UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) /X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1998 or ----------------- /_/ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to -------- -------- SLM FUNDING CORPORATION ----------------------- formerly known as SALLIE MAE FUNDING CORPORATION (Exact name of registrant as specified in its charter) (Originator of the Sallie Mae Student Loan Trust 1995-1, the Sallie Mae Student Loan Trust 1996-1, the SLM Student Loan Trust 1996-2, the SLM Student Loan Trust 1996-3, the SLM Student Loan Trust 1996-4, the SLM Student Loan Trust 1997-1, the SLM Student Loan Trust 1997-2, the SLM Student Loan Trust 1997-3, the SLM Student Loan Trust 1997-4, the SLM Student Loan Trust 1998-1 and the SLM Student Loan Trust 1998-2) DELAWARE 33-95474/333-2502/333-24949/333-44465 23-2815650 - ---------------------------- ------------------------------------- ------------------- (State or other Jurisdiction (Commission File Numbers) (I.R.S. employer of Incorporation) Identification No.) 777 TWIN CREEK DRIVE KILLEEN, TEXAS 76543 -------------------- (Address of principal executive offices) (817) 554-4500 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------------- -------------- No documents are incorporated by reference into this Form 10-K. State the aggregate market value of the voting stock held by non-affiliates of the Registrant: None. 1 This Annual Report on Form 10-K is filed in reliance upon (1) certain no-action letters issued by the Office of Chief Counsel, Division of Corporate Finance of the Securities and Exchange Commission stating that the Division will not object if periodic reports filed by the registrant pursuant to Sections 13 and 15(d) of the Securities and Exchange Act of 1934 are filed in the manner set forth in such letters and the requests for such letters and (2) the Registrant's filing letter accompanying the Registrant's Current Report on Form 8-K filed with the Commission on or about November 6, 1995 in which the Registrant described the manner in which it intended to file such periodic reports. PART I. ITEM 2. PROPERTIES. The property of the Sallie Mae Student Loan Trust 1995-1, the Sallie Mae Student Loan Trust 1996-1, the SLM Student Loan Trust 1996-2, the SLM Student Loan Trust 1996-3, the SLM Student Loan Trust 1996-4, the SLM Student Loan Trust 1997-1, the SLM Student Loan Trust 1997-2, the SLM Student Loan Trust 1997-3, the SLM Student Loan Trust 1997-4, the SLM Student Loan Trust 1998-1 and the SLM Student Loan Trust 1998-2 (collectively, the "Trusts") consists solely of pools of education loans to students and parents of students made under the Federal Family Education Loan Program, all funds collected in respect thereof and monies on deposit in certain trust accounts. For more information regarding the property of the Trusts, see the Annual Statements of Compliance (the "Annual Statements of Compliance") attached as Exhibit 19.1 hereto, required by Section 3.2 of (i) those certain Administration Agreements, dated as of October 26, 1995, March 6, 1996, April 26, 1996, July 9, 1996, October 3, 1996 and March 20, 1997, by and among the respective Trusts, the Student Loan Marketing Association (the "Administrator"), Chase Manhattan Bank USA, National Association, not in its individual capacity but solely as Trustee (the "Eligible Lender Trustee"), Sallie Mae Servicing Corporation (the "Servicer"), SLM Funding Corporation (the "Registrant") and Bankers Trust Company, not in its individual capacity but solely as Indenture Trustee (the "Indenture Trustee") and (ii) that certain Master Administration Agreement, dated as of May 1, 1997, between the Registrant and the Administrator, as variously amended or supplemented (collectively, the "Administration Agreements"). ITEM 3. LEGAL PROCEEDINGS. The Registrant knows of no material pending legal proceedings involving the Registrant or its property. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Nothing to report. PART II. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. At December 31, 1998, the Registrant was a beneficial owner of the Trusts' Floating Rate Student Loan-Backed Certificates ("Certificates"), and there was one (1) registered holder of the Certificates, CEDE & Co., as nominee of The Depository Trust Company ("DTC"). There were thirty-six (36) 2 persons registered on the books of DTC as record owners of Certificates. There is no established trading market for the Certificates. ITEM 7. OTHER RELATED EVENTS AND INFORMATION. On February 1, 1999, President Clinton submitted his Fiscal Year 2000 budget proposal to Congress. The budget proposes achieving significant cost savings from the student loan programs, principally from the Federal Family Education Loan Program ("FFELP"). Among these proposals for student loan programs are: - Reinstatement of a lower rate for new Federal Direct Consolidation Loans. This variable rate (the 91-day Treasury bill rate plus 2.3% during repayment and 1.7% during in-school and grace periods) would apply for borrowers whose applications are received before September 30, 2000. The budget proposals would also lower the annual fee paid bylenders on FFELP consolidation loans made during the same period from 1.05% to .62% of the principal plus accrued unpaid interest; - Creation of a 90-day period during which interest on a highly delinquent FFELP loan does not accrue. The Higher Education Amendments of 1998 (the "Reauthorization Legislation") extended the period before lenders can submit default claims from 180 days to 270 days; the budget proposes to eliminate interest accrual during this extended period; - Reduction by 30 basis points of special allowance payments on FFELP loans funded with tax exempt securities; and - Implementation of additional Guarantor reforms, including the acceleration of recall of Guarantor reserves mandated by the Reauthorization Legislation, recall of an additional $1.5 billion in reserves, the reduction of the Guarantor retention rate on payments on defaulted loans to 18.5%, the reduction in the share of the remaining amount that Guarantors may retain, and an expansion of the use of voluntary flexible agreements authorized by the Reauthorization Legislation. All these proposals may be considered by Congress as it deliberates on the Fiscal Year 2000 budget. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Nothing to report. PART III. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. At December 31, 1998, the Certificates held by the Registrant were registered in the name of CEDE and Co., as nominee of DTC. The books of DTC indicate that thirty-six (36) participant institutions are record owners of more than 5% of the Certificates. 3 SALLIE MAE STUDENT LOAN TRUST 1995-1 CUSIP 795452AC5 $35,000,000 Name and Amount and Address of Nature of Percent of Title of Class Beneficial Beneficial Class Owner Ownership - ------------------------------ ------------------------------- ------------------------ ---------------------------- Floating Rate Student Chase Manhattan Bank Loan-Backed Certificates 4 New York Plaza 13th Floor $ 14,650,000.00 41.86% New York, NY 10004 SSB-Custodian Global Corp. Action Dept JAB5W P. O. Box 1631 $ $18,500,000.00 52.86% Boston, MA 02105-1631 SALLIE MAE STUDENT LOAN TRUST 1996-1 CUSIP 795452AF8 $52,500,000 Name and Amount and Address of Nature of Percent of Title of Class Beneficial Beneficial Class Owner Ownership - ------------------------------ ------------------------------- ------------------------ ---------------------------- Floating Rate Student Chase Manhattan Bank Loan-Backed Certificates 4 New York Plaza 13th Floor $ 50,000,000.00 95.24% New York, NY 10004 SLM STUDENT LOAN TRUST 1996-2 CUSIP 78442GAC0 $53,030,000 Title of Class Name and Amount and Percent of Address of Nature of Class Beneficial Beneficial Owner Ownership - ------------------------------ ------------------------------- ------------------------ ---------------------------- Floating Rate Student Boston Safe Deposit & Trust Loan-Backed Certificates Co. c/o Mellon Bank N.A. Three Mellon Bank Center Rm 153-3015 $ 22,800,000.00 42.99% Pittsburgh, PA 15259 Chase Manhattan Bank 4 New York Plaza 13th Floor $ 25,499,000.00 48.08% New York, NY 10004 4 SSB-Custodian Global Corp. Action Dept JAB5W P. O. Box 1631 $ 3,200,000.00 6.03% Boston, MA 02105-1631 SLM STUDENT LOAN TRUST 1996-3 CUSIP 78442GAF3 $52,750,000 Name and Amount and Address of Nature of Percent of Title of Class Beneficial Beneficial Class Owner Ownership - ------------------------------ ------------------------------- ------------------------ ---------------------------- Floating Rate Student Boston Safe Deposit & Trust Loan-Backed Certificates Co. c/o Mellon Bank N.A. Three Mellon Bank Center Rm 153-3015 $ 13,500,000.00 25.59% Pittsburgh, PA 15259 Bankers Trust Company c/o BT Services Tennessee Inc. $ 3,000,000.00 5.69% 648 Grassmere Park Drive Nashville, TN 37211 Chase Manhattan Bank 4 New York Plaza 13th Floor $ 19,000,000.00 36.02% New York, NY 10004 Huntington National Bank Proxy Department 41 South High Street $ 5,500,000.00 10.43% Columbus, OH 43287 Credit Suisse First Boston Corporation c/o ADP Proxy Services $ 5,000,000.00 9.48% 51 Mercedes Way Edgewood, NY 11717 SSB-Custodian Global Corp. Action Dept JAB5W $ 3,222,500.00 6.11% P. O. Box 1631 Boston, MA 02105-1631 5 SLM STUDENT LOAN TRUST 1996-4 CUSIP 78442GAJ5 $52,700,000 Title of Class Name and Amount and Percent of Address of Nature of Class Beneficial Beneficial Owner Ownership - ------------------------------ ------------------------------- ------------------------ ---------------------------- Floating Rate Student Boston Safe Deposit & Trust Loan-Backed Certificates Co. c/o Mellon Bank N.A. Three Mellon Bank Center Rm 153-3015 $ 13,700,000.00 26.00% Pittsburgh, PA 15259 The Bank of New York 925 Patterson Plank Rd. $ 14,300,000.00 27.13% Secaucus, NJ 07094 Bankers Trust Company c/o BT Services Tennessee Inc. $ 3,000,000.00 5.69% 648 Grassmere Park Drive Nashville, TN 37211 Chase Manhattan Bank 4 New York Plaza 13th Floor $ 10,000,000.00 18.98% New York, NY 10004 The Northern Trust Company 801 S. Canal C-In Chicago, IL 60607 $ 5,573,000.00 10.57% J. P. Morgan Securities, Inc. - Asset Backed 500 Stanton Christina Road $ 4,000,000.00 7.59% Newark, DE 19173 6 SLM STUDENT LOAN TRUST 1997-1 CUSIP 78442GAM8 $71,800,000 Title of Class Name and Amount and Percent of Address of Nature of Class Beneficial Beneficial Owner Ownership - ------------------------------ -------------------------------- ----------------------- ---------------------------- Floating Rate Student The Bank of New York Loan-Backed Certificates 925 Patterson Plank Rd. $ 13,000,000.00 18.11% Secaucus, NJ 07094 Boston Safe Deposit & Trust Co. c/o Mellon Bank N.A. Three Mellon Bank Center $ 34,800,000.00 48.47% Rm 153-3015 Pittsburgh, PA 15259 Chase Manhattan Bank 4 New York Plaza $ 12,000,000.00 16.71% 13th Floor New York, NY 10004 Huntington National Bank Proxy Department $ 12,000,000.00 16.71% 41 South High Street Columbus, OH 43287 SLM STUDENT LOAN TRUST 1997-2 CUSIP 78442GAQ9 $87,450,000 Title of Class Name and Amount and Percent of Address of Nature of Class Beneficial Beneficial Owner Ownership - ------------------------------ -------------------------------- ----------------------- ---------------------------- Floating Rate Student The Bank of New York Loan-Backed Certificates 925 Patterson Plank Rd. $ 30,000,000.00 34.31% Secaucus, NJ 07094 Bankers Trust Company c/o BT Services Tennessee Inc. $ 30,000,000.00 34.31% 648 Grassmere Park Drive Nashville, TN 37211 7 Boston Safe Deposit & Trust Co. c/o Mellon Bank N.A. Three Mellon Bank Center Rm 153-3015 $ 9,450,000.00 10.81% Pittsburgh, PA 15259 Chase Manhattan Bank 4 New York Plaza $ 13,000,000.00 14.87% 13th Floor New York, NY 10004 SSB-Custodian Global Corp. Action Dept JAB5W $ 5,000,000.00 5.72% P. O. Box 1631 Boston, MA 02105-1631 SLM STUDENT LOAN TRUST 1997-3 CUSIP 78442GAT3 $90,150,000 Title of Class Name and Amount and Percent of Address of Nature of Class Beneficial Beneficial Owner Ownership - ------------------------------ -------------------------------- ----------------------- ---------------------------- Floating Rate Student The Bank of New York Loan-Backed Certificates 925 Patterson Plank Rd. $ 60,800,000.00 67.44% Secaucus, NJ 07094 Bankers Trust Company c/o BT Services $ 12,200,000.00 13.53% Tennessee Inc. 648 Grassmere Park Drive Nashville, TN 37211 Boston Safe Deposit & Trust Co. c/o Mellon Bank N.A. $ 12,150,000.00 13.48% Three Mellon Bank Center Rm 153-3015 Pittsburgh, PA 15259 SSB-Custodian Global Corp. Action $ 5,000,000.00 5.55% Dept JAB5W P. O. Box 1631 Boston, MA 02105-1631 8 SLM STUDENT LOAN TRUST 1997-4 CUSIP 78442GAW6 $89,900,000 Title of Class Name and Amount and Percent of Address of Nature of Class Beneficial Beneficial Owner Ownership - ------------------------------ -------------------------------- ----------------------- ---------------------------- Floating Rate Student The Bank of New York Loan-Backed Certificates 925 Patterson Plank Rd. $ 89,900,000.00 100.00% Secaucus, NJ 07094 SLM STUDENT LOAN TRUST 1998-1 CUSIP 78442GAZ9 $ 106,550,000 Title of Class Name and Amount and Percent of Address of Nature of Class Beneficial Beneficial Owner Ownership - ------------------------------ -------------------------------- ----------------------- ---------------------------- Floating Rate Student The Bank of New York Loan-Backed Certificates 925 Patterson Plank Rd. $ 81,550,000.00 76.54% Secaucus, NJ 07094 The Northern Trust Company 801 S. Canal C-In $ 8,600,000.00 8.07% Chicago, IL 60607 SSB-Custodian Global Corp. Action $ 13,000,000.00 12.20% Dept JAB5W P. O. Box 1631 Boston, MA 02105-1631 SLM STUDENT LOAN TRUST 1998-2 CUSIP 78442GBC9 $ 105,750,000 Title of Class Name and Amount and Percent of Address of Nature of Class Beneficial Beneficial Owner Ownership - ------------------------------ -------------------------------- ----------------------- ---------------------------- Floating Rate Student The Bank of New York Loan-Backed Certificates 925 Patterson Plank Rd. $ 100,750,000.00 95.27% Secaucus, NJ 07094 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Nothing to Report. 9 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) EXHIBITS. The following documents are filed as part of this Annual Report on Form 10-K: Designation Description ----------- ----------- Exhibit 19.1 Annual Statements of Compliance Exhibit 19.2 Annual Independent Certified Public Accountant's Report (b) REPORTS ON FORM 8-K. Current Reports on Form 8-K were filed during the last quarter of the period covered by this report with the Commission on or about January 25, 1999 in connection with a quarterly Distribution Date. 10 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: March 25, 1999 SLM FUNDING CORPORATION By: /s/ Mark G. Overend ---------------------------- Name: Mark G. Overend Title: President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the dates indicated. SIGNATURE TITLE DATE - --------- ----- ---- /s/ Mark G. Overend - ------------------------ President and Director March 25, 1999 Mark G. Overend (Principal Executive Officer) /s/ J. Lance Franke - ------------------------ Chief Financial March 18, 1999 J. Lance Franke Officer and Director (Principal Financial Officer) /s/ William M.E. Rachal - ------------------------ Treasurer and Controller March 18, 1999 William M.E. Rachal (Principal Accounting Officer) /s/ Elizabeth S. Eldrige - ------------------------ Director March 18, 1999 Elizabeth S. Eldridge /s/ Douglas Johnson - ------------------------ Director March 18, 1999 Douglas Johnson 11 INDEX TO EXHIBITS ----------------- Sequentially Exhibit Numbered Number Exhibit Page - ------ ------- ------------ 19.1 Annual Statements of Compliance 13 19.2 Annual Independent Certified Public 35 Accountant's Report 12