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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 2003
SEC NO. 1-5998
A. Full title of the Plan:
MARSH & McLENNAN COMPANIES STOCK INVESTMENT PLAN
B. Name of issuer of the securities held pursuant to the Plan and the address of
its principal executive office:
MARSH & McLENNAN COMPANIES, INC.
1166 Avenue of the Americas
New York, NY 10036-2774
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Marsh &
McLennan Companies Benefits Administration Committee has duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
MARSH & McLENNAN COMPANIES STOCK
INVESTMENT PLAN
Date: December 23, 2003 /s/ Patricia A. Agnello
---------------------------------
Authorized Representative of the
Benefits Administration Committee
MARSH & McLENNAN COMPANIES STOCK INVESTMENT PLAN
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Statements of Net Assets Available for Benefits
as of June 30, 2003 and 2002 2
Statement of Changes in Net Assets Available
for Benefits for the Year Ended June 30, 2003 3
Notes to Financial Statements 4-9
Supplemental Schedules:
Schedule of Assets Held at End of Year
as of June 30, 2003 Schedule I
Schedule of Reportable Transactions for
the Year Ended June 30, 2003 Schedule II
Independent Auditors' Consent Exhibit 23
INDEPENDENT AUDITORS' REPORT
To Marsh & McLennan Companies Benefits Administration Committee:
We have audited the accompanying statements of net assets available for benefits
of the Marsh & McLennan Companies Stock Investment Plan (the "Plan") as of June
30, 2003 and 2002, and the related statement of changes in net assets available
for benefits for the year ended June 30, 2003. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, information regarding the Plan's net assets available for benefits as
of June 30, 2003 and 2002 and the changes in net assets available for benefits
for the year ended June 30, 2003 in conformity with accounting principles
generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
table of contents are presented for purposes of additional analysis and are not
a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These schedules are the responsibility of the Plan's management. Such
schedules have been subjected to the auditing procedures applied in the audit of
the basic 2003 financial statements and, in our opinion, are fairly stated in
all material respects when considered in relation to the basic financial
statements taken as a whole.
/s/ Deloitte & Touche LLP
December 22, 2003
New York, NY
1
MARSH & MCLENNAN COMPANIES STOCK INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
JUNE 30,
--------------------------------------
2003 2002
--------------- -----------------
ASSETS:
CASH AND CASH EQUIVALENTS $ 42,649,080 $ 81,330,812
--------------- ---------------
INVESTMENTS (NOTE 2) 2,377,777,294 2,026,316,414
LOANS RECEIVABLE - PARTICIPANTS 33,365,715 29,741,672
DIVIDENDS AND INTEREST RECEIVABLE 10,892,364 9,123,029
RECEIVABLE FROM COMPANY:
Contributions 5,903,692 5,297,961
Loan Repayments - 612,371
--------------- --------------
5,903,692 5,910,332
RECEIVABLE FOR INVESTMENTS SOLD - 247,293
--------------- --------------
TOTAL ASSETS 2,470,588,145 2,152,669,552
--------------- --------------
LIABILITIES:
PAYABLE FOR INVESTMENTS PURCHASED - 3,086,988
--------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS $2,470,588,145 $2,149,582,564
=============== ==============
See notes to financial statements
2
MARSH & MCLENNAN COMPANIES STOCK INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED JUNE 30, 2003
INVESTMENT INCOME:
Dividends $ 34,491,072
Interest 25,227,413
Net appreciation in fair value of investments 88,615,996
----------------------
NET INVESTMENT GAIN 148,334,481
----------------------
CONTRIBUTIONS
Employer 52,558,164
Employee 100,035,478
----------------------
152,593,642
DISTRIBUTIONS TO AND WITHDRAWALS BY EMPLOYEES (155,054,788)
TRANSFERS FROM OTHER PLAN (NOTE 1) 175,132,246
----------------------
INCREASE IN NET ASSETS 321,005,581
----------------------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 2,149,582,564
----------------------
End of year $ 2,470,588,145
======================
See notes to financial statements
3
MARSH & McLENNAN COMPANIES STOCK INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003 and 2002
(1) Description of the Plan
------------------------------
The Marsh & McLennan Companies Stock Investment Plan (the "Plan") is a defined
contribution Employee Stock Ownership Plan which allows eligible participants to
contribute through payroll deductions from 1% to 15% of their salary, on a
before and/or after-tax basis. Under the Plan, salaried employees who are at
least 18 years of age in the United States, as well as any subsidiary or
affiliate of Marsh & McLennan Companies, Inc. ("MMC" or the "Company") other
than Putnam Investments are eligible to contribute to the Plan. The Plan is
subject to provisions of the Employee Retirement Income Security Act of 1974
("ERISA").
MMC as of January 1, 2003 matches, after one year of service, up to the first
six percent of participants' before and/or after-tax contributions in the
following percentages:
o 100% for those participants age 55 or older or whose age plus years of
plan participation equals at least 65.
o 71-2/3% in all other cases.
Prior to August 1, 2003, all employee contributions and Company match were
invested in the MMC Stock Fund unless the participant's age was 55 or older or
their age plus years of plan participation equaled at least 65. These
participants could diversify their contribution and accumulated balance among
the MMC Stock Fund, a Fixed Income Fund, and various Putnam mutual funds. For
all participants, the Company's matching contributions were invested the same as
the participants' contributions.
The Company's matching contributions to a participant are suspended for 12
months if the participant makes certain in-service withdrawals from their
Account. Employee and Company contributions are subject to certain limitations
in accordance with Federal income tax regulations.
Beginning August 1, 2003, all participants may direct their future contributions
on a before and/or after-tax basis into one or more of 17 investment options.
Participants age 55 or older, or whose age plus years of plan participation
equals at least 65, will not be required to invest their Company match in the
same funds as their contributions. All other participants will continue to
invest their Company match in the MMC Stock Fund. If an employee does not make
an election their employee contributions will be invested in the Putnam Fixed
Income Fund and their Company match will be invested in the MMC Stock Fund.
4
Individual accounts are maintained for each Plan participant. Each participant's
account is credited with the participant's contribution, the Company's matching
contribution, and Plan earnings, and charged with withdrawals and an allocation
of Plan losses. Allocations are based on participant earnings or account
balances. The benefit to which a participant is entitled is the benefit that can
be provided from the participant's vested account.
Employees are vested immediately in their contributions plus actual earnings
thereon. Employees hired on or after January 1, 1998 who have an hour of service
on or after July 1, 2002 vest in the Company's matching contribution as follows:
20% after two years of service, 40% after three years of service, 67% after four
years of service and 100% after five years of service. Forfeited nonvested
accounts totaled $2,586,392 for the year ended June 30, 2003. These accounts
were used to reduce future employer contributions.
In the fourth quarter of 1998, the Company consummated a business combination
with Sedgwick Group plc ("Sedgwick"). Former employees of Sedgwick became
eligible to participate in the Plan effective January 1, 2000. Participants'
balances in the Sedgwick Savings & Investment Plan were transferred into the
Plan on December 2, 2002.
Effective April 1, 2003, the trustee for the Plan is State Street Corporation.
Deutsche Bank, the former trustee, sold its Defined Contribution Trustee
Services. The trustee is responsible for maintaining the assets of the Plan,
making distribution payments as directed by the Company and, generally,
performing all other acts deemed necessary or proper to fulfill its
responsibility as set forth in the trust agreement pertaining to the Plan.
Certain administrative functions are performed by employees of the Company or
its subsidiaries. All such costs as well as administrative expenses are paid
directly by the Company.
The preceding description of the Plan provides only general information.
Participants should refer to the Plan agreement and the MMC benefits handbook
via www.mmcpeoplelink.com for a more complete description of the Plan's
provisions.
(2) Summary of Significant Accounting Policies
----------------------------------------------
Basis of accounting
-------------------
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.
Use of estimates
----------------
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of net assets available for benefits and changes therein. Actual results
could differ from those estimates.
5
Risks and Uncertainties
-----------------------
The Plan utilizes various investment instruments. Investment securities, in
general, are exposed to various risks, such as interest rate, credit, and
overall market volatility. Due to the level of risk associated with certain
investment securities, it is reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes could
materially affect the amounts reported in the financial statements.
Cash and cash equivalents
----------------------------
Cash and cash equivalents primarily consist of interest bearing money market
investments, which are available on demand.
Investments
-----------
The common stock of Marsh & McLennan Companies, Inc. and shares of Putnam Mutual
Funds are reflected in the accompanying statements of net assets available for
benefits at quoted market prices.
The Plan's Fixed Income Fund, which consists of guaranteed insurance contracts
and group annuity contracts, has been presented in the financial statements at
contract value, which approximates fair market value. The investments in this
fund are valued at contract value, which is cost plus accrued interest, and are
guaranteed by the issuing institution as to principal and interest. Participants
may ordinarily direct the withdrawal or transfer of all or a portion of their
investment at contract value. The average yield for these investment contracts
was approximately 5.5% and 6.2% for the years ended June 30, 2003 and 2002.
There are no reserves against the value of the contract for credit risk or the
issuers otherwise. For some contracts the crediting interest rates are reset on
periodic basis in accordance with the terms of the individual contracts.
Purchases and sales of securities are recorded on a trade-date basis. Dividends
are recorded on the ex-dividend date.
Management fees and operating expenses charged to the Plan for investments in
the mutual funds are deducted from income earned on a daily basis and are not
separately reflected. Consequently, management fees and operating expenses are
reflected as a reduction of net appreciation (depreciation) in fair market value
of investments for such investments.
The following table presents the market values of investments that represent 5%
or more of the Plan's net assets at the end of the plan-year:
June 30,
----------------------------------
2003 2002
--------------- --------------
Marsh & McLennan Companies common stock $1,478,910,238 $1,315,391,574
=============== ===============
6
The Plan's investments (including gains and losses on investments bought and
sold, as well as held during the year) appreciated in value as follows:
Year Ended June 30,
----------------------------
2003
----------------------------
Common Stock $87,090,785
Fixed Income 717,191
Mutual Funds 808,020
----------------------------
$88,615,996
============================
Prior to August 1, 2003, the plan offered a program that was both participant
and non-participant directed. All non-participant directed contributions were
invested in the Marsh & McLennan Companies Stock Fund. The net assets as of June
30, 2003 and 2002 and changes in net assets relating to the Company stock fund
for the year ended June 30, 2003 are as follows:
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
June 30, 2003 June 30, 2002
-------------- ----------------
ASSETS:
CASH AND CASH EQUIVALENTS $ 10,346,821 $ 20,062,259
COMMON STOCK 1,478,910,238 1,315,391,574
DIVIDENDS AND INTEREST RECEIVABLE 8,984,012 7,675,965
RECEIVABLE FROM COMPANY
Contributions 5,447,704 4,893,804
Loan repayments - 574,918
--------------- -------------
5,447,704 5,468,722
--------------- -------------
INTER-FUND RECEIVABLE - 28,580
--------------- -------------
TOTAL ASSETS 1,503,688,775 1,348,627,100
--------------- -------------
LIABILITIES:
PAYABLE FOR INVESTMENTS PURCHASED - 1,292,674
--------------- -------------
TOTAL LIABILITIES - 1,292,674
--------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS $1,503,688,775 $1,347,334,426
================ ===============
7
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
June 30, 2003
-------------------
INVESTMENT INCOME:
Dividends $ 32,664,009
Interest 291,002
Net appreciation in fair value of investments 87,090,785
--------------------
NET INVESTMENT GAIN 120,045,796
--------------------
CONTRIBUTIONS:
Employer 48,125,564
Employee 86,098,168
--------------------
134,223,732
--------------------
DISTRIBUTIONS TO AND WITHDRAWALS BY EMPLOYEES (76,167,958)
--------------------
TRANFERS BETWEEN FUNDS (38,211,737)
--------------------
TRANSFERS FROM OTHER PLAN 16,464,516
--------------------
TOTAL INCREASE 156,354,349
--------------------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 1,347,334,426
--------------------
End of year $1,503,688,775
====================
(3) Related party transactions
------------------------------
The Putnam Investors Fund, Inc., the Putnam Fund for Growth & Income, the Putnam
Voyager Fund, the Putnam Global Growth Fund, the Putnam New Opportunities Fund,
the George Putnam Fund of Boston, the Putnam S&P 500 Index Fund and the Putnam
Bond Index Fund are managed by Putnam Investments, LLC, a majority owned
subsidiary of the Company. Investments in institutional funds managed by Putnam
at June 30, 2003 amounted to $458,130,983.
(4) Loans receivable-participants
---------------------------------
Plan participants may borrow from their accounts up to a maximum amount equal to
the lesser of $50,000 or 50% of the vested value of their Plan account.
Outstanding loans, which are secured by the participants' interest in the Plan
are repaid through semi-monthly payroll deductions or, at the option of the
participant may be paid in full without penalty. Loan repayments, which include
principal and interest, are credited directly to their Plan account. Interest is
charged on the outstanding balance at prime rate plus 1% based on the prime rate
in effect at the time the loan is processed.
New loans to participants amounted to $15,073,519 and $13,437,974 for the years
ended June 30, 2003 and 2002, respectively, and repayments from participants,
including interest, amounted to $15,515,206 and $15,007,677 respectively.
8
(5) Income Tax Status
---------------------
The Internal Revenue Service has determined and informed the Company by a letter
dated January 28, 2002, that the Plan is designed in accordance with applicable
sections of the Internal Revenue Code ("IRC"). The Plan has been amended since
receiving the determination letter. However, the Plan Administrator and the
Plan's tax counsel believe that the Plan is currently being operated in
compliance with the applicable requirements of the IRC.
(6) Payment of Benefits
-----------------------
Benefit payments to participants are recorded upon distribution. Amounts
allocated to accounts of persons who have elected to withdraw from the Plan but
have not yet been paid were $3,236,701 at June 30, 2003. These amounts have not
been recorded as liabilities in the accompanying financial statements.
(7) Supporting Schedules
------------------------
The detail of assets held for investment as of June 30, 2003 is provided on
Schedule I.
The summary of transactions occurring during the year ended June 30, 2003
representing more than 5% of the Plan's net assets as of July 1, 2002 is
reportable under the Department of Labor Regulation 2520.103-6 and is presented
on Schedule II.
All other schedules required by Section 2520.103-10 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 have been omitted because they are not applicable.
(8) Plan Termination
--------------------
Although it has not expressed any intention to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions set forth in ERISA. In the event that the Plan is
terminated, participants would become 100 percent vested in their account.
9
MARSH & MCLENNAN COMPANIES STOCK INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE I
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2003
PRINCIPAL AMOUNT OR NUMBER
OF SHARES 2003
------------------------------ --------------------------------------
2003 COST MARKET
------------------------------ --------------- --------------
COMMON STOCK:
28,958,493 MARSH & McLENNAN COMPANIES, INC. $ 630,346,386 $1,478,910,238
MUTUAL FUNDS:
7,240,598 PUTNAM INVESTORS FUND 107,134,690 70,595,827
4,307,014 THE PUTNAM FUND FOR GROWTH AND INCOME 80,916,291 67,404,762
4,369,288 PUTNAM VOYAGER FUND 94,131,959 61,563,264
5,076,094 PUTNAM GLOBAL GROWTH FUND 64,084,457 33,096,130
1,052,475 PUTNAM NEW OPPORTUNITIES FUND 69,706,994 34,510,644
2,150,607 GEORGE PUTNAM FUND OF BOSTON 36,761,166 34,065,609
4,447,033 PUTNAM S&P 500 INDEX FUND 133,911,191 107,440,310
3,663,292 PUTNAM BOND INDEX FUND 42,445,104 49,454,437
--------------- --------------
629,091,852 458,130,983
--------------- --------------
FIXED INCOME FUND:
2,032,887 SUNAMERICA LIFE INSURANCE CO 2,032,887 2,032,887
6.30% DUE JANUARY 2, 2004
101,816,384 CIGNA 101,816,384 101,816,384
7.07% DUE DECEMBER 30, 2005
10,492,710 PRINCIPAL MUTUAL LIFE INSURANCE COMPANY 10,492,710 10,492,710
5.38% DUE MARCH 31, 2005
24,020,789 JACKSON NATIONAL LIFE 24,020,789 24,020,789
4.86% DUE JANUARY 2, 2007
7,964,967 MONUMENTAL LIFE INSURANCE COMPANY 7,964,967 7,964,967
5.38% DUE DECEMBER 30, 2005
10,469,861 MONUMENTAL LIFE INSURANCE COMPANY 10,469,861 10,469,861
5.13% DUE SEPTEMBER 29, 2006
65,499,050 TRANSAMERICA LIFE INSURANCE COMPANY 65,499,050 65,499,050
3.516% DUE DECEMBER 31, 2005
11,998,410 JOHN HANCOCK LIFE INSURANCE 11,998,410 11,998,410
1.96% DUE NOVEMBER 30, 2003
14,131,931 METROPOLITAN LIFE INSURANCE 14,131,931 14,131,931
6.81% DUE SEPTEMBER 30, 2003
14,165,487 HARTFORD LIFE INSURANCE 14,165,487 14,165,487
6.92% DUE MARCH 31, 2004
15,829,177 METROPOLITAN LIFE 15,829,177 15,829,177
5.83% DUE JUNE 30, 2004
15,846,147 TRAVELERS INSURANCE CO 15,846,147 15,846,147
5.89% DUE SEPTEMBER 30, 2004
11,997,493 JOHN HANCOCK INSURANCE COMPANY 11,997,493 11,997,493
3.09% DUE NOVEMBER 30, 2004
21,724,308 NEW YORK LIFE 21,724,308 21,724,308
5.09% DUE SEPTEMBER 30, 2005
16,267,414 MONUMENTAL LIFE INSURANCE COMPANY 16,267,414 16,267,414
4.99% DUE JUNE 30, 2005
10,826,022 MONUMENTAL LIFE INSURANCE COMPANY 10,826,022 10,826,022
4.88% DUE MARCH 31, 2005
12,958,957 PRINCIPAL LIFE 12,958,957 12,958,957
5.60% DUE MARCH 31, 2006
11,031,533 NEW YORK LIFE 11,031,533 11,031,533
5.26% DUE MARCH 31, 2004
11,136,434 HARTFORD LIFE 11,136,434 11,136,434
5.79% DUE MARCH 31, 2005
12,302,511 METROPOLITAN LIFE 12,302,511 12,302,511
5.95% DUE JUNE 30, 2006
12,290,315 ALLSTATE LIFE 12,290,315 12,290,315
5.86% DUE SEPTEMBER 29, 2006
12,962,207 HARTFORD LIFE 12,962,207 12,962,207
5.63% DUE MARCH 31, 2006
12,971,079 MONUMENTAL LIFE INSURANCE COMPANY 12,971,079 12,971,079
5.67% DUE MARCH 31, 2006
--------------- --------------
440,736,073 440,736,073
--------------- --------------
TOTAL INVESTMENTS $1,700,174,311 $2,377,777,294
=============== ==============
MARSH & McLENNAN COMPANIES STOCK INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE II
SCHEDULE FOR REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED JUNE 30, 2003
CURRENT
VALUE OF NET
DESCRIPTION OF ASSET COST OF ASSETS ASSETS GAIN (LOSS)
-------------------- -------------- -------- -----------
TRANSACTION BY ISSUE:
DEUTSCHE BANK TRUST COMPANY AMERICAS
PYRAMID CASH TEMPORARY FUND
INVESTMENTS
233 PURCHASES $ 364,902,296 $ 364,902,296 $ -
304 SALES 392,842,080 392,842,080 -