UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE, SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from __________ to __________
Commission file number 000-19483
A. Full title of the plan and the address of the plan, if difference
from that of the issuer named below:
SWS GROUP 401(K) PROFIT SHARING PLAN
B. Name of issuer of these securities held pursuant to the plan and the
address of its principal executive office:
SWS GROUP, INC.
1201 Elm Street, Suite 3500
Dallas, Texas 75270
SWS GROUP
401(K) PROFIT SHARING PLAN
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2001 AND 2000
WITH REPORT OF INDEPENDENT ACCOUNTANTS
SWS GROUP
401(K) PROFIT SHARING PLAN
TABLE OF CONTENTS
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Page
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Report of Independent Accountants 1
Statements of Net Assets Available for Benefits -
December 31, 2001 and 2000 2
Statement of Changes in Net Assets Available for Benefits -
for the year ended December 31, 2001 3
Notes to Financial Statements 4-7
Supplemental Schedule:
Schedule of Assets Held for Investment Purposes at End of Year -
December 31, 2001 8
Report of Independent Accountants
To the Participants and Administrator of
SWS Group 401(k) Profit Sharing Plan:
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of SWS Group 401(k) Profit Sharing Plan (the "Plan") at December 31, 2001, and
the changes in net assets available for benefits for the year ended December 31,
2001 in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Plan's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion. The financial statements of
the Plan as of December 31, 2000 were audited by other independent accountants
whose report dated June 8, 2001 expressed an unqualified opinion on those
statements.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes at end of year is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audit 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.
PricewaterhouseCoopers LLP
May 31, 2002
Independent Auditors' Report
The Trustees Committee
Southwest Securities Group
401(K) Profit Sharing Plan:
We have audited the accompanying statement of net assets available for benefits
of Southwest Securities Group 401(K) Profit Sharing Plan as of December 31,
2000. This financial statement is the responsibility of the Plan's management.
Our responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the net assets available for benefits of Southwest
Securities Group 401(K) Profit Sharing Plan as of December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
Dallas, Texas
June 8, 2001
SWS GROUP
401(K) PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2001 AND 2000
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December 31, December 31,
2001 2000
------------ ------------
Investments, at fair value (Notes 4 and 5):
Common stock $ 25,977,960 $ 21,472,906
SWS Group Inc., common stock 1,861,611 5,124,755
Money market funds 8,014,929 6,768,789
Government securities 579,259 998,061
Mutual funds 18,518,336 17,288,093
Common/collective trusts 3,304,782 3,390,885
Corporate bonds and debentures 358,892 598,101
Preferred stock 218,648 102,010
Other assets 333,944 333,911
Loans to participants 2,495,071 2,090,940
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Total investments 61,663,432 58,168,451
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Receivables:
Employer contributions (Note 2 (a)) 1,657 2,833,791
Participant contributions (Note 2 (b)) 2,344 1,560
Other 1,672 929
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Total receivables 5,673 2,836,280
Cash 20,730 53,073
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Net assets available for benefits $ 61,689,835 $ 61,057,804
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The accompanying notes are an integral part of these financial statements.
2
SWS GROUP
401(K) PROFIT SHARING PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2001
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December 31,
2001
--------------
Additions (deductions) to net assets attributed to:
Investment income (loss) (Note 4):
Net depreciation in fair value of investments $ (1,293,232)
Interest and dividends 562,404
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(730,828)
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Contributions:
Employer 2,461,139
Participant 3,513,751
Participant rollovers from other plans 609,990
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Total additions 5,854,052
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Deductions from net assets attributed to:
Benefits paid to participants (5,977,920)
Administrative expenses (113,049)
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Total deductions (6,090,969)
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Transfers to the Plan (Note 1(a)) 868,948
Net increase 632,031
Net assets available for benefits, beginning of year 61,057,804
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Net assets available for benefits, end of year $ 61,689,835
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The accompanying notes are an integral part of these financial statements.
3
SWS GROUP
401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General
The SWS Group 401(k) Profit Sharing Plan (the "Plan") (formerly known
as the Southwest Securities Group 401(k) Profit Sharing Plan) is a
defined contribution plan covering all employees of companies
affiliated with SWS Group, Inc. (the "Company" or "Employer") who meet
certain minimum hours of service requirements. The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974
("ERISA"). Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
In September 2001, approximately $869,000 was merged into the Plan
from the qualified retirement plans of two of the Company's
affiliates, First Savings Bank and May Financial Corporation.
(b) Basis of Presentation
The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America.
(c) Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the Plan administrator to make estimates and assumptions that affect
the reported amounts of assets and liabilities and changes therein,
and disclosure of contingent assets and liabilities. Actual results
could differ from those estimates.
(d) Administration
The Plan is administered by a Trustee Committee appointed by the
Company's Board of Directors. The Trustees of the Plan are Charles
Schwab Trust Company and Westwood Trust Company, an affiliate of SWS
Group, Inc. Expenses of the Plan were $113,049 for 2001 and were paid
out of Plan assets.
2. CONTRIBUTIONS
(a) Employer
The Company contributes 100% of the first 4% of compensation that a
participant contributes into the Plan. The Board of Directors of the
Company determines the amount of discretionary Employer contribution
to the Plan each year. The contribution may not exceed the lesser of
15% of the total annual compensation paid to the participants or of
the Employer's net profits before taxes. These contributions are
allocated to each participant in the ratio of each participant's
covered compensation to the total covered compensation of all
participants. No discretionary contribution is required to be made by
the Employer.
4
SWS GROUP
401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
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The carrying amount of the Employer contributions receivable
approximates fair value at December 31, 2001 and 2000, due to the
short-term nature of the account.
(b) Participant Contributions
Participants may contribute up to 10% of pretax annual compensation,
as defined by the Plan. Participants may also contribute rollovers of
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.
Participant contributions were limited to $10,500 during the 2001 Plan
year.
The carrying amount of the Participant contributions receivable
approximates fair value at December 31, 2001 and 2000, due to the
short-term nature of the account.
(c) Forfeitures
Forfeitures reduce Employer contributions for the year in which the
forfeitures occur and are allocated to participants in the same manner
as the Employer contribution. At December 31, 2001 forfeited nonvested
accounts totaled $431,610. These accounts will be used to reduce
future employer contributions. During 2001, employer contributions
were reduced by approximately $977,000 from forfeited nonvested
accounts.
3. ELIGIBILITY AND VESTING
(a) Eligibility
Employees of the Company are eligible to participate in the Plan upon
hire, as soon as administratively possible.
(b) Vesting
Participant contributions and Employer matching contributions are
immediately vested. Employees who work a minimum of 1,000 hours a year
and are employed on the last day of the calendar year qualify for a
year of service and vest as follows in the discretionary Employer
contribution;
Years Percentage
of service vested
--------------- ---------------
Less than 2 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years 100%
5
SWS GROUP
401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
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(c) Plan Benefits
The vested portion of the accrued benefit of a participant upon
termination or retirement is his or her plan benefit. Normal
retirement age as elected by the Company is 55. Several options for
payments are available and all require the agreement of the
participant. Benefits are recorded by the Plan when paid.
4. INVESTMENTS AND INVESTMENT INCOME
All investments, except $2,563,034 in investments which are held by
Westwood Trust Company, an affiliate of SWS Group, Inc., are held by
Charles Schwab Trust Company. The Company maintains a self-directed plan
with separate, segregated accounts and each participant's income or loss,
including market fluctuations, is applied directly to the participant's
account.
Investments are carried at fair value based on quoted market prices. The
fair values of all securities held at December 31, 2001 and 2000 are based
on quoted market prices. Purchases and sales of securities are recorded on
a settlement-date basis. Interest income is recorded as earned and
dividends are recorded on the ex-dividend date.
Investments greater than 5% of net assets available for benefits at
December 31, 2001 and 2000 are as follows:
2001 2000
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Southwest Securities 401(k) Stock Fund $ * $5,124,755
Schwab Value Advantage Fund 3,304,782 3,390,885
Money market funds, Schwab 7,967,987 6,697,767
*Did not meet 5% threshold for reporting for this period.
The Plan has investments in parties-in-interest (including SWS Group, Inc.)
with market values of $15,240,389 and $22,083,079 at December 31, 2001 and
2000, respectively. During the year ended December 31, 2001, the Plan
received dividends from investments in SWS Group, Inc. of approximately
$55,000.
During the year ended December 31, 2001, the Plan's investments, including
those bought, sold and held during the year, appreciated (depreciated) in
value as follows:
2001
------------
Common stock $ 186,207
Mutual funds (1,479,299)
Other (140)
------------
Net depreciation in fair value of investments $(1,293,232)
============
6
SWS GROUP
401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
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Included in net appreciation in common stock is depreciation on investments
in SWS Group, Inc. of approximately $86,800 for the year ended December 31,
2001.
5. LOANS TO PARTICIPANTS
As allowed by the Plan, loans have been made to numerous participants. Loans
are limited to a maximum term of five years except when the loan is used to
acquire the principal residence of the participant. Loan amounts are limited
to 50% of the respective participant's nonforfeitable accrued benefit at the
time of the loan less any outstanding loans up to a maximum total of
$50,000. Interest rates ranged from 4.75% to 10.5% at December 31, 2001.
6. TAX STATUS
The Company has modeled its Plan on a prototype plan for which a favorable
tax determination letter has been received from the Internal Revenue
Service. The Plan has not applied for a determination letter. The Plan
administrator believes that the Plan is currently designed and being
operated in compliance with the applicable requirements of the Internal
Revenue Code. Therefore, the Plan was qualified and the related trust was
tax-exempt as of the financial statement date.
7. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company may terminate
the Plan at any time subject to the provisions of ERISA. In the event of
Plan termination, the rights of each participant to the amount in his or her
account on the date of such termination shall be fully vested and
nonforfeitable.
8. SUBSEQUENT EVENT
In 2002, the Plan was amended to include the language that complies with
certain provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001. The changes modified the top-heavy rules and increased the annual
eligible compensation and benefit limits.
7
SWS GROUP
401(K) PROFIT SHARING PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR AT DECEMBER 31,
2001
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Identity of issuer, borrower, lessor or similar party and
description of investment including maturity date, Current
rate of interest, collateral, par or maturity value value
-------------------------------------------------------------------------- ------------
* Schwab Value Advantage Fund $ 3,304,782
* Southwest Securities 401(k) Stock Fund 1,861,611
Self-directed brokerage accounts 41,786,215
Alliance Premier Growth Fund 1,407,632
* Gabelli Westwood Balanced Fund 901,862
* Gabelli Westwood Equity Fund 959,564
* Gabelli Westwood Realty Fund 27,880
* Gabelli Westwood Small Cap Equity RET Fund 781,249
Manager's Special Equity Fund 702,184
Pimco Total Return FD Class D Fund 453,005
* Schwab Markettrack Balanced Fund 230,452
* Schwab Markettrack Conservative Fund 188,519
* Schwab Markettrack Growth Fund 350,909
* Schwab S&P 500-Investors SHS Fund 1,575,456
Scudder International Fund 737,481
Weitz Value Portfolio 1,336,526
* SEI Government Securities Principal 46,942
* Westwood Trust Fourth Wave Fund-EB Fund 482,442
* Westwood Trust Mid Cap Equity-EB Fund 336,497
* Westwood Trust Small Cap Equity-EB Fund 858,349
* Westwood Trust High Yield Bond-EB Fund 450,505
* Westwood Trust Real Estate Invest Trust-EB Fund 141,389
* Westwood Trust International Equity-EB Fund 59,949
* Westwood Trust Large Cap Equity-EB Fund 93,405
* Westwood Trust Core Investment Grade Bond-EB Fund 93,556
* Loans to Participants,
Interest Rates 4.75% to 10.5% due through 2025 2,495,071
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Total assets held for investment purposes $ 61,663,432
============
*Designates a party in-interest.
Note: Cost information has been omitted as all investments are
participant-directed.
8
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrator has duly caused this annual report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE SWS GROUP
401(K) PROFIT SHARING PLAN
Date: June 26, 2002 By: /s/ Jim Zimcosky
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Jim Zimcosky
Director - Human Resources
Plan Administrator