SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
Annual Report Pursuant to Section 15(d) of the Securities
Exchange Act of 1934
(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 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From _________ to _________
Commission File Number 1-1105
AT&T Corp.
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
AT&T OF PUERTO RICO, INC. LONG TERM SAVINGS PLAN
FOR MANAGEMENT EMPLOYEES
B. Name and issuer of the securities held pursuant to the
plan and the address of its principal executive office:
AT&T CORP.
ONE AT&T WAY
BEDMINSTER, NJ 07921
AT&T of Puerto Rico, Inc. Long Term Savings Plan for Management Employees
Financial Statements
and Supplemental Schedule
December 31, 2003
AT&T of Puerto Rico, Inc. Long Term Savings Plan
for Management Employees
Index
December 31, 2003 and 2002
--------------------------------------------------------------------------------
Page(s)
Report of Independent Registered Public Accounting Firm........................1
Financial Statements
Statements of Net Assets Available for Benefits................................2
Statement of Changes in Net Assets Available for Benefits......................3
Notes to Financial Statements................................................4-8
Supplemental Schedule
Schedule of Assets (Held at End of Year).......................................9
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
AT&T of Puerto Rico, Inc. Long Term Savings Plan for Management Employees
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of AT&T of Puerto Rico, Inc. Long Term Savings Plan for Management Employees
(the "Plan") as of December 31, 2003 and 2002, and the changes in net assets
available for benefits for the year ended December 31, 2003, in conformity with
accounting principles generally accepted in the United States of America. 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 of these statements 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) as of December 31, 2003 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
July 1, 2004
AT&T of Puerto Rico, Inc. Long Term Savings Plan
for Management Employees
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
--------------------------------------------------------------------------------
(thousands of dollars)
2003 2002
Assets
Investments, at fair value
Investment in Group Trust $ 6,246 $ 6,217
Participant loans receivable 144 139
---------- ----------
Total assets 6,390 6,356
---------- ----------
Liabilities
Total liabilities -- --
---------- ----------
Net assets available for benefits $ 6,390 $ 6,356
---------- ----------
The accompanying notes are an integral part of these financial statements.
AT&T of Puerto Rico, Inc. Long Term Savings Plan
for Management Employees
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2003
--------------------------------------------------------------------------------
(thousands of dollars)
Total
Net assets available for benefits, January 1, 2003 $ 6,356
----------
Additions
Additions to net assets attributed to
Net income from investment in Group Trust 665
Interest on participant loans 7
----------
672
----------
Contributions and transfers
Employee contributions 129
Employing company contributions 62
Transfers of participants' balances from other plans, net 16
----------
207
----------
Total additions 879
----------
Deductions
Distributions to participants (845)
----------
(845)
----------
Net increase 34
----------
Net assets available for benefits, December 31, 2003 $ 6,390
----------
The accompanying notes are an integral part of these financial statements.
AT&T of Puerto Rico, Inc. Long Term Savings Plan
for Management Employees
Notes to Financial Statements
December 31, 2003
--------------------------------------------------------------------------------
1. Plan Description
The AT&T of Puerto Rico, Inc. Long Term Savings Plan for Management
Employees (the "Plan" or "PRLTSPME") is a defined contribution plan
established by AT&T Corp. ("AT&T") to provide a convenient way for
management employees (i.e., employees whose pay is defined at a monthly or
annual rate and whose positions are not subject to automatic wage
progression) of AT&T of Puerto Rico, Inc. to save on a regular and
long-term basis. The PRLTSPME participates in a master trust (the "Group
Trust"), for the investment of the pooled assets of various funds. Each
participating plan has an undivided interest in the Group Trust.
An eligible employee enters the Plan by authorizing a payroll allotment to
invest his/her contributions in one or more of the twenty-six (26)
different funds as set forth in the current Plan document.
The AT&T Wireless Stock Fund and the Liberty Media Stock Fund were
liquidated as of January 2003 and February 2003, respectively. Any balances
remaining in these funds at the liquidation date were transferred to the
AT&T Stable Value Fund.
On November 18, 2002, AT&T spun-off AT&T Broadband to AT&T shareholders of
record as of November 15, 2002. Immediately after the spin-off, AT&T
Broadband combined with the Comcast Corporation. For each share of AT&T
Corp. common stock, shareholders received .3235 shares of Comcast
Corporation Class A common stock as of the close on November 15, 2002. As a
result, a Comcast Stock Fund was added to the Group Trust in November 2002.
The Comcast Stock Fund is not an employer security and is frozen to
employee contributions.
Employee allotments of 2% to 16% of salary may be authorized. An employee
may designate allotments as pre-tax allotments or after-tax allotments. All
participant contributions and earnings thereon are immediately vested and
are not subject to forfeiture. Pre-tax contributions may be made up to the
Puerto Rico Department of Treasury limit of $8,000 or 10% of the
participants annual compensation, whichever is less, in 2003. Immediately
upon enrollment, the employing company (AT&T or any AT&T subsidiary
participating in the Plan) will contribute an amount equal to 66-2/3% of
the first 6% of the employee's salary contributed. Employing company
contributions are made in accordance with the participant's elected
investment direction. Employing company contributions and earnings thereon
are vested after three years of credited service.
Loans are available to all participants in an amount not less than $1,000,
up to a maximum of the lesser of $50,000 minus the participant's highest
outstanding loan balance in the last twelve (12) months or 50% of the
participant's vested account balance. Upon default, employees are
considered to have received a distribution and are subject to income taxes
on the distributed amount. Loan transactions are treated as a transfer to
(from) the investment funds from (to) the Participant Loan Account. The
term of the loan shall not exceed fifty-six (56) months. The loans are
collateralized by the balance in the participant's account and bear
interest at the prime rate on the last business day of the month preceding
the month the loan was taken. Interest rates are fixed for the term of the
loan. Interest rates on participant loans outstanding as of December 31,
2003 range from 4.0 percent to 9.5 percent. Principal and interest are paid
through payroll deductions or participant-initiated payments.
When a participant terminates employment, the entire vested amount in the
participant's account will be distributed in a single payment, if the
amount to be distributed is $5,000 or less. However, if the amount to be
distributed exceeds $5,000, and the participant does not request the
distribution, the participant's account shall remain in the Plan and may be
withdrawn or distributed at the participant's request, or as minimum
required distributions beginning when the participant attains age 70-1/2,
or upon the participant's death, whichever is earlier. When a participant
dies, the participant's beneficiary or beneficiaries may elect their share
of the participant's account balance as a single payment or as a transfer
to a PRLTSPME account in the beneficiary's name.
Participant forfeitures in 2003 were $8,972. The total forfeited non-vested
account as of December 31, 2003 is $38,677. Forfeitures will be used to
reduce future employer contributions. During 2003 there were no reductions
in employer contributions due to forfeited non-vested accounts.
For a complete description of the Plan, participants should refer to the
Plan Prospectus and Plan Summary Plan Description (SPD). The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA").
2. Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method
of accounting.
Payment of Benefits
Benefits are recorded when paid.
Valuation of Investments
Income and assets of the Group Trust are allocated to the Plan based on
participant balances. The net asset value of the Group Trust is calculated
by the Trustee. The Trustee determines the value of the underlying assets
in the investment manager portfolios, taking into account values supplied
by a generally accepted pricing or quotation service or quotations
furnished by one or more reputable sources, such as securities brokers,
dealers or investment bankers, mutual fund administrators, values of
comparable property, appraisals or other relevant information. Investments
in AT&T common shares and other securities listed on national stock
exchanges are carried at fair value determined on the basis of the last
published sales price per share on the last business day of the year.
Securities traded in over-the-counter markets are carried at fair value
based on the last bid prices or closing prices on December 31, as listed in
published sources if available or, if not available, from other sources
considered reliable. Contracts with insurance companies and financial
institutions, which are fully benefit responsive, are carried at contract
value (representing contributions made under the contracts plus accumulated
interest at the contract rates). All other investments are carried at the
fair value on the close of business on December 31. Participant loans
receivable are valued at cost which approximates fair value. Participant
loans are not part of the Group Trust.
Purchases and Sales of Investments
Purchases and sales of securities are recorded as of the trade date.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
accrued as earned.
Net Appreciation (Depreciation) in the Fair Value of Investments
The Plan presents in the statement of changes in net assets available for
benefits the net appreciation (depreciation) in the fair value of
investments, which consists of the realized gains (losses) and the
unrealized appreciation (depreciation) on those investments.
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
changes therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates. The most significant
estimates relate to the valuation of the investments.
Risk and Uncertainties
Investments held by the Group Trust are exposed to various risks, such as
interest rate, market and credit. Due to the level of risk associated with
certain investment securities and the level of uncertainty related to
changes in the value of investment securities, it is at least reasonably
possible that changes in the near term could materially affect
participants' future account balances and the amounts reported in the
statement of net assets available for benefits and the statement of changes
in net assets available for benefits.
Certain amounts in prior periods have been reclassified to conform to the
current presentation.
3. Tax Status
The Puerto Rico Department of Treasury has determined and informed AT&T by
letter dated May 31, 1995, that the Plan and related trust are qualified in
accordance with applicable sections of the Puerto Rico Income Tax Act of
1954 (the "Act"). The Plan has been amended since receiving the
determination letter. The Plan Administrator, however, believes that the
Plan is qualified and is currently being operated in compliance with the
applicable requirements of the Act.
4. Concentrations of Investment Risk
At December 31, 2003, Plan participants' accounts that are invested in the
investment options mentioned herein, were exposed to market risk in the
event of a significant decline in the value of AT&T Corp. stock, and/or
Comcast stock.
5. Plan Termination
Although it has not expressed any intent to do so, AT&T has the right under
the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
the Plan provides that the net assets are to be distributed to
participating employees in amounts equal to their respective interest in
such assets.
6. Plan Expenses
In general, fees paid for Plan administration, including recordkeeping
(except for such services as are attributable to the participant loan
program), are paid from the trust, unless those expenses are paid by the
Company or participant(s). Fees for trustee services, are paid out of trust
assets. Expenses attributable to the management and investment of each of
the investment options shall be charged against respective options.
7. Group Trust Investments
The following table presents the investments in the Group Trust held by
Fidelity Management Trust Company ("FMTC") as Trustee, at December 31, 2003
and 2002 (in thousands of dollars except for percentages).
December 31,
--------------------------------
Type of Group Trust investments 2003 2002
Asset Allocation Strategies $ 560,314 $ 476,869
Index Funds 342,148 269,382
AT&T Custom Funds 3,979,005 3,601,076
Mutual Funds 2,708,720 1,969,665
Stock Funds 754,883 830,588
------------- --------------
Total Group Trust Investments $ 8,345,070 $ 7,147,580
------------- --------------
Type of Group Trust Investments December 31, 2003
Government securities $ 16,572
Short-term securities 10,189
Corporate bonds 6,127
Common stocks 1,567,644
Mutual funds 2,795,255
Commingled funds 1,294,002
Investment contracts* 2,652,419
Cash 2,862
----------------
Total Group Trust investments $ 8,345,070
----------------
*Investment contracts include synthetic investment
contracts with a contract value of $2,294,485
wrapping fixed income investments of $2,543,093.
Allocation of Group Trust investments 2003 2002
AT&T Long Term Savings Plan for Management
Employees 83.15% 82.54%
AT&T Long Term Savings and Security Plan 16.54% 17.26%
AT&T Retirement Savings and Profit Sharing Plan 0.22% 0.10%
AT&T of Puerto Rico, Inc. Long Term Savings
Plan for Management Employees 0.08% 0.08%
AT&T of Puerto Rico, Inc. Long Term Savings
and Security Plan 0.01% 0.02%
--------- ---------
100.00% 100.00%
--------- ---------
Net appreciation in fair value of Group Trust investments December 31, 2003
Asset Allocation Strategies $ 106,330
Index Funds 48,591
AT&T Custom Funds 319,077
Mutual Funds 570,624
Stock Funds 107,681
-------------
Total net appreciation in fair value of Group Trust
investments $ 1,152,303
-------------
Investment income
Interest $ 168,492
Dividends 10,353
-------------
$ 178,845
-------------
8. Related Party Transactions and Party-in-Interest
Certain Plan investments are in shares of mutual funds managed by Fidelity
Management and Research (FMR), the parent of FMTC. FMTC is the trustee of
the Plan and, therefore, these transactions qualify as party-in-interest
transaction. At December 31, 2003 the total of these investments amounted
to $1,914,936,504 or approximately 23% of the Group Trust.
In addition, the Plan invests in common shares of AT&T Corp. stock, which
qualifies as a related party transaction. At December 31, 2003 the total of
these investments amounted to $256,799,741 or approximately 3% of the Group
Trust.
9. Subsequent Events
The Comcast Stock Fund was liquidated in May 2004. Balances remaining in
these funds as of the liquidation date were transferred into the AT&T
Stable Value Fund.
The Group Trust has been renamed the AT&T Savings Master Trust.
AT&T of Puerto Rico, Inc. Long Term Savings Plan
for Management Employees
Schedule of Assets (Held at End of Year)
December 31, 2003
--------------------------------------------------------------------------------
Name of Issuer and Title of Issue Cost Value
Participant Loans Receivable (4.0% - 9.5%) $ 144 $ 144
--------- ---------
Group Trust $ $ 6,246
--------- ---------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Savings Plan Committee has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
AT&T OF PUERTO RICO, INC. LONG TERM
SAVINGS PLAN FOR MANAGEMENT EMPLOYEES
By Savings Plan Committee
/s/ Brian Byrnes
______________________________
Brian Byrnes
Secretary of the Savings Plan Committee
Date: July 2, 2004
EXHIBIT INDEX
Exhibit No.
23 Consent of PricewaterhouseCoopers LLP