UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission file numbers 33-84656 and 333-17773.
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Gray Communications Systems, Inc.
Capital Accumulation Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Gray Communications Systems, Inc.
126 N. Washington Street
Albany, Georgia 31701
<PAGE>
GRAY COMMUNICATIONS SYSTEMS, INC.
FORM 11-K
REQUIRED INFORMATION
(a) Financial Statements. Filed as part of this Report on form
11-K are the financial statements and the schedules thereto of
the Gray Communications Systems, Inc. Capital Accumulation
Plan as required by Form 11-K, together with the report
thereon of Ernst & Young LLP, independent auditors, dated
April 23, 1999.
(b) Exhibits. A consent of Ernst & Young LLP dated June 25, 1999
is being filed as an exhibit to this report.
SIGNATURES
The Plan. Pursuant to the requirements of the Securities
Exchange Act of 1934, the Plan Administrator has duly caused
this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
GRAY COMMUNICATIONS SYSTEMS, INC.
CAPITAL ACCUMULATION PLAN
Date: June 25, 1999 By: /S/ James C. Ryan
--------------------
James C. Ryan
Chief Financial Officer
Plan Administrator
<PAGE>
Audited Financial Statements and Schedules
Gray Communications Systems, Inc.
Capital Accumulation Plan
YEARS ENDED DECEMBER 31, 1998 AND 1997
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Audited Financial Statements and Schedules
Years ended December 31, 1998 and 1997
CONTENTS
Report of Independent Auditors................................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits...............................2
Statements of Changes in Net Assets Available for Benefits....................3
Notes to Financial Statements.................................................4
Supplemental Schedules
Line 27a - Schedule of Assets Held for Investment Purposes...................10
Line 27d - Schedule of Reportable Transactions...............................11
<PAGE>
Report of Independent Auditors
Benefit Committee
Gray Communications Systems, Inc.
We have audited the accompanying statements of net assets available for benefits
of the Gray Communications Systems, Inc. Capital Accumulation Plan as of
December 31, 1998 and 1997, 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 generally accepted auditing
standards. 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 the Plan at
December 31, 1998 and 1997 and the changes in its net assets available for
benefits for the years then ended, in conformity with 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 accompanying supplemental schedules
of Assets Held for Investment Purposes as of December 31, 1998 and Reportable
Transactions for the year ended December 31, 1998, are presented for purposes of
complying with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The supplemental
schedules have been subjected to the auditing procedures applied in our 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/ Ernst & Young LLP
---------------------
Atlanta, Georgia
April 23, 1999
1
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-----------------------------------------
<S> <C> <C>
ASSETS
Investments (NOTES 2 AND 4):
Collective trust mutual funds $ 5,882,368 $ 2,268,935
Sponsor's common stock fund 2,056,151 1,851,627
Participant loans receivable 66,206 37,151
-----------------------------------------
8,004,725 4,157,713
Sponsor contributions receivable 45,128 33,392
Participant contributions receivable 107,971 80,673
-----------------------------------------
153,099 114,065
-----------------------------------------
Net assets available for benefits $ 8,157,824 $ 4,271,778
=========================================
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Statements of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997
-------------------------------------------
<S> <C> <C>
ADDITIONS
Participant contributions $ 1,175,960 $ 1,020,712
Sponsor contributions 491,403 419,546
Rollover contributions 1,752 117,556
Transfers from acquisitions 2,813,400 -
Investment income:
Interest and dividend income 35,953 5,506
Net realized and unrealized appreciation of
investments 470,891 800,118
------------------------------------------
506,844 805,624
-------------------------------------------
Total additions 4,989,359 2,363,438
DEDUCTIONS
Withdrawals by participants (614,707) (357,765)
Transfers related to sale of a subsidiary (453,100) -
Administrative and other expenses (35,506) (19,427)
-------------------------------------------
Total deductions (1,103,313) (377,192)
-------------------------------------------
Net increase in assets available for benefits 3,886,046 1,986,246
Net assets available for benefits at
beginning of period 4,271,778 2,285,532
-------------------------------------------
Net assets available for benefits at end of period $ 8,157,824 $ 4,271,778
===========================================
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements
December 31, 1998
1. DESCRIPTION OF THE PLAN
The following brief description of the Gray Communications Systems, Inc. Capital
Accumulation Plan (the "Plan") is provided for general information purposes
only. Participants should refer to the Plan Document for more complete
information.
The Plan was established effective October 1, 1994 for the benefit of eligible
employees of Gray Communications Systems, Inc., and of its subsidiaries and
affiliates that subsequently adopt the Plan.
GENERAL
The Plan is a voluntary defined contribution plan for salaried and non-salaried
employees of Gray Communications Systems, Inc. and its subsidiaries (the
"Sponsor") who have completed one eligibility year of service as defined in the
Plan document. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
While the Sponsor has not expressed any intent to do so, the Benefit Committee
retains the right to terminate the Plan at any time, subject to the provisions
of ERISA. In the event a decision is made by the Benefit Committee to terminate
the Plan, all participants shall receive full distribution of the balance in
their account.
TRUST AGREEMENT
Assets of the Plan are held for safekeeping and investment by INVESCO Trust
Company (the "Trustee") as part of a trust agreement between the Sponsor and the
Trustee.
CONTRIBUTIONS
Each active Plan participant may make contributions up to a maximum of 16% of
their compensation on a before-tax basis and up to a maximum of 16% on an
after-tax basis, as long as the sum of the before-tax and after-tax percentages
does not exceed 16% of compensation on a before-tax basis. Participant
contributions made on a before-tax basis under Section 401(k) of the Internal
Revenue Code (the "Code") can not exceed the elective contribution limit of
$10,000 and $9,500 during the years ended 1998 and 1997, respectively.
Contributions by highly compensated employees are subject to additional
restrictions.
The Sponsor shall contribute to the Plan a percentage, as determined by a
declaration of its Board of Directors before the beginning of any Plan year, of
the eligible contributions of plan participants not to exceed 6% of eligible
compensation as defined in the Plan document. The matching percentage was 50%
for the years ended December 31, 1998 and 1997, respectively. The Sponsor's
matching contributions can be made either in shares of Gray Communications
Systems, Inc. Class B common stock or in cash. Any forfeitures of Sponsor
contributions are used to reduce future Sponsor contributions. Forfeitures of
nonvested amounts were approximately $63,700 and $33,200 for the years ended
December 31, 1998 and 1997, respectively.
4
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
VESTING
Participants are fully vested with regard to their contributions. Participants
vest in the Sponsor's contributions after completing five years of service, as
defined in the Plan document.
WITHDRAWALS
A participant may withdraw all or part of their after-tax contributions for any
reason, subject to the suspension of such participant's rights to make after tax
contributions for six months.
Hardship withdrawals may be available as defined by the Plan document. A
participant making a hardship withdrawal is ineligible to contribute to the Plan
for the next twelve months from the date of receipt of the withdrawal and is
prohibited from making any elective or employee contributions to all other plans
of the Sponsor, including, but not limited to, any stock option, stock purchase
or similar plan maintained by the Sponsor.
DISTRIBUTIONS
A participant, following termination of employment, can elect to have Plan
benefits paid in a single lump-sum distribution, in installments or in a
combination of the two methods.
Approximately $-0- and $74,500 of the net assets available for benefits at
December 31, 1998 and 1997, respectively, were allocated to the accounts of
persons who had withdrawn from participation in the Plan, but had not been paid.
Such amounts are recorded as benefits payable for purposes of the Plan's Form
5500.
LOANS
The Plan provides for participant loans at rates of interest established by the
Sponsor's Benefit Committee. Such loans are limited as defined by the Plan
document.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared based on the accrual
method of accounting with investments carried at fair values as described below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
5
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS
The collective trust mutual funds are valued at their redemption prices (fair
values) as established by the Trustee. Generally, the fair values are based on
national stock exchange closing prices or other published sources. Investments
traded on a national securities exchange are valued at the last reported sales
price on the last business day of the Plan year. Securities traded in the
over-the-counter market are valued at the last reported sales price on the last
business day of the Plan year.
Purchases and sales of securities are reflected on the trade dates. Dividend
income is recorded on the ex-dividend date. Income from other investments is
recorded as earned.
ADMINISTRATIVE EXPENSES
All administrative and investment expenses, except for fund management fees, are
paid by the Sponsor. Administrative and investment expenses paid by the Sponsor
were approximately $13,650 and $13,600 for the years ended December 31, 1998 and
1997, respectively.
3. INCOME TAX STATUS
The Internal Revenue Service ruled on October 25, 1995, that the Plan qualifies
under Section 401(a) and 401(k) of the Internal Revenue Code ("IRC") and,
therefore, the related trust is not subject to tax under present income tax law.
The Plan is required to operate in conformity with Section 401(a) of the Code to
maintain its qualification. Management of the Plan is not aware of any course of
action or series of events that have occurred that might adversely affect the
Plan's qualified status.
4. NET ASSETS AVAILABLE FOR BENEFITS
Participant contributions may be invested in collective investment trust mutual
funds offered by the Trustee or in a fund invested primarily in the Sponsor's
Class A and Class B common stock. Descriptions of the various funds are as
follows: (a) Principal Protection Fund, which is 80% invested in short term
money market instruments, intermediate government and corporate bond funds, and
20% in common stocks; (b) Intermediate Return Fund, which is 40% invested in
short term money market instruments, 20% in intermediate government and
corporate bond funds, and 40% in common stock funds; (c) Growth and Income Fund,
which is 20% invested in short term money market instruments, 20% in
intermediate government and corporate bond funds and 60% in common stock funds;
(d) Maximum Appreciation Fund, which is 20% invested in short term money market
instruments and intermediate government and corporate bond funds and 80%
invested in common stock funds; and/or (e) Gray Communications Systems, Inc.
Common Stock Fund, which is invested primarily in Gray Communications Systems,
Inc. Class A and Class B common stock. Participants elect the percentage
invested in each fund in multiples of 10%. Contributions to the Gray
Communications Systems, Inc. Common Stock Fund are temporarily invested in a
Retirement Trust Liquid Asset Fund until used to purchase Gray Communications
Systems, Inc. common stock. Participants cannot elect to participate in the
Retirement Trust Liquid Asset Fund.
6
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
4. NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED)
The following represents the net assets available for benefits, by fund, as
of December 31, 1998:
<TABLE>
<CAPTION>
PRINCIPAL INTERMEDIATE GROWTH AND MAXIMUM
PROTECTION RETURN INCOME APPRECIATION
FUND FUND FUND FUND
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Investments:
INVESCO Trust
Company collective
trust mutual funds:
Money market funds $ -0- $ -0- $ -0- $ -0-
Equity funds 560,333 628,448 1,854,977 2,813,850
Common Stock of
Sponsor -0- -0- -0- -0-
Participant
loans receivable -0- -0- -0- -0-
-------- -------- ---------- ----------
560,333 628,448 1,854,977 2,813,850
Sponsor contributions
receivable -0- -0- -0- -0-
Participant contributions
receivable 5,640 9,603 30,701 46,087
======= ======== ========== ==========
$565,973 $638,051 $1,885,678 $2,859,937
======= ======== ========== ==========
<CAPTION>
GRAY GRAY
COMMUNICATIONS COMMUNICATIONS PARTICIPANT RETIREMENT
COMMON STOCK COMMON STOCK LOANS TRUST LIQUID
(CLASS A) (CLASS B) RECEIVABLE ASSETS TOTAL
------------- -------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Investments:
INVESCO Trust
Company collective
trust mutual funds:
Money market funds $ -0- $ -0- $ -0- $ 24,760 $ 24,760
Equity funds -0- -0- -0- -0- 5,857,608
Common Stock of
Sponsor 1,012,936 1,043,215 -0- -0- 2,056,151
Participant
loans receivable -0- -0- 66,206 -0- 66,206
---------- --------- ------- ------- ---------
1,012,936 1,043,215 66,206 24,760 8,004,725
Sponsor contributions
receivable -0- 45,128 -0- -0- 45,128
Participant contributions
receivable -0- 15,940 -0- -0- 107,971
========= ========== ======= ======= =========
$1,012,936 $1,104,283 $66,206 $24,760 $8,157,824
========= ========== ======= ======= =========
</TABLE>
The changes in net assets available for benefits by fund for the year ended
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
GROWTH
PRINCIPAL INTERMEDIATE AND MAXIMUM
PROTECTION RETURN INCOME APPRECIATION
FUND FUND FUND FUND
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Contributions
invested $ 47,786 $94,535 $332,998 $425,998
Contributions
receivable 5,640 9,603 30,701 46,087
Rollover from
other plans -0- -0- 840 492
Transfers from
acquisitions 373,783 265,000 681,480 1,326,326
Interest and
dividend income 4,125 1,330 6,189 11,626
Net realized and
unrealized
appreciation
of investments 22,764 53,759 214,245 397,857
Withdraws paid to
participants (13,418) (46,172) (138,245) (250,370)
Transfers related
to sale of a
subsidiary (11,928) (31,910) (66,878) (103,068)
Participant
loans/
repayments
(net) (12,823) (3,450) (4,873) (16,052)
Administrative
and other
expenses (1,632) (4,061) (12,059) (17,298)
Interfund
transfers (3,357) (195) (594) 2,179
======== ========= =========== ============
$410,940 $338,439 $1,043,804 $ 1,823,777
======== ========= =========== ============
<CAPTION>
GRAY GRAY RETIREMENT
COMMUNICATIONS COMMUNICATIONS PARTICIPANT TRUST
COMMON STOCK COMMON STOCK LOANS LIQUID
(CLASS A) (CLASS B) RECEIVABLE ASSETS TOTAL
-------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Contributions
invested $ -0- $612,947 $ -0- $ -0- $1,514,264
Contributions
receivable -0- 61,068 -0- -0- 153,099
Rollover from
other plans -0- -0- -0- 420 1,752
Transfers from
acquisitions -0- -0- -0- 166,811 2,813,400
Interest and
dividend income -0- -0- -0- 12,683 35,953
Net realized and
unrealized
appreciation
of investments 50,279 (268,013) -0- -0- 470,891
Withdraws paid to
participants (92,611) (49,366) (3,630) (20,895) (614,707)
Transfers related
to sale of a
subsidiary (156,434) (70,190) (12,692) (453,100)
Participant
loans/
repayments
(net) (2,281) (2,776) 43,300 (1,045) -0-
Administrative
and other
expenses -0- (100) -0- (356) (35,506)
Interfund
transfers 963 136,291 2,077 (137,364) -0-
============ ============ ========= ======== ===========
$(200,084) $419,861 $29,055 $20,254 $3,886,046
============ ============ ========= ======== ===========
</TABLE>
7
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
4. NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED)
The following represents the net assets available for benefits, by fund, as
of December 31, 1997:
<TABLE>
<CAPTION>
PRINCIPAL INTERMEDIATE GROWTH AND MAXIMUM
PROTECTION RETURN INCOME APPRECIATION
FUND FUND FUND FUND
-------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Investments:
INVESCO Trust
Company collective
trust mutual funds:
Money market funds $ -0- $ -0- $ -0- $ -0-
Equity funds 150,571 291,425 817,765 1,004,668
Common Stock of
Sponsor -0- -0- -0- -0-
Participant
loans receivable -0- -0- -0- -0-
------- -------- -------- ----------
150,571 291,425 817,765 1,004,668
Sponsor
contributions
receivable -0- -0- -0- -0-
Participant
contributions
receivable 4,462 8,187 24,109 31,492
======= ======== ======== ==========
$155,033 $299,612 $841,874 $1,036,160
======= ======== ======== ==========
<CAPTION>
GRAY GRAY RETIREMENT
COMMUNICATIONS COMMUNICATIONS PARTICIPANT TRUST
COMMON STOCK COMMON STOCK LOANS LIQUID
(CLASS A) (CLASS B) RECEIVABLE ASSETS TOTAL
------------- -------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Investments:
INVESCO Trust
Company collective
trust mutual funds:
Money market funds $ -0- $ -0- $ -0- $4,506 $ 4,506
Equity funds -0- -0- -0- -0- 2,264,429
Common Stock of
Sponsor 1,213,020 638,607 -0- -0- 1,851,627
Participant
loans receivable -0- -0- 37,151 -0- 37,151
---------- --------- ------- ------ ---------
1,213,020 638,607 37,151 4,506 4,157,713
Sponsor
contributions
receivable -0- 33,392 -0- -0- 33,392
Participant
contributions
receivable -0- 12,423 -0- -0- 80,673
========== ========= ======= ====== =========
$1,213,020 $ 684,422 $37,151 $4,506 $4,271,778
========== ========= ======= ====== =========
</TABLE>
The changes in net assets available for benefits by fund for the year ended
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
GROWTH
PRINCIPAL INTERMEDIATE AND MAXIMUM
PROTECTION RETURN INCOME APPRECIATION
FUND FUND FUND FUND
-------- ----------- ----------- ------------ -
<S> <C> <C> <C> <C>
Contributions
invested $ 44,500 $89,551 $289,011 $355,280
Contributions
receivable 4,462 8,187 24,109 31,492
Rollover from
other plans 8,238 6,414 27,510 50,735
Interest and
dividend income 106 204 494 493
Net realized and
unrealized
appreciation
of investments 19,880 35,546 109,647 147,813
Withdrawls paid
to participants (92,494) (25,360) (52,766) (72,508)
Participant
loans/
repayments
(net) (4,310) (4,220) (13,944) (9,749)
Administrative
and other
expenses (1,254) (2,424) (6,399) (7,585)
Interfund
transfers 1,276 (1,927) 13,012 12,702
======== =========== =========== ============
$(19,596) $105,971 $390,674 $508,673
======== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
GRAY GRAY RETIREMENT
COMMUNICATIONS COMMUNICATIONS PARTICIPANT TRUST
COMMON STOCK COMMON STOCK LOANS LIQUID
(CLASS A) (CLASS B) RECEIVABLE ASSETS TOTAL
------------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Contributions
invested $ -0- $493,458 $ -0- $ 54,393 $1,326,193
Contributions
receivable -0- 45,815 -0- -0- 114,065
Rollover from
other plans -0- 3,750 -0- 20,909 117,556
Interest and
dividend income -0- -0- -0- 4,209 5,506
Net realized and
unrealized
appreciation
of investments 345,916 141,316 -0- -0- 800,118
Withdrawls paid
to participants (97,891) (10,675) (6,376) 305 (357,765)
Participant
loans/
repayments
(net) (3,513) -0- 33,439 2,297 -0-
Administrative
and other
expenses (581) (549) -0- (635) (19,427)
Interfund
transfers 43,179 11,307 (255) (79,294) -0-
============= ============== ========== ========== ============
$287,110 $684,422 $26,808 $2,184 $1,986,246
============= ============== ========== ========== ============
</TABLE>
8
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
5. YEAR 2000 ISSUE (UNAUDITED)
The Plan Sponsor has determined that it will be necessary to take certain steps
in order to ensure that the Plan's information systems are prepared to handle
year 2000 dates. The Plan Sponsor is taking a multiphase approach to the year
2000 issue which includes assessment, remediation, testing, and contingency
planning. The Plan Sponsor anticipates substantially completing all phases by
September 30, 1999. Costs associated with modifying software and equipment are
not estimated to be significant and will be paid by the Plan Sponsor.
Additionally, the Plan Sponsor established formal communications with its third
party service providers to determine that they have developed plans to address
their own year 2000 problems as they relate to the Plan's operations. All third
party service providers have indicated that they will be year 2000 compliant
during 1999. If modification of data processing systems of either the Plan, the
Plan Sponsor, or its service providers are not completed timely, the year 2000
problem could have a material impact on the operations of the Plan.
9
<PAGE>
SUPPLEMENTAL SCHEDULES
10
<PAGE>
Plan Number: 003
EIN: 58-0285030
Gray Communications Systems, Inc.
Capital Accumulation Plan
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
CURRENT HISTORICAL
IDENTITY OF ISSUE NO. OF UNITS VALUE COST
- --------------------------------------- ---------------------------- ---------------------- -------------------
INVESCO Trust Company
Collective Trust Mutual Funds *:
<S> <C> <C> <C>
Liquid Assets Fund 24,760.770 units $ 24,760 $ 24,760
Principal Protection Fund 35,196.767 units 560,333 523,810
Intermediate Return Fund 34,043.790 units 628,448 543,769
Growth and Income Fund 90,047.444 units 1,854,977 1,542,997
Maximum Appreciation Fund 124,838.064 units 2,813,850 2,316,393
---------------------- -------------------
5,882,368 4,951,729
Total
Sponsor Common Stock Fund -
Gray Communications Systems, Inc.
Common Stock - Class A* 55,314 shares 1,012,936 674,335
Common Stock - Class B* 76,217 shares 1,043,215 1,170,812
Participant loans 66,206 66,206
---------------------- ------------------
$ 8,004,725 $ 6,863,082
====================== ==================
</TABLE>
* This is a party-in-interest investment.
11
<PAGE>
Plan Number: 003
EIN: 58-0285030
Gray Communications Systems, Inc.
Capital Accumulation Plan
Line 27d - Schedule of Reportable Transactions
Year Ended December 31, 1998
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Category (i) - Individual transaction in excess of 5% of Plan assets
Invesco Trust Company ITC Principle Protection Fund
Purchase
Invesco Trust Company ITC Growth & Income Fund
Purchase
Invesco Trust Company Maximum Appreciation Fund
Purchase
Purchase
12
<PAGE>
<TABLE>
<CAPTION>
SELLING CURRENT VALUE OF ASSET
PURCHASE PRICE PRICE COST OF ASSET ON TRANSACTION DATE NET GAIN (LOSS)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 321,986 - $ 321,986 $ 321,986 -
466,499 - 466,499 466,499 -
482,173 - 482,173 482,173 -
825,891 - 825,891 825,891 -
</TABLE>
13
<PAGE>
Plan Number: 003
EIN: 58-0285030
Gray Communications Systems, Inc.
Capital Accumulation Plan
Line 27d - Schedule of Reportable Transactions
Year Ended December 31, 1998
<TABLE>
<CAPTION>
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET
- ---------------------------------------------------------------------------------------------------------------------
CATEGORY (III) SERIES OF SECURITIES TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
<S> <C>
*Gray Communications Systems, Inc. Gray Communications Systems, Inc.
Common Stock - Class A
Purchases of 22,644 shares
Sales of 13,540 shares
*Gray Communications Systems, Inc. Gray Communications Systems, Inc.
Common Stock - Class B
Purchases of 60,546 shares
Sales of 9,130 shares
*INVESCO Trust Company Principal Protection Fund
Purchases of 27,800 units
Sales of 2,937 units
*INVESCO Trust Company Intermediate Return Fund
Purchases of 21,215 units
Sales of 4,984 units
*INVESCO Trust Company Growth and Income Fund
Purchases of 55,341 units
Sales of 11,889 units
*INVESCO Trust Company Maximum Appreciation Fund
Purchases of 89,810 units
Sales of 19,103 units
*INVESCO Trust Company Liquid Asset Fund
Purchases of 846,763 units
Sales of 825,758 units
</TABLE>
CATEGORY (II) OR (IV) TRANSACTIONS
There were no category (ii) or (iv) transactions during 1998.
* This is a party-in-interest investment.
14
<PAGE>
<TABLE>
<CAPTION>
CURRENT VALUE OF ASSET ON
PURCHASE PRICE SELLING PRICE COST OF ASSET TRANSACTION DATE NET GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 26,787 $ 26,787 $ 26,787
$ 277,125 185,282 277,125 $ 91,843
827,144 827,144 827,144
154,523 154,444 154,523 79
432,352 432,352 432,352
45,354 40,462 45,354 4,892
371,013 371,013 371,013
87,749 70,031 87,749 17,718
1,051,277 1,051,277 1,051,277
228,260 178,297 228,260 49,963
1,806,885 1,806,885 1,806,885
395,560 297,951 395,560 97,609
846,763 846,763 846,763
825,758 825,758 825,758 -0-
</TABLE>
15
<PAGE>
GRAY COMMUNICATIONS SYSTEMS, INC.
FORM 11-K
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Exhibit Number
- ------ ------- ------
<S> <C> <C>
23 Consent of Ernst & Young LLP to 16
incorporation of its report by
reference in Gray Communications
Systems, Inc. Registration Statement
on Form S-8, No. 33-84656 and No. 333-17773.
</TABLE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-84656 and Form S-8 No. 333-17773) pertaining to the Gray
Communications Systems, Inc. Capital Accumulation Plan of our report dated
April 23, 1999, with respect to the financial statements and schedules of the
Gray Communications Systems, Inc. Capital Accumulation Plan included in this
Annual Report (Form 11-K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
------------------------------
Ernst & Young LLP
Atlanta, Georgia
June 25, 1999
