UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
Commission file number 001-13913
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
(Full title of the Plan)
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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, 2000 and 1999
(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, 2000
and 1999, 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, 2000 and 1999, 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 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 4, 2001
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Statements of Net Assets Available for Benefits
December 31, 2000 and 1999
2000 1999
----------- -----------
Investments (note 4) $73,360,055 73,437,983
Receivable from participating employees 135,295 87,941
Receivable from participating employers 273,899 184,750
----------- -----------
Net assets available for benefits $73,769,249 73,710,674
=========== ===========
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, 2000 and 1999
2000 1999
----------- -----------
Investment income:
Dividends - stock $ 135,393 167,731
Dividends on mutual funds 10,828,071 4,791,565
Net appreciation (depreciation) of investments (note 4) (7,700,169) 11,570,882
----------- -----------
Investment income 3,263,295 16,530,178
----------- -----------
Contributions (note 5):
Employees 4,197,601 3,446,065
Employers 2,097,292 1,568,784
Merger of Waddell & Reed, Inc. Career Field Retirement Plan
(note 1) -- 1,302,542
Employee rollovers 8,626 25,785
----------- -----------
6,303,519 6,343,176
----------- -----------
Withdrawals (9,508,239) (5,609,214)
----------- -----------
Net increase 58,575 17,264,140
Net assets available for benefits:
Beginning of year 73,710,674 56,446,534
----------- -----------
End of year $73,769,249 73,710,674
=========== ===========
See accompanying notes to financial statements.
3
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2000 and 1999
(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).
Effective October 22, 1999, the Waddell & Reed, Inc. Career Field
Retirement Plan (Career Field Plan) was merged with and into the Plan.
All assets and liabilities of the Career Field Plan were assumed by
the Plan. Assets transferred were credited to rollover contribution
subaccounts established in the name of each participant of the Career
Field Plan, and will be distributed to participants upon separation
from service or at an earlier time as permitted under the Plan.
The Plan allows contributions to be invested in mutual fund shares and
Waddell & Reed Financial, Inc. Class A and Class B stock. The Waddell
& Reed Advisors and W&R Funds are managed by Waddell & Reed Investment
Management Company, Inc., which is a participating employer in the
Plan. Fiduciary Trust Company of New Hampshire serves as Trustee for
the Plan.
The Plan had 1,168 and 909 participants at December 31, 2000 and 1999,
respectively. At December 31, 2000, 184 of the 1,168 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, 2000 and 1999. Torchmark
Corporation common stock and Waddell & Reed Financial, Inc. Class A
and Class B stock are stated at market value based upon market
quotations as of December 31, 2000 and 1999. 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 contribution. Forfeitures used to reduce
employer contributions were $5,596 and $23,653 for 2000 and 1999,
respectively.
4 (Continued)
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2000 and 1999
(f) FEDERAL INCOME TAXES
The Plan has 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.
(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
Effective January 1, 1999, employees were 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.
Effective January 1, 1999, each eligible employee is allowed to make
"Unmatched Contributions" ranging from 1% to 6% of eligible earnings
to the thrift component (after-tax) of the Plan.
5 (Continued)
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2000 and 1999
(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 contribution.
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, 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 1, 2000. There were no rollover contributions by employees of ACF
during 2000.
(4) TORCHMARK CORPORATION COMMON STOCK, WADDELL & REED FINANCIAL, INC. CLASS A
STOCK, WADDELL & REED FINANCIAL, INC. CLASS B STOCK, WADDELL & REED ADVISOR
FUNDS, AND W&R FUNDS.
In September 1999, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 99-3, ACCOUNTING FOR AND REPORTING OF
CERTAIN DEFINED CONTRIBUTION PLAN INVESTMENTS AND OTHER DISCLOSURE MATTERS.
SOP 99-3 simplifies the disclosure for certain investments and is effective
for plan years ending after December 15, 1999. The Plan adopted SOP 99-3
during the Plan year ended December 31, 1999.
In July 2000, the United Mutual Funds and Waddell & Reed Funds were renamed
the Waddell & Reed Advisors Funds and the W&R Funds, respectively.
6 (Continued)
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2000 and 1999
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 stock, and mutual fund investments as of December 31, 2000 and
1999. Investments that represent 5% or more of the Plan's net assets are
separately identified.
NUMBER FAIR
DECEMBER 31, 2000 OF SHARES VALUE
------------------------------------------------------ --------- -----------
Torchmark Corporation common stock 91,418 $ 3,513,053
Waddell & Reed Financial, Inc. Class A stock 231,041 8,693,967
Waddell & Reed Financial, Inc. Class B stock 90,940 3,411,443
Cash 457,681 457,681
Waddell & Reed Advisors 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 Funds shares 53,621,345
-----------
W&R Funds shares 238,777 3,662,566
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Total investments $73,360,055
===========
NUMBER FAIR
DECEMBER 31, 1999 OF SHARES VALUE
------------------------------------------------------ --------- -----------
Torchmark Corporation common stock 154,925 $ 4,258,464
Waddell & Reed Financial, Inc. Class A stock 156,904 4,091,420
Waddell & Reed Financial, Inc. Class B stock 59,121 1,484,921
Cash 271,398 271,398
United Group of Mutual Funds shares:
United Cash Management 5,796,737 5,796,737
United International Growth 619,754 8,565,004
United Income 1,543,635 12,549,632
United New Concepts 801,333 11,314,711
United Science and Technology 456,944 8,521,881
Other United Funds 1,833,970 13,843,440
-----------
Total United Group of Mutual Funds shares 60,591,405
-----------
Waddell & Reed Group of Mutual Funds shares 88,619 2,740,375
========= -----------
Total investments $73,437,983
===========
7 (Continued)
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 2000 and 1999
During 2000 and 1999, the Plan's investments (including investments bought
and sold, as well as held during the year) appreciated (depreciated) as
follows:
2000 1999
------------ -----------
Torchmark Corporation common stock $ 629,368 (1,026,350)
Waddell & Reed Class A common stock 4,538,782 364,462
Waddell & Reed Class B common stock 1,688,104 100,830
Waddell & Reed Advisors Funds:
Accumulative (129,783) 184,955
Asset Strategy 17,993 27,846
Bond 14,292 (31,736)
Continental Income (14,413) (5,841)
Gold and Government Securities -- (7,509)
Government Securities 52,718 (83,741)
High Income (137,334) (73,683)
Global Bond Fund (303,950) (188,860)
Core Investment (1,610,775) 926,261
International Growth (3,327,603) 2,439,393
New Concepts (3,149,134) 3,468,361
Retirement Shares (240,930) 101,709
Science and Technology (3,230,559) 3,476,001
Small Cap (122,045) 370,813
Value 740 --
Vanguard (429,380) 735,671
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Total Waddell & Reed Advisors Funds (12,610,163) 11,339,640
------------ ----------
W&R Funds:
Asset Strategy (1,284) 5
Small Cap Growth (324,261) 88,085
High Income (816) (94)
International Growth (642,922) 165,210
Large Cap Growth 14,307 --
Limited Term Bond 48 (3)
Mid Cap Growth (13,163) --
Science & Technology (936,967) 538,481
Core Equity (41,202) 616
------------ ----------
Total W&R Funds (1,946,260) 792,300
------------ ----------
Net appreciation (depreciation) $ (7,700,169) 11,570,882
============ ==========
8 (Continued)
(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:
2000 1999
----------------------- -----------------------
EMPLOYEES EMPLOYER EMPLOYEES EMPLOYER
--------- -------- --------- --------
Waddell & Reed Financial, Inc. $ 22,377 14,030 -- --
Waddell & Reed, Inc. 2,506,042 1,204,482 2,308,962 1,008,260
Waddell & Reed Investment
Management Company 677,946 363,087 633,330 288,456
Waddell & Reed Services
Company 618,718 345,216 503,773 272,068
The Legend Group 261,213 114,292 -- --
Austin Calvert & Flavin, Inc. 111,305 56,185 -- --
---------- --------- --------- ---------
$4,197,601 2,097,292 3,446,065 1,568,784
========== ========= ========= =========
(6) RELATED PARTY TRANSACTIONS
Plan investments include shares of mutual funds managed by Waddell & Reed
Financial, Inc., 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.
(7) SUBSEQUENT EVENT
On April 25, 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. The
elimination of the dual classes of common stock is not expected to impact
the value of the Plan's interest in these shares.
9
SCHEDULE 1
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Schedule of Assets Held for Investment Purposes
December 31, 2000
IDENTITY OF ISSUER, BORROWER, CURRENT
LESSOR, OR SIMILAR PARTY DESCRIPTION OF INVESTMENT VALUE
---------------------------------------- ------------------------------------------- -----------
* Cash 457,681 cash $ 457,681
* Torchmark Corporation 91,418 shares of common stock 3,513,053
* Waddell & Reed Financial, Inc. Class A 231,041 shares of common stock 8,693,967
* Waddell & Reed Financial, Inc. Class B 90,940 shares of common stock 3,411,443
* Waddell & Reed Advisors Funds 1,892,510 shares of Core Investment 13,417,899
* Waddell & Reed Advisors Funds 590,089 shares of Science and Technology 6,561,788
* Waddell & Reed Advisors Funds 290,566 shares of Accumulative 2,469,809
* Waddell & Reed Advisors Funds 86,940 shares of Bond 533,810
* Waddell & Reed Advisors Funds 736,432 shares of International Growth 5,869,362
* Waddell & Reed Advisors Funds 32,562 shares of Continental Income 239,980
* Waddell & Reed Advisors Funds 104,949 shares of High Income 797,614
* Waddell & Reed Advisors Funds 262,316 shares of Vanguard 2,751,698
* Waddell & Reed Advisors Funds 870,946 shares of New Concepts 8,456,884
* Waddell & Reed Advisors Funds 661,477 shares of Global Bond 2,262,251
* Waddell & Reed Advisors Funds 5,424,935 shares of Cash Management 5,424,935
* Waddell & Reed Advisors Funds 205,401 shares of Government Securities 1,117,379
* Waddell & Reed Advisors Funds 92,164 shares of Retirement Shares 704,132
* Waddell & Reed Advisors Funds 206,361 shares of Small Cap 2,459,824
* Waddell & Reed Advisors Funds 55,516 shares of Asset Strategy 389,723
* Waddell & Reed Advisors Funds 16,360 shares of Value 164,257
-----------
Total Waddell & Reed Advisors Funds 53,621,345
-----------
* W&R Funds 945 shares of Asset Strategy 12,369
* W&R Funds 51,982 shares of Small Cap Growth 615,981
* W&R Funds 959 shares of High Income 7,973
* W&R Funds 58,527 shares of International Growth 875,560
* W&R Funds 256 shares of Limited Term Bond 2,561
* W&R Funds 62,302 shares of Science & Technology 1,428,578
* W&R Funds 19,552 shares of Core Equity 223,286
* W&R Funds 26,762 shares of Large Cap Growth 313,118
* W&R Funds 17,492 shares of Mid Cap Growth 183,140
-----------
Total W&R Funds 3,662,566
-----------
Total investments $73,360,055
===========
* 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 27th, 2001.
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
By: /s/ Robert L. Hechler
Robert L. Hechler, 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