11-K 1 f11k6-2003.txt MMC STOCK INVESTMENT PLAN - JUNE 30, 2003 ================================================================================ 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 -