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 of California, Inc. 401(k) Retirement 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 of California, Inc. 401(k) Retirement Plan
Financial Statements and
Additional Information
December 31, 2001 and 2000
DST Systems of California, Inc. 401(k) Retirement 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 4-8
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 Advisory Committee of the
DST Systems of California, Inc. 401(k) Retirement 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 of California, Inc. 401(k)
Retirement 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 of California, Inc. 401(k) Retirement Plan
Statements of Net Assets Available for Benefits
-------------------------------------------------------------
December 31,
--------------------------------------------
2001 2000
-------------------- --------------------
Cash and cash equivalents $ 43,244 $
Investments:
Pooled separate accounts 51,719,818
General asset account 26,315,693
Mutual funds 59,973,078
DST Common Stock 21,664,793 25,793,880
Loans to participants 4,060,095 5,704,539
-------------------- --------------------
Total investments 85,697,966 109,533,930
Employer contributions receivable 2,372
-------------------- --------------------
Net assets available for benefits $ 85,743,582 $ 109,533,930
==================== ====================
The accompanying notes are an integral part of these financial statements.
2
DST Systems of California, Inc. 401(k) Retirement Plan
Statements of Changes in Net Assets Available for Benefits
-------------------------------------------------------------
Year Ended December 31,
--------------------------------------------
2001 2000
------------------ -------------------
Investments income:
Dividends, interest and other distributions $ 2,265,286 $ 1,853,320
Net appreciation (depreciation) in fair value of
investments (16,787,587) 4,937,091
------------------ -------------------
(14,522,301) 6,790,411
------------------ -------------------
Contributions:
Employer 5,791
Participants 2,763
------------------ -------------------
5,791 2,763
------------------ -------------------
(14,516,510) 6,793,174
Benefits paid to participants (9,259,575) (23,527,439)
Administrative expenses (14,263) (29,885)
------------------ -------------------
(9,273,838) (23,557,324)
------------------ -------------------
Net change in net assets available for benefits (23,790,348) (16,764,150)
Net assets available for benefits:
Beginning of year 109,533,930 126,298,080
------------------ -------------------
End of year $ 85,743,582 $ 109,533,930
================== ===================
The accompanying notes are an integral part of these financial statements.
3
DST Systems of California, Inc. 401(k) Retirement Plan
Notes to Financial Statements
-------------------------------------------------------------
1. Description of the Plan
The DST Systems of California, Inc. 401(k) Retirement Plan
(the "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.
Sponsor
The Plan Sponsor is DST Systems of California, Inc.
(formerly USCS International, Inc.), a wholly-owned
subsidiary of DST Systems, Inc. ("DST"), and certain of its
subsidiaries and affiliates (the "Sponsor").
Trustee
The trustee of the Plan is UMB Bank, n.a. (the "Trustee").
Prior to April 1, 2001, the trustee was Connecticut General
Life Insurance Company (CIGNA). The Trustee holds and
administers all assets of the Plan in accordance with the
provisions of the Plan agreement.
Administration of the Plan
An advisory committee (the "Advisory Committee"), which
consists of members who are selected by the Board of
Directors of the Sponsor, 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 employees of the Sponsor who were employed prior to
January 1, 2000 and who were not members of a collective
bargaining unit or nonresident aliens were eligible to
participate in the Plan on the Plan entry date. The Plan
entry date is the later of the first day of the month
following the date the employee commences service or the
date the employee attains age 21. After December 31, 1999,
no new participants were allowed into the Plan.
Contributions and Vesting
Effective January 1, 2001, all invested balances in the
Plan were fully vested and no further contributions are
planned. Participant and Sponsor contributions under the
Plan after December 31, 1999 are made to the DST Systems,
Inc. 401(k) Profit Sharing Plan and are subject to its
terms and conditions. The Sponsor will make contributions,
however, for the restoration of reemployed participants'
forfeited accounts. Restored accounts will be fully vested
upon restoration, as provided in the Plan.
Prior to January 1, 2000, contributions were made through
participant salary reductions and rollovers from other
qualified plans. Participants could contribute from 1% to
15% of their annual eligible compensation to the Plan
(subject to Internal Revenue Service limitations).
Sponsor 401(k) contributions consisted of a match equal to
$0.50 for each $1.00 contributed by the participant up to 6%
of their eligible compensation ("highly compensated
employees" are subject to Internal Revenue Service
limitations).
4
In addition, the Sponsor made a fixed profit sharing
contribution consisting of 3% of each participant's
eligible compensation. The Sponsor, under the direction of
the Board of Directors, could also make a discretionary
profit sharing contribution of up to 5% of a participant's
eligible compensation. A participant had to be employed on
December 31st to be eligible for the profit sharing
contributions.
Participant accounts
Each participant's account is credited with the
participant's contributions, matching contributions, profit
sharing contributions, rollover contributions and an
allocation of Plan earnings or losses. Allocations of
earnings or losses are based on account balances.
Discretionary contributions were allocated to participant
accounts based on the proportion which the participant's
eligible compensation bore 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.
Investment options
Participants may direct their contributions into DST Common
Stock ($0.01 par value) or any number of the 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.
Participants may change their investment options daily.
Plan participants
The following summarizes the number of participants by
investment option as of December 31, 2001:
American Century Value 173
American Century Growth 62
American Century Select 59
American Century Ultra 91
American Century International 69
DST Systems, Inc. Common Stock 1,286
Davis NY Venture 165
Fidelity Advisor Growth 81
Janus Investment 164
Janus Investment Enterprise 126
Janus Investment Mercury 165
Janus Investment Overseas 137
Managers Fund Special Equity 67
Money Market Obligs Prime Value 116
PIMCO Total Return 191
T. Rowe Price Mid-cap Growth 160
Royce Total Return 163
Standish Ayer & Wood Fixed Income 129
Vanguard Bond Index 1,619
Vanguard Index 500 1,609
Vanguard Value 110
5
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 upon termination as a cash 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.
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 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 publicly announced by the Trustee 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.
6
Investment valuation and security transactions
Investments in pooled separate accounts are based on the
fair value of the underlying assets as reported by CIGNA.
Investments in the general asset account are fully benefit
responsive and are recorded at contract value, which
approximates fair value. 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. Unrealized gains and losses are recognized in
the year in which they occur. 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 $7,957. The amount paid in 2001
for withdrawals and employees terminated during 2000 was
$41,914.
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 June 1998, 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. However,
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,
----------------------------------------
2001 2000
------------------ -----------------
Pooled separate accounts:
Charter Large Company Stock Index $ $ 13,266,114
Fidelity Advisor Growth Opportunities 11,273,527
Dreyfus Founders Balanced
Janus Worldwide 6,878,667
Mutual funds:
Vanguard Bond Index 18,726,433
Vanguard Index 500 15,236,827
DST Common Stock 21,664,793 25,793,880
Guaranteed Long-Term 26,315,693
Participant loans 5,704,539
7
During 2001 and 2000, the Plan's 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
-------------------- -------------------
Pooled separate accounts $ (4,122,199) $ (6,538,663)
Mutual funds (2,695,651)
DST Common Stock (9,969,737) 11,475,754
-------------------- -------------------
$ (16,787,587) $ 4,937,091
==================== ===================
4. 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 and disregard rollovers in the
determination of involuntary distributions. Participants
should refer to the Plan agreement for more complete
information.
8
Schedule I
DST Systems of California, Inc. 401(k) Retirement Plan
EIN 94-1727009 / PIN 003
Line 4i-Schedule of Assets Held at End of Year
December 31, 2001
(a) (b) Identity (c) Description (d) Cost (e) Current Value
--------- ------------------------------------- ----------------------------------------------- ----------- ----------------------
American Century Value (1) $ 2,369,816
American Century Growth (1) 356,279
American Century Select (1) 479,476
American Century Ultra (1) 566,345
American Century International (1) 396,334
* DST Systems, Inc. Common Stock (1) 21,664,793
Davis NY Venture (1) 1,913,572
Fidelity Advisor Growth (1) 473,267
Janus Investment Investment (1) 1,103,033
Janus Investment Enterprise (1) 975,161
Janus Investment Mercury (1) 1,212,267
Janus Investment Overseas (1) 1,359,415
Managers Fund Special Equity (1) 668,490
Money Market Obligs Prime Value (1) 3,715,757
PIMCO Total Return (1) 3,423,003
T. Rowe Price Mid-cap Growth (1) 1,486,120
Royce Total Return (1) 1,994,932
Standish Ayer & Wood Fixed Income (1) 2,239,165
Vanguard Bond Index (1) 18,726,433
Vanguard Index 500 (1) 15,236,827
Vanguard Value (1) 1,277,386
* Participant Loans Interest rate - Prime + 1% 0 4,060,095
* 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 of California, Inc. 401(k)
Retirement Plan
Date: June 28, 2002 By: /s/ Kenneth V. Hager
---------------------------------
Kenneth V. Hager
Vice President, Chief Financial
Officer and Treasurer