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 April 30, 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 333-55380
A. Full title of the plan and address of the plan:
KPMG Consulting, Inc. 401(k) Plan
c/o Human Resources
KPMG Consulting, Inc.
1676 International Drive
McLean, Virginia 22102
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive offices:
KPMG Consulting, Inc.
1676 International Drive
McLean, Virginia 22102
REQUIRED INFORMATION
Independent Auditors' Report
Audited Statement of Financial Condition
Audited Statement of Income and Changes in Plan Equity
Exhibits:
Exhibit 23.1 Consent of Independent Certified Public Accountants
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed by the undersigned hereunto duly authorized.
KPMG CONSULTING, INC. 401(K) PLAN
Date: March 22, 2002 By /s/ Mary Sullivan
-------------------------------
Mary Sullivan
Chair, 401(k)Plan Committee
C O N T E N T S
Page
----
Report of Independent Certified Public Accountants F-2
Financial Statements
Statements of Net Assets Available for Benefits F-3
Statements of Changes in Net Assets Available for Benefits F-4
Notes to Financial Statements F-5 - F-14
Supplemental Schedules
Report of Independent Certified Public Accountants
Applicable to Supplemental Schedules F-16
Schedule H, Item 4i - Schedule of Assets Held for
Investment Purposes - April 30, 2001 F-17 - F-18
Schedule H, Item 4i - Schedule of Assets Held for
Investment Purposes - April 30, 2000 F-19 - F-20
Schedule H, Item 4d - Schedule of Nonexempt
Transactions - April 30, 2001 F-21
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Consulting, Inc. 401(k) Plan
We have audited the accompanying statements of net assets available for
benefits, as of April 30, 2001 and 2000, of the KPMG Consulting, Inc. 401(k)
Plan (the "Plan"), and the related statements of changes in net assets available
for benefits for the year ended April 30, 2001 and for the period from February
1, 2000 (inception) to April 30, 2000. These financial statements are the
responsibility of the management of the Plan. 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 the Plan, as of
April 30, 2001 and 2000, and changes in net assets available for benefits for
the year ended April 30, 2001 and for the period from February 1, 2000
(inception) to April 30, 2000, in conformity with accounting principles
generally accepted in the United States of America.
GRANT THORNTON LLP
New York, New York
January 28, 2002
F-2
KPMG Consulting, Inc. 401(k) Plan
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
April 30,
------------------------
2001 2000
------------ ---------
ASSETS
Investments (Note C) $244,355,000 $224,501,444
Loans to participants 8,043,639 6,417,294
Receivables
Company contributions, net of forfeitures 13,640,180 642,710
Contribution from KPMG LLP (Note E) - 5,226,369
Participant contributions - 2,266,399
Reimbursement of expenses (Note A-7) 47,008 -
------------ ------------
Total receivables 13,687,188 8,135,478
------------ ------------
Cash and cash equivalents 131,922 165,954
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $266,217,749 $239,220,170
============ ============
The accompanying notes are an integral part of these statements.
F-3
KPMG Consulting, Inc. 401(k) Plan
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Period from
February 1,
Year ended 2000 (inception)
April 30, to April 30,
2001 2000
--------------- ----------------
Additions to net assets attributed to:
Investment (loss) income
Net (depreciation) appreciation in fair value of
investments (Note C) $(42,900,700) $ 37,428,941
Interest and dividends 15,398,763 579,582
------------ --------------
Total investment (loss) income (27,501,937) 38,008,523
Contributions
Participant contributions and rollovers 58,459,965 16,229,246
Company contributions, net of forfeitures 13,682,248 642,710
------------ --------------
Total contributions 72,142,213 16,871,956
Reimbursement of investment managers' fees (Note A-7) 148,220 -
Initial transfer from KPMG LLP 401(k) Plan (Note A-1) - 180,536,579
Transfer from KPMG LLP 401(k) Plan (Note A-10) 9,746,591 -
Transfers of matching contributions from KPMG LLP
401(k) Plan (Note E) - 5,226,369
------------ -------------
Total transfers from KPMG LLP 401(k) Plan 9,746,591 185,762,948
Other (Note A-8) 455,444 -
------------ -------------
Total additions 54,990,531 240,643,427
Deductions from net assets attributed to:
Benefit payments to participants 27,905,726 1,423,257
Administrative expenses (Note A-7) 87,226 -
------------ -------------
NET INCREASE IN NET ASSETS 26,997,579 239,220,170
Net assets available for benefits
Beginning of period 239,220,170 -
------------ -------------
End of period $266,217,749 $ 239,220,170
============ =============
The accompanying notes are an integral part of these statements.
F-4
KPMG Consulting, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS
April 30, 2001 and 2000
NOTE A - DESCRIPTION OF THE PLAN
1. General
The following brief description of the KPMG Consulting, Inc. 401(k) Plan
(the "Plan") is provided for general information purposes only.
Participants should refer to the Plan agreement for a more complete
description of the provisions of the Plan.
Effective February 1, 2000, KPMG LLP spun off its consulting practice into
a wholly owned subsidiary of a recently established corporation, KPMG
Consulting, Inc. (the "Company" or "KCIN"). In connection with this
transaction, KCIN established a new 401(k) plan for its employees. Balances
in the KPMG LLP 401(k) Plan belonging to former employees of KPMG LLP, who
became employees of KCIN effective February 1, 2000, were transferred to
the KCIN 401(k) Plan, which became the opening balance in the Plan. Since
the Plan invests in the same investment options, balances were transferred
on a no gain or loss basis.
The Plan is a defined contribution plan. All full-time employees of the
Company are eligible to participate. The Plan has two features: the 401(k)
portion, which allows participants to make pre-tax contributions, and the
thrift portion, which allows participants to make after-tax contributions.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
Effective May 1, 2001, the Plan was amended to establish a discretionary
specified minimum employer contribution (Note K).
2. Contributions
Participants may contribute from 1 percent to 20 percent of their annual
pre-tax compensation to the maximum permitted by the Internal Revenue Code,
$10,500 for the calendar years 2001 and 2000, as further limited by the
Internal Revenue Code. Participants may also roll over amounts representing
distributions from other qualified defined benefit or defined contribution
plans. Participants direct the investment of their contributions into
various investment options offered by the Plan. The Plan currently offers a
variety of options, including a money market fund, collective trusts,
guaranteed interest and annuity contracts, mutual funds and Company common
stock as investment options to participants. Eligible employees may receive
an employer matching contribution granted at the discretion of the Board of
Directors of up to 50 percent of the first six percent of pre-tax base
compensation contributed to the Plan.
F-5
KPMG Consulting, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 2001 and 2000
NOTE A (continued)
The matching contribution is calculated once a year on the last date of the
Plan year for active participants on that date. Matching contributions may
be made in cash or common stock of the Company. Matching contributions for
the year ended April 30, 2001, and for the period from February 1, 2000
(inception) to April 30, 2000, were paid in cash subsequent to the
respective Plan year-end and were reduced by forfeitures of approximately
$883,000 and $621,000, respectively. Forfeitures represent the nonvested
account balances for participants who have terminated their employment with
the Company. (See Note E.)
The Company may, at its discretion, make profit-sharing contributions to
the Plan to eligible employees, allocated according to their relative
amount of compensation. No profit-sharing contributions were made for the
Plan year ended April 30, 2001, and for the period from February 1, 2000
(inception) to April 30, 2000.
3. Participant Accounts
Individual accounts are maintained for each participant. The account of
each participant is credited with: (a) the contributions of the
participant, (b) allocation of any applicable Company contributions, and
(c) an allocation of plan earnings, based on account balances. The account
balances are charged for loans and withdrawals of the participants.
Allocations are based on participant earnings or account balances, as
defined. The benefit to which a participant is entitled is the benefit that
can be provided from the participant's vested account balance.
4. Vesting
Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in the Company's matching contribution portion of
the participant's account balance, plus actual earnings thereon, is based
on years of service. A participant is 100% vested after five years of
credited service.
5. Participant Loans
Active participants may borrow from their vested accounts, excluding the
thrift account, a minimum of $500 to a maximum equal to the lesser of
$50,000 or fifty percent of their vested account balance. Loan terms range
from one to five years or up to twenty years for the purchase of a primary
F-6
KPMG Consulting, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 2001 and 2000
NOTE A (continued)
residence. The loans are secured by the vested balances in the accounts of
the participants and bear interest at a fixed rate commensurate with the
prime interest rate at the date of the loan. As of April 30, 2001 and 2000,
interest rates ranged from 6.0% to 8.5%. Principal and interest are paid
ratably, generally through payroll deductions. A participant may have up to
two loans outstanding at any time.
6. Payment of Benefits
Upon termination of service, a participant who has vested benefits below
$5,000 receives a lump-sum distribution. A participant whose vested
benefits equal or exceed $5,000 may elect to receive the vested portion of
his/her account as a lump-sum distribution, or in monthly installments over
a period not to exceed his/her life expectancy, or the joint and last
survivor life expectancy of him/her or his/her beneficiary. Active
employees, over the age of 59-1/2, may withdraw all available amounts in
their accounts. Certain hardship withdrawals by active employees may be
allowed, as determined by the Company's 401(k) Plan Committee, to the
maximum amount available for hardship distribution in the account of the
participant. Benefit payments for the year ended April 30, 2001 include
approximately $12,000 of corrective distributions.
7. Administration
Employees of the Company and KPMG LLP provide services to the Plan. Neither
these individuals, nor the Company or KPMG LLP, receive compensation from
the Plan. Substantially all administrative expenses, including the expenses
related to the use of premises, facilities and equipment, etc., for the
year ended April 30, 2001, and the period ended April 30, 2000, were paid
by the Company.
As of January 1, 2001, the Plan entered into an arrangement with Fidelity
Investments, one of the investment managers of the Plan, whereby Fidelity
would reimburse the Plan the management fees paid as part of fund expenses,
since Fidelity performs no management services for the Plan. For the year
ended April 30, 2001, an aggregate of $148,200, of which $47,008 was
received subsequent to April 30, 2001, was refunded to the Plan. Such funds
were used to pay Plan expenses of $87,226, including accounting, legal and
other investment advisory fees.
F-7
KPMG Consulting, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 2001 and 2000
NOTE A (continued)
8. Trust Fund
The assets of the Plan are held by Merrill Lynch & Co., as Trustee, of the
KPMG Consulting, Inc. 401(k) Plan Trust (the "Trust"). The assets in the
Trust are invested in various mutual funds, guaranteed interest and annuity
contracts, collective trusts, money market funds and Company common stock.
The assets of the Plan are invested with the following investment managers
as of April 30, 2001 and 2000: Fund Asset Management, L.P. and Merrill
Lynch Asset Management, L.P. (subsidiaries of Merrill Lynch & Co.);
Fidelity Management and Research Company; Templeton Global Advisors
Limited; and Massachusetts Financial Services Company; Lord Abbett; Mercury
Hotchkis and Wiley; Federated Investors; and Munder Net Net. (See Note
A-9.)
On December 14, 2000, the assets that were held in three mutual funds, for
which Merrill Lynch ("Merrill") is the investment manager, were transferred
into collective trusts with the same investment guidelines. Merrill
determined that the assets held in the mutual funds should have been
invested in the respective collective trusts at the time that Merrill
became the trustee and recordkeeper for the KPMG LLP 401(k) Plan and the
KPMG LLP Money Purchase Plan (March 1997), and advised KPMG LLP
(predecessor plan sponsor) and the Company of this matter. The respective
collective trusts have lower overall expense ratios. Each participant's
account was corrected to reflect his or her balance had his or her
investments been placed in the collective trusts, rather than the mutual
funds, at the time he or she originally elected this investment choice.
Neither KPMG LLP nor the Company was required to fund additional
contributions to the Plan. The net effect of this transfer was to increase
the total assets of the Plan by $455,444.
9. Plan Amendment
In May 2000, the Plan was amended whereby participants in the Plan may
elect to invest in KPMG Consulting, Inc. common stock. Merrill is
authorized to purchase shares on the open market as trustee of the Plan.
Additionally, on February 7, 2001, the Company filed a Registration
Statement on Form S-8, registering an aggregate of 15,000,000 shares of
Company common stock to be issued to Plan participants, as needed.
10. Transfers from the KPMG LLP 401(k) Plan
Subsequent to February 1, 2000, and through the date of the Company's
Initial Public Offering, additional employees transferred to the Company.
Account balances of employees who transferred up through April 30, 2001,
are reflected as transfers from the KPMG LLP 401(k) Plan.
F-8
KPMG Consulting, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS(continued)
April 30, 2001 and 2000
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Accounting
The financial statements of the Plan are prepared using the accrual method
of accounting.
2. Investment Valuation
The investments of the Plan are stated at fair value, except for
guaranteed investment contracts which are valued at contract value in
accordance with AICPA Statement of Position 94-4, "Reporting of Investment
Contracts Held by Health and Welfare Benefit Plans and Defined Contribution
Pension Plans" ("SOP 94-4"). Contract value represents contributions made
under the contract plus earnings, less participant withdrawals.
Participants may direct the withdrawal or transfer of all or a portion of
their investments at contract value.
Shares of Company common stock are valued at quoted market prices at the
end of the period. Shares of registered investment companies are valued at
quoted market prices which represent the net asset value of shares held by
the Plan at year-end. Other investments, not having an established market
value, are valued at estimated fair value, as determined by the Trustee.
Purchases and sales of securities are recorded on a trade-date basis, and
gain or loss on disposition is based on average cost. Unsettled security
transactions at year-end are reflected in the financial statements as a net
payable or receivable. Dividend income is recorded as of the "ex-dividend
date," and interest income is recorded on the accrual basis.
3. 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 in determining the reported
amounts of net assets and disclosure of contingent assets and liabilities,
as of the date of the financial statements, and reported amounts of
additions to and deductions from the net assets during the reporting
period. Actual results may differ significantly from those estimates.
4. Payment of Benefits
Benefits are recorded when paid.
F-9
KPMG Consulting, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS(continued)
April 30, 2001 and 2000
NOTE B (continued)
5. Significant New Accounting Pronouncements
In September 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"),
"Accounting for Derivative Instruments and Hedging Activities," which
requires entities to recognize all derivatives in their financial
statements as either assets or liabilities measured at fair value. SFAS
No. 133 also specifies new methods of accounting for hedging
transactions, prescribes the items and transactions that may be hedged
and specifies detailed criteria to be met to qualify for hedge
accounting. SFAS No. 133 supersedes SOP 94-4 with respect to accounting
for guaranteed investment contracts, requiring such contracts to be
valued at fair value and not contract value. SFAS No. 133, as amended by
SFAS No. 137, is effective for fiscal years beginning after June 15,
2000. The Company is evaluating the impact that this statement will have
on the Plan's results of operations, financial position and related
disclosures.
NOTE C - INVESTMENTS
The following investments represent 5% or more of the Plan's net assets as
of April 30, 2001 and 2000:
April 30,
--------------------------------
2001 2000
-------------- ------------
Merrill Lynch Basic Value Fund, 847,359 units
and 674,625 units, respectively $29,072,892 $25,628,997
Fidelity Magellan Fund, 542,810 units and
462,950 units, respectively 61,690,345 63,461,140
Merrill Lynch Equity Index Trust, 509,572 units
and 414,697 units, respectively 44,373,508 41,602,355
MFS Emerging Growth Fund, 447,822 units and
331,353 units, respectively 17,263,542 22,697,705
Blended Fixed Interest Fund, 30,295,450 units
and 24,430,132 units, respectively 30,295,450 24,430,133
F-10
KPMG Consulting, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 2001 and 2000
NOTE C(continued)
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:
Period from
February 1,
2000
Year ended (inception)
April 30, to April 30,
2001 2000
------------ -----------
Mutual Funds $(36,057,321) $25,705,983
Collective Trusts (6,742,360) 11,722,958
Common Stock (101,019) -
------------ -----------
$(42,900,700) $37,428,941
============ ===========
All investments are participant directed.
As of October 31, 2001, the weighted average net asset values of the Plan's
investments at April 30, 2001 declined by an average of 14%.
NOTE D - INVESTMENT CONTRACT WITH INSURANCE COMPANIES
The Blended Fixed Interest Fund invests in a guaranteed interest contract
with JP Morgan and in the Merrill Lynch Retirement Preservation Trust
(MLRPT), which invests in guaranteed interest and annuity contracts and
synthetic GICs.
As of April 30, 2001 and 2000, the interest rate, applicable to guaranteed
interest and annuity contracts, was 6.49%. The average yields, applicable
to these contracts for the year ended April 30, 2001, and for the period
from February 1, 2000 (inception) to April 30, 2000, were approximately
6.58% and 6.43%, respectively.
The Blended Fixed Interest Fund is valued at contract value as permitted by
SOP 94-4. As of April 30, 2001 and 2000, the contract value of the Blended
Fixed Interest Fund approximates the aggregate fair value calculated by the
Trustee. The aggregate fair value was calculated by the Trustee based on
the discounted present value of the cash flows of the instruments held by
the Blended Fixed Interest Fund,
F-11
KPMG Consulting, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 2001 and 2000
NOTE D (continued)
without regard to the benefit-responsive features or other particular
contractual provisions of any such instruments and does not necessarily
represent the actual value of the Blended Fixed Interest Fund.
There are no reserves against contract value for credit risk of the
contract issuers or otherwise.
NOTE E - CONTRIBUTIONS AND TRANSFERS
For the three months ended April 30, 2000, participants in the Plan
received a matching contribution equal to 25 percent of the first six
percent of pre-tax base compensation (up to the maximum limit allowed by
the Internal Revenue Service) that was contributed by such participant to
the KPMG LLP 401(k) Plan during the period from May 1, 1999 to January 31,
2000. Such matching contribution was recorded as contribution income on the
KPMG LLP 401(k) Plan, and reflected as transfers of matching contributions
from the KPMG LLP 401(k) Plan in the financial statements of the Plan.
Additionally, plan participants as of April 30, 2000, received a Company
match equal to 25 percent of the first six percent of eligible pre-tax base
compensation contributed to the Plan during the period from February 1,
2000 (inception) to April 30, 2000, provided that their eligible base
compensation earned during the period from May 1, 1999 to January 31, 2000
did not exceed the maximum allowable compensation under the Plan. Such
contribution has been reflected as contributions in the financial
statements of the Plan.
NOTE F - THRIFT FEATURE
The Thrift Feature allows employees to make voluntary contributions, to a
maximum of 10% of after-tax compensation. As of April 30, 2001 and 2000,
the portions of net assets available for benefits, relating to the Thrift
Feature, were approximately $8,769,000 and $6,738,000, respectively.
F-12
KPMG Consulting, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 2001 and 2000
NOTE G - RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds and collective trusts
managed by Merrill. Additionally, certain assets of the Plan are invested
in the MLRPT, which is managed by Merrill. As of April 30, 2001 and 2000,
Merrill was the trustee of the Plan, and, therefore, these transactions are
considered party-in-interest transactions. Additionally, Merrill acts as
the recordkeeper for the Plan. Fees for the investment management and
recordkeeping services are paid by the Company.
Certain investment management fees were reimbursed by Fidelity during the
year ended April 30, 2001. (See Note A-7.)
NOTE H - PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right to discontinue its contributions and terminate the Plan, subject to
the provisions of ERISA. In the event of Plan termination, participants
will become 100% vested in their accounts.
NOTE I - INCOME TAX STATUS
The Plan Administrator has submitted a request for determination to the
Internal Revenue Service. The Plan Administrator believes that the Plan is
designed, and is currently being operated, in compliance with the
applicable requirements of the Internal Revenue Code.
NOTE J - PROHIBITED TRANSACTION
Under U.S. Department of Labor regulation section 2510.3-102, salary
deferrals to a 401(k) plan and loan repayments that are withheld from
employees' paychecks must be deposited into the plan as soon as reasonably
possible, but in no event later than the fifteenth business day of the
month following the month of the withholding from the paycheck. When this
regulation is not satisfied, the plan sponsor has engaged in a prohibited
transaction.
During the plan year ended April 30, 2001, the Company inadvertently
engaged in a prohibited transaction. The Company remitted two deposits to
the Plan after the required fifteen days. Salary deferrals of $71,000 and
participant loan repayments of $1,590 were due on June 21, 2000, but were
not deposited into the Plan's account until July 14, 2000. These late
remittances arose because the Company did not receive timely payroll
information from the payroll department of a former subsidiary. The payroll
of this subsidiary was combined with the Company's payroll on July 1, 2000.
F-13
KPMG Consulting, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 2001 and 2000
NOTE J (continued)
The Company is taking corrective actions relating to these prohibited
transactions, which consist of: (a) restoring lost interest on the deposit
to the participants; (b) restoring earnings on the lost interest to the
Plan based on applicable IRS regulations, and (c) filing IRS Form 5530 and
paying the applicable excise tax. Excise taxes are calculated at 15% of the
earnings plus the interest on the earnings on the late deposits. Management
of the Company believes that corrective actions will be completed no later
than March 15, 2002. Based on information currently available to the
Company, the Company estimates that the total cost of the lost earnings
thereon will aggregate approximately $120.
NOTE K - SUBSEQUENT EVENTS
1. Discretionary Contribution
Effective May 1, 2001, the Plan was amended to establish a
discretionary specified minimum contribution to the Plan associated
with those participants who were participants from the first day to the
last day of the Company's tax year, which begins on July 1 and ends on
June 30. The specified minimum contribution will be determined and paid
on or before March 15.
The specified minimum contribution will be allocated based on the
participant's deferral percentage. If any of the specified minimum
contribution remains after the allocation, the remaining amount can be
used as an employer match contribution to each first day participant's
match account. This will be made without regard to the "employed as of
the last day of the Plan year" requirement of employer match
contributions. Any further remaining specified minimum contribution
after allocation as an employer match shall be allocated as a
profit-sharing contribution to each first day participant's
profit-sharing account in the ratio of their compensation.
2. New Investment Options
Beginning January 1, 2002, the Company is making available to
participants eight new mutual fund investment options, eliminating five
existing mutual fund investment options and providing participants with
a portfolio rebalancing service at no cost.
F-14
SUPPLEMENTAL SCHEDULES X
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
APPLICABLE TO SUPPLEMENTAL SCHEDULES
KPMG Consulting, Inc. 401(k) Plan
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements, taken as a whole, as of April 30, 2001 and 2000, of the
KPMG Consulting, Inc. 401(k) Plan and for the year ended April 30, 2001 and for
the period from February 1, 2000 (inception) to April 30, 2000. The supplemental
schedules included in the table of contents are presented for the purpose of
additional analysis, and are not a required part of the basic financial
statements, but are supplementary information required by the Rules and
Regulations for Reporting and Disclosure of the Department of Labor, under the
Employee Retirement Income Security Act of 1974. These supplemental schedules
are the responsibility of the management of the Plan. The supplemental schedules
have been subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, are fairly stated, in all
material respects, in relation to the basic financial statements, taken as a
whole.
GRANT THORNTON LLP
New York, New York
January 28, 2002
F-16
KPMG Consulting, Inc. 401(k) Plan
SCHEDULE H, ITEM 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT END OF YEAR
April 30, 2001
Employer Identification Number - 22-3680505
Plan Number - 001
(c) Description of investment, including
(a) (b) Identity of issue, borrower, maturity date, rate of interest, (e) Current
lessor or similar party collateral, par or maturity value value
---------------------------- -------------------------------------- ---------
* Merrill Lynch Institutional Fund Money Market Fund,
4,703,840.1240 units $ 4,703,940
* Merrill Lynch Basic Value Fund Mutual Fund,
847,359.1261 units 29,072,892
Fidelity Magellan Fund Mutual Fund,
542,809.9106 units 61,690,345
* Merrill Lynch Corporate Bond Fund - Mutual Fund,
High Income Portfolio 640,196.9726 units 3,425,054
* Merrill Lynch Equity Index Trust Fund Collective Trust,
509,571.7400 units 44,373,508
* Merrill Lynch Balanced Capital Fund Mutual Fund,
214,002.5114 units 6,313,074
Templeton Foreign Fund Mutual Fund,
1,130,546.7792 units 11,373,301
* Merrill Lynch Growth Fund Mutual Fund,
460,233.7229 units 8,541,938
MFS Emerging Growth Fund Mutual Fund,
447,822.0884 units 17,263,542
* Blended Fixed Interest Fund Guaranteed Interest and Annuity Contracts,
30,295,450.4321 units 30,295,450
Lord Abbett Global Fund, Inc. - Mutual Fund,
Income Series 12,516.0837 units 80,103
MFS Global Equity Fund Mutual Fund,
32,549.3948 units 653,917
Hotchkis & Wiley Small Cap Fund Mutual Fund,
52,747.9672 units 1,280,193
Hotchkis & Wiley International Fund Mutual Fund,
41,092.2192 units 975,900
* Merrill Lynch Small Cap Index Collective Mutual Fund,
Trust 166,170.3139 units 2,412,793
* Party-in-interest.
F-17
KPMG Consulting, Inc. 401(k) Plan
SCHEDULE H, ITEM 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT END OF YEAR (continued)
April 30, 2001
Employer Identification Number - 22-3680505
Plan Number - 001
(c) Description of investment, including
(a) (b) Identity of issue, borrower, maturity date, rate of interest, (e) Current
lessor or similar party collateral, par or maturity value value
---------------------------- -------------------------------------- ---------
* Merrill Lynch Aggregate Bond Index Mutual Fund,
Collective Trust 222,709.9358 units $ 2,988,768
* Merrill Lynch International Index Mutual Fund,
Collective Trust 184,844.7230 units 2,299,469
Lord Abbett Developing Growth Fund, Inc. Mutual Fund,
83,223.8382 units 1,210,907
Federated American Leaders Fund, Inc. Mutual Fund,
12,777.3206 units 319,177
Massachusetts Investors Growth Stock Fund Mutual Fund,
489,250.3198 units 7,216,442
Massachusetts Investors Trust Mutual Fund,
62,094.3286 units 1,147,503
MFS Research Fund Mutual Fund,
66,988.1111 units 1,467,040
MFS Bond Fund Mutual Fund,
58,616.4512 units 723,327
MFS Government Securities Fund Mutual Fund,
120,298.5874 units 1,156,069
Munder NetNet Fund Mutual Fund,
84,989.0837 units 2,113,679
* KPMG Consulting, Inc. Common Stock Common stock,
80,504.1253 shares 1,256,669
-------------
$ 244,355,000
=============
Loans to participants ** $ 8,043,639
=============
Cash and cash equivalents $ 131,922
=============
* Party-in-interest.
** General loans must be repaid within five years of the date of the loan.
Mortgage loans must be repaid within twenty years. The interest rate
charged will be prime interest rate at the date of the loan; interest
rates, as of April 30, 2001, range between 6% and 8.5%.
F-18
KPMG Consulting, Inc. 401(k) Plan
SCHEDULE H, ITEM 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT END OF YEAR
April 30, 2000
Employer Identification Number - 22-3680505
Plan Number - 001
(c) Description of investment, including
(a) (b) Identity of issue, borrower, maturity date, rate of interest, (e) Current
lessor or similar party collateral, par or maturity value value
---------------------------- -------------------------------------- ---------
* Merrill Lynch Institutional Fund Money Market Fund,
3,983,645.1960 units $ 3,983,915
* Merrill Lynch Basic Value Fund Mutual Fund,
674,625.0437 units 25,628,997
Fidelity Magellan Fund Mutual Fund,
462,950.0450 units 63,461,140
* Merrill Lynch Corporate Bond Fund -
High Income Portfolio Mutual Fund,
498,125.8325 units 3,143,664
* Merrill Lynch Equity Index Trust Fund Collective Trust,
414,697.5491 units 41,602,355
* Merrill Lynch Balanced Capital Fund Mutual Fund,
171,452.6888 units 5,490,569
Templeton Foreign Fund Mutual Fund,
1,003,287.3104 units 10,275,194
* Merrill Lynch Growth Fund Mutual Fund,
349,404.1334 units 9,792,584
MFS Emerging Growth Fund Mutual Fund,
331,353.7506 units 22,697,705
* Blended Fixed Interest Fund Guaranteed Interest and Annuity Contracts,
24,430,132.112 units 24,430,133
Lord Abbett Global Fund, Inc. - Mutual Fund,
Income Series 6,443.6857 units 42,915
MFS Global Equity Fund Mutual Fund,
16,204.2016 units 384,145
Hotchkis & Wiley Small Cap Fund Mutual Fund,
9,062.4198 units 156,961
Hotchkis & Wiley International Fund Mutual Fund,
25,595.4022 units 662,921
* Merrill Lynch Small Cap Index Trust Mutual Fund,
87,165.1682 units 1,050,939
* Party-in-interest.
F-19
KPMG Consulting, Inc. 401(k) Plan
SCHEDULE H, ITEM 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT END OF YEAR (continued)
April 30, 2000
Employer Identification Number - 22-3680505
Plan Number - 001
(c) Description of investment, including
(a) (b) Identity of issue, borrower, maturity date, rate of interest, (e) Current
lessor or similar party collateral, par or maturity value value
---------------------------- -------------------------------------- ---------
* Merrill Lynch Aggregate Bond Index Trust Mutual Fund,
134,550.5315 units $ 1,349,445
* Merrill Lynch International Index Trust Mutual Fund,
101,860.2946 units 1,452,662
Lord Abbett Developing Growth Fund, Inc. Mutual Fund,
72,051.8325 units 1,289,500
Federated American Leaders Fund, Inc. Mutual Fund,
4,056.6613 units 101,224
Massachusetts Investors Growth Stock Fund Mutual Fund,
276,545.0712 units 5,805,505
Massachusetts Investors Trust Mutual Fund,
26,552.1428 units 549,107
MFS Research Fund Mutual Fund,
22,518.5130 units 679,514
MFS Bond Fund Mutual Fund,
26,919.9720 units 323,578
MFS Government Securities Fund Mutual Fund,
15,940.6232 units 145,797
Munder Net Net Fund Mutual Fund,
14.0633 units 975
--------------
$ 224,501,444
==============
Loans to participants** $ 6,417,294
==============
Cash and cash equivalents $ 165,954
==============
* Party-in-interest.
** General loans must be repaid within five years of the date of the loan.
Mortgage loans must be repaid within twenty years. The interest rate
charged will be prime interest rate at the date of the loan; interest
rates, as of April 30, 2000, range between 6% and 8-1/2%.
F-20
KPMG Consulting, Inc. 401(k) Plan
SCHEDULE H, ITEM 4d - SCHEDULE OF NONEXEMPT TRANSACTIONS
Plan year ended April 30, 2001
Employer Identification Number - 22-3680505
Plan Number - 001
(b) Description of (g) Expense
(b) Relationship to transactions including incurred in
plan, employer maturity date, rate connection
(a) Identity of or other party- of interest, collateral (d) Purchase (e) Selling (f) Lease with (h) Cost of
party involved in interest par or maturity value price price rental transaction asset
-------------- --------------- ----------------------- --------- --------- --------- ----------- -------
The KPMG Plan Sponsor Employee $71,112
Consulting, contributions *
Inc.
The KPMG Plan Sponsor Participant loan 1,589
Consulting, repayments*
Inc.
(j) Net
gain or
(i) Current (loss)
value on each
of asset transaction
- ------------- ---------------
$71,112 $ -
1,589 -
Note: Items (d), (e) and (f) are not applicable.
*Employee contributions and participant loan repayments due to the Plan on
June 21, 2000, inadvertently were not deposited in the Plan's account until
July 14, 2000 (23 days late). Corrective action is being taken.
F-21