<PAGE>
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, 1999
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)
<PAGE>
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Financial Statements and Schedule
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
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, 1999
and 1998 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 generally accepted auditing
standards. 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, 1999 and 1998 and the
changes in its net assets available for benefits for the years then ended, in
conformity with generally accepted accounting principles.
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
June 2, 2000
<PAGE>
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Statements of Net Assets Available for Benefits
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Investments (note 3) $73,437,983 56,331,186
Receivable from participating employees 87,941 81,874
Receivable from participating employers 184,750 33,474
----------- ----------
Net assets available for benefits $73,710,674 56,446,534
=========== ==========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Investment income:
Dividends - stock $ 167,731 176,589
Dividends on mutual funds 4,791,565 5,070,623
Interest income -- 3,433
----------- ----------
Investment income 4,959,296 5,250,645
----------- ----------
Net appreciation of investments (note 3) 11,570,882 3,500,074
----------- ----------
Contributions (note 4):
Employees 3,446,065 2,273,548
Employers 1,568,784 896,323
Merger of Waddell & Reed, Inc. Career Field Retirement Plan
(note 1) 1,302,542 --
Employee rollovers 25,785 --
----------- ----------
6,343,176 3,169,871
----------- ----------
Withdrawals (5,609,214) (7,412,859)
----------- ----------
Net increase 17,264,140 4,507,731
Net assets available for benefits:
Beginning of year 56,446,534 51,938,803
----------- ----------
End of year $73,710,674 56,446,534
=========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(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), formerly the
Waddell & Reed Financial, Inc. Savings and Investment 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 currently allows contributions to be invested in mutual fund
shares and Waddell & Reed Financial, Inc. Class A and B stock. The
United and Waddell & Reed Groups of Mutual 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 909 and 793 participants at December 31, 1999 and 1998,
respectively. At December 31, 1999, 175 of the 909 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, 1999 and 1998. 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, 1999 and 1998. 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 for one year and are then used to
reduce the employer's current year contribution. Forfeitures used to
reduce employer contributions were $23,653 and $37,625 for 1999 and
1998, respectively.
4 (Continued)
<PAGE>
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(f) FEDERAL INCOME TAXES
The Plan has received a favorable determination letter from the
Internal Revenue Service, dated January 4, 1996, 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 generally accepted accounting
principles. 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 may make "Unmatched
Contributions" ranging from 1% to 6% of eligible earnings to the
thrift component (after-tax) of the Plan.
Prior to January 1, 1999, each eligible employee was allowed to make
"Matched Contributions" ranging from 1% to 6% of eligible earnings.
The Plan provided for a matching employer contribution of 50% of the
employee's contribution, not to exceed 3% of the employee's salary.
Employees were also able to make "Unmatched Contributions" to the Plan
not to exceed 10% of eligible earnings.
5 (Continued)
<PAGE>
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(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 the following Plan year.
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.
At December 31, 1998, participants whose account balances totaled
$20,941 notified the Plan Administrator that they had elected to
withdraw from the Plan. Such amounts are presented herein as a
component of net assets, but were presented as a liability of the Plan
in Form 5500 for 1998. The Plan Administrator was not notified of any
participants electing to withdraw from the Plan as of December 31,
1999.
(3) TORCHMARK CORPORATION COMMON STOCK, WADDELL & REED FINANCIAL, INC. CLASS A
STOCK, WADDELL & REED FINANCIAL, INC. CLASS B STOCK, UNITED GROUP OF MUTUAL
FUNDS, AND WADDELL & REED GROUP OF MUTUAL 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. Accordingly, information
previously required to be disclosed about participant-directed fund
investment programs is not presented in the Plan's 1999 financial
statements. The Plan's 1998 financial statements have been reclassified to
conform with the current year presentation.
6 (Continued)
<PAGE>
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 1999 and 1998
The following table presents the number of shares and fair value of Torchmark
Corporation common stock, Waddell & Reed Financial, Inc. Class A and B stock,
and mutual fund investments as of December 31, 1999 and 1998. Investments that
represent 5% or more of the Plan's net assets are separately identified.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------
NUMBER
OF SHARES/ FAIR
UNITS VALUE
--------- -----------
<S> <C> <C>
Torchmark Corporation common stock 491,060 $ 4,267,309
Waddell & Reed Financial, Inc. Class A stock 364,489 4,351,142
Waddell & Reed Financial, Inc. Class B stock 131,594 1,487,752
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
===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------
NUMBER
OF SHARES/ FAIR
UNITS VALUE
--------- -----------
<S> <C> <C>
Torchmark Corporation common stock 650,575 $ 6,752,971
Waddell & Reed Financial, Inc. Class A stock 358,662 3,672,695
Waddell & Reed Financial, Inc. Class B stock 119,082 1,233,692
United Group of Mutual Funds shares:
United Cash Management 5,817,096 5,817,096
United International Growth 614,632 6,060,272
United Income 1,610,962 12,114,434
United New Concepts 744,498 7,072,732
United Science and Technology 296,972 2,963,784
Other United Funds 1,616,182 10,643,510
========= -----------
Total United Group of Mutual Funds shares 44,671,828
-----------
Total investments $56,331,186
===========
</TABLE>
7 (Continued)
<PAGE>
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 1999 and 1998
During 1999 and 1998, the Plan's investments (including investments bought and
sold, as well as held during the year) appreciated (depreciated) as follows:
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Torchmark Corporation common stock $(1,026,350) (745,218)
Waddell & Reed Class A common stock 364,462 310,812
Waddell & Reed Class B common stock 100,830 815,340
United Group of Mutual Funds:
Accumulative 184,955 145,502
Asset Strategy 27,846 5,539
Bond (31,736) 5,973
Continental Income (5,841) 8,938
Gold and Government Securities (7,509) (15,480)
Government Securities (83,741) 6,583
High Income (73,683) (80,304)
High Income II (188,860) (159,289)
Income 926,261 (96,844)
International Growth 2,439,393 436,695
New Concepts 3,468,361 1,301,187
Retirement Shares 101,709 17,890
Science and Technology 3,476,001 1,047,655
Small Cap 370,813 --
Vanguard 735,671 495,095
----------- ---------
Total United Group of Mutual Funds 11,339,640 3,119,140
----------- ---------
Waddell & Reed Group of Mutual Funds:
Asset Strategy 5 --
Growth 88,085 --
High Income (94) --
International Growth 165,210 --
Limited Term Bond (3) --
Science & Technology 538,481 --
Total Return 616 --
----------- ---------
Total Waddell & Reed Group of
Mutual Funds 792,300 --
----------- ---------
Net appreciation $11,570,882 3,500,074
=========== =========
</TABLE>
8 (Continued)
<PAGE>
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(4) CONTRIBUTIONS BY PARTICIPANTS AND PARTICIPATING EMPLOYERS
The contributions of each participating employer and its employees for the
years ended December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
EMPLOYEES EMPLOYER EMPLOYEES EMPLOYER
---------- --------- --------- --------
<S> <C> <C> <C> <C>
United Investors Life $ -- -- 15,189 7,143
Waddell & Reed, Inc. 2,308,962 1,008,260 1,524,621 556,516
Waddell & Reed Asset
Management Company -- -- 9,600 4,800
Waddell & Reed Investment
Management Company 633,330 288,456 392,217 182,347
Waddell & Reed Services
Company 503,773 272,068 331,921 145,517
---------- --------- --------- -------
$3,446,065 1,568,784 2,273,548 896,323
========== ========= ========= =======
</TABLE>
(5) RELATED PARTY TRANSACTIONS
The Plan purchased Torchmark Corporation common stock at the prevailing
market price prior to the spin-off of Waddell & Reed from Torchmark
Corporation in 1998. The Plan also received Waddell & Reed Financial, Inc.
Class A common stock and Waddell & Reed Financial, Inc. Class B common
stock as a result of Waddell & Reed's spin-off from Torchmark Corporation
during 1998, and purchased the common stock at the prevailing market price
during both 1998 and 1999.
(6) SUBSEQUENT EVENT
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.
9
<PAGE>
SCHEDULE 1
WADDELL & REED FINANCIAL, INC.
401(K) AND THRIFT PLAN
Schedule of Assets Held for Investment Purposes
December 31, 1999
<TABLE>
<CAPTION>
IDENTITY OF ISSUER, BORROWER, CURRENT
LESSOR, OR SIMILAR PARTY DESCRIPTION OF INVESTMENT VALUE
----------------------------------------------- ------------------------------------------------------ ---------------
<S> <C> <C>
* Torchmark Corporation 491,060 shares of common stock $ 4,267,309
* Waddell & Reed Financial, Inc. Class A 364,489 shares of common stock 4,351,142
* Waddell & Reed Financial, Inc. Class B 131,594 shares of common stock 1,487,752
* United Funds 1,543,635 shares of Income 12,549,632
* United Funds 456,944 shares of Science and Technology 8,521,881
* United Funds 231,661 shares of Accumulative 2,117,383
* United Funds 84,668 shares of Bond 505,467
* United Funds 619,754 shares of International Growth 8,565,004
* United Funds 42,828 shares of Continental Income 336,631
* United Funds 124,504 shares of High Income 1,105,593
* United Funds 250,830 shares of Vanguard 3,095,123
* United Funds 801,333 shares of New Concepts 11,314,711
* United Funds 614,711 shares of High Income II 2,397,372
* United Funds 5,796,737 shares of Cash Management 5,796,737
* United Funds 197,892 shares of Government Securities 1,026,697
* United Funds 54,707 shares of Retirement Shares 598,491
* United Funds 197,926 shares of Small Cap 2,438,447
* United Funds 34,243 shares of Asset Strategy 222,236
-----------
Total United Funds 60,591,405
-----------
* Waddell & Reed Funds 11 shares of Asset Strategy 144
* Waddell & Reed Funds 23,134 shares of Growth 473,788
* Waddell & Reed Funds 256 shares of High Income 2,494
* Waddell & Reed Funds 27,249 shares of International Growth 746,076
* Waddell & Reed Funds 37 shares of Limited Term Bond 365
* Waddell & Reed Funds 36,968 shares of Science & Technology 1,505,344
* Waddell & Reed Funds 964 shares of Total Return 12,164
-----------
Total Waddell & Reed Funds 2,740,375
-----------
Total investments $73,437,983
===========
</TABLE>
* Indicates party-in-interest investment.
See accompanying independent auditors' report.
10
<PAGE>
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 20th, 2000.
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
