UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-15279
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
GENERAL COMMUNICATION, INC.
2550 Denali Street, Suite 1000
Anchorage, Alaska 99503
1
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
FORM 11-K
FOR THE YEAR ENDED DECEMBER 31, 2002
TABLE OF CONTENTS
Page No.
--------
Independent Auditors' Report dated June 3, 2003..........................................................3
Statements of Net Assets Available for Benefits at December 31, 2002 and 2001............................4
Statements of Changes in Net Assets Available for Benefits for the Years Ended
December 31, 2002 and 2001............................................................................5
Notes to Financial Statements............................................................................6
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) .........................................17
Schedule H, Line 4j - Schedule of Reportable Transactions ..............................................18
Signature...............................................................................................19
Exhibits:
Exhibit No. Description
- ---------------- ---------------------------------------------------------------------------------------------
23.1 Consent of KPMG LLP (Accountant for the Plan) *
99.1 Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 *
-------------------------
* Filed herewith.
-------------------------
2
INDEPENDENT AUDITORS' REPORT
The Plan Trustees
General Communication, Inc. Qualified
Employee Stock Purchase Plan
We have audited the accompanying statements of net assets available for benefits
of General Communication, Inc. Qualified Employee Stock Purchase Plan as of
December 31, 2002 and 2001, and the related statements of changes in net assets
available for 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 benefits of General
Communication, Inc. Qualified Employee Stock Purchase Plan as of December 31,
2002 and 2001, and the changes in those net assets available for 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 taken as a whole. The supplemental schedules of assets held
at end of year and reportable transactions are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements but are 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. The supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/
KPMG LLP
Anchorage, Alaska
June 3, 2003
3
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
2002 2001
-------------- --------------
Cash and cash equivalents $ 3 8
-------------- --------------
Investments, at fair value:
Nonparticipant directed:
Common stock 29,044,279 37,474,528
-------------- --------------
Participant directed:
Common stocks 8,827,050 2,218,647
Mutual funds 4,387,931 4,303,188
Common/collective trust 707,308 547,656
-------------- --------------
13,922,289 7,069,491
Participant loans 875,297 843,557
Pending settlements 4,084 ---
-------------- --------------
Total investments, at fair value 43,845,949 45,387,576
-------------- --------------
Contributions receivable:
Employee 162,415 150,773
Employer 134,853 129,199
-------------- --------------
297,268 279,972
Investment income receivable 8,399 5,935
Accrued excess employee contributions --- (47,942)
-------------- --------------
Net assets available for benefits $ 44,151,619 45,625,549
============== ==============
See accompanying notes to financial statements.
4
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 2002 and 2001
2002 2001
--------------- ---------------
Contributions:
Employee $ 4,940,036 3,883,166
Employer 4,065,147 3,321,168
--------------- ---------------
9,005,183 7,204,334
--------------- ---------------
Investment income:
Net appreciation (depreciation) in fair value of investments (8,966,795) 5,364,369
Dividend income 101,571 164,731
Interest income 81,644 67,601
--------------- ---------------
(8,783,580) 5,596,701
--------------- ---------------
Increase in net assets available for benefits 221,603 12,801,035
Employee withdrawals 1,695,533 2,766,493
--------------- ---------------
Net increase (decrease) in net assets available for benefits (1,473,930) 10,034,542
Net assets available for benefits at beginning of period 45,625,549 35,591,007
--------------- ---------------
Net assets available for benefits at end of period $ 44,151,619 45,625,549
=============== ===============
See accompanying notes to financial statements.
5
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
(1) Description of Plan
The following description of the General Communication, Inc. Qualified
Employee Stock Purchase Plan ("Plan") provides general information
only. Participants should refer to the Plan document for a more
complete description of the Plan's provisions.
General
The Plan is a defined contribution plan covering employees of
General Communication, Inc. ("GCI") and affiliated companies
(collectively, the "Company") who have completed one year of
service, as defined in the Plan document. Affiliated companies
include GCI, Inc., GCI, Inc.'s subsidiary GCI Holdings, Inc., GCI
Holdings, Inc.'s subsidiaries GCI Communication Corp., GCI Cable,
Inc., and GCI Transport Co., Inc., GCI Fiber Co., Inc., GCI Fiber
Communication Co., Inc. and Fiber Hold Co., Inc. and GCI Fiber Co.,
Inc.'s and Fiber Hold Co., Inc.'s partnership Alaska United Fiber
System Partnership ("Alaska United"), GCI Communication Corp.'s
subsidiary Potter View Development Co., Inc., GCI Cable, Inc.'s
subsidiary GCI American Cablesystems, Inc., GCI American
Cablesystems, Inc.'s subsidiary GCI Cablesystems of Alaska, Inc.,
and GCI Transport Co., Inc.'s subsidiary GCI Satellite Co., Inc. All
subsidiaries are wholly-owned at December 31, 2002.
Effective January 1, 2003 GCI American Cablesystems, Inc. and GCI
American Cablesystems, Inc.'s subsidiary GCI Cablesystems of Alaska,
Inc. were merged with GCI Cable, Inc.
Contributions
The Plan provides for a qualified cash or deferred arrangement as
defined in Section 401(k) of the Internal Revenue Code of 1986
("Code"). A participant may elect the following methods to make
employee contributions:
(1) Salary Reduction Contributions which will not be included in
the participant's current earnings for federal income tax
purposes but rather are taxable upon distribution, or
(2) Non-qualified Voluntary Contributions ("after-tax
contributions") which will be included in the participant's
current earnings for federal income tax purposes and are not
taxable upon distribution.
Eligible employees of the Company may elect to reduce their
compensation in any amount up to 10% of such compensation subject to
a maximum of $11,000 and $10,500 in 2002 and 2001, respectively;
they may contribute up to 10% of their compensation with after-tax
dollars; or they may elect a combination of salary reduction and
after-tax contributions.
The Company may match employee salary reduction and after-tax
contributions in any amount determined by the Company's Board of
Directors each year, but not more than 10% of any one employee's
compensation will be matched in any pay period. All matching
contributions are invested in GCI Class A or Class B common stock.
The combination of salary reduction, after-tax, forfeited and
matching contributions cannot exceed the lesser of:
o 100% of any employee's compensation (determined after salary
reduction), or $40,000 for 2002, and
o 25% of any employee's compensation (determined after salary
reduction), or $35,000 for 2001.
6 (Continued)
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
Compensation considered for all Plan purposes is subject to a
compensation ceiling of $200,000 and $170,000 in 2002 and 2001,
respectively. Beginning in 2002, eligible employees were allowed to
make catch-up contributions of no more than $1,000. These catch-up
contributions are not eligible to receive employer matching
contributions.
As of January 1, 2003, eligible employees can elect to reduce their
compensation in any even dollar amount up to 50 percent of such
compensation (subject to certain limitations) up to a maximum of
$12,000 and may make catch-up contributions of up to $2,000.
Employee contributions invested in GCI Class A and Class B common
stock may receive up to 100% matching, as determined each year by
the Company's Board of Directors, in GCI Class A and Class B common
stock. Employee contributions invested in other than GCI Class A and
Class B common stock may receive up to 50% matching, as determined
each year by the Company's Board of Directors, in GCI Class A and
Class B common stock.
Matching amounts contributed to the Plan by the Company are not
taxed to the employee until distribution upon retirement, hardship,
disability, death or termination of employment. Plan earnings are
taxable to the employee either upon distribution or, in the case of
GCI common stock distributions, upon eventual disposition of the
stock.
Participant Accounts
Each participant account is credited with the participant's
contributions, employer matching contributions and allocations of
Plan earnings. Plan earnings are allocated quarterly. Earnings of
assets other than GCI Class A and Class B common stock are allocated
based on the participant's weighted average account balance
(excluding GCI common stock) as a proportion of total weighted
average account balances (excluding GCI common stock) during the
calendar quarter. Earnings on GCI common stock are allocated to the
accounts holding such common stock, based upon the number of shares
held by each participant account at the end of the calendar quarter.
Vesting
A participant's interest in his or her Salary Reduction
Contributions and Non-qualified Voluntary Contributions is always
fully vested and is not subject to forfeiture.
The participant's interest in the Company matched portion of their
account ("Matching Account") is vested based upon years of service
with the Company (as defined in the Plan document), in accordance
with the following schedule:
Years of Service Vested Percentage
-------------------------- -----------------
Less than 1 0%
1 or more but less than 2 20%
2 or more but less than 3 30%
3 or more but less than 4 45%
4 or more but less than 5 60%
5 or more but less than 6 80%
6 or more 100%
Any portion of a participant's account which is forfeitable shall be
forfeited on the earlier of the date a terminated participant
receives a distribution or the date on which the participant
experiences five consecutive one-year breaks in service (as defined
in the Plan document).
A participant's interest in their Matching Account fully vests
without regard to the number of years of service when the
participant, while still employed: (i) attains Normal Retirement Age
7 (Continued)
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
(as defined in the Plan document) and retires under the terms of the
Plan; (ii) dies; or (iii) becomes totally and permanently disabled.
A participant's interest in their Matching Account fully vests upon
the termination or partial termination of the Plan or upon complete
discontinuance of Company contributions.
If a participant terminates participation for any reason other than
attainment of Normal Retirement Age and retirement, death or
disability while any portion of his or her account in the Plan is
forfeitable, and receives a distribution of his or her vested
account balance attributable to Company matching contributions not
later than the close of the second Plan year following the Plan year
in which participation terminated, then upon becoming an eligible
employee, the participating employee will have the right to repay
the distribution to the Plan in accordance with Plan provisions. The
shares of that participating employee's account previously forfeited
will be restored.
Forfeitures
If a participating employee terminates participation for any reason
other than attainment of Normal Retirement Age and retirement, death
or disability, that portion of his or her account attributable to
Company matching contributions which has not vested will be
forfeited. All amounts so forfeited will be used to reduce future
Company matching contributions. During 2002 and 2001, employer
contributions were reduced by $223,939 and $0, respectively, from
forfeited nonvested accounts. At December 31, 2002 and 2001,
$103,509 and $295,533, respectively, had been forfeited but had not
yet been used to reduce the Company's match.
Participant Loans
Participants may borrow from their accounts a minimum of $1,000 up
to a maximum equal to the lesser of $50,000 or 50% of the portion of
their account balance comprised of participant contributions and
earnings upon such contributions. Loan transactions are treated as a
transfer to (from) the appropriate investment fund (from) to the
participant's loan. Loan terms range from 1-5 years. Loans are
secured by the vested balance in the participant's account and earn
interest at a fixed rate calculated at the loan date. The fixed rate
is calculated using the prime rate reported in the Wall Street
Journal at the loan date plus 2%. Principal and interest is paid
ratably through semi-monthly payroll deductions.
(2) Summary of Significant Accounting Policies
The Plan financial statements are based on the accrual method of
accounting in accordance with generally accepted accounting principles.
Plan investments are stated at fair value.
In preparing the financial statements, the Plan administrator is
required to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the financial statements and
additions and deductions to (from) net assets for the period. Actual
results could differ from those estimates and assumptions.
At December 31, 2002 the fair values of GCI Class A common stock,
Comcast Corporation common stock, WorldCom Group common stock, MCI
Group common stock, AT&T Corporation common stock and AT&T Wireless
Corporation common stock are based on the average of the bid and ask
prices during the day as listed on the National Association of
Securities Dealers Automated Quotation (NASDAQ) National Market System.
GCI Class B common stock is traded on the Over-the-Counter market. GCI
Class B common stock is convertible share-for-share into GCI Class A
common stock and is valued based on Over-the-Counter activity. Mutual
fund investments are carried at fair value, as determined by individual
fund management, based upon quoted market prices.
8 (Continued)
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
The Common/Collective Trust invests primarily in money market
instruments, U.S. Government agency obligations, and investment
contracts. The Plan's ownership in the Common/Collective Trust is
carried at fair value based on the investment's net asset value per
unit. Money market instruments and U.S. Government agency obligations
in the Common/Collective Trust are valued at amortized cost. The
investment contracts in the Common/Collective Trust are carried at
either contract value, which approximates fair value, because certain
contracts are fully benefit responsive, or at contract book value which
approximates amortized cost.
Pending Settlements represent the value of sold or purchased securities
during the three-business day settlement period.
Purchases and sales of securities are recorded on a trade-date basis.
Reclassifications have been made to the 2001 financial statements to
make them comparable with the 2002 presentation.
(3) Administration of Plan Assets
Merrill Lynch is the Plan's recordkeeper and asset trustee.
Administrative expenses related to the Plan of $22,013 and $16,191 for
the years ended December 31, 2002 and 2001, respectively, are paid
directly by the Company to the recordkeeper and the asset trustee. The
asset trustee charges trade fees for all transactions in common stock
investments. Trade fees for mutual fund investments, if any, are
described in each fund's prospectus. Company employees provide
administrative support to the Plan but no employee receives
compensation from the Plan.
(4) Amendment or Termination
The Company's Board of Directors has reserved the right to amend or
terminate the Plan. No amendment may reduce the accrued benefits of any
participant or give the Company any interest in the trust assets of the
Plan. In the event of termination of the Plan, a participant with
respect to the Plan becomes fully vested in his or her Matching
Account.
(5) Investments
Investment choices offered to Plan participants at December 31, 2002
were as follows:
Common Stock:
-------------
o GCI Class A and Class B.
o AT&T Corporation - prior to March 15, 1999, the Plan allowed
participants to invest in TCI Group Series A common stock. On
March 15, 1999 AT&T merged with TCI and subsequently converted
each share of TCI Group Series A common stock into 0.7757 share
of AT&T Corporation common stock.
o AT&T Wireless Corporation- on July 9, 2001, AT&T Corporation
distributed shares of AT&T Wireless Group Inc. to its
shareholders. Shareholders received 0.3218 share of AT&T
Wireless Corporation common stock for each share of AT&T
Corporation common stock outstanding.
o Comcast Corporation- on November 15, 2002, AT&T Corporation
distributed shares of Comcast Corporation to its shareholders.
Shareholders received 0.3235 share of Comcast Corporation
common stock for each share of AT&T Corporation common stock
outstanding.
9 (Continued)
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
o WorldCom Group- this common stock was delisted from The Nasdaq
Stock Market on July 30, 2002, as a result of WorldCom Inc.'s
bankruptcy filing in July 2002. The Plan no longer allowed
investment in WorldCom Group common stock as of February 14,
2003 (see note 9).
o MCI Group- after The Nasdaq Stock Market closed on June 7,
2001, each share of WorldCom common stock was converted to one
share of WorldCom Group common stock and 1/25 of a share of MCI
Group common stock. This common stock was delisted from The
Nasdaq Stock Market on July 30, 2002, as a result of WorldCom,
Inc.'s bankruptcy filing in July 2002. The Plan no longer
allowed investment in MCI Group common stock as of February 14,
2003 (see note 9).
Common/Collective Trust:
o Merrill Lynch Retirement Preservation Trust - a collective
trust seeking to provide preservation of principal, liquidity
and current income that is typically higher than money market
accounts, by investing in a broadly diversified portfolio of
Guaranteed Investment Contracts, U.S. government agency
securities, and high-quality money market securities.
Mutual Funds:
o Alger Large Cap Growth Institutional Portfolio Fund - a mutual
fund seeking long-term capital appreciation. The fund normally
invests at least 65% of its total assets in equity securities
of companies that, at the time of purchase, have a total market
capitalization of $1 billion or greater. The fund may also
invest up to 35% of its total assets in equity securities of
companies that, at the time of purchase, have a total market
capitalization of less than $1 billion. In addition, the Fund
may invest up to 20% of its total assets in foreign securities.
o Mercury Total Return Bond Fund - a mutual fund seeking to
maximize long-term total return through investment in bonds of
varying maturities with a portfolio duration of two to eight
years. In February 2003, the Mercury Total Return Bond Fund was
merged into the Merrill Lynch Bond Fund Core Bond Portfolio.
The primary objective of the new fund is to seek a high level
of current income through investments primarily in long-term
corporate bonds rated A or better by either Moody's Investors
Service or Standard & Poor's Rating Group. The Fund may invest
up to 25% of its total assets in foreign securities. The fund
may also seek to hedge its portfolio against market and
currency risk through the use of currency and other financial
futures contracts and related options transactions. As a
secondary objective, the fund seeks capital appreciation when
consistent with its primary objective.
o Oakmark Select Fund - a mutual fund seeking long-term capital
appreciation. The fund invests primarily in securities of U.S.
issuers. However, it may invest up to 25% of its total assets
(valued at the time of investment) in securities of non-U.S.
issuers, including foreign government obligations as well as
foreign equity and debt securities that are traded
over-the-counter or on foreign exchanges. There are no
geographic limits on the Fund's foreign investments, but the
Fund does not expect to invest more than 5% of its assets in
securities of issuers based in emerging markets. The Fund's
adviser uses a value investment strategy that evaluates
individual companies whose shares trade in the market at
significant discounts to what they believe is their true
business value. The Fund is a non-diversified portfolio that
holds a high concentration of assets in a relatively small
number of securities.
o Dreyfus Founders Discovery Fund - a mutual fund seeking capital
appreciation. The fund normally invests at least 65% of its
total assets in common stocks of small, rapidly growing
10 (Continued)
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
U.S.-based companies with small market capitalizations. The
fund may invest up to 30% of its total assets in foreign
securities.
o Merrill Lynch Basic Value Fund - a mutual fund seeking capital
appreciation and, secondarily, income by investing in
securities, primarily equities, that Fund management believes
are undervalued. The fund seeks to invest in stocks that
possess one or more of the following characteristics:
- Are selling at a discount either from book value (a
company's assets, minus its liabilities, divided by the
number of shares of common stock outstanding), or from
historical price-earnings ratios.
- Seem capable of recovering from situations that caused the
companies to become temporarily out of favor.
Particular emphasis is placed on securities that provide an
above-average dividend return and sell at a below-average
price-earnings ratio. This Fund may invest up to 25% of its
total assets in foreign securities.
o PIMCO PEA Innovation Fund - a mutual fund seeking capital
appreciation. The fund invests at least 65% of its total assets
in common stocks of companies which utilize innovative
technologies to gain a strategic competitive advantage in the
industry, as well as in companies that provide and service
those technologies. Securities are selected with minimal
emphasis on more traditional factors, such as growth potential
or value relative to intrinsic worth. Special emphasis is
placed on companies that fund management believes have
innovative technologies in new products, enhanced distribution
systems and improved management techniques. Although the fund
emphasizes the utilization of technologies, it is not
restricted to investment in companies in a particular business
sector or industry. The fund may buy and sell certain
"derivative" instruments, contracts or options for the purpose
of hedging or increasing its return, when advisable and
consistent with the fund's investment objective, subject to
limitations.
o Van Kampen Aggressive Growth Fund - a mutual fund seeking
capital growth. The fund ordinarily invests at least 65% of its
total assets in common stocks and other equity securities fund
management believes have above-average potential for capital
growth. The fund emphasizes the securities of small- to
mid-sized companies, but may also invest in the securities of
larger companies that fund management believes have an
above-average potential for capital growth. In selecting
investments, fund management seeks to identify companies
positioned to produce an attractive level of future earnings
through the development of new products, services or markets,
or as a result of changing market or industry conditions. The
fund may buy and sell certain derivative instruments, contracts
or options for the purpose of hedging or increasing its return,
when advisable and consistent with the fund's investment
objective, subject to certain limitations. The Fund may also
invest up to 20% of its total assets in the securities of
foreign issuers.
o Merrill Lynch S&P 500(R) Index Fund - a mutual fund seeking to
provide investment results that, before expenses, replicate the
total return of the Standard & Poor's 500 Composite Stock Price
Index (S&P 500(R)). The Index is composed of the common stocks
of 500 large-capitalization companies within various industrial
sectors, most of which are listed on the New York Stock
Exchange. In seeking this objective, fund management generally
will allocate investments among common stocks in approximately
the same weightings as the Index. However, certain factors may
make the purchase of some stocks impracticable or unnecessary.
11 (Continued)
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
o State Street Research Aurora Fund - a mutual fund seeking a
high total return, consisting principally of capital
appreciation. The fund ordinarily invests at least 65% of its
total assets in small-company value stocks. The fund generally
expects that most of these stocks will not be larger than the
stocks of the largest companies in the Russell 2000(R)Index.
Fund management takes a value approach, searching for those
companies that appear to be trading below their true worth. The
fund reserves the right to invest up to 35% of its total assets
in other securities. These may include other types of stocks,
such as larger-company stocks or growth stocks. Up to 35% of
the fund's total assets may be invested in the securities of
foreign issuers. The Fund may also buy or sell certain
derivative instruments, contracts or options for the purpose of
hedging or speculation, when advisable and consistent with the
Fund's investment objective, subject to certain limitations.
o AIM International Equity Fund - a mutual fund seeking to
provide long-term growth of capital by investing in a
diversified portfolio of international equity securities, the
issuers of which are considered by fund management to have
strong earnings momentum. The fund normally invests at least
70% of its total assets in marketable equity securities
(including common stock, preferred stock, depositary receipts
for stock and other securities having the characteristics of
stock) of foreign companies which are listed on a recognized
foreign securities exchange or traded in a foreign
over-the-counter market. The fund may also invest up to 20% of
its total assets in securities exchangeable for, or convertible
into, equity securities of foreign companies. The fund will
emphasize investments in foreign companies in the developed
countries of Western Europe and the Pacific Basin, and may also
invest, to a limited extent, in the securities of companies
located in developing countries in various regions of the
world.
o Oppenheimer Quest Balanced Value Fund - a mutual fund primarily
seeking growth of capital and, secondarily, investment income.
The fund invests primarily in marketable equity securities
traded on national exchanges that fund management believes are
undervalued in the marketplace and offer the possibility of
increased value. The fund invests at least 25% of its total
assets in equity securities, including common stocks and
preferred stocks. The fund also invests at least 25% of its
total assets in fixed-income senior securities. These
securities include bonds, debentures, notes, participation
interests, convertible securities, U.S. government obligations
and money market instruments. The fund may invest up to 25% of
its total assets in lower grade debt securities, and may invest
in the securities of foreign issuers. The Fund may buy and sell
certain derivative instruments, contracts or options for the
purpose of hedging, when advisable and consistent with the
Fund's investment objective, subject to certain limitations.
Common stock investment prices per share follow:
December 31, December 31,
May 31, 2003 2002 2001
-------------- --------------- ---------------
GCI Class A $ 5.63 6.71 8.53
GCI Class B 6.15 7.60 10.25
AT&T Corporation 19.49 26.11 18.14
AT&T Wireless Corporation 7.77 5.65 14.37
Comcast Corporation 30.01 23.57 N/A
WorldCom Group 0.07 0.14 14.06
MCI Group 0.18 0.18 12.70
12 (Continued)
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
The Plan was amended in 2002 to allow 25% of each participant's March
31, 2002 GCI common stock holdings to be sold and reinvested in other
Plan investment choices, at the participant's election. The amendment
provides each participant with the ability to sell such shares and
reinvest the proceeds in other Plan investments, or continue to retain
the shares of GCI common stock.
Investments which represent 5% or more of the Plan's net assets at
December 31, 2002 and 2001 follow:
2002 2001
---------------- ----------------
GCI Class A and Class B common stock:
Participant directed $ 8,652,386 1,566,727
Nonparticipant directed 29,044,279 37,474,528
---------------- ----------------
$ 37,696,665 39,041,255
================ ================
The Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) have appreciated
(depreciated) in value as follows:
Years ended December 31,
------------------------------------
2002 2001
---------------- ----------------
Common stock $ (8,041,705) 5,648,625
Mutual funds (925,090) (284,256)
---------------- ----------------
$ (8,966,795) 5,364,369
================ ================
Net appreciation (depreciation) in fair value by participant and
nonparticipant directed investments is as follows:
Years ended December 31,
------------------------------------
2002 2001
---------------- ----------------
Participant directed:
Common stock $ 373,698 316,880
Mutual funds (925,090) (284,256)
---------------- ----------------
Total participant directed (551,392) 32,624
Nonparticipant directed common stock
(8,415,403) 5,331,745
---------------- ----------------
$ (8,966,795) 5,364,369
================ ================
13 (Continued)
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
(6) Changes in Net Assets of Nonparticipant Directed Investments
The GCI Class A and Class B common stock contributed to the Plan by the
employer or purchased by the Plan with employer matching funds are
nonparticipant directed investments. The following summarizes the
significant components of the changes in net assets of nonparticipant
directed investments:
Years ended December 31,
------------------------------------
2002 2001
---------------- ----------------
Changes in net assets:
Contributions $ 7,619,763 6,703,110
Net appreciation (depreciation) (8,415,403) 5,331,745
Interest income 18,639 51,467
Employee withdrawals (917,438) (2,328,693)
Net transfers to participant directed
investments (6,735,810) (597,277)
---------------- ----------------
$ (8,430,249) 9,160,352
================ ================
(7) Income Taxes
The Plan is qualified under Section 401(a) of the Code pursuant to
favorable tax determination letters dated December 9, 1987, March 8,
1988, March 13, 1996, February 23, 2001, and June 25, 2002 obtained
from the Internal Revenue Service. Although the most recent tax
determination letter received by the Plan Sponsor does not reflect
certain changes made to the Plan, the Plan Administrator believes the
Plan is currently designed and is operated in compliance with the
applicable requirements of the Code. The trust established pursuant to
the Plan is, therefore, exempt from taxation under Section 501(a) of
the Code.
(8) Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500:
Years Ended December 31,
------------------------------------
2002 2001
---------------- ----------------
Benefits paid to participants per the
financial statements $ 1,695,533 2,766,493
Less accrued participant withdrawals,
prior year --- (47,545)
---------------- ----------------
Benefits paid to participants per Form
5500 $ 1,695,533 2,718,948
================ ================
(9) Subsequent Events
In April 2002, the Plan was amended to allow certain portions of all
active, inactive and terminated participants' GCI common stock holdings
to be sold and reinvested in other Plan investment choices, at the
participant's election ratably over four years. Effective January 1,
2003, the April 2002 amendment was superceded by a new Plan amendment
which allows participating employees to sell up to 100 percent of their
holdings of GCI Class A and B common stock balances computed as of
December 31, 2002 and purchase other investments offered by the Plan.
Each participant will have complete discretion to sell or continue to
retain such shares of GCI common stock.
14 (Continued)
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
Effective January 23, 2003, the Plan added seven mutual fund investment
choices as follows:
o American Intermediate Bond Fund of America - a mutual fund seeking
to provide current income and preservation of capital through a bond
portfolio with an average effective maturity no greater than five
years. The fund seeks to maintain a portfolio of debt securities
with quality ratings of A or better, or unrated but determined to be
of equivalent quality including securities issued and guaranteed by
the U.S. government and securities backed by mortgages or other
assets.
o Federated Fund for U.S. Government Securities - a mutual fund
seeking to provide current income by investing exclusively in
securities which are primary or direct obligations of or guaranteed
by the U.S. government, its agencies or instrumentalities, as well
as certain collateralized mortgage obligations. Such securities
include: (1) U.S. Treasury bills, notes and bonds; (2) U.S.
government agency and instrumentality obligations; and (3) mortgage
obligations collateralized by the Government National Mortgage
Association, the Federal National Mortgage Association, or the
Federal Home Loan Mortgage Corporation Participation Certificates.
o Lord Abbett Bond Debenture Fund - a mutual fund seeking current
income and capital appreciation for a high total return. Under
normal circumstances, the fund invests at least 65% of its total
assets in bonds and/or debentures. The fund seeks unusual values and
may invest substantially in a portfolio of high-yield, lower-quality
bonds and notes. The fund may also invest up to 20% of its total
assets in foreign debt securities.
o MFS Total Return Fund - a mutual fund seeking above-average income
(compared to a portfolio entirely invested in equity securities)
consistent with the prudent employment of capital. The fund also
seeks reasonable opportunity for growth of capital and income. The
fund may invest up to 20% (and expects to invest between 5% and 20%)
of its total assets in foreign and emerging market securities. The
fund may invest up to 20% in high-yield securities. The fund has the
flexibility to invest in derivative securities when fund management
believes such securities can provide better value relative to direct
investments in stocks or bonds.
o AIM Mid Cap Core Equity Fund - a mutual fund seeking long-term
growth of capital. The fund invests at least 65% of its total assets
in equity securities of U.S. middle-capitalization companies, which
are defined as companies with market capitalizations between $1
billion and $5 billion. Fund management uses a multistage process to
identify companies that possess sustainable above-average growth at
an attractive offering price. The fund may invest up to 35% of its
total assets in equity securities of U.S. companies that have market
capitalizations of less than $1 billion or greater than $5 billion,
as well as in equity securities of issuers not located in the U.S.
In addition, the fund may invest up to 35% of its total assets in
investment grade debt securities, including U.S. and foreign
government securities and corporate debt securities. The fund may
also buy and sell certain derivative instruments, contracts or
options for the purpose of hedging, when advisable and consistent
with the fund's investment objective, subject to certain
limitations.
o Phoenix-Duff & Phelps Real Estate Securities Fund - a mutual fund
seeking capital appreciation and income. The fund normally invests
at least 75% of its assets in real-estate-related securities such as
real estate investment trusts ("REITs"). The fund may invest the
balance of its assets in debt securities of companies mainly engaged
in the real-estate industry, Real Estate Mortgage Investment
Conduits ("REMICs"), and short-term
15 (Continued)
GENERAL COMMUNICATION, INC
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
instruments. Fund management seeks issuers which derive at least 50%
of their gross revenues from the ownership, development,
construction, financing, management, or sale of real estate. The
fund is non-diversified and therefore considered more risky than one
that is more diversified.
o Eaton Vance Utilities Fund - a mutual fund seeking to provide a high
level of total return, consisting of capital appreciation and
relatively predictable income. The fund invests principally in
dividend-paying common stocks of utilities companies, including
(among others) producers and distributors of gas power and electric
energy, and communications service providers. The fund may invest up
to 20% of its net assets in fixed-income securities (including up to
10% of net assets in lower rated fixed-income securities), and up to
20% of its total assets in foreign securities. The Fund may engage
in derivative transactions to protect against price decline, to
enhance returns or as a substitute for purchasing or selling
securities. The Fund is non-diversified and invests a larger portion
of its assets in the obligations of a limited number of issuers than
would a diversified fund.
The impaired market for shares of WorldCom Group and MCI Group common
stock has resulted in difficulty executing trades on behalf of
participating employees. Accordingly, as of February 14, 2003,
participating employees were no longer allowed to invest in the common
stock of WorldCom Group or MCI Group.
16
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2002
(e) Current
(a) (b) Identity of Issue (c) Description of Investment (d) Cost Value
- ------ --------------------------------- ------------------------------------- -------------- ---------------
Nonparticipant Directed:
Common stock:
* General Communication, Inc 4,316,977 total shares of Class A and
Class B common stock $ 24,441,693 $ 29,044,279
---------------
Participant Directed:
Common stocks:
* General Communication, Inc 1,285,659 total shares of Class A and
Class B common stock ** 8,652,386
AT&T Corporation 2,168 shares of common stock ** 56,610
AT&T Wireless Corporation 5,160 shares of common stock ** 29,156
Comcast Corporation 3,337 shares of common stock ** 78,646
* WorldCom Group 61,709 shares of common stock ** 8,516
* MCI Group 9,641 shares of common stock ** 1,736
---------------
8,827,050
---------------
Mutual fund investments:
Alger Large Cap Growth
Institutional Portfolio 4,692 shares ** 39,320
Mercury Total Return Bond Fund 45,235 shares ** 602,074
Oakmark Select Fund 8,489 shares ** 201,265
Dreyfus Founders Discovery Fund 4,718 shares ** 90,064
Merrill Lynch Basic Value Fund 31,105 shares ** 724,127
PIMCO Innovation Fund 4,219 shares ** 45,443
Van Kampen Aggressive Growth Fund 24,204 shares ** 214,450
Merrill Lynch S&P 500 Index Fund 58,488 shares ** 629,330
State Street Research Aurora Fund 34,203 shares ** 882,426
AIM International Equity Fund 38,468 shares ** 491,623
Oppenheimer Quest Balanced Value
Fund 37,039 shares ** 467,809
---------------
4,387,931
Common / collective trust:
Merrill Lynch Retirement
Preservation Trust 707,308 units ** 707,308
Participant loans Interest bearing at 6.25% to 11.50% ** 875,297
Pending settlements 4,084 units ** 4,084
---------------
Total participant directed 14,801,670
---------------
$ 43,845,949
===============
* Party-in-interest
** Not required for participant directed investments
See accompanying independent auditors' report.
17
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Schedule H, Line 4j - Schedule of Reportable Transactions
Year Ended December 31, 2002
(h) Current
Value of
Asset on
(a) Identity of (b) Description of (c) Purchase (d) Selling (g) Cost of Transaction (i) Net Gain
Party Involved Asset Price Price Asset Date (Loss)
- ------------------- -------------------- -------------- -------------- -------------- -------------- ------------
Series of
transactions:
GCI * Class A common stock $ 1,436,396 $ --- $ 1,436,396 $ 1,436,396 $ ---
GCI * Class A common stock 3,955,895 6,567,586 --- --- 2,611,691
* Party-in-interest
See accompanying independent auditors' report.
18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees of the Plan have duly caused this annual report to be signed on its
behalf by the undersigned thereunto duly authorized.
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Signature Title Date
- -------------------------------------- -------------------------------------------- -------------------
/s/ Alfred J. Walker Plan Administrator June 16, 2003
Alfred J. Walker
19