<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 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 [NO FEE REQUIRED]
For the transition period from _____ to _____
Commission file number 0-20421
TCI 401(K) STOCK PLAN
------------------------
(Full title of the Plan)
TELE-COMMUNICATIONS, INC.
----------------------------------------------------
(Issuer of the securities held pursuant to the Plan)
9197 S. Peoria
Englewood, Colorado 80112
-------------------------------------------
(Address of its principal executive office)
<PAGE> 2
REQUIRED INFORMATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Financial Statements:
---------------------
Independent Auditors' Report 1
Statements of Net Assets Available
for Participant Benefits,
December 31, 1998 and 1997 2
Statements of Changes in Net Assets
Available for Participant Benefits,
Years ended December 31, 1998, 1997 and 1996 3
Notes to Financial Statements,
December 31, 1998, 1997 and 1996 4
Schedule 1 - Line 27a - Schedule of Assets
Held for Investment Purposes - December 31, 1998 10
Schedule 2 - Line 27d - Schedule of Reportable
Transactions - Year ended December 31, 1998 11
Exhibit -
---------
23-Consent of KPMG LLP
</TABLE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the members of the Plan Committee have duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
TCI 401(K) STOCK PLAN
(Name of Plan)
By /s/ Ann M. Koets
------------------------------------
Ann M. Koets
Plan Administrator
and Member of Plan Committee
June 30, 1999
<PAGE> 3
Independent Auditors' Report
The Plan Committee
TCI 401(k) Stock Plan:
We have audited the accompanying statements of net assets available for
participant benefits of the TCI 401(k) Stock Plan as of December 31, 1998 and
1997, and the related statements of changes in net assets available for
participant benefits for each of the years in the three-year period ended
December 31, 1998. 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 participant benefits of the
TCI 401(k) Stock Plan as of December 31, 1998 and 1997, and the changes in net
assets available for participant benefits for each of the years in the
three-year period ended December 31, 1998 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 supplemental schedules of assets held
for investment purposes 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. These 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.
KPMG LLP
Denver, Colorado
June 23, 1999
1
<PAGE> 4
TCI 401(K) STOCK PLAN
Statements of Net Assets Available
for Participant Benefits
December 31, 1998 and 1997
<TABLE>
<CAPTION>
Assets 1998 1997
- ------ --------- ---------
amounts in thousands
<S> <C> <C>
Cash and cash equivalents $ 44,711 128
Accrued interest receivable 222 --
Investments, at market value (note 2):
Tele-Communications, Inc. ("TCI") common
stock (note 2):
Series A TCI Group Common Stock (8,399,000 and 9,398,000 shares, with a
cost of $138,752,000 and $145,574,000 at December 31, 1998 and 1997,
respectively)
464,558 262,553
Series A Liberty Media Group Common Stock (5,515,000 and 6,270,000
shares, with a cost of $67,030,000 and $70,947,000 at December 31,
1998 and 1997, respectively)
254,045 152,866
Series A TCI Ventures Group Common Stock (7,194,000 and 8,118,000 shares
with a cost of $58,207,000 and $62,223,000 at December 31, 1998 and
1997, respectively)
169,521 116,454
-------- --------
888,124 531,873
-------- --------
Mutual Funds:
DFA Investment Dimensions Group Inc. U.S. 6-10 Value Portfolio 6,219 --
Dodge & Cox Balanced Fund 6,711 --
The Dreyfus/Laurel Funds, Inc. Dreyfus BASIC S&P 500 Stock Index
Fund 14,792 --
The PBHG Funds, Inc. PBHG Growth Fund 7,846 --
Templeton Funds, Inc. Templeton Foreign Fund 2,931 --
-------- --------
38,499 --
Other:
Investment in TCI Satellite Entertainment, Inc. ("TSAT") Series A Common
Stock (462,000 and 1,032,000 shares, with a cost of $6,341,000 and
$14,174,000 at December 31, 1998 and 1997, respectively (note 2) 664 7,095
The Dreyfus Trust Company Dreyfus-Certus Stable Value Fund 12,312 --
-------- --------
939,599 538,968
-------- --------
Net assets available for participant benefits $984,532 539,096
======== ========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 5
TCI 401(K) STOCK PLAN
Statements of Changes in Net Assets Available
for Participant Benefits
Years ended December 31, 1998, 1997
and 1996 (See note 5)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
amounts in thousands
<S> <C> <C> <C>
Contributions:
Employer $ 48,021 37,262 36,917
Employee 48,021 37,262 36,917
Transfers from other plans (note 4) 217 100 193
--------- --------- ---------
96,259 74,624 74,027
--------- --------- ---------
Net investment income (loss):
Net unrealized appreciation (depreciation) of
securities (note 3) 392,715 269,565 (61,563)
Realized gains (losses) on securities
transactions 38,113 (196) 16
Interest income 2,464 29 42
--------- --------- ---------
433,292 269,398 (61,505)
--------- --------- ---------
Total contributions and net investment income 529,551 344,022 12,522
Forfeitures used to pay plan expenses (671) (508) --
Distributions to participants (83,444) (66,232) (28,601)
--------- --------- ---------
Increase (decrease) in net assets available for
participant benefits 445,436 277,282 (16,079)
Net assets available for participant benefits:
Beginning of year 539,096 261,814 277,893
--------- --------- ---------
End of year $ 984,532 539,096 261,814
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 6
TCI 401(K) STOCK PLAN
Notes to Financial Statements
December 31, 1998, 1997 and 1996
(1) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements of the TCI 401(k) Stock Plan
(formerly the Tele-Communications, Inc. Employee Stock Purchase Plan)
(the "Plan") have been prepared on an accrual basis and present the net
assets available for participant benefits and the changes in those net
assets.
Trust Fund Managed by US Bank ("Trustee")
Under the terms of a trust agreement between the Trustee and the Plan,
the Trustee manages a trust fund on behalf of the Plan and has been
granted discretionary authority concerning purchases and sales of
investments for the trust fund. The Trustee may invest up to 100% of
the assets of the Plan in employer securities without regard to any
fiduciary requirement to diversify Plan assets. Additionally, the Plan
is allowed to invest in non-employer securities.
Cash and Cash Equivalents
The Plan considers investments with initial maturities of three months
or less to be cash equivalents, which are recorded at cost which
approximates fair value. Effective January 1, 1998, the Plan holds up
to 5% of the market value of each individual stock fund balance in cash
and cash equivalents to allow for daily election transfers and other
plan transactions.
Investments
Investments are reflected in the accompanying financial statements at
current market value. Current market value represents the closing
prices for those securities having readily available market quotations
and fair value as determined by the Trustee with respect to other
securities. The market values used for the Tele-Communications, Inc.
Series A TCI Group Common Stock, par value $1.00 per share ("TCI Group
Series A Stock"), the Tele-Communications, Inc. Series A Liberty Media
Group Common Stock, par value $1.00 per share ("Liberty Media Group
Series A Stock"), the Tele-Communications, Inc. Series A TCI Ventures
Group Common Stock, par value $1.00 per share ("TCI Ventures Group
Series A Stock") and the TCI Satellite Entertainment, Inc. Series A
Common Stock, par value $1.00 per share ("TSAT Series A Stock") were
$55.31, $46.06, $23.56 and $1.44 per share, respectively, at December
31, 1998. The market values used for the TCI Group Series A Stock, the
Liberty Media Group Series A Stock, the TCI Ventures Group Series A
Stock and the TSAT Series A Stock were $27.94, $24.17, $14.16 and $6.88
per share, respectively, at December 31, 1997. The foregoing prices are
the closing market prices of the common stock on those dates.
Securities transactions are accounted for on the trade date.
Distributions are priced at current market value and are accounted for
when shares are transferred by the Trustee to participants. The cost
basis of such shares distributed is determined using the "first-in,
first-out" method.
(continued)
4
<PAGE> 7
TCI 401(K) STOCK PLAN
Notes to Financial Statements
On March 9, 1999, AT&T Corp. ("AT&T") acquired TCI in a merger (the
"AT&T Merger"), in which certain shares of TCI common stock were
converted into certain shares of AT&T common stock and TCI became a
subsidiary of AT&T. See note 2.
Income Taxes
The Plan has applied for a new determination letter from the Internal
Revenue Service for the amended plan, and expects to maintain its
qualified status. The Plan administrator and the Plan's tax counsel
believe that the Plan is designed and is currently being operated in
compliance with the applicable requirements of the Internal Revenue
Code.
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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of additions
and deductions during the reporting period. Actual results could differ
significantly from those estimates.
Plan Expenses
Any employer contribution amounts forfeited may be used to pay plan
expenses. Any additional administrative expenses of the Plan are paid
by TCI.
(2) Description of the Plan
Effective January 1, 1998, the Plan was amended, and is now called the
TCI 401(k) Stock Plan. The Plan is a defined contribution plan
sponsored by TCI, which enables participating employees to acquire a
proprietary interest in TCI and to receive benefits upon retirement.
Employees who are at least 18 years of age and have worked at least
three consecutive months of service are eligible to participate in the
Plan. In addition, the Plan includes a salary deferral feature with
respect to employee contributions. At December 31, 1998, there were
approximately 18,000 participants in the Plan and approximately 32,000
employees who had one or more years of service and met all other
eligibility requirements who were eligible to participate. Participants
may contribute up to 10% of their compensation, as defined, to the
Plan. TCI (by annual resolution of the Board) may contribute up to 100%
of the participant contributions. Forfeitures (due to participants'
withdrawal prior to full vesting) may be applied to reduce TCI's
otherwise determined contributions or offset the expenses of
maintaining the Plan. Such forfeitures amounted to $3,805,000,
$3,485,000 and $722,000 for the years ended December 31, 1998, 1997 and
1996, respectively. Participant contributions are always fully vested.
As of the amendment date, the Plan has nine investment options
including six mutual funds and three TCI stock funds: a Stable Value
Fund, a Balanced Fund, a Core Equity Fund, an International Equity
Fund, a Growth Equity Fund, a Small Cap Equity Fund, a TCI Group Common
Stock Fund, a Liberty Media Group Common Stock Fund, and a TCI Ventures
Group Common Stock Fund. As amended, Plan participants may change
investment options and contribution percentages on a daily basis.
Distributions are processed on a monthly basis and other withdrawals
are processed twice a month.
(continued)
5
<PAGE> 8
TCI 401(K) STOCK PLAN
Notes to Financial Statements
Additionally, participants acquire a vested right in employer match
contributions as follows:
Vesting
Years of service percentage
---------------- ----------
Less than 1 0%
1 year 33%
2 years 66%
3 years 100%
On March 9, 1999, as a result of the AT&T Merger, (i) each share of TCI
Group Series A Stock was converted into 0.7757 of a share of AT&T
common stock (1.16355 shares as adjusted for an April 1999
three-for-two AT&T stock split), (ii) each share of Liberty Media Group
Series A Stock was converted into one share of a newly created class of
AT&T common stock (two shares as adjusted for a June 1999 two-for-one
stock split) designated as the Class A Liberty Media Group Common
Stock, par value $1.00 per share (the "AT&T Liberty Class A Tracking
Stock"), and (iii) each share of TCI Ventures Group Series A Stock was
converted into 0.52 of a share of AT&T Liberty Class A Tracking Stock
(1.04 shares as adjusted for a June 1999 two-for-one stock split).
Prior to the AT&T Merger, TCI's assets and operations were included in
three separate groups, each of which was tracked separately by public
equity securities. These groups were formerly known as the "Liberty
Media Group" (referred to herein as the "Old Liberty Group"), the "TCI
Ventures Group" and the "TCI Group."
Old Liberty Group was intended to reflect the separate performance of
TCI's assets which produce and distribute programming services.
The TCI Ventures Group was intended to reflect the separate performance
of TCI's principal international assets and businesses and
substantially all of TCI's non-cable and non-programming assets.
The TCI Group was intended to reflect the separate performance of TCI
and its subsidiaries and assets not attributed to Old Liberty Group or
TCI Ventures Group. Such subsidiaries and assets are comprised
primarily of TCI's domestic cable and communications business.
The TCI Group was tracked separately through the TCI Group Series A
Stock and the Tele-Communications, Inc. Series B TCI Group Common Stock
(collectively, "TCI Group Stock"). The Old Liberty Group was tracked
through the Liberty Media Group Series A Stock and the
Tele-Communications, Inc. Series B Liberty Media Group Common Stock.
The TCI Ventures Group was tracked separately through the TCI Ventures
Group Series A Stock and the Tele-Communications, Inc. Series B TCI
Ventures Group Common Stock.
(continued)
6
<PAGE> 9
TCI 401(K) STOCK PLAN
Notes to Financial Statements
The Plan suspended the processing of transactions, including benefit
payments and distributions, during a December 1997 blackout period to
allow adequate time for the conversion of the record keeping system to
the "daily" methodology used by the amended Plan. As a result, there
were no benefits payable to Plan participants at December 31, 1997 as
all such withdrawals and distributions were paid prior to the blackout
period.
On December 4, 1996, all of the capital stock of TSAT ("TSAT Common
Stock") was distributed to holders of record of TCI Group Stock as of
the close of business on November 12, 1996 (the "Record Date").
Stockholders of record of TCI Group Stock on the Record Date received
one share of TSAT Common Stock for each ten shares of TCI Group Stock
owned of record at the close of business on the Record Date (the "TSAT
Distribution"). Fractional shares were not issued. Fractions of
one-half or greater of a share were rounded up and fractions of less
than one-half of a share were rounded down to the nearest whole number
of shares of TSAT Common Stock. As a result of the TSAT Distribution,
1,273,108 shares of TSAT Series A Stock were distributed to the Plan
during 1996. All shares of TSAT Series A Stock remaining in the Plan at
December 31, 1998 were liquidated subsequent to December 31, 1998.
Although TCI has not expressed an intent to terminate the Plan, it may
do so at any time. The Plan provides for full and immediate vesting of
all participant rights upon termination of the Plan.
Effective July 1, 1999, the Plan is expected to be amended. See note 6.
(3) Change in Unrealized Appreciation (Depreciation)
Unrealized appreciation (depreciation) of investments for the years
ended December 31, 1998, 1997 and 1996, is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
amounts in thousands
<S> <C> <C> <C>
End of year $ 618,821 246,050 (475)
Change in unrealized appreciation
due to distributions 19,944 23,040 10,299
Less beginning of year (246,050) 475 (71,387)
--------- --------- ---------
Net unrealized appreciation
(depreciation) of investments $ 392,715 269,565 (61,563)
========= ========= =========
</TABLE>
(4) Transfers from Other Plans
TCI has certain subsidiaries that maintain separate retirement savings
plans. Participants in a subsidiary plan may elect, on a quarterly
basis, to transfer their entire account balance to the Plan. During
1998, 1997 and 1996, transfers to the Plan from such subsidiary plans
aggregated $217,000, $100,000 and $193,000, respectively.
(continued)
7
<PAGE> 10
TCI 401(K) STOCK PLAN
Notes to Financial Statements
(5) Investment Fund Information
During the years ended December 31, 1997 and 1996, all net assets
available for participant benefits were maintained in one fund. The
changes in net assets available for participant benefits fund
information for the year ended December 31, 1998 is as follows (amounts
in thousands):
<TABLE>
<CAPTION>
Net appreciation
Balance at (depreciation) in Distributions
December 31, Fair value of Interest Participant to Administrative
Investment Funds 1997 Investments Income contributions participants expenses
- ---------------- ------------ ----------------- ------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Short term Clearing Fund $ 85 24,635 55 (528) (24,800) 56
DFA Investment Dimensions
Group Inc. U.S. 6-10
Value Portfolio 0 (579) 103 5,477 (412) --
The PBHG Funds, Inc.
PBHG Growth Fund 0 273 -- 5,862 (450) --
Templeton Funds, Inc.
Templeton Foreign Fund 0 (259) 72 2,345 (153) --
The Dreyfus/Laurel
Funds, Inc
Dreyfus BASIC S&P 500
Stock Index Fund 0 2,149 200 7,459 (760) --
Dodge & Cox Balanced Fund 0 73 173 3,939 (456) --
The Dreyfus Trust Company
Dreyfus-Certus Stable
Value Fund 0 (275) 426 10,344 (2,202) 877
TCI Stock Fund 539,011 404,811 1,435 61,361 (54,211) (1,604)
--------- --------- --------- --------- --------- ---------
Totals $ 539,096 430,828 2,464 96,259 (83,444) (671)
========= ========= ========= ========= ========= =========
<CAPTION>
Balance at
Interfund December 31,
Investment Funds transfers 1998
- ---------------- --------- ------------
<S> <C> <C>
Short term Clearing Fund 497 --
DFA Investment Dimensions
Group Inc. U.S. 6-10
Value Portfolio 1,630 6,219
The PBHG Funds, Inc.
PBHG Growth Fund 2,161 7,846
Templeton Funds, Inc.
Templeton Foreign Fund 926 2,931
The Dreyfus/Laurel
Funds, Inc
Dreyfus BASIC S&P 500
Stock Index Fund 5,744 14,792
Dodge & Cox Balanced Fund 2,982 6,711
The Dreyfus Trust Company
Dreyfus-Certus Stable
Value Fund 3,142 12,312
TCI Stock Fund (17,082) 933,721
--------- ---------
Totals -- 984,532
========= =========
</TABLE>
(continued)
8
<PAGE> 11
TCI 401(K) STOCK PLAN
Notes to Financial Statements
(6) Subsequent Event - Plan Changes
Effective July 1, 1999, the Plan is expected to be amended to be
renamed the AT&T Long Term Savings Plan ("LTSP"). As amended, employees
who have completed three consecutive months of employment are expected
to be eligible to participate in the LTSP. As of the effective date,
the LTSP is expected to have eleven investment options including three
custom funds, which will only be available to LTSP participants: a
fixed income fund, an equity fund and an international securities fund;
three mutual funds: a money market mutual fund, a growth and income
mutual fund and a growth mutual fund; three investment strategies which
will be portfolios managed by independent investment managers, selected
and closely reviewed by AT&T: a conservative investment strategy, a
moderate investment strategy, and an aggressive investment strategy; an
AT&T stock fund and an AT&T Liberty stock fund. As amended, LTSP
participants may change investment options and contribution percentages
on a daily basis. Distributions are expected to be processed on a daily
basis.
The LTSP is expected to allow participants to borrow up to 50% of their
expected vested account balance or $50,000, whichever is lower. The
minimum loan amount is expected to be $1,000, and the interest rate
will be set as the prime rate, as of the last business day of the month
prior to the month of the loan request. All other terms of the LTSP are
expected to be consistent with those of the Plan, as described in note
2.
9
<PAGE> 12
Schedule 1
TCI 401(K) STOCK PLAN
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
(amounts in thousands)
<TABLE>
<CAPTION>
(b) (c) (d) (e)
Identity of Description of investment Current
issuer including par value Cost value
----------- ------------------------- ---------- --------
<S> <C> <C> <C>
* Tele-Communications, Inc. Series A TCI Group Common Stock, par
value $1.00 per
share $ 138,752 464,558
* Tele-Communications, Inc. Series A Liberty Media Group Common
Stock, par value $1.00
per share $ 67,030 254,045
* Tele-Communications, Inc. Series A TCI Ventures Group Common
Stock, par value $1.00 per share $ 58,207 169,521
TCI Satellite Entertainment, Inc. Series A TSAT Common Stock, par value
$1.00 per share $ 6,341 664
DFA Investment Dimensions
Group Inc. U.S. 6-10 Value Portfolio $ 7,415 6,219
Dodge & Cox Dodge & Cox Balanced Fund $ 6,968 6,711
The Dreyfus/Laurel Funds, Inc. Dreyfus BASIC S&P 500 Stock Index Fund $ 12,848 14,792
The PBHG Funds, Inc. PBHG Growth Fund $ 7,532 7,846
Templeton Funds, Inc. Templeton Foreign Fund $ 3,373 2,931
The Dreyfus Trust Company Dreyfus-Certus Stable Value Fund $ 12,312 12,312
</TABLE>
* Denotes party-in-interest
See accompanying independent auditors' report.
10
<PAGE> 13
Schedule 2
TCI 401(K) STOCK PLAN
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
(amounts in thousands)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
Expense
Identity of party Description of Purchase incurred with
involved asset price Selling price Lease rental transaction
----------------- -------------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
First American Prime Prime Money Market
Obligation Fund Fund $ 231,427 -- -- --
First American Prime Prime Money Market
Obligation Fund Fund $ -- 189,840 -- --
Tele-Communications, Series A TCI
Inc. Group Common
Stock $ 12,400 -- -- --
Tele-Communications, Series A TCI
Inc. Group Common
Stock $ -- 30,540 -- --
<CAPTION>
(a) (g) (h) (i)
Current value of
Identity of party Cost of asset on Net gain
involved asset transaction date or (loss)
----------------- -------- -------------------- ---------
<S> <C> <C> <C>
First American Prime
Obligation Fund 231,427 231,427 --
First American Prime
Obligation Fund 189,840 189,840 --
Tele-Communications,
Inc.
12,400 12,400 --
Tele-Communications,
Inc.
13,580 30,540 16,960
</TABLE>
See accompanying independent auditors' report.
11
<PAGE> 14
EXHIBIT INDEX
Shown below is the exhibit which is filed as a part of this Report -
23-Consent of KPMG LLP
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
The Plan Committee
TCI 401(k) Stock Plan
We consent to incorporation by reference in the registration statement (No.
333-42917) on Form S-8 of the TCI 401(k) Stock Plan of our report dated June 23,
1999, relating to the statements of net assets available for participant
benefits of the TCI 401(k) Stock Plan as of December 31, 1998 and 1997, and the
related statements of changes in net assets available for participant benefits
for each of the years in the three-year period ended December 31, 1998 and
related schedules, which report appears in the December 31, 1998 Annual Report
on Form 11-K of the TCI 401(k) Stock Plan.
KPMG LLP
Denver, Colorado
June 29, 1999
