afl11k1203

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

FORM 11-K

ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934


For the year ended December 31, 2003
Commission File No. 1-7434

 

AFLAC INCORPORATED 401(k) SAVINGS
AND PROFIT SHARING PLAN
1932 Wynnton Road
Columbus, Georgia 31999


AFLAC INCORPORATED

1932 Wynnton Road

Columbus, Georgia 31999

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AFLAC INCORPORATED 401(k) SAVINGS AND

PROFIT SHARING PLAN
   
   

Date:  June 15, 2004

By:

  /s/ Peter T. Adams, CPA

 

Peter T. Adams, CPA

 

Vice President,

 

Human Resources - Support

 

AFLAC INCORPORATED 401(k) SAVINGS AND PROFIT SHARING PLAN


Table of Contents

  

Page

 

Report of Independent Registered Public Accounting Firm

1
   

Statements of Net Assets Available for Plan Benefits

2
   

Statements of Changes in Net Assets Available for Plan Benefits

3
   

Notes to Financial Statements

4-7
   

Schedule 1 - Schedule H, Line 4i - Schedule of Assets (Held at End of Year)

8
   

Exhibit 23 - Consent of Independent Registered Public Accounting Firm

9

 

i

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




The Pension Committee
AFLAC Incorporated 401(k) Savings
   and Profit Sharing Plan:


We have audited the accompanying statements of net assets available for plan benefits of the AFLAC Incorporated 401(k) Savings and Profit Sharing Plan (the Plan) as of December 31, 2003 and 2002, and the related statements of changes in net assets available for plan benefits for the years then ended. 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 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the AFLAC Incorporated 401(k) Savings and Profit Sharing Plan at December 31, 2003 and 2002, and the changes in net assets available for plan benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Our audits were performed for the purpose of forming an opinion on the basic financial statements of the AFLAC Incorporated 401(k) Savings and Profit Sharing Plan taken as a whole. The supplementary information included in Schedule 1 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. Such information 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.


 

KPMG LLP
   
   

June 15, 2004

  

Atlanta, Georgia

  

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Table of Contents

AFLAC INCORPORATED 401(k) SAVINGS AND PROFIT SHARING PLAN

Statements of Net Assets Available for Plan Benefits

December 31,

2003    

2002    

Assets:

            

Investments (Note 5)

$

111,507,145

  

$

87,564,179

  
 

Cash

  

336,005

    

246,464

  
 

Accrued employer matching contribution

  

216,851

    

206,686

  
 

Accrued employee contribution

  

322,359

    

-

  

 

Total assets

  

112,382,360

    

88,017,329

  

Liabilities:

            

Excess employee contributions payable

  

45,472

    

12,642

  

 

Total liabilities

  

45,472

    

12,642

  

 

Net assets available for plan benefits

$

112,336,888

  

$

88,004,687

  

See accompanying Notes to Financial Statements.

  

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AFLAC INCORPORATED 401(k) SAVINGS AND PROFIT SHARING PLAN

Statements of Changes in Net Assets Available for Plan Benefits

Years Ended December 31,

 

     

2003

    

2002

  

Contributions:

            

Participant withholdings

$

7,098,479

  

$

6,332,315

  

Participant transfers from other plans

  

513,448

    

798,923

  

Employer matching

  

3,375,149

    

2,708,909

  

 

Total contributions

  

10,987,076

    

9,840,147

  

Dividend income

  

1,349,317

    

1,100,750

  

Interest income

  

297,474

    

335,989

  

Net appreciation in fair value of investments (Note 5)

  

18,191,985

    

4,226,683

  

Distributions to participants

  

(5,951,477

)

  

(3,192,377

)

Forfeitures

  

(391,567

)

  

(226,048

)

Administrative fees

  

(150,607

)

  

(148,004

)

 

Increase in net assets

  

24,332,201

    

11,937,140

  

Net assets available for plan benefits:

            

Beginning of year

  

88,004,687

    

76,067,547

  

End of year

$

112,336,888

  

$

88,004,687

  

See accompanying Notes to Financial Statements.

        

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Table of Contents

AFLAC INCORPORATED 401(k) SAVINGS AND PROFIT SHARING PLAN


Notes to Financial Statements
December 31, 2003 and 2002

1.  DESCRIPTION OF THE PLAN

     The AFLAC Incorporated 401(k) Savings and Profit Sharing Plan (the Plan) was established for the benefit of the employees of AFLAC Incorporated; American Family Life Assurance Company of Columbus (excluding Japan Branch employees); American Family Life Assurance Company of New York; AFLAC International, Incorporated; and Communicorp, Incorporated (collectively "the Company").

     The following description provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions.

(a)

General
   

The Plan is subject to certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

   

Eligible employees may voluntarily participate in the Plan on the first day of the month, which coincides with or next follows the completion of thirty days of employment.

   

The Plan is administered by a plan administrator appointed by the Pension Committee of AFLAC Incorporated's Board of Directors. The majority of the Plan's administrative expenses are paid by the Plan sponsor. A portion of the Plan's administrative expenses is allocated to the Plan and is deducted from the investment earnings (losses) in participant accounts. Administrative fees on loans and in-service withdrawal expenses are paid directly by the requesting participant and are deducted from the loan or in-service withdrawal amount.

   

(b)

Contributions
   

Contributions to the Plan are made by both participants and the Company. Participants may contribute portions of their salary and bonus on a pretax basis in increments of whole percentages of up to 50% in 2003 and 2002, subject to aggregate limits imposed by Internal Revenue Service (IRS) regulations. Aggregate limits as prescribed by the IRS were $12,000 for participants under the age of 50 and $14,000 for participants age 50 and older in 2003 and $11,000 for participants under the age of 50 and $12,000 for participants age 50 and older in 2002. The first 1% to 6% of participants' compensation contributed may be subject to a percentage matching contribution by the Company. For the years ended December 31, 2003 and 2002, subject to certain limitations, the Company's matching contribution was 50% of the portion of the participants' contributions, which were not in excess of 6% of the participants' compensation.
   

4

 

Table of Contents

(c)

Participant Accounts
   

An account is maintained for each participant and is credited with participant contributions and investment earnings or losses thereon. Contributions may be invested in one or more of the investment funds available under the Plan at the direction of the participant. A separate account is maintained with respect to each participant's interest in the Company's matching contributions. Amounts in this account are apportioned and invested in the same manner as the participant's account.
   

(d)

Vesting
   

Participants are 100% vested in their contributions plus actual investment earnings or losses thereon.
   

Participants become vested in the Company's contributions and the related earnings or losses thereon according to the following schedule.
         

 

Years of Service

Vested Percentage

  

 

Less than 1

0%

  

 

1

20%

  

 

2

40%

  

 

3

60%

  

 

4

80%

  

 

5 or more

100%

  
         

A participant's interest in the Company's contributions and the related earnings or losses thereon is also vested upon termination either because of death or disability or after attaining early retirement date or normal retirement age. Except as previously described, participants forfeit the portion of their interest which is not vested upon termination of employment. These forfeitures are available to reduce the Company's future matching contributions or plan expenses.
         

(e)

Distributions
         

Participants may receive a distribution equal to the vested value of their account upon death, disability, retirement, or termination of either the Plan or the participant's employment. Distributions may only be made in the form of a lump-sum cash payment and/or AFLAC Incorporated common stock.

         

The Plan permits in-service withdrawals for participants who are 100% vested in the Company's contribution and have attained age 59 1/2.
         

(f)

Loans
     

Participants are allowed to borrow funds from their accounts. The minimum amount of any loan is $1,000. Participants may have up to two active loans from their account at any time. The maximum amount of loans made to a participant from the Plan, when added together, cannot exceed the lesser of:
         

   a.

50% of the participant's vested benefit (as defined by the Plan document); or
       

   b.

$50,000, reduced by the amount, if any, of the highest balance of all outstanding loans to the participant during the one-year period ending on the day prior to the day on which the loan is made.

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Table of Contents

 

All participant loans carry a maturity date of five years or less from the date the loan is made and are secured by the balance in the participant's account. Interest rates on participant loans are established at the prevailing prime interest rate at the time the loan is made plus 2%. The prime interest rate was 4.00% at December 31, 2003, compared with 4.25% at December 31, 2002.
   

(g)

Transactions With Parties-in-Interest
         

The assets of the Plan are held in a trust maintained by Charles Schwab Trust Company (Charles Schwab).
   
 

As of December 31, 2003 and 2002, the statements of net assets available for plan benefits include the following investments in and accounts with AFLAC Incorporated and affiliates of Charles Schwab, parties-in-interest to the Plan.

   

2003     

  

2002     

  

AFLAC Incorporated common stock

$

58,720,499

  

$

50,272,269

  
             

Schwab Institutional Advantage Money Fund

  

4,239,727

    

3,874,543

  
               

Schwab S&P 500 Investors Fund

  

1,599,189

    

915,034

  

2.  SUMMARY OF ACCOUNTING POLICIES

(a)

Basis of Presentation
   

The accompanying statements of net assets available for plan benefits and changes in net assets available for plan benefits have been prepared on the accrual basis of accounting.
   

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the plan administrator to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
   

(b)

Reclassifications
   
 

Certain prior year amounts have been reclassified to conform with the presentation adopted in the current year statements. These reclassifications had no impact on net assets available for plan benefits.
   

(c)

Investments
   

Investments are stated at fair value based upon market quotations obtained from national security exchanges. Securities transactions are accounted for on the trade date (the date the order to buy or sell is executed). Realized gains and losses on the sale of investments are calculated based on the difference between selling price and cost on an average cost basis.
   
 

Participant loans are stated at cost, which approximates fair value.

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Table of Contents

(d)

Distributions
   
 

Distributions to participants are recorded when paid.
   

(e)

Fair Value of Financial Instruments
   
 

The carrying amounts for cash, receivables, and payables approximated their fair values due to the short-term nature of these instruments.

3.  FEDERAL INCOME TAXES

     The Internal Revenue Service has determined and informed the Company by letter dated February 27, 2002, that the Plan and related trust are in compliance with applicable sections of the Internal Revenue Code and is exempt from Federal income taxes. The Plan intends to continue as a qualified plan and trust to maintain its tax exempt status.

     Participants in the Plan are not subject to federal and state income taxes on their contributions, on amounts contributed by the employer, or on earnings or appreciation of investments held by the Plan until withdrawn by the participant or distributed to the participant's named beneficiary in the event of death.


4.  PLAN TERMINATION

     Although it has not expressed any intent to do so, the Company has the right to terminate the Plan at any time subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their accounts.


5.  INVESTMENT FUNDS

     The following table presents the fair value of individual investments that exceeded 5% of the Plan's net assets as of December 31:

 

2003     

  

2002     

  

Mutual Funds:

            

Davis New York Venture Fund

$

7,483,109

  

$

5,374,004

  

Dodge & Cox Balanced Fund

  

12,625,063

    

8,152,806

  

Dodge & Cox Stock Fund

  

13,483,165

    

9,379,921

  

AFLAC Incorporated common stock

  

58,720,499

    

50,272,269

  

     During 2003 and 2002, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:

   

2003    

    

2002    

  

Mutual Funds

$

8,155,688

  

$

(4,686,701

)
             

Common Stock

  

10,036,297

    

8,913,384

  

               

Total Investments

$

18,191,985

  

$

4,226,683

  

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Table of Contents

SCHEDULE 1

AFLAC INCORPORATED 401(k) SAVINGS AND PROFIT SHARING PLAN


Schedule H, Line 4i - Schedule of Assets (Held at End of Year)

As of December 31, 2003

 Identity of Issue and Description of Investment

Shares/Units

  

Current Value

Money Market Funds

          

Schwab Institutional Advantage Money Fund*

4,239,727

  

$

4,239,727

  

               

Mutual Funds

          

Columbia Fixed Income Securities Fund

139,888

    

1,886,515

  

Davis New York Venture Fund

272,537

    

7,483,109

  

Dodge & Cox Balanced Fund

172,875

    

12,625,063

  

Dodge & Cox Stock Fund

188,574

    

13,483,165

  
 

Growth Fund of America

117,580

    

2,872,449

  

Invesco Dynamics Fund

76,691

    

1,130,423

  

Julius Baer International Equity Fund

62,691

    

1,661,308

  

Rydex OTC Fund

139,015

    

1,380,413

  

Schwab S&P 500 Investors Fund*

93,356

    

1,599,189

  

 

Total Mutual Funds

      

44,121,634

  

               

AFLAC Incorporated common stock*

1,624,593

    

58,720,499

  
               

Participant loans (1,186 loans outstanding with interest rates

         

  from 6% to 11.5% and maturity dates of less than one year

          

  to five years)

4,425,285

    

4,425,285

  

               

Total Investments

    

$

111,507,145

  

*Indicates party-in-interest, as defined in ERISA Section 406.

  

See accompanying independent auditors' report.

 

8