compensation plans 63,656,530 $44.9369 63,296,283 (4)
not approved by
stockholders
- ------------------------------------------------------------------------------------------------------------------
89,315,072 (5) $42.2968 111,327,541 (5)
TOTAL
- ------------------------------------------------------------------------------------------------------------------
- ----------------------------
(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 31,650,325 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.
22
o 4,422,938 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 7,507,775 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.
o 3,407,596 shares available for future deferrals directed into share
units under the STOCK INVESTMENT SUPPLEMENTAL PLAN, 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.
(4) Includes the following:
o 12,742,316 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 8,585,198 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 39,240,799 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 190,403 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 2,278,892 shares available for future awards, and 258,675 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 26.1 million shares in 2003. 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
23
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 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 "Directors' Compensation" and
"Transactions with Management and Others; Other Information" in the 2004 Proxy
Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information under the heading "Ratification of Selection of
Auditors--Fees of Independent Auditors" in the 2004 Proxy Statement, including
the Audit Committee Policy on Preapproval of Services Provided by the
Independent Auditor attached as Appendix B to the 2004 Proxy Statement, is
incorporated herein by reference.
24
PART IV
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 30 through 53 of the 2003 Annual Report):
Consolidated Statements of Income for each of the three
years in the period ended December 31, 2003
Consolidated Balance Sheets as of December 31, 2003 and 2002
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 2003
Consolidated Statements of Stockholders' Equity and
Comprehensive Income for each of the three years in the
period ended December 31, 2003
Notes to Consolidated Financial Statements
Independent Auditors' Report
Supplemental Note to Consolidated Financial Statements
Independent Auditors' Report
Other:
Selected Quarterly Financial Data and Supplemental
Information (Unaudited) for the three years ended December
31, 2003 (incorporated herein by reference to page 54 of the
2003 Annual Report)
Five-Year Statistical Summary of Operations (incorporated
herein by reference to page 55 of the 2003 Annual Report)
2. All required Financial Statement Schedules are included in the
Consolidated Financial Statements, the Notes to Consolidated
Financial Statements or the Supplemental Note to Consolidated
Financial Statements.
3. The following exhibits are filed as a part of this report:
(3.1) MMC's restated certificate of incorporation
25
(3.2) MMC's by-laws (incorporated by reference to MMC's
Annual Report on Form 10-K for the year ended
December 31, 2002)
(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. 333-108566)
(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) Second Supplemental Indenture dated as of February
19, 2003 between MMC and U.S. Bank National
Association (as successor to State Street Bank and
Trust Company), as trustee (incorporated by reference
to MMC's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003)
(4.4) Third Supplemental Indenture dated as of July 30,
2003 between MMC and U.S. National Bank Association
(as successor to 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, 2003)
(4.5) 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)
(4.6) 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-A12B/A filed on June 20, 2002)
(4.7) 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)
- --------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 15(c) of Form 10-K.
26
(10.2) *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)
(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) *Putnam Investments Trust Equity Partnership Plan
(10.10) *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)
(10.11) *Amendment to Marsh & McLennan Companies Supplemental
Retirement Plan (incorporated by reference to MMC's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003)
(10.12) *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)
- --------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 15(c) of Form 10-K.
27
(10.13) *Marsh & McLennan Companies, Inc. U.S. Employee 2003
Cash Bonus Award Voluntary Deferral Plan
(10.14) *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)
(10.15) *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)
(10.16) *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)
(10.17) *Renewal of Consulting Agreement between A.J.C. Smith
and MMC dated as of May 24, 2001 (incorporated by
reference to MMC's Quarterly Report on Form 10-Q for
the quarter ending June 30, 2001)
(10.18) *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)
(10.19) *Renewal and Amendment to Consulting Agreement
between A.J. C. Smith and MMC dated as of May 16,
2003 (incorporated by reference to MMC's Quarterly
Report on Form 10-Q for the quarter ending June 30,
2003)
(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.
28
(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.
29
(10.32) *Amended and Restated Limited Partnership Agreement
of Trident III Professional Fund, L.P. dated December
18, 2003
(10.33) *Amended and Restated Limited Partnership Agreement
of Trident III ESC, L.P. dated December 12, 2003
(10.34) *Amended and Restated Limited Partnership Agreement
of Trident Capital III, L.P. dated December 4, 2003
(10.35) *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)
(10.36) *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)
(10.37) Form of Waiver dated June 24, 2002 of certain
provisions of the MMC Capital Long-Term Incentive
Plan executive by Messrs. Greenberg and Davis
(incorporated by reference to MMC's Quarterly Report
on Form 10-Q for the quarter ending June 30, 2002)
(10.38) 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, 2003, 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 (incorporated by reference to
MMC's Annual Report on Form 10-K for the year ended
December 31, 2002)
(21) list of subsidiaries of MMC (as of 2/27/2004)
(23) independent auditors' consent
- --------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 15(c) of Form 10-K.
30
(24) powers of attorney
(31) Rule 13a-14(a)/15d-14(a) Certifications
(32) Section 1350 Certifications
(b) The following reports on Form 8-K were filed by MMC in the fiscal
quarter ended December 31, 2003:
o Current Report on Form 8-K dated October 21, 2003 reporting
MMC's issuance of a press release announcing its unaudited
third quarter financial results for the quarter ended
September 30, 2003.
o Current Report on Form 8-K dated October 28, 2003 reporting
the initiation by the SEC and the Commonwealth of
Massachusetts of administrative proceedings against Putnam
Investments and two Putnam employees.
o Current Report on Form 8-K dated November 3, 2003 reporting
MMC's issuance of a press release announcing a new management
team at Putnam Investments.
o Current Reports on Form 8-K dated November 7, 2003, November
14, 2003 and November 21, 2003, each reporting the current
status of assets under management at Putnam Investments.
31
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 15th day of March, 2004 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 15th day of March, 2004.
/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
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* A.J.C. Smith*
- --------------------------------------- --------------------------------------
The Rt. Hon. Lord Lang of Monkton, DL 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
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, 2003 and 2002, 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, 2003, and have issued our report thereon dated March 5, 2004; such financial
statements and report are included in your 2003 Annual Report to Stockholders
and are incorporated herein by reference. Our audits also included the
supplemental note to the consolidated financial statements (the "Supplemental
Note") listed in Item 15. This Supplemental Note is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the Supplemental Note, when considered in relation to
the basic consolidated statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As described in Note 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
March 5, 2004
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTE 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, 2003 follows (in millions of dollars):
2003 2002 2001
---- ---- ----
Balance at beginning of year................................... $124 $139 $135
Provision charged to operations................................ 18 21 30
Accounts written-off, net of recoveries........................ (36) (44) (24)
Effect of exchange rate changes................................ 10 8 (2)
--------- ------ -------
Balance at end of year......................................... $116 $124 $139
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