UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-14036
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
DST Systems, Inc. 401(k) Profit Sharing Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
DST Systems, Inc.
333 West 11th Street
Kansas City, Missouri 64105
REQUIRED INFORMATION
1. Report of PricewaterhouseCoopers LLP
2. Audited Statements of Net Assets Available for Benefits as of
December 31, 2001 and 2000
3. Audited Statements of Changes in Net Assets Available for Benefits for
the Years Ended December 31, 2001 and 2000
4. Notes to Financial Statements
5. Schedule of Assets Held at End of Year
6. Signature Page
7. Consent of PricewaterhouseCoopers LLP (Exhibit 23.1)
DST Systems, Inc.
401(k) Profit
Sharing Plan
Financial Statements and
Additional Information
December 31, 2001 and 2000
DST Systems, Inc. 401(k) Profit Sharing Plan
Index to Financial Statements and Additional Information
-------------------------------------------------------------------------------
Page
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-9
Additional information* Schedule
Line 4i - Schedule of Assets Held at End of Year I
* Other schedules required by Section 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure under ERISA have been
omitted because they are not applicable.
Report of Independent Accountants
To the Participants and the Advisory Committee of the
DST Systems, Inc. 401(k) Profit Sharing Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the DST Systems, Inc. 401(k) Profit Sharing Plan (the "Plan") at
December 31, 2001 and 2000, and the changes in net assets available for
benefits for the years then ended in conformity with accounting principles
generally accepted in the United States of America. 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 of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets
Held at End of Year is presented for the purpose of additional analysis and is
not a required part of the basic financial statements but is 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. This supplemental schedule is the responsibility of the Plan's
management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
Kansas City, Missouri
June 25, 2002
DST Systems, Inc. 401(k) Profit Sharing Plan
Statements of Net Assets Available for Benefits
-------------------------------------------------------------------------------
December 31,
-------------------------------------------
2001 2000
------------------- -------------------
Cash and cash equivalents $ 950,242 $ 1,011,782
Investments:
Mutual funds 70,720,600 61,637,108
DST Common Stock 6,704,505 3,867,787
Investment in Master Trust 218,679,257 191,211,573
Loans to participants 1,930,669 1,326,437
------------------- -------------------
Total investments 298,035,031 258,042,905
Employer contributions receivable 7,347,250 5,535,714
------------------- -------------------
Net assets available for benefits $ 306,332,523 $ 264,590,401
=================== ===================
The accompanying notes are an integral part of these financial statements.
2
DST Systems, Inc. 401(k) Profit Sharing Plan
Statements of Changes in Net Assets Available for Benefits
-------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------
2001 2000
--------------------- -------------------
Investment income:
Dividends, interest and other distributions $ 853,128 $ 5,421,529
Net depreciation in fair value of investments (16,396,449) (15,278,318)
Net appreciation in fair value of investment
in Master Trust 22,848,259 35,538,869
--------------------- -------------------
7,304,938 25,682,080
--------------------- -------------------
Contributions:
Employer 26,167,516 23,330,703
Participants 24,510,330 24,975,504
--------------------- -------------------
50,677,846 48,306,207
--------------------- -------------------
57,982,784 73,988,287
Transfer from DST Profit Sharing Plan 158,414,150
Benefits paid to participants (16,197,662) (17,289,613)
Administrative expenses (43,000) (37,147)
--------------------- -------------------
(16,240,662) 141,087,390
Net change in net assets available for benefits 41,742,122 215,075,677
Net assets available for benefits:
Beginning of year 264,590,401 49,514,724
--------------------- -------------------
End of year $ 306,332,523 $ 264,590,401
===================== ===================
The accompanying notes are an integral part of these financial statements.
3
DST Systems, Inc. 401(k) Profit Sharing Plan
Notes to Financial Statements
-------------------------------------------------------------------------------
1. Description of the Plan
The DST Systems, Inc. 401(k) Profit Sharing Plan is a contributory, defined
contribution plan subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). The following brief description of the Plan is
provided for general information purposes only. Participants should refer to
the Plan agreement for more complete information.
Effective January 1, 2000, the DST Systems, Inc. Profit Sharing Plan (the
"Profit Sharing Plan") merged into the DST Systems, Inc. 401(k) Plan (the
"401(k) Plan") to form the DST Systems, Inc. 401(k) Profit Sharing Plan (the
"Plan"). The net assets available for Plan benefits of the Profit Sharing
Plan at December 31, 1999 is shown as a transfer into the Plan on the Plan's
financial statements for the year ended December 31, 2000. The Form 5500
for both the Profit Sharing Plan and the 401(k) Plan reflects the transfer as
of end of business on December 31, 1999.
Sponsor
The Plan Sponsor is DST Systems, Inc. ("DST") and certain of its subsidiaries
and affiliates (the "Sponsor").
Trustee and Investment Manager
The trustee of the Plan is UMB Bank, n.a. (the "Trustee"). The Trustee holds
and administers all assets of the Plan in accordance with the provisions of the
Plan agreement.
The investment manager of the DST Systems, Inc. Master Trust ("Master Trust")
is Ruane, Cunniff & Co., Inc. (the "Investment Manager").
Administration of the Plan
An advisory committee (the "Advisory Committee"), which consists of members who
are selected by the Board of Directors of DST, has full power, authority and
responsibility to control and manage the operations and administration of the
Plan. All expenses of operating the Plan may be paid out of Plan assets,
except to the extent the Sponsor decides to pay these expenses. For the years
ended December 31, 2001 and 2000, the Sponsor paid Plan expenses.
Eligibility
All full-time employees of the Sponsor who are not members of a collective
bargaining unit or nonresident aliens are eligible to participate in the Plan
on the Plan entry date. The Plan entry date is the first day of the calendar
month following the date an employee, other than seasonal or temporary,
completes one hour of service. Seasonal and temporary employees must complete
1,000 hours of service, as defined in the Plan agreement, prior to entering the
Plan.
Contributions
Contributions are made through participant salary reductions and rollovers from
other qualified plans. Participants can contribute from 1% to 15% of their
annual gross salary to the Plan (subject to Internal Revenue Service
limitations).
Sponsor 401(k) contributions consist of a dollar-for-dollar match of the first
3% of participant contributions ("highly compensated employees" are subject to
Internal Revenue Service limitations).
4
In addition, the Sponsor may make discretionary profit sharing contributions.
Generally, an employee must complete 1,000 hours of service during the Plan
year and be employed on December 31st to be eligible.
Participant accounts
Each participant's account is credited with the participant's contributions,
matching contributions, profit sharing contributions, rollover contributions,
forfeitures of terminated participants' non-vested accounts and
an allocation of Plan earnings or losses. Allocations of earnings or losses
are based on account balances. Discretionary contributions and forfeitures are
allocated to participant accounts based on the proportion which the
participant's eligible compensation bears to the aggregate eligible
compensation of all participants for the year. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's account.
Vesting
Participants are always 100% vested in their own contributions and rollover
contributions (as adjusted to reflect investment earnings and losses).
Generally, participants originally employed by the Sponsor prior to January 1,
2000, will become vested in Sponsor matching contributions and Sponsor profit
sharing contributions (as adjusted to reflect investment earnings and losses)
in accordance with the following schedule:
Years of Service Percentage Vested
---------------- -----------------
less than 1 0%
1 but less than 2 10%
2 but less than 3 20%
3 but less than 4 30%
4 but less than 5 60%
5 or more 100%
Participants not within the above categories will be vested in Sponsor matching
contributions and Sponsor profit sharing contributions (as adjusted to reflect
investment earnings and losses) according to the following schedule:
Years of Service Percentage Vested
---------------- -----------------
less than 3 0%
3 but less than 4 30%
4 but less than 5 60%
5 or more 100%
Investment options
Participants may direct their contributions into DST Common Stock ($0.01 par
value) or any number of the mutual fund investment options as selected by the
Advisory Committee. The investment options contain different degrees of risks.
Participants should refer to the respective fund prospectus for a more complete
description of the investment objectives of each fund. The Advisory Committee
reserves the right to change the available investment options from time to time.
5
Participants may change their investment options daily.
Forfeitures
Forfeitures of unvested accounts are first used for the restoration of
reemployed participants' forfeited amounts and then added to the profit sharing
contribution.
All profit sharing contributions are invested by the Trustee as advised by the
Investment Manager.
Plan participants
The following summarizes the number of participants by investment option as of
December 31, 2001:
American Century Value 769
American Century Growth 1,536
American Century Select 1,064
American Century Ultra 1,986
American Century International 612
DST Systems, Inc. Common Stock 1,970
Davis NY Venture 760
Fidelity Advisor Growth 788
Janus Investment 2,760
Janus Investment Enterprise 2,353
Janus Investment Mercury 3,383
Janus Investment Overseas 2,010
Managers Fund Special Equity 637
Money Market Obligs Prime Value 608
PIMCO Total Return 740
T. Rowe Price Mid-cap Growth 1,221
Royce Total Return 687
Standish Ayer & Wood Fixed Income 408
Vanguard Bond Index 1,644
Vanguard Index 500 2,751
Vanguard Value 685
Distribution of benefits
Benefit distributions generally will be made in the event of retirement, death,
disability, resignation or dismissal. A participant's normal retirement age is
59 1/2.
Balances not exceeding $5,000 will be automatically distributed as a lump sum
as soon as administratively practicable following termination of employment.
Balances exceeding $5,000 will be distributed upon participant election as soon
as administratively practicable but no later than April 1st of the Plan year
following the Plan year in which age 70 1/2 is attained. Such distributions
may be elected as a lump sum or paid in monthly, quarterly or annual
installments. Distributions shall be made in cash or, at the option of the
Participant, in cash plus the number of whole shares of DST Common Stock
allocated to the Participant's account.
6
Distributions must begin no later than the 60th day after the close of the Plan
year in which a participant reaches normal retirement age or celebrates their
10th anniversary as a Plan member (whichever is later).Certain exceptions apply.
Upon death, all sums credited to the participant's account will be paid to the
beneficiary or beneficiaries designated by the participant.
Distributions may also be made in the event of financial hardship of the
participant. Certain restrictions apply.
Participant loans
Participants may borrow the lesser of $50,000 or 50% of their vested
participant-directed accounts (subject to certain Plan and Internal Revenue
Service limitations). Generally, loans must be repaid within five years. Loans
bear a fixed rate of interest, which is set at loan origination using the Prime
rate as published in the Wall Street Journal plus 1%.
Plan termination
The Sponsor believes the Plan will continue without interruption; however, it
reserves the right to terminate the Plan at any time subject to the provisions
of ERISA. In the event of Plan termination, participants will become fully
vested in any unvested balances from Sponsor contributions and their respective
account balances will be distributed in accordance with the Plan.
2. Significant Accounting Policies
Basis of accounting
The accompanying financial statements are presented on the accrual basis of
accounting.
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 assets, liabilities and changes in net assets available for plan benefits.
Actual results could differ from those estimates.
Cash and cash equivalents
Short-term liquid investments with a maturity of three months or less are
considered cash equivalents. Due to the short-term nature of these investments,
carrying value approximates market value.
Investment valuation and security transactions
Investments are recorded at fair value. Unrealized gains and losses are
recognized in the year in which they occur. Investments in mutual funds and
DST Common Stock are valued at net asset value representing the value
at which shares of the fund may be purchased or redeemed. The investments of
the Master Trust are recorded at fair value as determined by quoted prices in
active markets. Investment income of the Master Trust is allocated quarterly
to participating plans based upon the fair value of participating plan
interests in the Master Trust at the end of each quarter. Net assets of the
Master Trust are allocated to participating plans based upon the value of the
participating plan interests in the Master Trust at the beginning of the
quarter plus actual contributions to the Master Trust and allocated
7
investment income less actual distributions from the Master Trust. Loans are
valued at the current amount due from participants.
Contributions
Contributions are recognized in the year to which they relate.
Accounting for obligations for benefit payments
The Plan does not record a liability relating to the obligations for benefit
payments. Distributions paid to participants in 2002 for withdrawals and
employees terminated during 2001 was $3,754,988. The amount paid in 2001 for
withdrawals and employees terminated during 2000 was $5,488,578.
The Plan's Form 5500 reflects the liability in the year of withdrawal or
termination.
Income tax status of the Plan
The Internal Revenue Service has determined and informed the Sponsor by a
letter dated February 14, 1995, that the Plan is designed in accordance with
applicable sections of the Internal Revenue Code (the "IRC"). The Plan has
been amended since receiving the determination letter and applied in December
2001 to receive a new determination letter. The Advisory Committee and the
Plan's tax counsel believe that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC. Therefore,
no provision for income taxes has been included in the Plan's financial
statements.
3. Plan Investments
The following investments represent 5% or more of net assets available for
benefits at year-end:
December 31, December 31,
2001 2000
------------------------- ----------------------------
Investment in Master Trust $ 218,679,257 $ 191,211,573
The Investment in Master Trust is nonparticipant-directed.
During 2001 and 2000, the Plan's participant-directed investments (including
gains and losses on investments bought and sold, as well as held during the
year) appreciated (depreciated) in value as follows:
Year Ended December 31,
-----------------------------------------------------------
2001 2000
--------------------------- ---------------------------
Mutual funds $ (15,386,840) $ (16,248,262)
DST Common Stock (1,009,609) 969,944
--------------------------- ---------------------------
$ (16,396,449) $ (15,278,318)
=========================== ===========================
4. Master Trust
The Plan's percentage ownership in the Master Trust is 75.1% and 72.8% at
December 31, 2001 and
8
2000, respectively. The following Master Trust disclosures represent 100%
of the balances in the Master Trust.
The Master Trust's assets by general type at year-end is as follows:
December 31, December 31,
2001 2000
------------------------- --------------------------
Cash and cash equivalents $ 33,071 $ 32,813
Mutual funds 4,903,847 18,983,432
Common stocks 251,318,424 232,402,259
Corporate debt 7,844,038 3,232,588
Government securities 26,967,639 7,967,133
------------------------- --------------------------
$ 291,067,019 $ 262,618,225
========================= ==========================
The Master Trust's total investment income by type for the years ended
December 31, 2001 and 2000 is as follows:
Year Ended December 31,
---------------------------------------------------------
2001 2000
-------------------------- -------------------------
Interest $ 1,687,709 $ 718,121
Dividends 1,071,510 1,489,541
Net appreciation 28,108,457 47,718,248
-------------------------- -------------------------
$ 30,867,676 $ 49,925,910
========================== =========================
The Master Trust's net appreciation (depreciation) of investments by type for
the years ended December 31, 2001 and 2000 is as follows:
Year Ended December 31,
---------------------------------------------------------
2001 2000
-------------------------- -------------------------
Mutual funds $ 79 $ 123
Common stocks 26,363,377 47,720,875
Corporate debt 1,729,075 (84,584)
Government securities 15,926 81,834
-------------------------- -------------------------
$ 28,108,457 $ 47,718,248
========================== =========================
5. Subsequent Events
Effective January 1, 2002, the Plan was amended in accordance with the Economic
Growth and Tax Relief Reconciliation Act of 2001 to, among other things, change
the limit on contributions, allow for catch-up contributions for participants
aged 50 or older, revise the vesting schedule, disregard rollovers in the
determination of involuntary distributions and increase the elective deferral
percentage limit. Participants should refer to the Plan agreement for more
complete information.
9
Schedule I
DST Systems, Inc. 401(k) Profit Sharing Plan
EIN 43-1581814 / PIN 004
Line 4i-Schedule of Assets at End of Year
December 31, 2001
(a) (b) Identity (c) Description (d) Cost (e) Current Value
------------ ----------------------------- ------------------------------- -------------------------- -------------------------
American Century Value (1) $ 1,628,425
American Century Growth (1) 4,220,039
American Century Select (1) 2,649,433
American Century Ultra (1) 6,954,956
American Century International (1) 656,964
* DST Systems, Inc. Common Stock (1) 6,691,952
Davis NY Venture (1) 1,602,662
Fidelity Advisor Growth (1) 1,320,014
Janus Investment Investment (1) 7,617,170
Janus Investment Enterprise (1) 5,363,492
Janus Investment Mercury (1) 11,418,575
Janus Investment Overseas (1) 5,034,815
Managers Fund Special Equity (1) 1,081,083
Money Market Obligs Prime Value (1) 2,107,338
PIMCO Total Return (1) 1,555,691
T. Rowe Price Mid-cap Growth (1) 2,449,852
Royce Total Return (1) 1,455,066
Standish Ayer & Wood Fixed Income (1) 639,722
Vanguard Bond Index (1) 3,768,965
Vanguard Index 500 (1) 8,115,101
Vanguard Value (1) 1,092,495
* Participant Loans Interest rate - Prime + 1% 0 1,931,964
* Indicates a party-in-interest
(1) In accordance with instructions to the Form 5500, the Plan is not required
to disclose the cost component of participant-directed investments
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
DST Systems, Inc. 401(k) Profit Sharing Plan
Date: June 28, 2002 By: /s/ Kenneth V. Hager
---------------------------------------
Kenneth V. Hager
Vice President, Chief Financial Officer
and Treasurer