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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

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333 West 11th Street
Kansas City, MO 64105

DST SYSTEMS, INC.
NOTICE AND PROXY STATEMENT
for
Annual Meeting of Stockholders

Tuesday, May 11, 2010

YOUR VOTE IS IMPORTANT

You have received information on casting your vote. We began delivering annual meeting materials, or Notice of Internet Availability of Proxy Materials, on or about March 22, 2010.

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DST Systems, Inc.
333 West 11th Street
Kansas City, Missouri 64105

        

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Proxy Statement
and
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

        

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        We invite you to attend our annual meeting of stockholders.

        Stockholders will consider and vote upon the following matters:

•

Election of the Company's three nominees for Director, each to serve a three-year term expiring upon the 2013 Annual Meeting of Stockholders or until a successor is duly elected and qualified



•

Approval of 2005 Equity Incentive Plan Performance Goal Provisions



•

Ratification of the Audit Committee's Selection of Independent Registered Public Accounting Firm

        The record date for determining which stockholders may vote at this meeting or any adjournment is March 12, 2010. We will provide the recordholder list during the annual meeting if any stockholder wishes to examine it for any purpose pertaining to the meeting. We will make the list available during regular business hours at the above address for the ten-day period before the annual meeting.

        Please vote your shares, regardless of whether you plan to attend the meeting, by following the voting instructions. Whether you vote by telephone, through the Internet, or by mail, you are authorizing the Proxy Committee (and/or the trustee of DST benefit plans or any broker or nominee through which you hold shares) to vote as you specify on the three proposals. You are also authorizing them to vote in their discretion on other proposals a stockholder properly brings before the meeting. If you hold shares on behalf of an estate or corporation, in some other legal capacity or jointly, you confirm by voting that you have the authority to vote on behalf of all owners of the shares.

        If you need assistance at the annual meeting because of a disability, please let us know by May 3, 2010, at (816) 435-8655.

        The date of this Notice is March 22, 2010.

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DST Systems, Inc.
333 West 11th Street
Kansas City, Missouri 64105

        

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PROXY STATEMENT

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PROXY STATEMENT

        On or about March 22, 2010, we began delivering to you, our stockholders of record at the close of business on March 12, 2010 (our record date), this Proxy Statement for our 2010 annual stockholders' meeting and our Annual Report on Form 10-K for the fiscal year ended December 31, 2009. We mailed full sets of the materials to our stockholders of record, other than stockholders of record who have consented to receive the materials electronically and employees with workplace email accounts. We delivered a Notice of Internet Availability of Proxy Materials to our stockholders holding through brokers or other nominees.

        We will hold the annual meeting at 10:30 a.m. Central Daylight Time on Tuesday, May 11, 2010, at our principal executive offices, 333 West 11^th Street, 3^rd Floor, Kansas City, Missouri 64105. At the meeting, our Board of Directors will present three proposals and solicit your vote on them. You may vote on the proposals if you own our common stock, par value $.01 per share, on the record date. We have listed our common stock, our only class of voting securities ("DST stock"), on the New York Stock Exchange.

        Our Board asks that you vote "for" the three proposals. We do not know of any other matters on which you will vote at the annual meeting. Recordholders may appoint the Proxy Committee as their proxy. The Proxy Committee members are Thomas A. McDonnell, Chief Executive Officer, Kenneth V. Hager, Chief Financial Officer, and Randall D. Young, General Counsel and Corporate Secretary. The Proxy Committee will vote your shares as you direct.

        This Proxy Statement contains a separate report by each of the Audit Committee and Compensation Committee of our Board. The two Board committee reports are "furnished," not "filed," for Securities Act of 1934 purposes. Within Board committee reports, "we," "ours," "us" or similar terms mean the committee giving the report. Otherwise, such words or "the Company" mean DST Systems, Inc. ("DST") and its subsidiaries.

        This Proxy Statement references the Corporate Governance Guidelines, the Business Ethics and Legal Compliance Policy, and the charters of the Board's Audit Committee, Compensation Committee, and Corporate Governance/Nominating Committee ("Governance Committee"). You can access each of these documents at our website, www.dstsystems.com. We will furnish you a copy of any of these documents without charge, if you request in writing to:

DST Corporate Secretary
333 W. 11^th Street, 5^th Floor
Kansas City, MO 64105

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PROPOSAL 1
ELECT DIRECTORS

        Our Bylaws divide our Board into three classes with class terms expiring each year in rotation. At each annual meeting, stockholders elect a class of directors for a full three-year term. Our Board asks you to elect A. Edward Allinson, Michael G. Fitt, and Robert T. Jackson for a three-year term expiring in 2013 or until their successors are elected and qualified. They are willing and able to continue serving as directors.

        Mr. Allinson has served on our Board during two separate periods aggregating 28 years. Mr. Fitt has served on our Board for over 14 years. Mr. Jackson has served on our Board for approximately two and one-half years. All three are retired from executive positions at other companies, as described in the Service and Qualifications section beginning at page 12.

        If any Board nominee should become unavailable for election, the Proxy Committee will vote for another nominee whom the Governance Committee will propose. Alternatively, the Board may reduce the number of directors to be elected at the meeting.

OUR BOARD RECOMMENDS THAT
YOU VOTE "FOR" THE ELECTION OF
MESSRS. ALLINSON, FITT, AND JACKSON

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PROPOSAL 2
APPROVE 2005 EQUITY INCENTIVE PLAN PERFORMANCE GOAL PROVISIONS

        In 2005, our Board adopted and our stockholders approved the DST Systems, Inc. 2005 Equity Incentive Plan, which we refer to in this Proxy Statement as the "Plan," or the "2005 Plan" and which was previously known as the 1995 Stock Option and Performance Award Plan (the "1995 Plan"). The 2005 Plan is an omnibus equity compensation plan that provides the Company, its subsidiaries and joint ventures the means by which to grant annual and long-term incentive compensation to key employees. The types of awards available under the Plan are annual incentive awards, stock options, stock appreciation rights ("SARs"), restricted stock, performance units in the form of cash or stock, restricted stock units ("RSUs"), deferred stock, dividend equivalents, anniversary service awards, and substitute awards, as further described below.

        In May 2005, we obtained stockholder approval of the 2005 Plan, in part for reasons related to Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations promulgated thereunder. Code Section 162(m) imposes a $1 million limit on the deductibility of certain compensation but allows an exception to such limit for qualified performance-based compensation ("162(m) Exception"). The stockholder approval we obtained in 2005 has allowed compensation related to awards under the Plan to qualify for the 162(m) Exception. Code Section 162(m) allows certain forms of performance-based compensation to continue qualifying for the 162(m) Exception only if stockholders approve certain material terms of the performance-based compensation every five years. Five years have elapsed since stockholder approval and we are resubmitting performance goal terms and conditions to stockholders. Approval will allow us to continue applying the 162(m) Exception to our performance-based compensation.

        On February 23, 2010, our Board amended and restated the 2005 Plan to make certain updates for which stockholder approval was not required. The 2010 amendments included updating the performance measures and increasing the maximum annual cash amount that may be paid under the Plan to any employee whose compensation is subject to Code Section 162(m). We are requesting you to approve the material terms of the business criteria and performance measures under which incentive compensation is to be paid (the "Performance Measures"), as well as the Plan provisions on participant eligibility for awards and limits that annually apply to participant awards (collectively, "Performance Goal Provisions"). Our Board believes that, due to the 162(m) Exception, stockholder approval of the Performance Goal Provisions will potentially increase our after-tax per share earnings.

PERFORMANCE GOAL PROVISIONS

        Participant Eligibility.    The Compensation Committee may select employees and consultants of DST and its subsidiaries and joint ventures to participate in the Plan. As of February 26, 2010, approximately 8,900 domestic employees were employed more than 20 hours per week and therefore eligible to receive anniversary service awards. Approximately 700 persons had outstanding stock options, and approximately 340 employees were at management levels currently considered by the Committee as eligible to receive other types of awards under the Plan, and most of these optionees and managers are included in the number of persons eligible to receive anniversary service awards.

        Performance Measures.    At the discretion of the Compensation Committee, any of the 2005 Plan awards described below may be contingent on attainment of one or more of the following Performance Measures:

•

Earnings measures, including net earnings on either a LIFO, FIFO or other basis



•

Operating measures, including operating income, operating earnings or operating margin



•

Income or loss measures, including net income or net loss

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Cash flow measures, including cash flow or free cash flow



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Revenue measures



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Reductions in expense measures



•

Operating and maintenance cost management and employee productivity measures



•

Company return measures, including return on assets, investments, equity, or sales



•

Growth or rate of growth of any of the Performance Measures set forth herein



•

Share price (including attainment of a specified per-share price during the performance period, growth measures and total stockholder return or attainment of a specified share price for a specified period of time)



•

Strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market share, market penetration, business expansion targets, project milestones, production volume levels and cost targets



•

Accomplishment of, or goals related to, mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions



•

Achievement of business or operational goals such as market share, business development and/or customer objectives.

        Where applicable, Performance Measures will be expressed in terms of attaining a specified level of the particular criteria or attaining a specified increase (or decrease) in the particular criteria and may be applied to the performance of the Company as a whole, to one or more affiliates, or to a department, unit, division or function of the Company or an affiliate or to an employee, all as determined by the Compensation Committee. The Committee determines the terms, conditions and limitations applicable to any award that is subject to the attainment of the Performance Measures. Performance Measures may include levels of performance at which varying amounts and types of awards will be made or specified vesting will occur. The achievement of Performance Measures will be subject to certification by the Committee. The Committee has the authority to adjust the Performance Measures, provided that the Committee may adjust the degree of attainment of the Performance Measures only before the end of a performance period and may not make an adjustment that would result in additional compensation for any employee whose compensation could be non-deductible under Code Section 162(m). In no event will the performance period for any performance-based equity award be less than one year.

        Annual Award Limits.    The annual limit in our Plan for cash awards to an individual participant is 600% of base salary (up to a maximum of $2,000,000 of base salary), or $12,000,000. Current annual cash awards do not approach this limit for any Plan participant. The limit we are submitting for your approval is higher than the $6,000,000 cash award limit (600% of base salary (up to a maximum of $1,000,000 of base salary)) approved by stockholders in 2005. The Board amended the limit so that the Compensation Committee has the discretion and flexibility to make cash awards as it deems appropriate, even if current executive officer base salary or incentive opportunity levels increase. Increases could occur for inflationary or benchmarking reasons or for purposes of executive officer recruitment, retention or performance. In addition to the annual cash award limit, the maximum number of shares with respect to which an individual may be granted awards in one year is 800,000. This maximum number of shares limit has not changed from the limit approved by stockholders in 2005.

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OTHER PRINCIPLE PLAN FEATURES

        Shares Authorized under the Plan.    A total of 4,000,000 shares of DST stock are reserved for awards under the Plan, plus shares remaining under the 1995 Plan; plus shares becoming available for reasons such as award forfeiture or lapse or, in certain circumstances, share withholding for taxes; plus any shares required to satisfy substitute awards.

        The maximum number of shares could increase or decrease based on stock splits, the effects of corporate transactions, and other significant events. As of February 26, 2010, 4,811,680 shares of DST stock remain available for issuance under the Plan.

        Plan Benefits.    Future benefits under the Plan are not currently determinable. The benefits to any officer, employee or consultant from future equity awards will not increase by reason of approval of this proposal. The Compensation Committee will determine whether to make future awards and vesting and other terms and conditions that will apply to any such awards. Whether future awards will be made will depend on Committee action. The value of any future equity awards will ultimately depend on vesting and on the future price of DST stock, among other factors. For additional details on the Plan awards granted as compensation for and during 2009, please refer to the named officer compensation tables beginning at page 50 of this Proxy Statement.

        Administration.    The Compensation Committee, which is comprised entirely of independent directors, or another committee of our Board that meets specified independence criteria, administers the Plan. The Committee may interpret and administer the Plan, and, subject to certain limitations contained in the Plan, may establish, amend, suspend or waive rules relating to the Plan. The Committee may make any other determination and take any other action that may be necessary or advisable for administration of the Plan. Except as otherwise expressly provided in the Plan, all determinations, designations, interpretations, and other decisions of the Committee are final, conclusive and binding. All determinations of the Committee under the Plan shall be made only if there is a quorum for Committee action and by a majority of members present but no less than two members.

        Transferability.    Unless otherwise determined by the Compensation Committee, awards granted under the Plan are not transferable except by will or the laws of descent and distribution. To the extent allowed by the Committee or as may be provided in an award agreement, an award (other than an Incentive Stock Option) may be transferred to certain family members as specified in the Plan.

        Change in Control.    If there is a change in control (as defined in the Plan), the Compensation Committee may provide for the cash-out of any award, adjust the award as appropriate to reflect the change in control, or cause the award to be assumed or a substitute award to be granted by the survivor. Except where an award agreement or other agreement approved by the Committee addresses the effect of a change in control or termination following a change in control, if DST (or its successor) were to terminate a grantee's employment (other than a termination for cause) within the three-year period following a change in control, all awards held by such grantee will become fully vested or exercisable and any performance goals relating to outstanding awards are deemed satisfactorily completed without any action required by the Committee.

        Amendment, Modification, and Termination.    Our Board may amend or terminate the Plan without stockholder approval unless required by any federal or state law or regulation or the rules of any stock exchange on which DST stock is traded. However, unless permitted by the Plan or the terms of the award, no amendment or termination may materially adversely affect any outstanding award without the grantee's consent.

        Effective Date; Term of the Plan.    The effective date of the 2005 amendment and restatement to the 1995 Plan is May 10, 2005 and the effective date of this proposal if approved would be May 11, 2010. No awards may be granted under the Plan after May 9, 2015, but awards made before that date

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may continue to be exercisable and/or to vest after that date, and will otherwise be governed by the terms of the Plan.

AWARDS UNDER THE PLAN

        Subject to Plan limits, the Compensation Committee determines the size of awards. The Committee may grant shares of DST stock and the following types of awards, any or all of which may be made contingent on continued employment and/or achievement of performance-based criteria:

        Annual Incentive Awards.    The Committee must designate individuals eligible for an annual incentive award within the first 90 days of a year, with certain exceptions. The Committee will establish performance goals from among the performance measures listed above and will establish the threshold and maximum bonus opportunities for each participant for the attainment of specified levels of performance goals. Performance goals and bonus opportunities may be weighted for different factors and measures. The Committee will certify the degree of attainment of performance goals within 90 days after the end of each year, and annual incentive awards will be paid as soon as administratively practicable after the certification.

        Options.    The Committee may grant non-qualified and incentive stock options. In addition, the Committee may permit eligible individuals to elect to receive, in lieu of all or a portion of salary or bonus, options having a market value (determined under the Black-Scholes option pricing method or other method determined by the Committee) equal to the amount of salary or bonus foregone. Options are subject to the terms and conditions, including vesting conditions, set by the Committee. Incentive stock options are subject to further statutory restrictions as set forth in the Plan. The term of an option will generally be no longer than ten years, although the Committee may set a longer or shorter term. Each option gives the grantee the right to receive a number of shares of DST stock upon exercise of the option and payment of the option price. The option price may be paid by cash (including cash obtained through a broker selling the shares acquired on exercise) or, if approved by the Committee, shares of DST stock or restricted DST stock. Repricing of options is prohibited unless approved by our stockholders.

        Stock Appreciation Rights.    The Committee may grant an SAR either alone or in addition to other Plan awards, including in connection with an option. Subject to the terms of the Plan, a grantee will have the right to receive upon exercise of an SAR an amount equal to the excess of the fair market value of one share of DST stock on the date of exercise, over the strike price, which in no event may be less than the fair market value of a share of DST stock on the SAR grant date. Payment may be made in cash, DST stock, other awards or other property, in any combination.

        Restricted Stock.    Restricted stock is DST stock that is forfeitable until the restrictions lapse. The Committee may impose time-based restrictions or performance-based restrictions or both on restricted stock. Time-based restrictions may lapse over time, but (other than time-based restrictions following the achievement of specific performance goals) may not lapse entirely prior to the third anniversary of the grant date except for death, disability, retirement, change in control or certain terminations of employment following a change in control.

        Performance Units.    Performance units are cash or stock awards that are payable at the end of a performance period established by the Committee, in an amount or number that depends on the extent to which the performance goals established by the Committee are satisfied.

        Restricted Stock Units and Deferred Stock.    An RSU is the right to receive a share of DST stock upon satisfaction of conditions specified by the Committee, which may be time-based or performance-based. Deferred stock is the right to receive shares of DST stock upon the expiration of a specified deferral period. The Committee may grant RSUs and deferred stock on a stand-alone basis or pursuant

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to the election of a grantee to defer payment or distribution of certain awards. Time-based restrictions may lapse over time, but (other than time-based restrictions following the achievement of specific performance goals) may not lapse entirely prior to the third anniversary of the grant date except for death, disability, retirement or change in control or certain terminations of employment following a change in control.

        Dividend Equivalents.    The Committee may at its discretion grant dividend equivalents with restricted stock, RSUs and stock-based performance units. Dividend equivalents will only be made with respect to other outstanding awards and cannot be granted as a stand-alone right without any underlying award. Dividend equivalents are subject to the same restrictions and other terms as apply to the underlying award with respect to which such dividend equivalent is credited, and in no event will the payment of the dividend equivalent be made before the underlying award is payable.

        Anniversary Service Awards.    Anniversary service awards consist of shares granted as of the end of a calendar quarter to employees of DST and designated affiliates who have attained a number of years of service in such quarter that is divisible by five and yields a whole number. The number of shares is equal to the number of the individual's years of service, e.g., five shares for five years of service, ten shares for ten years of service, etc. The Chief Executive Officer or his delegate administers the anniversary service award program, and grants are automatic except that the Committee administers such program and grants such awards to certain participants required to file stock ownership reports with the Securities and Exchange Commission. Such awards are accompanied by a cash payment (a gross-up) intended to be applied toward applicable taxes on the service awards.

        Substitute Awards.    The Committee may grant substitute awards in replacement of stock and stock-based awards held by current and former employees or non-employee directors of, or consultants to, another business that is, or whose stock is, acquired by DST or an affiliate in connection with a corporate transaction.

U.S. TAX CONSEQUENCES

        This summary is based on U.S. federal income tax laws in effect as of the date hereof. The summary does not constitute tax advice and does not address possible state, local or foreign tax consequences.

        The grant of an option will have no immediate tax consequences for the grantee or DST. Upon exercising a non-qualified stock option, the recipient will recognize ordinary income in an amount equal to the difference between the exercise date fair market value of DST stock and the option exercise price, and we will be entitled to a deduction in the same amount. In general, if applicable holding period requirements are satisfied, the recipient will have no taxable income upon the exercise of an incentive stock option (except that the alternative minimum tax may apply), and we will have no deduction. Upon a disposition of shares acquired through the exercise of an option, the difference in the amount received on the disposition over the participant's basis will be taxed as a capital gain or loss, either short-term or long-term, depending on how long the shares were held and on whether they were acquired through an incentive or non-qualified stock option exercise. Generally, there will be no tax consequences to the Company in connection with a disposition of shares acquired on exercise of an option, except that we may be entitled to a deduction upon disposition of shares acquired on exercise of an incentive stock option before the applicable holding period has been satisfied.

        Under current rulings of the Internal Revenue Service, a recipient who pays the exercise price for an option with DST stock does not recognize gain or loss with respect to the disposition of the stock transferred in payment of the option price. However, the recipient normally will recognize ordinary income upon the exercise of a non-qualified stock option in this manner. The recipient's basis in a number of acquired shares equal to the number surrendered will be the same as the recipient's basis in

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the surrendered shares, and the recipient's basis in any additional option shares will be equal to the amount of income the recipient recognizes upon the exercise of the option.

        Generally, no taxes are due when an award of restricted stock is made, but the award becomes taxable when it vests or becomes transferable, unless the recipient elects, under Code Section 83(b) within 30 days of receiving the grant, to be taxed in the year the restricted stock is granted. Income tax is paid on the value of the stock at ordinary rates when the award vests or becomes transferable (or, if a Section 83(b) election is made, at the time of grant), and then at long- or short-term capital gains rates when the shares are sold. We are entitled to a deduction (subject to the limitations of Code Section 162(m)) at the time and in the amount the recipient recognizes income.

        Generally, no taxes are due when an award of RSUs is made, but the award becomes taxable when it vests. In addition, we are entitled to a deduction (subject to the limitations of Code Section 162(m)) at the time and in the amount the recipient recognizes income. A recipient may not make a Section 83(b) election for RSUs. Rules relating to the timing of payment of deferred compensation under Code Section 409A are applicable to RSUs, and any violation of Code Section 409A could trigger interest and penalties applicable to the recipient.

        Upon the granting of an anniversary service award, the recipient recognizes ordinary income in an amount equal to the value of the shares delivered in satisfaction of the award. Any additional cash payment accompanying the service award is also ordinary income to the recipient. DST is entitled to a deduction (subject to the limitations of Code Section 162(m)) at the time and in the amount the recipient recognizes income.

        Awards that are considered to be deferred compensation and that comply with the rules under Code Section 409A with regard to the timing and acceleration of payment and the timing of elections to defer compensation are not taxed until the award is paid or distributed. In addition, we are entitled to a deduction (subject to the limitations of Code Section 162(m)) at the time and in the amount the recipient recognizes income. Any violation of Code Section 409A could trigger a 20% penalty tax to be paid by the grantee plus interest and other penalties applicable to the grantee.

        To qualify for the 162(m) Exception, options, restricted stock, RSUs, and other awards must be granted under the Plan by a committee consisting solely of two or more "Non-Employee Directors" (as defined under Code Section 162(m) regulations) and satisfy the Plan's limit on the total number of shares or total dollar amount that may be awarded to any one participant during any year. In addition, for awards other than options to qualify, the grant, issuance, vesting or retention of the award must be contingent upon satisfying one or more of the Performance Measures. However, the Compensation Committee may weigh long-term strategic objectives against tax efficiency and award non-deductible compensation when it deems such grants to be in the Company's best interest.

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EQUITY COMPENSATION PLAN INFORMATION

        The following table provides information as of December 31, 2009 about DST stock that may be issued under the Plan upon the exercise of options, warrants and rights, as well as other year-end information about our equity compensation plans.

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        The following table lists all options granted to the individuals and groups indicated below since the adoption of the 1995 Plan whether exercised, lapsed, or forfeited. The table shows options granted to non-employee directors, who received such options under the 1995 Plan but since the effective date of the 2005 amendment have been ineligible to receive any awards under the 2005 Plan. The option awards listed below for the covered executives and directors include the option awards listed in the compensation tables beginning at page 50 of this Proxy Statement and are not additional awards. As of February 26, 2010, the closing price of DST stock on the New York Stock Exchange was $38.43 per share.

OUR BOARD RECOMMENDS THAT
YOU VOTE "FOR" THE 2005 EQUITY INCENTIVE PLAN
PERFORMANCE GOAL PROVISIONS

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PROPOSAL 3
RATIFY THE AUDIT COMMITTEE'S SELECTION
OF PRICEWATERHOUSECOOPERS

        The Audit Committee has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2010. Our Board requests stockholders to ratify such selection.

        PricewaterhouseCoopers will:

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audit our consolidated financial statements and internal control over financial reporting



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review certain reports we will file with the Securities and Exchange Commission



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provide you and our Board with certain reports



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provide such other services as the Audit Committee and its Chairperson from time to time determine.

        PricewaterhouseCoopers served as our independent registered public accounting firm for 2009, performing professional services for us. We expect representatives of PricewaterhouseCoopers to attend the annual meeting. We will allow them to make a statement if they desire and to respond to appropriate questions. The Audit Committee may retain another independent registered public accounting firm at any time during the year if it concludes that such change would be in your best interest.

OUR BOARD RECOMMENDS THAT
YOU VOTE "FOR" THE RATIFICATION OF
THE AUDIT COMMITTEE'S SELECTION
OF PRICEWATERHOUSECOOPERS

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THE BOARD OF DIRECTORS

SERVICE AND QUALIFICATIONS

        DST and Public Company Board Service.    During 2009, the Company employed Thomas A. McDonnell and Thomas A. McCullough as executive officers. Mr. McCullough retired as an executive officer on December 31, 2009 and we do not employ the remaining directors listed in the table.

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(1)

Their terms will expire in 2013 if stockholders elect them at the 2010 annual meeting.

(2)

Within the past five years, Messrs. Allinson and Fitt were also directors of Kansas City Southern and Mr. McDonnell was a director of Blue Valley Ban Corp.

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        Principal Occupations and Qualifications.    The Board has concluded that each of its members is qualified to serve as a director due to the value of the following experiences, qualifications, attributes and skills:

A. EDWARD ALLINSON

        Mr. Allinson was Executive Vice President of State Street Bank and Trust Company ("State Street Bank") and Executive Vice President of State Street Corporation ("State Street"), the parent company of State Street Bank, from March 1990 through December 1999. State Street Corporation is a financial services corporation that provides banking, trust, investment management, global custody, administration and securities processing services. From December 1999 through his retirement in October 2000, Mr. Allinson served as Chief Executive Officer and Chairman of the Board of EquiServe Limited Partnership, a stock transfer agent for publicly listed corporations which became, for a time, our wholly-owned subsidiary.

        Mr. Allinson's extensive background as an executive in the financial services industry, the computer and data processing industry and transfer agency operations are uniquely suited to our businesses. He was one of the founders of Boston Financial Data Services ("Boston Financial"), our full service transfer agency joint venture with State Street. He therefore has a deep understanding of our core transfer agency operations and related service and technology offerings, as well as our customer base. He also brings to our Board skills related to our international businesses, which he developed through his experiences at both State Street Bank and another major national bank. He contributes to our Board his past experience as a director with Kansas City Southern, which owned all of our shares prior to our initial public offering in 1995. His long service as our director and as a director of our previous parent gives him invaluable insights into our history and growth and a unique perspective of the strategic direction of our businesses.

GEORGE L. ARGYROS

        Except during his ambassadorship from November 2001 to November 2004, Ambassador Argyros has served from 1968 as Chairman and Chief Executive Officer of Arnel & Affiliates, a prominent West Coast diversified investment company, and from 1987 as a general partner and the principal financial partner in Westar Capital, a private investment company.

        Ambassador Argyros' experiences operating a diversified investment company and a large real estate investment portfolio are helpful to Board evaluation of our diversification transactions and real estate related operations. Having owned and operated companies for more than 40 years, Ambassador Argyros also has experiences in banking, manufacturing, and corporate restructuring. He brings to our Board insight into various management, financial and governance matters developed by serving on numerous boards, both private and public. He has extensive experience with political and international matters as a result of his service as a United States ambassador.

MICHAEL G. FITT

        Mr. Fitt was Chief Executive Officer and Chairman of GE Employers Reinsurance Corporation, a reinsurance company that has been acquired by the Swiss Re Group, from 1980 through 1992 and its President from 1979 through October 1991. He retired from GE Employers in 1992. Mr. Fitt's role as our Lead Independent Director is to fulfill the responsibilities described on page 17.

        Mr. Fitt's past experiences, including a leadership position for one of the largest reinsurance companies in the world as well as other executive positions in a major financial company, provide the Board with seasoned judgment in the evaluation of our senior executives and management of the important relationships between the Board and our senior executives. His experience for over 40 years in the insurance industry also makes him a valuable resource for the Board in fulfilling its risk

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oversight function. From his membership on various profit and not-for-profit boards, he brings to the Board knowledge of a variety of industries and of the challenges of international operations. His knowledge of finance, management and governance gained through prior senior executive roles has contributed to his effectiveness as Lead Independent Director and as our former Audit Committee Chairperson. He also contributes to our Board his past experience as a director with Kansas City Southern, which owned all of our shares prior to our initial public offering in 1995, and he has served on our Board since our initial public offering in 1995.

ROBERT T. JACKSON

        Mr. Jackson retired in 2006 as the principal financial officer and an administrative officer of American Century Investments, an investment management company. Prior to joining American Century in 1995, Mr. Jackson held various leadership positions in Kemper Corporation, a financial services company.

        Mr. Jackson's experience in the financial services industry spans more than 30 years. He brings extensive knowledge of the mutual fund and financial services industry served by our core business operations. He uses his financial experience as our current Audit Committee Chairperson and as a member of the Compensation Committee. He has led operations and technology functions and also brings to the Board knowledge of the life insurance and brokerage industries, both of which are important to the growth of our financial services and print-mail businesses. He is the newest member of our Board and brings a fresh perspective to Audit Committee communication with the Finance Department and internal and external auditors and to Board oversight and understanding of our business strategies.

THOMAS A. MCCULLOUGH

        Mr. McCullough served as an Executive Vice President from April 1987 through December 2009 and as our Chief Operating Officer from May 2001 through June 2009. He retired from service as an executive of the Company at the end of 2009. His responsibilities included full service mutual fund processing, remote service mutual fund client servicing, Automated Work Distributor products, information systems, product sales and marketing, and data centers. From September 2000 through 2003, he served as Chief Executive Officer and from September 2000 through June 2009 he served as Chairman of Boston Financial, our joint venture with State Street. He continues to serve on the Boston Financial Board of Directors. Boston Financial performs shareowner accounting services for mutual fund companies and remittance and proxy processing, teleservicing and class action administration services.

        Having recently retired after nearly 23 years of DST service, Mr. McCullough brings to the Board hands-on experience with the challenges and nuances of our financial services and software businesses and in-depth knowledge of our print-mail, health care and international businesses. He has participated extensively in the selection, leadership and development of our executive officers. The director and officer positions he has held with our joint venture, Boston Financial, give him important insight into our U.S. and international joint venture relationships. His experience as a partner in the consulting division of a national accounting firm prior to joining our company has given him significant knowledge of financial and internal audit matters and exposure to strategic issues faced by a number of different companies in a variety of industries. His service on the board of a company in the health care industry adds important knowledge to the Board's understanding of our health care service operations, and his service on other companies' boards of directors provides a valuable perspective to the Board on governance matters and effective relationships with executive management.

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THOMAS A. MCDONNELL

        Mr. McDonnell has served as our Chief Executive Officer since October 1984, and as our President from January 1973 through June 2009 (except for a 30-month period from October 1984 to April 1987). He served as Treasurer from February 1973 to September 1995.

        Mr. McDonnell has been with DST since inception and is considered one of the principal founders of the Company. He has led our company into its core financial services and software businesses and into our international and various diversified business ventures. He has a unique understanding of the interrelationship of such businesses. The Board has determined that he sets a tone for ethical behavior, represents us well with clients and the communities in which we have a significant presence, and stewards our resources with proficiency. He has a solid business education that has enabled his leadership of our finance and human resources functions. As a member of numerous boards, he has experienced various styles of board oversight and interplay with executive management. These experiences enhance his collaboration with our Board and his skill at providing our directors with the information and understanding needed to serve us well.

WILLIAM C. NELSON

        In March 2001, Mr. Nelson joined George K. Baum Holdings, Inc., an investment banking and holding company, as Chairman, George K. Baum Asset Management. In March 2000, Mr. Nelson retired from his positions as President, Kansas City Region, of Bank of America, N.A. and Chairman of Bank of America Mid-West. Mr. Nelson had served since June 1988 as an executive officer of certain banks acquired by Bank of America.

        Mr. Nelson has had over 40 years experience in the banking industry. His leadership of a Kansas City bank resulted in significant and measurable improvements, and that experience has added to the Board's ability to evaluate various strategic initiatives and challenges in our businesses. His broad knowledge of finance, lending and credit markets is valuable to the Board's evaluation of liquidity and credit matters. He contributes to the Board his knowledge of expense management, risk evaluation and regulatory compliance, as well as client relationship, international business, human resources, and acquisition integration management. He serves as a director, chairman or advisor of other public, private and not-for-profit organizations, which is helpful to his role as Chairperson of the Governance Committee. He has served on our Board since our initial public offering in 1995, which gives him invaluable insights into our history and growth and the strategic direction of our various businesses.

TRAVIS E. REED

        Mr. Reed is founder of Reed Investment Corporation, which acquires equity interests in various businesses. He has served as its President since 1977.

        Mr. Reed's experiences over a period of 45 years in the financial industry as an investor qualify him to serve on our Board. As an entrepreneur, he brings a unique perspective to the challenge of balancing risk and rewards faced by our businesses and in acquisition transactions. He has gained experiences valuable to our Board by serving as a founder, director and/or officer of two publicly-held corporations and one privately-held corporation. His knowledge of complex financial arrangements, regulatory compliance, mergers and acquisitions, and markets and trading activities is helpful to the Board in evaluating the merits of strategic initiatives and acquisitions and addressing strategic challenges. His service at the U.S. Department of Commerce in a senior leadership role involving both domestic and international businesses brings to the Board an understanding of the impact of national governmental initiatives, policies and regulation on our businesses. He currently chairs the board audit committee of a major university, which has provided our Audit Committee with valuable perspective in managing its relationship with our independent auditors and performance of its financial reporting oversight function.

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M. JEANNINE STRANDJORD

        Ms. Strandjord is a retired executive of Sprint Corporation (today, Sprint Nextel Corp.), a global communications company. From September 2003 until her retirement in November 2005, she served Sprint as Senior Vice President and Chief Integration Officer. Prior to holding such office she served in various Sprint positions: Senior Vice President of Financial Services (between January 2003 and September 2003); Senior Vice President of Finance for the Global Markets Group (between November 1998 and December 2002); Senior Vice President and Treasurer (from 1990 to November 1998); and Vice-President and Controller (from 1986 through 1989).

        Ms. Strandjord brings over 40 years of experience in financial executive roles with three different industries and a national certified public accounting firm. She has supervised the streamlining of transaction processing, led a successful restructuring, and served as a representative of her company on international joint ventures. Each of these experiences is helpful to our Board and management. She serves on other public company boards and chairs a committee of each. As Chairperson of our Compensation Committee, she draws upon her substantial experience in talent acquisition and her understanding of the financial impact of compensation determinations. She has in-depth knowledge of the most current corporate governance issues through her leadership in governance organizations and contributions to governance panels. As a director of several investment companies, she stays abreast of the various changes in the mutual fund industry, which is the core industry we serve. She has served on our Board since our initial public offering in 1995, which gives her invaluable insights into our history and growth and strategic direction of our various businesses.

COMMITTEES AND MEETINGS

        Our Board met six times in 2009. The Board appoints the members of the three Board committees: the Audit Committee, the Compensation Committee, and the Governance Committee. During 2009, the Audit Committee held four meetings, the Governance Committee held one meeting, and the Compensation Committee held five meetings.

        In 2009, each director attended all regular and special Board meetings and all meetings of Board committees on which the director served. Our directors shall, whenever reasonably practicable, attend annual stockholders' meetings. All directors attended the 2009 annual stockholders' meeting. Non-employee directors, led by Lead Independent Director Michael G. Fitt, meet regularly in private session without management.

LEADERSHIP STRUCTURE AND RISK OVERSIGHT

        Our Bylaws provide that the Board has the discretion but may choose not to appoint a Chairman of the Board. In the absence of such an appointment, the Chief Executive Officer chairs meetings of the Board. Our Board has not elected a Chairman of the Board with the result that our Chief Executive Officer, Thomas A. McDonnell, chairs the Board meetings and discharges the other duties of Chairman.

        The Board has determined that the Board and the Company are presently best led by having a Lead Independent Director as well as having the Chief Executive Officer discharge the duties of a chairman. Having the Chief Executive Officer perform the functions of a chairman provides both accountability to the Board and clear and effective leadership for the Board and the Company, while avoiding any potential for confusion or duplication of efforts between the Chief Executive Officer and a separately appointed chairman.

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        Currently, seven of our nine directors are "independent" as defined by the New York Stock Exchange rules. Our Corporate Governance Guidelines, which are available on our website, provide for a strong and independent lead independent director role. The Board has appointed Michael G. Fitt as Lead Independent Director. The Lead Independent Director performs the following functions and such other functions as the Board may direct:

•

Presiding at executive sessions of the Board at which only non-management or independent directors are permitted to be present, along with other persons invited to attend such sessions by the Lead Independent Director or by consensus of a majority of the non-management or independent directors.



•

Serving as liaison between the non-management or independent directors and either the Chairman of the Board, if one is appointed, or the Chief Executive Officer.



•

Advising the Chairman of the Board, if one is appointed, or the Chief Executive Officer of agenda items for Board meetings suggested by any non-management director.



•

Serving as a point of contact for stockholders wishing to communicate with the Board other than through the Chairman of the Board, if one is appointed, or the Chief Executive Officer.

        Our governance processes, including the Board's involvement in developing and implementing strategy, active oversight of risk, regular review of business results and thorough evaluation of chief executive officer performance and compensation, provide rigorous Board oversight of the Chief Executive Officer as he fulfills his various responsibilities, including discharging the duties of the Chairman.

        The Board, with the assistance of the Audit Committee, has oversight of the Company's risk assessment and risk management, with particular focus by the Board on material corporate governance and business strategy risks. The Audit Committee assists the Board with oversight of the Company's material financial risk exposures, including without limitation liquidity, credit, operational and investment risks, and the Company's material financial statement and financial reporting risks. The Compensation Committee assists the Board with oversight of whether the Company's compensation policies and practices for all employees, including non-executive officers, create risks that are reasonably likely to have a material adverse effect on the Company, and whether the effect of incentive compensation structures for executive officers may cause inappropriate risk-taking. In each case the Board or the Committee oversees the steps Company management has taken to monitor and control such exposures.

        The Chief Executive Officer, by leading Board meetings, facilitates reporting by the Audit Committee and the Compensation Committee to the Board of their respective activities in risk oversight assistance to the Board. The Lead Independent Director, who serves on both committees, suggests risk management topics for Board agenda as he and other non-management directors deem appropriate. He may lead risk management discussions in executive sessions of non-management or independent directors. The Chief Executive Officer's collaboration with the Board allows him to gauge whether management is providing adequate information for the Board to understand the interrelationships of our various business risks. He is available to the Board to address any questions from directors regarding executive management's ability to identify and mitigate risks and weigh them against potential rewards.

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INDEPENDENCE AND ACCESSIBILITY

        Non-Employee Director Independence.    New York Stock Exchange standards, certain securities and tax laws, and our Corporate Governance Guidelines govern the independence of non-employee directors. A majority of our Board must be independent, and directors must be independent for purposes of Board committee service. Our Board has determined the independence for Board service and for service on their respective Board committees of each of Ms. Strandjord, Ambassador Argyros, and Messrs. Allinson, Fitt, Jackson, Nelson and Reed. As a group, they constitute a majority of the Board. To determine independence for service on the Board and the Audit Committee, the Board applied the independence standards contained in our Corporate Governance Guidelines. The Board uses the standards to determine whether a non-employee director has a material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us.

        Under the Guidelines, the Board presumes a non-employee director is independent if the director:

•

during the preceding three years



•

has not been our employee and has no immediate family member (as defined in the Guidelines) whom we have employed as an executive officer, and



•

has not received, and has no immediate family member who has received, more than $120,000 in any 12-month period in direct compensation from us (other than in certain allowable circumstances including serving in his or her capacity as a member of the Board or of any Board committee);



•

is not and has not been within the last three years, and has no immediate family member who is or has been within the last three years, employed as an executive officer by any company on whose compensation committee any one of our current executive officers concurrently serves or served;



•

is not a current employee, and has no immediate family member who is a current executive officer, of:



•

the Company,



•

a company that made payments to or received payments from us for property or services in any of the last three fiscal years in an amount which exceeds the greater of $1 million or 2% of such other company's consolidated gross revenues, as reported in the last completed fiscal year of such company, or



•

a charitable organization to which we contributed in any of the last three fiscal years more than 2% of such charitable organization's consolidated gross revenues or $1 million, whichever is greater;



•

has no immediate family member who is a current partner of a firm that is our internal or external auditor;



•

has no immediate family member who is a current employee of a firm that is our internal or external auditor and personally works on the Company's audit;



•

has no immediate family member who was, within the last three years, a partner or employee of such a firm and personally worked on our audit within that time; and



•

is not a current partner or employee of a firm that is our internal or external auditor, and who was not within the last three years a partner or employee of such a firm and personally worked on our audit within that time.

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        The Guidelines are available on our website as described on page 1. They explain circumstances in which a director can be independent even though one or more of the above circumstances exist.

        The Guidelines provide that a non-employee director is independent for purposes of serving on the Audit Committee only if:

•

we have not paid any consulting, advisory or other compensatory fee to the director other than for serving on the Board or a Board committee; and



•

the director is not considered an affiliated person of the Company under applicable securities regulations.

        Interested Party and Stockholder Communication with Directors.    Interested parties and stockholders may communicate in writing with the Board, Lead Independent Director Michael G. Fitt, any director, or any group of directors such as all non-employee directors or all members of a Board committee. A vendor unaffiliated with DST receives such communications and forwards them to directors. You may direct communications to the directors in care of our vendor:

Clarence M. Kelley and Associates, Inc.
Attention: Todd Dupriest/DST
7945 Flint
Lenexa, Kansas 66214

NON-EMPLOYEE DIRECTOR COMPENSATION

        Only non-employee directors participate in the compensation structure we describe in this section. Thomas A. McDonnell, Chief Executive Officer, and Thomas A. McCullough, Executive Vice President through his retirement at the end of 2009 and our previous Chief Operating Officer, did not receive such compensation for their service on the Board during 2009.

CONSULTANT/MANAGEMENT SUPPORT TO THE COMMITTEE

        The Compensation Committee recommended the current non-employee director compensation structure to our Board in 2003. Prior to recommending the compensation, the Committee engaged compensation consultant Deloitte Consulting LLP ("Deloitte") to assist in evaluating the competitiveness of our non-employee director compensation program.

        In 2003, the Committee charged Deloitte with:

•

recommending a potential peer group and general industry surveys to the Committee Chairperson and reviewing and analyzing the non-employee director compensation data contained in peer proxy statements and surveys



•

developing competitive benchmarks for the fees and equity compensation of non-employee directors, preparing a report to the Committee on the results, and recommending components of non-employee director compensation to the Committee for recommendation to the Board.

        Nine of the 13 companies in this 2003 peer group used to develop non-employee director compensation comprise the peer group that was used to evaluate and update executive officer compensation in late 2007 and early 2008. The Committee did not analyze competitive benchmarks specifically for 2009 director annual retainers and meeting fees, which have not increased since 2003.

        In 2008, the Committee recommended, and the Board approved, an update to the non-employee director compensation program with respect to its equity component. The Committee believes that a transfer restriction period on equity grants to directors does not serve a significant retention or other purpose, and it discontinued such restrictions in connection with annual director grants in 2008.

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Although Deloitte did not conduct a formal survey of director compensation practices, it advised that issuance of unrestricted stock to non-employee directors was within the range of competitive practice.

COMPENSATION STRUCTURE

        In approving the current elements of non-employee director compensation, the Board reviewed Deloitte data and considered Board and committee members' duties and the Compensation Committee's recommendations. The compensation includes annual equity grants, described in note (1) on page 21, and the following cash compensation:

ANNUAL RETAINERS AND MEETING FEES

        To address retirement and tax planning, the Board allows non-employee directors to defer their cash compensation. The DST Systems, Inc. Directors' Deferred Fee Plan, a nonqualified deferred compensation plan, governs the deferrals and allows non-employee directors to annually elect deferral of all or a part of any cash compensation earned during the next calendar year. We credit each participating non-employee director's account with the amount of compensation deferred. We monthly adjust the account by a rate of return on a hypothetical investment the director selects among a limited number of choices including long-term investments, both equity-based and income-oriented. If the non-employee director does not select hypothetical investments for all or a portion of the account, we adjust the account by an interest factor equal to a rate of return the Board selects. We continue to hold fees related to Mr. Allinson's prior service on the Board from 1977 to 1990. The fees are held in a directors' deferred fee plan that terminated effective August 31, 1995. Non-employee directors are always fully vested in their accounts.

        We will distribute a non-employee director's plan account balance after Board service terminates. We pay balances in a lump sum but will pay in installments not to exceed ten years if the Board allows and the director has timely elected installments pursuant to plan provisions and applicable tax laws and regulations.

        We have established a grantor trust in connection with the current Directors' Deferred Fee Plan and the terminated directors' deferred fee plan. We may fund the trust equal to the sum of the payout obligations under such plans. If on or after a change in control we fail to honor obligations under such plans to a plan participant, the trust, if funded, is to distribute the required amounts to the plan participants. The trust requires us to be solvent to distribute trust accounts. Trust assets are subject to the claims of our creditors in the event of our bankruptcy. The Compensation Committee may revoke the trust until we have a change in control. The trust uses the same definition of change in control as used in executive compensation award agreements, summarized beginning at page 47.

        We purchase term life insurance for non-employee directors. The directors name the policy beneficiaries. We provide spousal travel to an annual planning meeting and reimburse family entertainment at such meeting. If we do not incur an incremental cost for an additional passenger, the spouse or significant other of a director may accompany the director to the location at which meetings of the Board or its committees are occurring by traveling on aircraft in which we have an interest.

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2009 NON-EMPLOYEE DIRECTOR COMPENSATION

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BOARD COMMITTEE MATTERS AND REPORTS

AUDIT COMMITTEE

        We identify Committee members in the table on page 12. Committee members serve staggered three-year terms corresponding with their terms as directors. As described in the Audit Committee charter, the Committee is responsible for:

•

appointing, approving the services and overseeing the work of, and receiving reports directly from, the independent registered public accounting firm



•

reviewing audited financial statements and various other public disclosures



•

assisting the Board in overseeing material financial risk exposures



•

assisting the Board in overseeing our internal audit function and legal and regulatory compliance, as well as the integrity of our financial statements and certain internal controls.

        Our Board has determined that Ms. Strandjord, who is independent under the standards beginning at page 18, is an "audit committee financial expert" as defined in securities regulations. Other members of the Audit Committee may also qualify as audit committee financial experts under the regulations. No Committee member serves on more than two other public company audit committees.

Audit Committee Report

        We reviewed and discussed the Company's consolidated financial statements with management and PricewaterhouseCoopers LLP, DST's independent registered public accounting firm. PricewaterhouseCoopers gave us its opinion, and management represented, that the Company prepared its consolidated financial statements in accordance with generally accepted accounting principles. We discussed with the Company's independent registered public accountants the matters that Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board ("PCAOB") in Rule 3200T, requires the Committee and the auditors to discuss.

        PricewaterhouseCoopers gave us and we reviewed the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent registered public accounting firm's communications with us concerning independence. We also discussed with PricewaterhouseCoopers its independence from management.

        Based on the above discussions, we recommended to the Board that the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

THE AUDIT COMMITTEE
Robert T. Jackson, Chairperson
A. Edward Allinson
Michael G. Fitt
William C. Nelson
Travis E. Reed
M. Jeannine Strandjord

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COMPENSATION COMMITTEE

        Committee Structure.    We identify Committee members in the table on page 12. Committee members serve one-year terms. As described in the Compensation Committee charter, the Committee is responsible for:

•

establishing policies and procedures for compensating executive officers and non-employee directors



•

retaining independent compensation consultants



•

determining the structure and objectives of each element of executive officer compensation, and the base salaries, incentive award opportunity levels, and all other components of such compensation



•

setting incentive compensation goals



•

approving awards under equity and incentive compensation programs, and exercising administrative authority under benefit plans



•

evaluating Chief Executive Officer performance and reviewing evaluations of the performance of other executive officers



•

recommending to the Board the structure of non-employee director compensation



•

assisting the Board in overseeing compensation risk including determinations regarding the risk of employee compensation practices and policies



•

approving certain compensation disclosures.

        Executive Officer Compensation Practices.    The policies and procedures for determining executive officer compensation are written and were approved by the Compensation Committee.

        The Committee is responsible for and has the authority to determine the components of executive officer compensation. The Committee seeks to provide competitive compensation packages that include cash and non-cash as well as short- and long-term components. It also seeks to tie a portion of executive officer compensation to whether we achieve Company performance goals.

        The Committee periodically reviews executive officer compensation. For each review, the Committee may consider, and decide the weight it will give to, any combination of the following:

•

market competition for employees



•

market information regarding salaries, incentives and benefits



•

individual executive officer performance



•

Company or business unit performance



•

Company financial information



•

accounting effects of compensation



•

Company and individual tax issues



•

executive officer retention



•

executive officer health and welfare



•

executive officer retirement planning



•

executive officer responsibilities



•

effects of a potential change in control or of a Company transaction.

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        The Committee may request our Chief Executive Officer, President, Chief Financial Officer, Human Resources Officer, General Counsel, or other management to recommend compensation package components, to communicate hiring and retention concerns and business unit personnel needs, and to provide:

•

market analysis data



•

product, service and business unit overviews



•

proposed benefit plan terms and conditions



•

financial, accounting and tax information



•

legal requirements for benefit plan and award structures



•

valuation information regarding outstanding awards and undistributed account balances



•

historical Company compensation data



•

Company performance data



•

executive officer evaluations.

The Committee relies on our Chief Financial Officer, Human Resources Officer, General Counsel, and other management to implement executive officer compensation decisions and adopt appropriate compensation procedure internal controls.

        The Committee develops the criteria for evaluating Chief Executive Officer performance and privately and annually reviews his performance against such criteria. The Chief Executive Officer periodically and privately discusses the President's performance with the Committee. The Chief Executive Officer and the President periodically and privately discuss with the Committee their views of the performance of the other executive officers. The Committee may review human resources and business unit records, contact any officer about the performance or responsibilities of any other officer, and obtain from the Corporate Secretary responses by executive officers to an annual ethics policy compliance questionnaire.

        Our Chief Executive Officer, President, Chief Financial Officer, or General Counsel contacts the Chairperson of the Committee with any proposed separation arrangement for an executive officer involuntarily terminating employment. The Committee Chairperson discusses the arrangement with a majority of Committee members. She reports the Committee's determination regarding the proposed arrangement to management and makes a record of such determination at the next regularly scheduled Committee meeting.

        The Committee may retain, at Company expense, an independent compensation consultant to advise the Committee on executive compensation practices and trends and to assist the Committee with any determination it will make under these procedures. The Committee selects, engages and instructs the consultant and may rely on our Chief Financial Officer, Corporate Secretary, or other management to coordinate the consultant's work. The consultant recommends to the Committee compensation structures for executive officer compensation but does not determine individual compensation.

        Non-Employee Director Compensation Practices.    The policies and procedures for determining non-employee director compensation are written and were approved by the Compensation Committee. The Committee recommends components of non-employee director compensation to the Board. The Board is responsible for and has the authority to determine the components of non-employee director compensation.

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        In determining when to review non-employee director compensation, and whether to recommend that the Board modify it, the Committee may consider, and decide the weight it will give to, any combination of the following:

•

market competition for directors



•

securities law and New York Stock Exchange independence, expertise and qualification requirements



•

market information regarding director compensation at other public companies of comparable size and complexity



•

directors' duties and responsibilities as set forth in Board committee charters and our Corporate Governance Guidelines



•

Company and individual tax issues



•

director retention



•

director welfare



•

director retirement planning



•

director compensation principles in our Bylaws and Corporate Governance Guidelines



•

legal or other changes in the required structure or duties of the Board



•

annual self-evaluations of our Board and its committees



•

the value of outstanding awards and undistributed account balances



•

historical director compensation data.

        The Committee may request our Chief Executive Officer, President, Chief Financial Officer, Human Resources Officer, General Counsel, or other management to provide:

•

proposed director benefit plan terms and conditions



•

financial, accounting and tax information



•

legal requirements for benefit plan and award structures.

The Committee and the Board rely on our Chief Financial Officer, Human Resources Officer, General Counsel, and other Company management to implement director compensation decisions and adopt appropriate compensation procedure internal controls.

        The Committee may retain, at Company expense, an independent compensation consultant as further described in our Compensation Discussion and Analysis. The consultant recommends to the Committee non-employee director compensation alternatives based on the market data but does not determine such compensation.

        Employee Compensation Risk.    The Compensation Committee requests that executive management, including business unit executives and the Human Resources Officer, provide information to the Committee to assist with its determination of whether employee compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. The Committee analyzes corporate, business unit, domestic, international, incentive, equity, sales commission and other programs. It considers human resources controls such as benchmarking, Committee practices such as setting goals and award limits, and the assistance to the Company and the Committee provided by independent compensation consultants. In February 2010, the Committee determined that our employee compensation practices and policies do not create risks that are reasonably likely to have a material adverse effect on the Company.

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        Compensation Consultant Engagements.    The Compensation Committee has engaged Deloitte with respect to executive officer compensation as described in our Compensation Discussion and Analysis. It has engaged Deloitte with respect to compensation of non-employee directors as described on page 20.

Compensation Committee Report

        We reviewed and discussed with management the Compensation Discussion and Analysis section of this Proxy Statement. Based on such review and discussion, we recommended to the Board that this Proxy Statement include the Compensation Discussion and Analysis.

THE COMPENSATION COMMITTEE
M. Jeannine Strandjord, Chairperson
George L. Argyros
Michael G. Fitt
Robert T. Jackson
William C. Nelson
Travis E. Reed

GOVERNANCE COMMITTEE

        Committee Functions and Structure.    We identify Committee members in the table on page 12. Committee members serve one-year terms. As described in the Governance Committee charter, the Committee is responsible for:

•

identifying and recommending to the Board persons to serve as directors and on Board committees



•

evaluating independence and other qualifications of Board and committee members



•

recommending corporate governance guidelines to and overseeing evaluations of the Board



•

adopting and implementing written policies and procedures for reviewing, approving and ratifying transactions of $120,000 or more in which the persons listed in the Beneficial Ownership section or their immediate families have a direct or indirect material interest



•

adopting and performing certain administrative duties with respect to our Business Ethics and Legal Compliance Policy.

        Director Nomination Matters.    In recommending nominees to the Board, the Governance Committee identifies candidates who meet the current challenges and needs of the Board. The Committee identifies and evaluates nominees through multiple sources including Board and management referrals. The Committee may seek input from third-party executive search firms. It did not use a search firm to recommend the nominees for the 2010 stockholders' meeting (Messrs. Allinson, Fitt and Jackson). The Committee has not adopted a policy for considering whether to designate as a Board nominee a candidate proposed by a stockholder. It does not believe a policy is necessary because it could respond on an ad hoc basis. It will consider director nominees timely proposed by stockholders in a written notice and evaluate stockholder nominees for director in the same manner it evaluates other nominees, which includes considering and giving weight to input about a nominee from management or incumbent directors.

        In recommending a director nominee (including an incumbent director), the Governance Committee considers:

•

whether the nominee has the requisite or appropriate experience, qualifications and skills

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•

the nominee's commitment to prepare for and regularly attend meetings of the Board and committees



•

whether, if applicable, the nominee meets the New York Stock Exchange standards for independence and has qualifications and attributes necessary under applicable listing standards and laws and regulations for service on Board committees.

In considering these items, the Governance Committee may contemplate the interplay of the nominee's attributes with that of the other Board members and appraise the extent to which a candidate would be a desirable addition to the Board and, as applicable, its committees. Although the Board does not have a specific policy for Board diversity, the Board may, as stated in the Corporate Governance Guidelines, consider whether the nominee's background would add to the diversity of experiences, qualifications, and skills the various directors may bring to their Board service.

        Additionally, in recommending an incumbent director for re-election, the Committee considers:

•

the nominee's prior service on the Board



•

continued commitment to Board service



•

whether the nominees possess the requisite financial and management experience and expertise appropriate for service on the Board and its respective committees



•

any changes in employment or other status that are likely to affect such nominee's qualifications to serve.

        Related Person Transaction Procedures.    Written policies and procedures adopted by the Governance Committee address Committee review of transactions of $120,000 or more in which the Company participates and a "related person" has a direct or indirect material interest. A "related person" is a director, executive officer, 5% or more stockholder, or immediate family member of any such person. Our General Counsel reviews responses to director and officer questionnaires to determine whether any related person has, or during the relevant period has had, a direct or indirect material interest in a related person transaction and reports any actual or proposed related person transaction to the Governance Committee Chairperson. For each such reported transaction, the Committee considers whether the related person serves on a Board committee and, if so, whether such continued service is appropriate under securities regulations pertaining to such committee. The Committee determines whether to ratify the transaction considering:

•

the significance of the transaction to the Company



•

the best interests of our stockholders



•

our ethics policy requirements



•

the materiality of the transaction to the related person



•

whether the transaction is significantly likely to impair any judgments an executive officer or director would make on our behalf.

If the Committee does not approve or ratify a transaction, it discusses with management a strategy for terminating the transaction or modifying the structure of the transaction.

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BENEFICIAL OWNERSHIP

        As of February 26, 2010, we had 47,820,423 shares of our common stock outstanding, including 253,788 shares of unvested restricted stock, and the following table shows share ownership as of such date based upon available information.

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INSIDER DISCLOSURES

        Certain Transactions with Related Persons.    President and Chief Operating Officer Stephen C. Hooley is a board member and a non-executive officer of Boston Financial, our joint venture with State Street. Mr. Hooley was president and chief executive officer of Boston Financial from January 2004 through June 2009. In addition to his current positions with Boston Financial, Mr. Hooley serves other joint ventures of DST and State Street. He has served since May 30, 2007 as chief executive officer of IFDS, L.P., and since October 4, 2006 as a director on the board of International Financial Data Services Limited ("IFDS UK"). Mr. Hooley's brother, Joseph L. Hooley, is president and chief operating officer of State Street.

        For 2009, the Company had equity in earnings of unconsolidated affiliates, net of income taxes provided by the unconsolidated affiliates of $12.1 million from Boston Financial, $10.9 million from IFDS, L.P., and $9.2 million from IFDS UK. A Company subsidiary holds investments in State Street (at February 26, 2010, approximately 10.6 million shares with a market value of approximately $475.2 million).

        Boston Financial uses our mutual fund shareowner accounting and recordkeeping system and services as a remote services client. Certain of our subsidiaries provide printing, mailing and other services and license software to Boston Financial and its subsidiaries. In 2009, we had consolidated revenues of $185.4 million from Boston Financial and its subsidiaries. We also entered into a related party promissory note with Boston Financial on March 1, 2006. The agreement provides for unsecured revolving borrowings by DST of up to $100 million and matures on July 1, 2010. The amount outstanding under this promissory note was $75 million at December 31, 2009. For the year ended December 31, 2009, we recorded interest expense related to the loan of $1 million.

        Section 16(a) Beneficial Ownership Reporting Compliance.    The securities regulations require our non-employee directors, certain of our officers, and each person who owns more than 10% of DST stock to file ownership reports with the Securities and Exchange Commission. Based on our review of the reports, and our officers' and directors' written representations to us, we believe required reports for 2009 transactions were timely filed with the exception of a report filed in January 2010 by Joan Horan, Vice President of Human Resources, for shares withheld for taxes related to vesting of restricted stock in November 2009.

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        Engagement.    PricewaterhouseCoopers LLP served as our independent registered public accounting firm as of and for the year ended December 31, 2009. PricewaterhouseCoopers LLP performed professional services in connection with the audit of our consolidated financial statements and internal control over financial reporting and the review of reports we filed with the Securities and Exchange Commission. It also reviewed control procedures of our mutual fund processing services and provided us certain other accounting, auditing and tax services.

        PricewaterhouseCoopers fees for services related to 2009 and 2008 were as follows:

        Engagement Procedures.    Audit Committee procedures prohibit the Committee from engaging an independent registered public accounting firm to perform any service it may not perform under the securities laws. The Audit Committee must pre-approve the independent registered public accounting firm's annual audit of our consolidated financial statements. The procedures require the Committee or its Chairperson to pre-approve or reject any other audit or non-audit services the independent registered public accounting firm is to perform. The Committee has directed that its Chairperson, with the assistance of our Chief Financial Officer, present and describe at regularly scheduled Audit Committee meetings all pre-approved services. The Committee has required management to present services for pre-approval within a specified period in advance of the date the services are to commence. The Committee regularly examines whether the fees for audit services exceed estimates. Securities regulations waive pre-approval requirements for certain non-audit services if their aggregate amount does not exceed specified amounts we pay to the independent registered public accounting firm. The procedures require the Committee or its Chairperson to approve, prior to completion of the audit, any services subject to this waiver. We have not applied the waiver to a non-audit service. The Audit Committee pre-approved all services PricewaterhouseCoopers LLP rendered to us and our subsidiaries for 2009.

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COMPENSATION DISCUSSION AND ANALYSIS

        The Compensation Committee determines compensation for the named officers listed in the Summary Compensation Table. Named officers include Thomas A. McDonnell, our Chief Executive Officer, and Kenneth V. Hager, our Chief Financial Officer. They also include our three executive officers other than the Chief Executive Officer and Chief Financial Officer receiving the highest total compensation for 2009: Stephen C. Hooley, who joined the Company as President and Chief Operating Officer on July 1, 2009, Thomas A. McCullough, who retired as Chief Operating Officer on July 1, 2009 and served as Executive Vice President through December 31, 2009, and Jonathan J. Boehm, who was promoted to Executive Vice President from Group Vice President on July 1, 2009.

OBJECTIVES FOR 2009 COMPENSATION

        The Committee's primary objectives for its 2009 named officer compensation program are described in the following table. For all named executive officers, including the Chief Executive Officer and the President and Chief Operating Officer, the Compensation Committee applies the same compensation objectives and reviews the same compensation general industry and peer group survey data to evaluate market rates of compensation.

        As shown in the table, we align named officer and stockholder interests and further retention objectives by incorporating performance goals into various elements of compensation. We do not disclose the actual goals because they are confidential business information. We do not view such disclosures as necessary to an understanding of the Committee's executive compensation policies and decisions. Moreover, the reasons not to disclose the goals are compelling. We believe that disclosure of the goals, or any one of them, could cause substantial economic harm to our competitive position.

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(1)

The following elements are described in separate sections beginning at the pages indicated:

•

base salaries (page 40)

•

Incentive Program awards including deferred cash awards (page 40)

•

upfront restricted stock (page 42)

•

perquisites (page 43)

•

insurance benefits (page 43)

•

Separation from service and change in control terms and conditions of awards and employment agreements; ERISA excess and other deferral plans and programs (page 44).

The Committee has determined that the benefit to the executive, the Company and our stockholders justifies the Company cost in providing each element of compensation. In structuring the Incentive Program and in determining to grant upfront restricted stock, the Committee considered the target levels of compensation set forth on page 33. In determining individual elements of compensation, the Committee does not otherwise consider amounts realizable from prior compensation or awards, for the reasons below:

(2)

Total cash compensation is base salary plus the current cash portion of incentive awards. Total direct compensation is the combination of base salary, annual incentive awards, and annualized upfront equity awards. The Committee set the total cash compensation targets and total direct compensation targets in the upper quartile because:

•

a significant portion of named officer compensation is at risk

•

the highly competitive nature of our industry warrants higher levels of potential compensation to allow us to attract and retain the quality leadership needed to succeed

•

companies that achieve similar levels of performance over a period of time are generally ranked in the upper quartile of total direct and total cash compensation ranges.

In the chart below, we have summarized the comparison between the 2009 compensation for the named officers and competitive compensation levels. The competitive positioning is derived from general industry survey and peer group data provided by our compensation consultant, whose services we describe in the following section.

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*If we meet target Incentive Program goals.

(3)

The Committee authorized a signing bonus to Stephen C. Hooley as part of its efforts to recruit him as President and Chief Operating Officer. The Committee also approved relocation benefits for Mr. Hooley. The Committee believes that both compensation elements are fair given our strong desire to attract Mr. Hooley to leave his former employment at Boston Financial, our joint venture. The Committee noted Mr. Hooley's success at the joint venture, our familiarity with his skills and regard for him, and the importance of the DST position in view of the retirement of Mr. McCullough, who had served for over 20 years as our second highest ranking executive officer and was regarded by employees, clients and the financial services industry for his leadership. The amount of Mr. Hooley's signing bonus also reflects the fact that he did not immediately receive an equity grant when he commenced employment, as has traditionally occurred for new executives.

(4)

Establishing such levels for the upfront restricted stock grant in 2004 allowed the Committee to avoid making such equity grants at annualized levels that would cause, in its opinion, excessive dilution and expense over the vesting period. The grant was to, and did, cliff vest at the end of the five-year vesting period if we employed the named officer on such date and had achieved the consolidated EPS performance goal. We spread the grant cost evenly over the vesting period.

(5)

Code Section 162(m) limits our deductions for federal income tax purposes of compensation expenses exceeding $1 million paid to certain named officers other than performance-based compensation that meets the requirements of the 162(m) Exception, as further explained on page 3. There can be no assurances that named officer compensation will be fully deductible.

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(1)

Mr. Hooley commenced employment July 1, 2009, so he earned only a portion of his 2009 base salary of $550,000.

(2)

Mr. Hooley received a $1,000,000 signing bonus in connection with the commencement of his employment.

(3)

Vesting terms and conditions are described in the table and notes beginning at page 58. For our accounting assumptions in deriving the amount in Column C, see note (11) to the Consolidated Financial Statements in our Form 10-K for the year ended December 31, 2009.

(4)

Current cash and deferred cash are the two components of the Incentive Program award for 2009 goal achievement (first two columns in the table below). Deferred cash vesting terms and conditions are described in the table and notes beginning at page 58. Deferred cash accounts are subject to earnings and losses based on hypothetical investment choices (third column, below). Column D of the Summary Compensation Table for 2009 does not include deferred cash awards made in February 2009 because those awards were for 2008 Incentive Program performance. We show those awards in the Grants of Plan-Based Awards in 2009 table on page 55. The amounts in Column D for 2009 are a total of the following: