UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the year ended: December 31, 2003
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-13251
PIONEER CREDIT RECOVERY, INC. 401(K) PLAN
(Full title of the Plan)
SLM CORPORATION
(Name of the issuer of the securities held pursuant to the Plan)
11600 Sallie Mae Drive
Reston, Virginia 20193
(address of principal executive office of the issuer)
Pioneer Credit Recovery, Inc.
401(k) Plan
Contents
December 31, 2003 and 2002
| Page(s) | ||
| 1 | ||
| Financial Statements |
||
| Statements of net assets available for benefits As of December 31, 2003 and 2002 |
2 | |
| Statement of changes in net assets available for benefits For the year ended December 31, 2003 |
3 | |
| 4 | ||
| Supplemental Schedule* |
||
| 10 | ||
| 11 | ||
| Consent |
A1 | |
| * | Other schedules required by 29 CFR 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they were not applicable |
Report of Independent Registered Public Accounting Firm
To the Participants and Plan Administrator of the
Pioneer Credit Recovery, Inc. 401(k) Plan:
In our opinion, the accompanying statements of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Pioneer Credit Recovery, Inc. 401(k) Plan (the “Plan”) at December 31, 2003 and 2002, and the changes in net assets available for benefits for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of asssets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
McLean, VA
June 24, 2004
1
Pioneer Credit Recovery, Inc. 401(k) Plan
Statement of Net Assets Available for Benefits
As of December 31, 2003 and 2002
| 2003 |
2002 | |||||
| Assets |
||||||
| Interest in Sallie Mae 401(k) Savings Plan Master Trust |
$ | 2,732,644 | $ | 1,575,534 | ||
| Net assets available for benefits |
$ | 2,732,644 | $ | 1,575,534 | ||
The accompanying notes are an integral part of these financial statements.
2
Pioneer Credit Recovery, Inc. 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2003
| 2003 | |||
| Additions: |
|||
| Additions to net assets attributed to: |
|||
| Interest in Sallie Mae 401(k) Savings Plan Master Trust investment income |
$ | 401,326 | |
| Contributions: |
|||
| Participants |
766,714 | ||
| Employer |
154,495 | ||
| Rollovers |
7,542 | ||
| 928,751 | |||
| Total additions |
1,330,077 | ||
| Deductions: |
|||
| Deductions from net assets attributed to benefits paid to participants |
172,967 | ||
| Net increase |
1,157,110 | ||
| Net assets available for benefits: |
|||
| Beginning of year |
1,575,534 | ||
| End of year |
$ | 2,732,644 | |
The accompanying notes are an integral part of these financial statements.
3
401(k) Plan
Notes to Financial Statements
December 31, 2003 and 2002
| 1. | Plan Description |
General
The Pioneer Credit Recovery, Inc. 401(k) Plan (the “Plan”) is a defined contribution plan established for the benefit of eligible employees electing to participate in the Plan (the “Participants”). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. The following description of the Plan provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.
The Plan covers substantially all employees of Pioneer Credit Recovery, Inc. (the “Company” or the “Employer”), who have completed 90 days of service and have attained the age of 18. The Company is a wholly-owned subsidiary of SLM Corporation.
Contributions and vesting
Participants are eligible to contribute from 1 percent to 20 percent of their compensation to the Plan under salary reduction agreements up to the Internal Revenue Service maximum of $12,000 in 2003. The Plan allows participants who have attained age 50 to make additional contributions up to the IRS maximum of $2,000 for 2003. Participants may also contribute amounts rolled over from qualified employer plans in which they had previously participated.
After one year of service, the Employer contributes an amount equal to 25 percent of Participant contributions up to 8 percent of the Participant’s eligible compensation. Employer contributions not yet vested at termination of employment are forfeited by the Participant and reduce the Employer’s future contribution. During 2003, there were $18,333 forfeitures used to reduce Employer contributions. Unused forfeitures at December 31, 2003 and 2002 were $996 and $2,096, respectively, which will be used to offset future Employer contributions.
Participants vest fully upon death, total disability, attainment of age 65 or upon termination of the Plan by the Employer. Participants vest in Employer contributions and earnings thereon in accordance with the following schedule:
| Vesting Percentage |
|||
| One but less than two years of service |
20 | % | |
| Two but less than three years of service |
40 | % | |
| Three but less than four years of service |
60 | % | |
| Four but less than five years of service |
80 | % | |
| Five or more years of service |
100 | % |
Other contributions
The Plan also allows for a profit sharing contribution, whereby the Company will determine the amount of net profits, if any, to contribute to the Plan. There were no profit sharing contributions made during 2003.
Participant loans
Participants may borrow up to 50 percent of their vested benefit to a maximum of $50,000. Participants may have no more than two loans outstanding at any time. The term of a loan shall not
4
Pioneer Credit Recovery, Inc.
401(k) Plan
Notes to Financial Statements
December 31, 2003 and 2002
exceed the lesser of five years or the number of years remaining before the Participant’s Normal Retirement Age, as defined in the Plan document, except in the case of a loan that is used for the Participant’s principal residence, which must be repaid over ten years. Loans are secured by the Participant’s account balance, and bear interest rates equal to the prime rate at the time of loan origination. Principle and interest is paid through biweekly payroll deductions.
Investment elections
Fidelity Management Trust Company (“Fidelity”) is the Plan Trustee and recordkeeper. Contributions are invested, based on Participants’ instructions, in any of the various investment options selected by the Sallie Mae 401(k) Savings Plan and Investment Committees. At December 31, 2003 the Plan offers various mutual funds, an employer stock fund, a money market fund and a self-directed brokerage option. Under the self-directed brokerage option, Participants may direct investments in any security or other investments offered by Fidelity, regardless of whether they are included as investment options offered by the Plan. In order to participate in the self-directed brokerage option, Participants must have a minimum Plan balance of $10,000 and at least $500 must remain in the other available funds.
Participant accounts
Each Participant’s account is credited with the Participant’s and Company’s contributions and their portion of the Plan’s earnings (losses). Allocations are based on Participant earnings or account balances, as defined. The benefit to which a Participant is entitled is the benefit that can be provided from the Participant’s vested account.
Payment of benefits
Participants may withdraw funds from their account upon retirement, disability, separation from employment or upon reaching age 65. Distributions shall be made by lump sum or an annuity, reduced by the outstanding balance of any loan not repaid by the Participant.
Administrative expenses
Participants pay fees for loans and withdrawals, and terminated Participants pay annual maintenance fees. The Participant costs are charged directly to the Participant’s account and are reflected in the statement of changes in net assets available for benefits as a component of investment income/(loss). The Employer bears the remaining cost of Plan administration, except for commissions associated with common stock purchases and sales.
Plan administration
Members of the Sallie Mae 401(k) Savings Plan and Investment Committees and Trustees of the Plan are appointed by the Board of Directors of the Employer. Three officers of the Employer presently serve as Sallie Mae 401(k) Savings Plan and Investment Committees members. The Plan pays no compensation for their services.
| 2. | Summary of Significant Accounting Policies |
Basis of accounting
The Plan maintains its accounting records on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
Investment valuation and income recognition
Investments held by the Sallie Mae 401(k) Savings Plan Master Trust (the “Master Trust”) consist of various mutual funds, an employer stock fund, a money market fund and a self-directed brokerage option. Money market funds are carried at cost, which approximates fair value. Common stock, securities and brokerage account investments traded on national securities exchanges are carried at market value based on the closing price on the last business day of the year. The fair value of mutual funds are determined based on the net asset value for shares held by the Plan. Loans to participants are carried at cost, which approximates fair value.
5
Pioneer Credit Recovery, Inc.
401(k) Plan
Notes to Financial Statements
December 31, 2003 and 2002
The Master Trust information in Note 4 presents the net appreciation in the fair value of its investments, which consists of realized gains or losses and the unrealized appreciation or depreciation on those investments. Dividend income is recorded on the ex-dividend date. Interest earned on investments is recorded on the accrual basis. Purchases and sales of securities are recorded on the trade date.
Contributions
Contributions made by Employees electing to participate in the Plan under salary reduction agreements and Employer contributions are recorded when payable into the Plan.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Such estimates include the estimation of fair value. Actual results could differ from those estimates.
Risks and uncertainties
The Plan, through the Master Trust, provides for various investment options. Such investments are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the fair values of the investment securities and risks in the near term could materially affect Participants’ account balances and the amounts reported in the statement of net assets available for benefits.
Benefit payments
Benefits are recorded when paid.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year classifications.
| 3. | Investments |
The individual investment representing 5 percent or more of the fair value of net assets available for benefits is the interest in the Master Trust which was $2,732,644 and $1,575,534 at December 31, 2003 and 2002, respectively.
| 4. | Investment in Master Trust |
At December 31, 2003 and 2002, the Plan’s investment assets were held in a trust account with the Trustee and consist of an interest in the Master Trust. The Master Trust also includes the investment assets of the Sallie Mae 401(k) Savings Plan and the General Revenue Corporation 401(k) and Profit Sharing Plan, both defined contribution retirement plans.
6
Pioneer Credit Recovery, Inc.
401(k) Plan
Notes to Financial Statements
December 31, 2003 and 2002
The Master Trust was composed of the following investments, at fair value, at December 31, 2003 and 2002:
| 2003 |
2002 | |||||
| Mutual Funds |
$ | 182,545,084 | $ | 131,442,547 | ||
| Sallie Mae Stock Fund |
48,959,428 | 42,495,422 | ||||
| Money Market Funds |
28,319,447 | 30,962,195 | ||||
| Common Stock/Preferred Stock |
4,571,061 | 2,434,741 | ||||
| Corporate Bonds |
469,875 | 467,652 | ||||
| Participant Loans |
6,230,530 | 5,196,175 | ||||
| Total Master Trust Assets |
$ | 271,095,425 | $ | 212,998,732 | ||
The net investment income of the Master Trust for the year ended December 31, 2003 is summarized as follows:
| 2003 | |||
| Dividends |
$ | 3,449,581 | |
| Interest |
313,348 | ||
| Net Appreciation in fair value of Investments related to: |
|||
| Mutual funds |
33,238,102 | ||
| Sallie Mae Stock Fund |
3,724,598 | ||
| Common Stock/Preferred Stock |
1,360,947 | ||
| Corporate Bonds |
34,323 | ||
| $ | 42,120,899 | ||
The Plan’s specific interest in the net assets of the Master Trust was approximately 1% at December 31, 2003 and December 31, 2002, respectively.
7
Pioneer Credit Recovery, Inc.
401(k) Plan
Notes to Financial Statements
December 31, 2003 and 2002
| 5. | Plan Termination |
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERlSA. In the event of Plan termination, participants will become 100% vested in their accounts.
| 6. | Related-Party Transactions |
At December 31, 2003, certain Plan investments are shares of mutual funds managed by Fidelity. Fidelity is the Trustee as defined by the Plan and therefore these transactions qualify as party-in-interest. Fees paid by the Plan to Fidelity were $4,024 for the year ended December 31, 2003.
Among the assets in the Master Trust are investments in the Sallie Mae Stock Fund which is comprised principally of SLM Corporation stock. At December 31, 2003 and 2002 the amounts were 5,773 and 911 units, respectively, valued at $160,309 and $23,256, respectively. During 2003, 6,133 units in the amount of $174,511 were purchased and 1,271 units in the amount of $35,196 were sold related to the Sallie Mae Stock Fund. Such transactions qualify as party-in-interest transactions, as SLM Corporation is the Plan’s sponsor.
| 7. | Income Tax Status |
The Internal Revenue Service has determined and informed the Company by a letter dated September 24, 2001, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Although the Plan has been amended since receiving the determination letter, the Plan administrator and the Plan’s tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC.
8
SUPPLEMENTAL SCHEDULE
9
401(k) Plan
Schedule of Assets (Held at End of Year)
December 31, 2003
| Identity of Issuer, Borrower of Similar Entity |
Description of Investment |
Cost** |
Current Value | ||||
| Participant Loans: |
|||||||
| Plan participants |
Loans allowable under the plan instrument, collateralized by participant account balances, due in varying installments through 2008, with interest rates ranging from 4.00% to 11.50% | $ | 191,132 | ||||
| * | Denotes party-in-interest |
| ** | Not applicable |
10
The Plan. Pursuant to the requirements of the Securities and Exchange Act of 1934, the Plan Administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
PIONEER CREDIT RECOVERY, INC. 401(K) PLAN
(Full title of the Plan)
| Date: June 28, 2004 |
By: | /s/ C.E. Andrews | ||
| C.E. Andrews | ||||
| Executive Vice President, Accounting and Risk Management |
11
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-109315) of SLM Corporation of our report dated June 24, 2004 relating to the financial statements of the Pioneer Credit Recovery, Inc. 401(k) Plan, which appears in this Form 11-K.
/s/PricewaterhouseCoopers LLP
McLean, VA
June 24, 2004
A1