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
For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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, 2003
TABLE OF CONTENTS
Page No.
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Report of Independent Registered Public Accounting Firm dated May 28, 2004...............................3
Statements of Net Assets Available for Benefits at December 31, 2003 and 2002............................4
Statements of Changes in Net Assets Available for Benefits for the Years Ended
December 31, 2003 and 2002............................................................................5
Notes to Financial Statements............................................................................6
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)..........................................16
Schedule H, Line 4j - Schedule of Reportable Transactions...............................................17
Signature...............................................................................................18
Exhibits:
Exhibit No. Description
- ----------- ----------------------------------------------------------------------
23.1 Consent of KPMG LLP (Independent Registered Public Accounting Firm) *
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* Filed herewith.
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2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2003 and 2002, 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 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 benefits of General
Communication, Inc. Qualified Employee Stock Purchase Plan as of December 31,
2003 and 2002, and the changes in those net assets available for benefits for
the years ended December 31, 2003 and 2002, in conformity with U.S. generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule H, line 4i -
schedule of assets (held at end of year) and supplemental schedule H, line
4j-schedule of reportable transactions are presented for purposes 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 Disclosures 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
May 28, 2004
3
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
2003 2002
-------------- --------------
Assets
Cash and cash equivalents $ --- 3
-------------- --------------
Investments, at fair value:
Non-participant directed:
Common stock 8,946,387 29,044,279
-------------- --------------
Participant directed:
Common stocks 43,070,030 8,827,050
Mutual funds 8,816,103 4,387,931
Common/collective trust 2,356,358 707,308
-------------- --------------
54,242,491 13,922,289
Participant loans 1,024,957 875,297
Pending settlements 11,008 4,084
-------------- --------------
Total investments, at fair value 64,224,843 43,845,949
-------------- --------------
Receivables:
Employee contributions 184,367 162,415
Employer contributions 154,561 134,853
Investment income 9,864 8,399
-------------- --------------
348,792 305,667
-------------- --------------
Liabilities
Excess contributions refundable:
Employee (146,918) ---
Employer (127,112) ---
-------------- --------------
(274,030) ---
-------------- --------------
Net assets available for benefits $ 64,299,605 44,151,619
============== ==============
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, 2003 and 2002
2003 2002
--------------- ---------------
Contributions:
Employee $ 4,940,531 4,940,036
Employer 3,989,447 4,065,147
--------------- ---------------
8,929,978 9,005,183
--------------- ---------------
Investment income:
Net appreciation (depreciation) in fair value of investments 13,284,796 (8,966,795)
Dividend income 128,606 101,571
Interest income 69,314 81,644
--------------- ---------------
13,482,716 (8,783,580)
--------------- ---------------
Increase in net assets available for benefits 22,412,694 221,603
Employee withdrawals 2,264,708 1,695,533
--------------- ---------------
Net increase (decrease) in net assets available for benefits 20,147,986 (1,473,930)
(1,010,770) (1,010,770)
Net assets available for benefits at beginning of period 44,151,619 45,625,549
--------------- ---------------
Net assets available for benefits at end of period $ 64,299,605 44,151,619
=============== ===============
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.
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 50% of such compensation subject to
a maximum of $12,000 in 2003 and up to 10% of such compensation
subject to a maximum of $11,000 in 2002; 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 combination of salary reduction, after-tax, forfeited and
matching contributions cannot exceed the lesser of 100% of any
employee's compensation (determined after salary reduction), or
$40,000 for 2003 and 2002.
Compensation considered for all Plan purposes is subject to a
compensation ceiling of $200,000 in 2003 and 2002. Eligible
employees were allowed to make catch-up contributions of no more
than $2,000 and $1,000 in 2003 and 2002, respectively. These
catch-up contributions are not eligible to receive employer-matching
contributions.
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. No more than 10% of any one employee's
compensation will be matched in any pay period.
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.
6 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
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
(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 2003 and 2002, employer
contributions were reduced by $103,509 and $223,939, respectively,
7 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
from forfeited nonvested accounts. At December 31, 2003, $132,239
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, 2003 the fair values of GCI Class A common stock,
Comcast Corporation Class A 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. The value of WorldCom common stock and MCI
Group-WorldCom Inc. common stock is based on the Over-the-Counter
Bulletin Board and Pink Sheets price at December 31, 2003. 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.
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 for contracts that
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.
(3) Administration of Plan Assets
Merrill Lynch is the Plan's recordkeeper and asset trustee.
Administrative expenses related to the Plan of $14,732 and $22,013 for
the years ended December 31, 2003 and 2002, 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.
8 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
(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, 2003
were as follows:
Common Stock:
o GCI Class A and Class B
o AT&T Corporation
o AT&T Wireless Corporation
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.
o WorldCom- 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. Beginning February 14, 2003,
plan participants were not allowed to purchase WorldCom Group
common stock.
o MCI Group-WorldCom, Inc.- 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. Beginning
February 14, 2003, plan participants were not allowed to
purchase MCI Group common stock.
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 AIM International Growth 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
9 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
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 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
capitalization 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. Generally, the value of fixed-income securities can
be expected to vary with changes in prevailing interest rates
(i.e., as interest rates rise, the market value of such
securities tends to decrease, and vice versa). 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. Such hedging strategies involve special
risks. In addition, there is no guarantee that the hedging
strategies used by the fund will be successful.
o American Intermediate Bond Fund of America - a mutual fund
seeking to provide current income. The Fund invests 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. An investment in the
Fund is neither insured nor guaranteed by the U.S. government.
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
U.S.-based companies with small market capitalizations. The
fund may invest up to 30% of its total assets in foreign
securities.
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 utility 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 use of these techniques is subject to certain
limitations and may expose the fund to increased risk of
principal loss. The fund is non-diversified, which means that
it may invest a larger portion of its assets in the obligations
of a limited number of issuers than a diversified fund. Because
the fund concentrates its investments, the value of fund shares
may fluctuate more than if the fund invested in a broader
variety of investments.
10 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
o Federated Fund for U.S. Government Securities - a mutual fund
seeking current income. The fund invests exclusively in
securities that 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. An investment in the
Fund is neither insured nor guaranteed by the U.S. government.
Generally, the value of fixed-income securities can be expected
to vary inversely with changes in prevailing interest rates
(i.e., as interest rates rise, the market value of such
securities tends to decrease, and vice versa).
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. Generally, the value of fixed-income securities can
be expected to vary inversely with changes in prevailing
interest rates (i.e., as interest rates rise, the market value
of such securities tends to decrease, and vice versa).
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:
o Stocks that 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.
o Stocks that 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 Merrill Lynch Bond Fund Core Bond Portfolio - a mutual fund
seeking 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.
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 ("Index"). 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 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 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 Oppenheimer Quest Balanced 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.
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). REITs
involve certain risks, including refinancing, economic impact
on the industry, changes in property value, dependency on
management skill, and risks similar to small-company investing.
The Fund may invest the balance of its assets in debt
securities of companies mainly engaged in the real-estate
industry, REMICs, and short-term 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
diversified.
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
12 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
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 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 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.
Common stock investment prices per share follow:
December 31, December 31,
2003 2002
--------------- ---------------
GCI Class A $ 8.70 6.71
GCI Class B 8.83 7.60
AT&T Corporation 20.30 26.11
AT&T Wireless Corporation 7.99 5.65
Comcast Corporation 32.79 23.57
WorldCom 0.01 0.14
MCI Group-WorldCom, Inc. 0.05 0.18
Effective January 1, 2003, participating employees were allowed to
diversify 100% of their holdings of GCI common stock at December 31,
2002, in other investments offered by the Plan.
Investments which represent 5% or more of the Plan's net assets at
December 31, 2003 and 2002 follow:
2003 2002
-------------- ---------------
GCI Class A and Class B common stock:
Participant directed $ 42,846,422 8,652,386
Non-participant directed 8,946,387 29,044,279
-------------- ---------------
$ 51,792,809 37,696,665
============== ===============
13 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
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,
------------------------------------
2003 2002
---------------- ----------------
Common stock $ 11,673,464 (8,041,705)
Mutual funds 1,611,332 (925,090)
---------------- ----------------
$ 13,284,796 (8,966,795)
================ ================
Net appreciation (depreciation) in fair value by participant and
non-participant directed investments is as follows:
Years ended December 31,
------------------------------------
2003 2002
---------------- ----------------
Participant directed:
Common stock $ 14,811,275 373,698
Mutual funds 1,611,332 (925,090)
---------------- ----------------
Total participant directed 16,422,607 (551,392)
Non-participant directed common stock
(3,137,811) (8,415,403)
---------------- ----------------
$ 13,284,796 (8,966,795)
================ ================
(6) Changes in Net Assets of Non-participant 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
non-participant directed investments. The following summarizes the
significant components of the changes in net assets of non-participant
directed investments:
Years ended December 31,
------------------------------------
2003 2002
---------------- ----------------
Increase (decrease) in net assets:
Contributions $ 7,659,385 7,619,763
Net depreciation (3,137,811) (8,415,403)
Interest income 36,496 18,639
Employee withdrawals (262,675) (917,438)
Net transfers to participant directed
investments (24,393,287) (6,735,810)
---------------- ----------------
$ (20,097,892) (8,430,249)
================ ================
(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 yet reflect
recent 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.
14 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
(8) Subsequent Events
The Plan was amended in the first quarter of 2004 resulting in the
following changes effective April 2004:
o Up to 100% of all participants' contributions, limited to 10% of any
one employee's compensation in a pay period, will be matched with
GCI common stock, as determined by the Company's Board of Directors
each year, and
o Participants' will be able to reinvest up to 100% of their existing
and future GCI common stock holdings into other investment choices
offered by the Plan.
MCI, Inc. emerged from bankruptcy on April 20, 2004. The WorldCom and
MCI Group-WorldCom, Inc. common stocks held by the Plan had no value on
this date.
15
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2003
(e) Current
(a) (b) Identity of Issue (c) Description of Investment (d) Cost Value
- ----- --------------------------------------- ----------------------------------- -------------- ---------------
Common stock:
* GCI 5,951,625 total shares of Class A
and Class B common stock $ 35,638,783 $ 51,792,809
AT&T Corporation 3,259 shares of common stock ** 66,156
AT&T Wireless Corporation 5,975 shares of common stock ** 47,743
Comcast Corporation 3,323 shares of common stock ** 108,950
* WorldCom 45,126 shares of common stock ** 587
* MCI Group-WorldCom, Inc. 3,520 shares of common stock ** 172
---------------
52,016,417
---------------
Common/collective trust:
Merrill Lynch Retirement Preservation
Trust 2,356,358 units ** 2,356,358
Mutual fund investments:
Alger Large Cap Growth Institutional
Portfolio Fund 11,544 shares ** 130,099
Oakmark Select Fund 16,760 shares ** 510,676
Dreyfus Founders Discovery Fund 9,268 shares ** 241,331
American Intermediate Bond Fund of
America 617 shares ** 8,543
Merrill Lynch Basic Value Fund 32,655 shares ** 994,671
Merrill Lynch Bond Fund Core Bond
Portfolio 79,979 shares ** 937,360
PIMCO PEA Innovation Fund 4,256 shares ** 72,566
Phoenix-Duff & Phelps Real Estate
Securities Fund 11,322 shares ** 230,864
Van Kampen Aggressive Growth Fund 43,916 shares ** 541,480
Merrill Lynch S&P 500 (R)Index Fund 99,200 shares ** 1,353,092
State Street Research Aurora Fund 42,766 shares ** 1,651,198
Lord Abbett Bond Debenture Fund 25,466 shares ** 208,061
MFS Total Return Fund 5,466 shares ** 82,542
AIM International Equity Fund 54,834 shares ** 894,342
Oppenheimer Quest Balanced Value Fund 46,658 shares ** 763,789
AIM Mid-Cap Core Equity Fund 828 shares ** 22,290
Eaton Vance Utilities Fund 8,996 shares ** 72,326
Federated Fund for U.S. Government
Securities 12,801 shares ** 100,873
---------------
8,816,103
---------------
Participant loans Interest bearing at 6.00% to 11.50% ** 1,024,957
Pending settlements 11,008 units ** 11,008
---------------
$ 64,224,843
===============
* Party-in-interest
** Not required for participant directed investments
See accompanying report of independent registered public accounting firm.
16
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Schedule H, Line 4j - Schedule of Reportable Transactions
Year Ended December 31, 2003
(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 $ 3,874 $ --- $ 3,874 $ 3,874 $ ---
GCI * Class A common stock
--- 10,760,384 10,759,814 --- 570
* Party-in-interest
See accompanying report of independent registered public accounting firm.
17
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 23, 2004
- --------------------------------------
Alfred J. Walker
18