UNITED STATES
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 DECEMBER 31, 2001
Commission file number 001-13913
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
(Full title of the Plan)
-------------------------------------
WADDELL & REED FINANCIAL, INC.
6300 Lamar Avenue
Overland Park, Kansas 66202
913-236-2000
(Name of issuer of securities held pursuant to the Plan)
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Financial Statements and Schedule
December 31, 2001 and 2000
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Plan Administrators
Waddell & Reed Financial, Inc.
401(k) and Thrift Plan:
We have audited the accompanying statements of net assets available for benefits
of Waddell & Reed Financial, Inc. 401(k) and Thrift Plan as of December 31, 2001
and 2000, and the related statements of changes in net assets available for
benefits for the years then ended. 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, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of Waddell & Reed
Financial, Inc. 401(k) and Thrift Plan as of December 31, 2001 and 2000, and the
changes in its net assets available for benefits for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule 1 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. The supplementary schedule is the responsibility of the Plan's management.
The supplementary 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/ KPMG LLP
May 17, 2002
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Statements of Net Assets Available for Benefits
December 31, 2001 and 2000
2001 2000
------------------- -------------------
Investments (note 4) $ 67,549,374 73,360,055
Receivable from participating employees 139,935 135,295
Receivable from participating employers 288,636 273,899
------------------- -------------------
Net assets available for benefits $ 67,977,945 73,769,249
=================== ===================
See accompanying notes to financial statements.
2
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2001 and 2000
2001 2000
------------------- -------------------
Investment income:
Dividends - stock $ 157,001 135,393
Dividends on mutual funds 1,656,313 10,828,071
Net depreciation of investments (note 4) (10,192,169) (7,700,169)
------------------- -------------------
Investment income (8,378,855) 3,263,295
------------------- -------------------
Contributions (note 5):
Employees 4,623,530 4,197,601
Employers 2,291,235 2,097,292
Employee rollovers 240,620 8,626
------------------- -------------------
7,155,385 6,303,519
------------------- -------------------
Withdrawals (4,567,834) (9,508,239)
------------------- -------------------
Net increase (decrease) (5,791,304) 58,575
Net assets available for benefits:
Beginning of year 73,769,249 73,710,674
------------------- -------------------
End of year $ 67,977,945 73,769,249
=================== ===================
See accompanying notes to financial statements.
3
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the
accrual basis of accounting and present the net assets available
for benefits and changes in those net assets of the Waddell & Reed
Financial, Inc. 401(k) and Thrift Plan (the "Plan").
The Plan allows contributions to be invested in mutual fund shares
and Waddell & Reed Financial, Inc. common stock. The Waddell &
Reed Advisors Group of Mutual Funds and the W&R Funds are managed
by Waddell & Reed Investment Management Company, which is a
participating employer in the Plan. Fiduciary Trust Company of New
Hampshire serves as Trustee for the Plan.
The Plan had 1,292 and 1,168 participants at December 31, 2001 and
2000, respectively. At December 31, 2001, 187 of the 1,292
participants in the Plan are former employees who have elected not
to withdraw from the Plan.
(b) VALUATION OF SECURITIES
Investments in mutual fund shares are stated at net asset value
based upon market quotations as of December 31, 2001 and 2000.
Torchmark Corporation common stock and Waddell & Reed Financial,
Inc. common stock are stated at market value based upon market
quotations as of December 31, 2001 and 2000. Securities
transactions are recorded on the trade date (the date the order to
buy or sell is executed).
(c) DIVIDEND INCOME
Dividend income is recorded on the ex-dividend date.
(d) ADMINISTRATIVE EXPENSES
Administrative expenses are paid by the participating employers,
which are listed in note 4.
(e) FORFEITURES
Forfeitures are held by the Plan and are then used to reduce the
employer's current year expense. Forfeitures used to reduce
employer expenses were $5,837 and $5,596 for 2001 and 2000,
respectively.
(f) FEDERAL INCOME TAXES
The Plan received a favorable determination letter from the
Internal Revenue Service, dated April 24, 2001, indicating that it
is qualified under Section 401(a) of the Internal Revenue Code
and, therefore, the related trust is exempt from tax under Section
501(a) of the Internal Revenue Code.
The Plan Administrator is not aware of any activity or
transactions that may adversely affect the qualified status of the
Plan.
4 (Continued)
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(g) USE OF ESTIMATES
The Plan Administrator has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare
these financial statements in conformity with accounting
principles generally accepted in the United States of America.
Actual results could differ from those estimates.
(2) DESCRIPTION OF PLAN
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.
The Plan is a defined contribution plan covering substantially all
employees of Waddell & Reed Financial, Inc. and subsidiaries. The Plan
complies with the provisions of the Employee Retirement Income Security
Act of 1974, as amended. Plan administration is accomplished through a
committee of three persons who have authority to arbitrate disputes and
settle claims arising under the Plan.
(a) CONTRIBUTIONS
Employees are allowed to make pre-tax and after-tax contributions
to the Plan. Employees may contribute a maximum of 21% of eligible
earnings to the Plan. Each eligible employee may make "Matched
Contributions" ranging from 1% to 5% of eligible earnings to the
401(k) component of the Plan. The Plan provides for a matching
employer contribution of 100% of the first 3% of the employee's
contribution and a 50% match of the next 2% of the employee's
contribution. Employees may make "Unmatched Contributions" to the
Plan not to exceed 10% of eligible earnings. Each eligible
employee is also allowed to make "Unmatched Contributions" ranging
from 1% to 6% of eligible earnings to the thrift component
(after-tax) of the Plan.
(b) BENEFITS
Employees are fully vested as to their own contributions. Prior to
January 1, 1999, vesting in employer contributions was graduated
to 100% after six years of employment. Effective January 1, 1999,
all future employer matching contributions are fully vested at the
time of the contribution. The vested portion of a participant's
account balance is paid in a Joint and 50% Survivor Annuity upon
retirement, death, or other termination of employment, unless a
participant chooses a lump-sum distribution. The nonvested portion
of employer contributions made prior to January 1, 1999 is
retained by the Plan until the separated participant incurs a
"break in service," at which time the remaining account balance is
forfeited and applied to reduce the employer's expense.
In accordance with regulations of the Internal Revenue Service, in
the event the Plan is terminated, all participants would
immediately become fully vested in their employer contribution
accounts and Plan assets would be distributed. Waddell & Reed
Financial, Inc. does not intend to terminate the Plan.
The Plan Administrator was not notified of any participants
electing to withdraw from the Plan as of December 31, 2001.
5 (Continued)
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(3) ACQUISITIONS
On March 31, 2000, the Legend Group was acquired by the Plan sponsor. An
eligible employee who was a participant in the Legend Services
Corporation 401(k) Profit Sharing Plan at the date of the acquisition
became eligible to participate in the Plan on April 1, 2000. An eligible
employee who was employed by the Legend Group on March 31, 2000, and who
was not a participant in the Legend Services Corporation 401(k) Profit
Sharing Plan, became eligible to participate in the Plan on an entry date
not earlier than April 1, 2000 or the next following date on which the
participant completes one-half year of service with the Legend Group.
There were no rollover contributions by employees of the Legend Group
during 2000.
On August 9, 1999, the Plan sponsor acquired Austin Calvert & Flavin,
Inc. ("ACF"). Employees of ACF became eligible to participate in the Plan
on August 6, 2000. There were no rollover contributions by employees of
ACF during 2000.
(4) TORCHMARK CORPORATION COMMON STOCK, WADDELL & REED FINANCIAL, INC.
CLASS A COMMON STOCK, WADDELL & REED FINANCIAL, INC. CLASS B COMMON
STOCK, WADDELL & REED ADVISORS GROUP OF MUTUAL FUNDS, AND W&R FUNDS,
INC.
In July 2000, the United Group of Mutual Funds and Waddell & Reed
Funds, Inc. were renamed the Waddell & Reed Advisors Group of Mutual
Funds and W&R Funds, Inc., respectively.
In April 2001, the stockholders of Waddell & Reed Financial, Inc. Class A
and Class B common stock approved the combination of the two classes of
common stock by converting shares of the Class B common stock into shares
of Class A common stock on a one-for-one basis. Effective as of the end
of business on April 30, 2001, each share of Class B common stock was
converted into one share of Class A common stock. Waddell & Reed
Financial, Inc. terminated the registration of Class B common stock under
the Securities Exchange Act of 1934, as amended, and the Class B common
stock is no longer listed or traded on the New York Stock Exchange.
6 (Continued)
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2001 and 2000
The following table presents the number of shares and fair value of Torchmark
Corporation common stock, Waddell & Reed Financial, Inc. Class A and Class B
common stock, and mutual fund investments as of December 31, 2001 and 2000.
Investments that represent 5% or more of the Plan's net assets are separately
identified.
NUMBER FAIR
DECEMBER 31, 2001 OF SHARES VALUE
------------------------------------------------------------------------ ------------------ ------------------
Torchmark Corporation common stock 66,078 $ 2,599,664
Waddell & Reed Financial, Inc. common stock 312,376 10,057,300
Cash -- 414,619
Waddell & Reed Advisors Group of Mutual Funds shares:
Waddell & Reed Advisors Cash Management 6,210,187 6,210,187
Waddell & Reed Advisors Core Investment 1,985,742 11,378,299
Waddell & Reed Advisors International Growth 722,242 4,434,564
Waddell & Reed Advisors New Concepts 902,749 7,185,881
Waddell & Reed Advisors Science and Technology 628,954 5,943,612
Other Waddell & Reed Advisors Funds 2,424,087 15,612,706
------------------
Total Waddell & Reed Advisors Group of
Mutual Funds shares 50,765,249
------------------
W&R Funds, Inc. shares 280,909 3,712,542
------------------
Total investments $ 67,549,374
==================
NUMBER FAIR
DECEMBER 31, 2000 OF SHARES VALUE
------------------------------------------------------------------------ ------------------ ------------------
Torchmark Corporation common stock 91,418 $ 3,513,053
Waddell & Reed Financial, Inc. Class A common stock 231,041 8,693,967
Waddell & Reed Financial, Inc. Class B common stock 90,940 3,411,443
Cash 457,681
Waddell & Reed Advisors Group of Mutual Funds shares:
Waddell & Reed Advisors Cash Management 5,424,935 5,424,935
Waddell & Reed Advisors Core Investment 1,892,510 13,417,899
Waddell & Reed Advisors International Growth 736,432 5,869,362
Waddell & Reed Advisors New Concepts 870,946 8,456,884
Waddell & Reed Advisors Science and Technology 590,089 6,561,788
Other Waddell & Reed Advisors Funds 2,014,612 13,890,477
------------------
Total Waddell & Reed Advisors Group of
Mutual Funds shares 53,621,345
------------------
W&R Funds, Inc. shares 238,777 3,662,566
------------------
Total investments $ 73,360,055
==================
7 (Continued)
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2001 and 2000
During 2001 and 2000, the Plan's investments (including investments bought
and sold, as well as held during the year) appreciated (depreciated) as
follows:
2001 2000
------------------ ------------------
Torchmark Corporation common stock $ 118,705 629,368
Waddell & Reed Class A common stock (1,042,502) 4,538,782
Waddell & Reed Class B common stock (645,534) 1,688,104
Waddell & Reed Advisors Group of Mutual Funds:
Accumulative (713,483) (129,783)
Asset Strategy (60,265) 17,993
Bond 9,790 14,292
Continental Income (27,758) (14,413)
Government Securities 17,255 52,718
High Income (18,550) (137,334)
Global Bond Fund 59,896 (303,950)
Core Investment (2,578,801) (1,610,775)
International Growth (1,306,028) (3,327,603)
New Concepts (1,513,282) (3,149,134)
Retirement Shares (103,775) (240,930)
Science and Technology (973,209) (3,230,559)
Small Cap (116,679) (122,045)
Value 30,705 740
Vanguard (729,571) (429,380)
------------------ ------------------
Total Waddell & Reed Advisors Group of
Mutual Funds (8,023,755) (12,610,163)
------------------ ------------------
W&R Funds, Inc.:
Asset Strategy (3,471) (1,284)
Small Cap Growth (9,783) (324,261)
High Income 112 (816)
International Growth (235,178) (642,922)
Large Cap Growth (81,447) 14,307
Limited Term Bond 142 48
Mid Cap Growth (22,999) (13,163)
Science and Technology (206,224) (936,967)
Core Equity (40,235) (41,202)
------------------ ------------------
Total W&R Funds, Inc. (599,083) (1,946,260)
------------------ ------------------
Net depreciation $ (10,192,169) (7,700,169)
================== ==================
8 (Continued)
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(5) CONTRIBUTIONS BY PARTICIPANTS AND PARTICIPATING EMPLOYERS
The contributions of each participating employer and its employees for
the years ended December 31 are as follows:
2001 2000
------------------------------------ ------------------------------------
EMPLOYEE EMPLOYER EMPLOYEE EMPLOYER
---------------- ---------------- ---------------- -----------------
Waddell & Reed Financial, Inc. $ 60,976 33,482 22,377 14,030
Waddell & Reed, Inc. 2,660,971 1,236,292 2,506,042 1,204,482
Waddell & Reed Investment
Management Company 721,751 377,917 677,946 363,087
Waddell & Reed Services
Company 754,429 409,709 618,718 345,216
The Legend Group 281,466 133,765 261,213 114,292
Austin Calvert & Flavin, Inc. 143,937 100,070 111,305 56,185
---------------- ---------------- ---------------- -----------------
$ 4,623,530 2,291,235 4,197,601 2,097,292
================ ================ ================ =================
(6) RELATED PARTY TRANSACTIONS
Plan investments include shares of mutual funds managed by Waddell & Reed
Investment Management Company, as well as shares of Class A and Class B
common stock of Waddell & Reed Financial, Inc. Waddell & Reed Financial,
Inc. is the sponsor, as defined by the Plan, and, therefore, these
transactions qualify as party-in-interest.
9
SCHEDULE 1
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Schedule of Assets Held for Investment Purposes
December 31, 2001
IDENTITY OF ISSUER, BORROWER, CURRENT
LESSOR, OR SIMILAR PARTY DESCRIPTION OF INVESTMENT VALUE
------------------------------------------------ --------------------------------------------------- -----------------
* Cash $ 414,619
* Torchmark Corporation 66,078 shares of common stock 2,599,664
* Waddell & Reed Financial, Inc. 312,376 shares of common stock 10,057,300
-----------------
13,071,583
-----------------
* Waddell & Reed Advisors Group
of Mutual Funds 393,745 shares of Accumulative 2,472,719
* Waddell & Reed Advisors Group
of Mutual Funds 97,750 shares of Asset Strategy 599,207
* Waddell & Reed Advisors Group
of Mutual Funds 98,495 shares of Bond 615,595
* Waddell & Reed Advisors Group
of Mutual Funds 42,048 shares of Continental Income 279,199
* Waddell & Reed Advisors Group
of Mutual Funds 6,210,187 shares of Cash Management 6,210,187
* Waddell & Reed Advisors Group
of Mutual Funds 131,106 shares of High Income 978,053
* Waddell & Reed Advisors Group
of Mutual Funds 690,197 shares of Global Bond 2,422,591
* Waddell & Reed Advisors Group
of Mutual Funds 1,985,742 shares of Core Investment 11,378,299
* Waddell & Reed Advisors Group
of Mutual Funds 722,242 shares of International Growth 4,434,564
* Waddell & Reed Advisors Group
of Mutual Funds 902,749 shares of New Concepts 7,185,881
* Waddell & Reed Advisors Group
of Mutual Funds 106,534 shares of Retirement Shares 703,127
* Waddell & Reed Advisors Group
of Mutual Funds 273,799 shares of Small Cap 3,132,256
* Waddell & Reed Advisors Group
of Mutual Funds 628,954 shares of Science and Technology 5,943,612
* Waddell & Reed Advisors Group
of Mutual Funds 277,240 shares of Vanguard 2,192,965
* Waddell & Reed Advisors Group
of Mutual Funds 92,302 shares of Value 997,788
* Waddell & Reed Advisors Group
of Mutual Funds 220,871 shares of Government Securities 1,219,206
-----------------
Total Waddell & Reed Advisors
Group of Mutual Funds 50,765,249
-----------------
* W&R Funds, Inc. 2,648 shares of Asset Strategy 29,528
* W&R Funds, Inc. 101,657 shares of Small Cap Growth 1,183,288
* W&R Funds, Inc. 1,991 shares of High Income 16,780
* W&R Funds, Inc. 57,013 shares of International Growth 626,005
* W&R Funds, Inc. 932 shares of Limited Term Bond 9,623
* W&R Funds, Inc. 73,671 shares of Science and Technology 1,457,951
* W&R Funds, Inc. 7,911 shares of Core Equity 74,127
* W&R Funds, Inc. 6,684 shares of Mid Cap Growth 60,761
* W&R Funds, Inc. 28,402 shares of Large Cap Growth 254,479
-----------------
Total W&R Funds, Inc. 3,712,542
-----------------
Total investments $ 67,549,374
=================
*Indicates party-in-interest investment.
See accompanying independent auditors' report.
10
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Administrative Committee of the Plan has duly caused
this annual report to be signed on its behalf by the undersigned, hereunto duly
authorized, in the City of Overland Park, State of Kansas, on June 25th, 2002.
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
By: /s/ John E. Sundeen, Jr.
John E. Sundeen, Jr., Member
Administrative Committee
By: /s/ Michael D. Strohm
Michael D. Strohm, Member
Administrative Committee
By: /s/ William D. Howey, Jr.
William D. Howey, Jr., Member
Administrative Committee