_______________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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
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 5313 __________.
Commission file number 333-21011
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
CENTERIOR ENERGY CORPORATION EMPLOYEE SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the
plan and the address of its principal executive office:
FIRSTENERGY CORP.
76 SOUTH MAIN STREET
AKRON, OH 4430
FINANCIAL STATEMENTS
OF THE
CENTERIOR ENERGY CORPORATION EMPLOYEE SAVINGS PLAN
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
Centerior Energy Corporation
Employee Savings Plan
Index
Report of Independent Public Accountants 2
Financial Statements:
Statement of Net Assets Available for Plan Benefits as of
December 31, 1998 3
Statement of Net Assets Available for Plan Benefits as of
December 31, 1997 4
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1998 5
Notes to Financial Statements 6
Supplemental Schedules:
Schedule I - Item 27A - Schedule of Assets Held for
Investment Purposes as of December 31, 1998 13
Schedule II - Item 27D - Schedule of Reportable
Transactions for the Year Ended December 31, 1998 14
- 1 -
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To The Plan Administrator of the Centerior Energy Corporation Employee
Savings Plan:
We have audited the accompanying statements of net assets available for
plan benefits of the Centerior Energy Corporation Employee Savings Plan
(the Plan) as of December 31, 1998 and 1997, and the related statement of
changes in net assets available for plan benefits for the year ended
December 31, 1998. These financial statements and the schedules referred
to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedules 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 plan
benefits as of December 31, 1998 and 1997, and the changes in net assets
available for plan benefits for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
As further discussed in Note 1 of the accompanying financial statements,
during 1998, the Plan was merged into the FirstEnergy Corp. Savings Plan.
In accordance with generally accepted accounting principles and as
discussed in Note 2 to the accompanying financial statements, the Plan
changed its basis of accounting, from the ongoing plan basis used in
presenting the 1997 financial statements to the liquidation basis used in
presenting the 1998 financial statements.
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 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 Rules and Regulations for Reporting
and Disclosure under the Employee Retirement Income Security Act of 1974.
The fund information in the statements of net assets available for plan
benefits and the statement of changes in net assets available for plan
benefits is presented for the purpose of additional analysis rather than
to present the net assets available for plan benefits and changes in net
assets available for plan benefits of each fund. The supplemental
schedules and fund information 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.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
June 14, 1999
- 2 -
<PAGE>
<TABLE>
CENTERIOR ENERGY CORPORATION
EMPLOYEE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
As of December 31, 1998
Participant-Directed Investments
-------------------------------------------------------------------------------------------
<CAPTION>
FirstEnergy Fixed Global Aggressive
Stock Equity Income Balanced Equity Growth Growth
ASSETS Fund Fund Fund Fund Fund Fund Fund Loans Total
- ------ ----------- ---------- ----------- ---------- ------------ ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets to be trans-
ferred to First-
Energy Corp. Savings
Plan, at market
value:
FirstEnergy -
common stock $18,716,854 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $18,716,854
Equity Fund -
diversified
common stock
fund 0 36,441,327 0 0 0 0 0 0 36,441,327
Investments in
mutual funds 0 0 0 5,680,657 11,021,330 4,094,267 2,118,967 0 22,915,221
Loans receivable
from participants 0 0 0 0 0 0 0 1,909,764 1,909,764
Assets to be trans-
ferred to First-
Energy Corp. Savings
Plan, at contract
value:
Funds invested
with insurance
companies and
banks 0 0 18,773,150 0 0 0 0 0 18,773,150
----------- ----------- ----------- ---------- ----------- ---------- ---------- ---------- -----------
Total investments 18,716,854 36,441,327 18,773,150 5,680,657 11,021,330 4,094,267 2,118,967 1,909,764 98,756,316
----------- ----------- ----------- ---------- ----------- ---------- ---------- ---------- -----------
Receivables:
Investment income
and other
receivables 598 0 0 0 0 0 0 0 598
----------- ----------- ----------- ---------- ----------- ---------- ---------- ---------- -----------
Total receivables 598 0 0 0 0 0 0 0 598
----------- ----------- ----------- ---------- ----------- ---------- ---------- ---------- -----------
Cash and temporary
cash investments 574,795 0 3 0 0 0 0 0 574,798
----------- ----------- ----------- ---------- ----------- ---------- ---------- ---------- -----------
Total assets 19,292,247 36,441,327 18,773,153 5,680,657 11,021,330 4,094,267 2,118,967 1,909,764 99,331,712
----------- ----------- ----------- ---------- ----------- ---------- ---------- ---------- -----------
LIABILITIES
- -----------
Transfers Payable
to FirstEnergy 18,792,247 36,441,327 18,773,153 5,680,657 11,021,330 4,094,267 2,118,967 1,909,764 98,831,712
Corp. Savings Plan
Liabilities for
investment
purchases and other 500,000 0 0 0 0 0 0 0 500,000
----------- ----------- ----------- ---------- ----------- ---------- ---------- ---------- -----------
Total liabilities 19,292,247 36,441,327 18,773,153 5,680,657 11,021,330 4,094,267 2,118,967 1,909,764 99,331,712
----------- ----------- ----------- ---------- ----------- ---------- ---------- ---------- -----------
Net assets available
for Plan benefits $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
=========== =========== =========== ========== =========== ========== ========== ========== ===========
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
- 3 -
<PAGE>
<TABLE>
CENTERIOR ENERGY CORPORATION
EMPLOYEE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
As of December 31, 1997
Participant-Directed Investments
------------------------------------------------------------------------------------------------
<CAPTION>
FirstEnergy Fixed Global Aggressive
Stock Equity Income Balanced Equity Growth Growth
ASSETS Fund Fund Fund Fund Fund Fund Fund Loans Total
- ------ ----------- ----------- ----------- ---------- ------------ ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investments, at
market value:
FirstEnergy -
common stock $53,021,135 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 53,021,135
Equity Fund -
diversified
common stock fund 0 98,391,202 0 0 0 0 0 0 98,391,202
Investments in
mutual funds 0 0 0 20,856,058 34,899,154 10,945,161 9,274,346 0 75,974,719
Loans receivable
from participants 0 0 0 0 0 0 0 5,482,804 5,482,804
Investments , at
contract value:
Funds invested
with insurance
companies and
banks 0 0 78,435,754 0 0 0 0 0 78,435,754
----------- ------------ ----------- ----------- ----------- ----------- ---------- ---------- ------------
Total investments 53,021,135 98,391,202 78,435,754 20,856,058 34,899,154 10,945,161 9,274,346 5,482,804 311,305,614
----------- ------------ ----------- ----------- ----------- ----------- ---------- ---------- ------------
Receivables:
Transfers receivable 0 0 269,614 0 0 0 0 0 269,614
Investment income
and other
receivables 1,748 175,055 33,584 1,098,171 41,108 99,172 42,407 0 1,491,245
----------- ------------ ----------- ----------- ----------- ----------- ---------- ---------- ------------
Total receivables 1,748 175,055 303,198 1,098,171 41,108 99,172 42,407 0 1,760,859
----------- ------------ ----------- ----------- ----------- ----------- ---------- ---------- ------------
Cash and temporary
cash investments 228,464 5,103,702 260,438 0 0 0 0 16,400 5,609,004
----------- ------------ ----------- ----------- ----------- ----------- ---------- ---------- ------------
Total assets 53,251,347 103,669,959 78,999,390 21,954,229 34,940,262 11,044,333 9,316,753 5,499,204 318,675,477
----------- ------------ ----------- ----------- ----------- ----------- ---------- ---------- ------------
LIABILITIES
- -----------
Transfers payable 0 75,227 0 11,700 41,108 99,172 42,407 0 269,614
Liabilities for
investment purchases
and other 502,166 178,555 318,485 1,086,471 0 0 0 0 2,085,677
----------- ------------ ----------- ----------- ----------- ----------- ---------- ---------- ------------
Total liabilities 502,166 253,782 318,485 1,098,171 41,108 99,172 42,407 0 2,355,291
----------- ------------ ----------- ----------- ----------- ----------- ---------- ---------- ------------
Net assets available
for Plan benefits $52,749,181 $103,416,177 $78,680,905 $20,856,058 $34,899,154 $10,945,161 $9,274,346 $5,499,204 $316,320,186
=========== ============ =========== =========== =========== =========== ========== ========== ============
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
- 4 -
<PAGE>
<TABLE>
CENTERIOR ENERGY CORPORATION
EMPLOYEE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
For the Year Ended December 31, 1998
Participant-Directed Investments
<CAPTION>
FirstEnergy Fixed Global Aggressive
Stock Equity Income Balanced Equity Growth Growth
Fund Fund Fund Fund Fund Fund Fund Loans Total
---------- ------------- ----------- ------------ ----------- ------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Participants $ 984,159 $ 3,206,592 $ 1,781,827 $ 976,500 $ 1,590,721 $ 611,496 $ 533,365 $ 0 $ 9,684,660
Employer 390,405 1,107,127 624,178 333,791 519,230 189,303 167,738 0 3,331,772
Rollover 518 83 311,265 3,107 2,589 518 83 0 318,163
Investment
Income:
Dividends 1,783,881 1,235,486 0 971,425 990,580 192,771 0 0 5,174,143
Interest 10,042 14,729 159,562 219 1,886 0 170 330,775 517,383
Net realized
gain and
unrealized
appreciation
in market
value of
investments 4,121,718 21,326,319 2,763,123 483,096 6,159,808 2,550,801 810,988 0 38,215,853
Transfers (to)/
from other
Funds, net (4,736,089) 990,606 7,849,362 849,619 (4,689,743) 398,263 (662,018) 0 0
Transfers to
FirstEnergy
Corp. Savings
Plan (51,499,871)(121,018,839) (81,235,144) (22,570,643) (36,612,425) (13,733,598) (9,559,149) (5,677,571) (341,907,240)
Administrative
expenses (18,501) (434,126) (113,745) 0 0 0 0 0 (566,372)
Loan activity:
Borrowings (374,451) (617,099) (512,879) (152,347) (197,954) (55,852) (58,184) 1,968,766 0
Repayment of
borrowings 0 0 1,686,646 0 0 0 0 (1,686,646) 0
Interest
payments 0 0 330,775 0 0 0 0 (330,775) 0
----------- ----------- ----------- ----------- ----------- ------------ ----------- --------- -------------
(49,338,189) (94,189,122) (66,355,030) (19,105,233) (32,235,308) (9,846,298) (8,767,007) (5,395,451) (285,231,638)
Less - Amounts
withdrawn by
participants 3,410,992 9,227,055 12,325,875 1,750,825 2,663,846 1,098,863 507,339 103,753 31,088,548
----------- ------------ ------------ ------------ ------------ ------------- ------------ ----------- -------------
Net decrease (52,749,181)(103,416,177) (78,680,905) (20,856,058) (34,899,154) (10,945,161) (9,274,346) (5,499,204) (316,320,186)
Net assets
available for
Plan benefits:
Beginning
of year 52,749,181 103,416,177 78,680,905 20,856,058 34,899,154 10,945,161 9,274,346 5,499,204 316,320,186
----------- ------------ ------------ ------------ ------------ ------------- ------------ ----------- -------------
End of year $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
=========== ============ ============ ============ ============ ============= ============ =========== =============
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
- 5 -
<PAGE>
CENTERIOR ENERGY CORPORATION
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL
STATEMENTS
NOTE 1 - GENERAL DESCRIPTION OF THE PLAN
- ----------------------------------------
The Centerior Energy Corporation (Centerior) Employee Savings
Plan (Plan) was approved by the Centerior Board of Directors in
1986 and went into effect as of January 1, 1987. The purpose of
the Plan is to afford eligible employees an opportunity to make
systematic savings through payroll deductions, to invest such
savings in a manner which will assist them in meeting their
savings and investment needs and to facilitate their becoming
share owners of their employer. Participation in the Plan is
voluntary.
An eligible employee is any part-time, temporary, full-time
probationary or full-time regular employee of Centerior,
Centerior Service Company (CSC), The Cleveland Electric
Illuminating Company (CEI), The Toledo Edison Company (TE) or any
other Centerior affiliate that adopts the Plan according to its
terms, that is at least age 18. On November 8, 1997, Centerior
and Ohio Edison Company merged to create FirstEnergy Corp.
(Merger). Effective with the Merger, CEI and TE became electric
utility operating subsidiaries of FirstEnergy Corp. (FirstEnergy)
and Centerior ceased to exist. Pursuant to the terms of the
Merger agreement, each outstanding share of Centerior common
stock (including certain shares held by the Plan) was converted
into .525 of a share of FirstEnergy common stock on the Merger
date.
During 1998, the Plan was merged into the FirstEnergy Corp.
Savings Plan (FirstEnergy Plan). Upon transfer of the assets of
the Plan to the FirstEnergy Plan, participants became eligible
for participation in the FirstEnergy Plan. Until that time,
participants continued participation in the Plan. Upon the
effective date of the final transfer of the assets of the Plan to
the FirstEnergy Plan, the Plan was terminated.
The assets of the Plan are held in a trust (Trust), which was
established by agreement among Centerior, CSC, and Key Trust
Company, N.A. (Key), Cleveland, Ohio. Key had been selected by
Centerior and maintained by FirstEnergy to serve as trustee
(Trustee) of the Trust. On July 1, 1998, effective as of June 30,
1998, the assets of the Plan that related to non-union
participants and non-active participants were transferred to the
FirstEnergy Plan and related trust. On January 2, 1999, effective
as of December 31, 1998, the remaining assets of the Plan, which
related to the union participants of the Plan, were transferred
to the FirstEnergy Plan and related trust. As the final asset
transfer was effective as of December 31, 1998, any assets
remaining in the Trust on that date are shown as a payable to the
FirstEnergy Corp. Savings Plan in the accompanying Statement of
Net Assets Available for Plan Benefits as of December 31, 1998,
and are included in transfers to the FirstEnergy Corp. Savings
Plan in the accompanying Statement of Changes in Net Assets
Available for Plan Benefits.
The Plan is subject to the reporting, disclosure, participation,
vesting and fiduciary responsibility provisions of Title I of the
Employee Retirement Income Security Act of 1974 (ERISA), but is
not subject to the funding provisions of Title I and the plan
termination insurance provisions of Title IV of ERISA.
All Plan activity, including fund account balances, transfers and
withdrawals, is updated each business day by the Trustee.
Participants can get up-to-date reports on their accounts via the
telephone information access system of the Trustee. All
participants share in the investment management costs and certain
administrative costs of the Plan.
- 6 -
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Basis of Accounting
- -------------------
The financial statements of the Plan are prepared on the accrual
basis of accounting. Due to the Plan being merged into the
FirstEnergy Plan in 1998 (and effectively terminated upon
completion of the merger), the Plan changed its basis of
accounting, from the ongoing plan basis used in presenting the
1997 financial statements to the liquidation basis used in
presenting the 1998 financial statements. This change did not
have a significant impact on the accompanying financial
statements.
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 from those estimates.
Valuation of Investments
- ------------------------
The FirstEnergy Stock Fund is valued at the average of the high
and low sales prices of the common stock as reported on Network A
of The Consolidated Transaction reporting system and as listed by
The Wall Street Journal on the last business day of the year.
- -----------------------
The Equity Fund invests in a diversified common stock fund and a
money market fund managed by National City Bank, Cleveland, Ohio.
The fund is valued at market prices on the last business day of
the year.
Fixed Income Fund investments in 1998 and 1997 consisted of
interest-bearing contracts with insurance companies and
investments in Key's EB MaGIC Fund and Fifth Third Bank's
Guaranteed Insurance Contract fund (5/3 Bank's GIC Fund). The EB
MaGIC Fund and 5/3 Bank's GIC Fund are collective funds which
invest primarily in insurance and other investment contracts.
These investments are fully benefit-responsive and stated at
contract value, which equals principal plus accrued interest.
Contract value approximated market value at December 31, 1998 and
1997.
The Balanced, Global Equity, Growth and Aggressive Growth Funds
are invested in diversified mutual funds, the Dodge & Cox
Balanced Fund, the American Funds' New Perspective Fund, the Van
Kampen American Capital Emerging Growth Fund, and the Stein Roe
Capital Opportunities Fund, respectively. These investments are
valued at market prices on the last business day of the year.
Investment Gains, Appreciation and Income
- -----------------------------------------
The net realized gain (loss) and unrealized appreciation
(depreciation) amounts shown in the accompanying Statement of
Changes in Net Assets Available for Plan Benefits were calculated
using the current value methodology for costing investments.
Current value represents the market value of investments held at
the beginning of the year plus the purchase price for investments
acquired during the current year.
The realized gains and losses on the distribution or sale of
shares in the FirstEnergy Stock, Equity, Balanced, Global Equity,
Growth and Aggressive Growth Funds represent the differences
between the market value of the shares on the dates of
distribution or sale and the cost of the shares using the current
value methodology described above. The net realized gain or loss
on the sales of securities in the FirstEnergy Stock Fund is
included in the amounts withdrawn or transferred by participants
- 7 -
<PAGE>
which caused the sale. The net realized gain or loss on the sales
of underlying investment securities in the Equity, Balanced,
Global Equity, Growth and Aggressive Growth Funds will contribute
to the annual increase (decrease) in the respective Fund's net
assets available for Plan benefits.
The Plan provides that the market value of all investments shall
be determined at the market close each business day by the
Trustee. Unrealized appreciation or depreciation, equal to the
difference between the cost and the daily market value of the
investments, is recognized in determining the value of each fund.
Dividend income within the FirstEnergy Stock Fund and the Equity
Fund is recorded on the ex-dividend dates. Income from all other
investments is recorded as earned.
Expenses of the Plan
- --------------------
Expenses of the Plan incurred by the Trustee to buy and sell
securities are included as a cost of those securities. Fund
earnings for the Balanced, Global Equity, Growth and Aggressive
Growth Funds are net of the charges assessed for mutual fund
investment management fees. All participants share in the
investment management costs and certain administrative costs of
the Plan.
The annual investment management and administrative fees assessed
on total assets under management at the end of the last two years
were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
------ ------
<S> <C> <C>
FirstEnergy Stock Fund 0.10% 0.10%
Equity Fund 0.60 0.60
Fixed Income Fund 0.25 0.25
Balanced Fund 0.54 0.55
Global Equity Fund 0.77 0.79
Growth Fund 1.00 1.05
Aggressive Growth Fund 1.20 1.17
</TABLE>
NOTE 3 - CONTRIBUTIONS
- ----------------------
The Plan consists of three parts (Parts) - the After Tax Part,
the Before Tax Part and the Rollover Part. The maximum
participant contribution into both the After Tax Part and the
Before Tax Part is 16% of pay: up to 6% as a Basic Contribution
and up to 10% as a Supplemental Contribution. The minimum
contribution is 1% of pay. Pay includes only straight-time hourly
wages or salary paid for regularly scheduled straight-time hours.
A participant may allocate contributions in increments of 1% into
the FirstEnergy Stock, Equity, Fixed Income, Balanced, Global
Equity, Growth and Aggressive Growth Funds which total 100% or
may allocate all contributions into any one Fund.
Participants make a single election for investment mix for their
contributions into both the After Tax and Before Tax Parts.
Participants may change their contribution percentages as often
as once a month and may change their investment mix, transfer
between funds or withdraw as often as once every 30 calendar
days. A participant's withdrawal of post-December 31, 1986 After
Tax contributions is penalized by requiring a six-month waiting
period for future participant contributions to the After Tax Part
of the Plan, except in certain cases of hardship and during
certain open enrollment periods.
The After Tax Part receives participant contributions after they
are taxed as pay. The Before Tax Part receives contributions
before they are taxed as pay, as participants may instruct their
employer to deposit their contributions into the Trust in
exchange for the election to have their pay reduced by the same
- 8 -
<PAGE>
amount. Participant contributions of pay under the Plan as Before
Tax contributions reduce a participant's taxable income for
federal and Ohio income tax purposes in the year of contribution.
Participant contributions into both the After Tax Part and the
Before Tax Part are subject to certain Internal Revenue Service
(IRS) limitations.
The employer of each participant contributes an amount equal to
50% of the participant's eligible Basic Contributions, which is
allocated on the same percentage basis and to the same Funds as
the participant's Basic Contributions. All employer matching
contributions are deposited solely into the Before Tax Part of
the Plan and vest immediately.
Employees retiring on or after July 1, 1993 are allowed to
directly transfer or rollover all or any part of their qualified
lump sum pension benefit from their respective Part of the Plan
into the Rollover Part of the Plan. The rollover may be invested
in the same investment Funds of the Plan, but the accounts are
segregated from existing After Tax Part and Before Tax Part
accounts. The minimum rollover required is $3,500.
Participants, including those who have terminated employment but
maintained account balances, may transfer any or all of their
contributions and the earnings thereon and employer matching
contributions and the earnings thereon among the various Funds.
Any integral increment of 1% may be transferred.
A participant's interests from a plan of a previous employer that
is qualified under Internal Revenue Code (IRC) Section 401(k) may
be transferred into the Plan.
NOTE 4 - INVESTMENTS
- --------------------
Effective with the Merger, contributions into the FirstEnergy
Stock Fund and the earnings thereon are invested by the Trustee
in FirstEnergy common stock. At the direction of FirstEnergy, the
common stock is either purchased in the open market at prevailing
prices or purchased from FirstEnergy at the market value on the
date of the purchase. Prior to the Merger, contributions into the
Centerior Stock Fund and the earnings thereon were invested by
the Trustee in Centerior common stock, which was purchased at the
direction of Centerior either in the open market or from
Centerior.
Contributions into the Equity Fund and the earnings thereon are
deposited by the Trustee in a diversified common stock fund.
These deposits are then invested by National City Bank primarily
in the common stocks of a large number of publicly owned
companies, excluding FirstEnergy.
Contributions into the Fixed Income Fund and the earnings thereon
are invested by the Trustee in Key's EB MaGIC Fund and in 5/3
Bank's GIC Fund in 1998 and 1997, and in interest-bearing
contracts with insurance companies prior to July 1997. Group
fixed-term contracts with insurance companies earned interest at
an annual rate of 7% in 1997. The earned interest rates for the
EB MaGIC Fund and 5/3 Bank's GIC Fund vary as each fund's various
investment contracts with insurance companies expire and new ones
are added. The EB MaGIC Fund's average annual earned interest
rate for the years ended December 31, 1998 and 1997 was 6.48% and
6.53%, respectively. The average annual earned interest rate for
5/3 Bank's GIC Fund at December 31, 1998 and 1997 was 6.21% and
6.08%, respectively. By agreement between the parties, the
investment contracts with the Life Insurance Company of Georgia
having a June 1999 maturity date were prematurely ended in June
1997. The proceeds were invested in the EB MaGIC Fund.
Contributions into the Balanced Fund and the earnings thereon are
deposited by the Trustee in a diversified mutual fund with the
investment objectives of long-term growth of capital, reasonable
income and conservation of capital. Through February 1, 1997, the
Balanced Fund investment was in the Phoenix Balanced Fund. The
Dodge & Cox Balanced Fund replaced the Phoenix Balanced Fund as
the Balanced Fund's diversified mutual fund effective February 1,
1997.
- 9 -
<PAGE>
Contributions into the Global Equity Fund and the earnings
thereon are deposited by the Trustee in a diversified mutual fund
with the investment objective of long-term growth of capital
through world-wide investments. The Global Equity Fund investment
is currently in the American Funds' New Perspective Fund.
Contributions into the Growth Fund and earnings thereon are
deposited by the Trustee into the Van Kampen American Capital
Emerging Growth Fund, a diversified mutual fund with the
investment objective of long-term capital appreciation by
investing primarily in the common stocks of small and mid-sized
companies.
Contributions into the Aggressive Growth Fund and the earnings
thereon are deposited by the Trustee into the Stein Roe Capital
Opportunities Fund, a diversified mutual fund with the investment
objective of long-term capital appreciation by investing in
aggressive growth companies.
Investments that represent 5% or more of the Plan's net assets at
the end of the last two years were as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
------ ------
<S> <C> <C>
FirstEnergy common stock,
-0- and 1,818,315 shares,
respectively $ 0 $53,021,135
EB MaGIC Fund 0 72,019,901
Dodge & Cox Balanced Fund, -0-
and 312,310 shares, respectively 0 20,856,058
American Funds' New Perspective
Fund, -0- and 1,801,712 shares,
respectively 0 34,899,154
-------- ------------
Total $ 0 $180,796,248
======== ============
</TABLE>
The Trustee can temporarily keep contributions deposited in any
of the Funds in short-term investments or in cash to have cash
available to meet participants' distribution requests or until
the Trustee invests it.
NOTE 5 - WITHDRAWALS
- ---------------------
Subject to certain limitations under the Plan and the law,
participants may elect to withdraw their contributions and
employer matching contributions and any related gains and
earnings on these contributions. Funds may be withdrawn in a lump
sum, as a rollover to another plan or a distribution to the
participant, or in installments. The participant may elect to
receive installments quarterly, monthly, semi-annually or
annually. For participants age 70-1/2 or older, minimum
distributions must begin based on single life or joint life
expectancy calculations.
- 10 -
<PAGE>
Withdrawals payable to participants at the end of the last two
years were as follows:
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1997
------ ------
<S> <C> <C>
FirstEnergy Stock Fund $ 0 $ 40,103
Equity Fund 0 60,759
Fixed Income Fund 0 224,619
Balanced Fund 0 28,534
Global Equity Fund 0 38,714
Growth Fund 0 446
-------- --------
Total $ 0 $393,175
======== ========
</TABLE>
NOTE 6 - LOANS TO PARTICIPANTS
- ------------------------------
Participants are eligible to apply for a loan to borrow from
their vested available investment accounts having a balance of at
least $2,000. To be eligible, participants must receive a regular
paycheck from which repayments may be withheld to repay the
borrowing and pay interest to their own accounts. Eligible
participants may borrow up to the lesser of 50% of their vested
account balances or $50,000. Loans from the Rollover Part are not
permitted. A participant may elect a repayment period of one to
60 months. All loan repayments are made to the Fixed Income Fund.
A fixed rate of interest applies to all loans. The interest rate
is The Chase Manhattan Bank prime rate plus 1%. The interest
rates on loans outstanding as of December 31, 1998 are between
8.75% and 9.5% and as of December 31, 1997 are between 9.25% and
9.5%.
NOTE 7 - TAX STATUS OF THE PLAN
- -------------------------------
Centerior received a determination letter from the IRS dated
November 13, 1996 to the effect that the Plan is a qualified
defined contribution plan under Section 401 of the IRC and that
the Plan, if operated in accordance with the Plan document, is
exempt from income taxes under Section 501 thereof. The effect of
such qualification and exemption is that the participating
employees are not subject to federal income taxes on employer
contributions or any income accruing to their accounts until
distributions are made from the accounts. When a distribution is
made, the excess of the amount distributed over the participating
employee's own After Tax contributions is taxable income to the
employee. Distributions from both the Before Tax Part and the
Rollover Part are subject to federal income tax.
Since receiving the last determination letter, the Plan has been
amended to include the Growth and Aggressive Growth Funds.
However, the Plan's legal counsel believes that the Plan is
currently designed and being operated in compliance with the
applicable requirements of the IRC.
- 11 -
<PAGE>
NOTE 8 - RECONCILIATION OF THE FINANCIAL STATEMENTS TO FORM 5500
- ----------------------------------------------------------------
The following is a reconciliation of net assets available for
Plan benefits according to the financial statements to Form 5500:
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Net assets available for Plan
benefits per the financial
statements $ 0 $316,320,186
Amounts allocated to withdrawing
participants 0 (393,175)
--------- ------------
Net assets available for benefits
per Form 5500 $ 0 $315,927,011
========= ============
</TABLE>
The following is a reconciliation of benefits paid to
participants according to the financial statements to Form 5500:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Benefits paid to participants per the
financial statement $31,088,548
Add: Amounts allocated to withdrawing
participants at December 31, 1998 0
Less: Amounts allocated to withdrawing
participants at December 31, 1997 393,175
-----------
$30,695,373
===========
</TABLE>
NOTE 9 - PARTY-IN-INTEREST TRANSACTIONS
- ---------------------------------------
There were no prohibited transactions with a party-in-interest,
as defined under ERISA.
- 12 -
<PAGE>
<TABLE>
SCHEDULE I
CENTERIOR ENERGY CORPORATION
EMPLOYEE SAVINGS PLAN
ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1998
<CAPTION>
Number
of Historical Market
Common Stock Shares Cost Value
- ----------------------------------------------------------------
<S> <C> <C> <C>
- 0 $ 0 $ 0
<FN>
The accompanying notes are an integral part of this schedule.
</TABLE>
- 13 -
<PAGE>
<TABLE>
SCHEDULE II
CENTERIOR ENERGY CORPORATION
EMPLOYEE SAVINGS PLAN
ITEM 27D-SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Current Value
Party Involved/ Purchase Selling Cost of of Asset on Net Gain
Security Name Price Price Expenses Asset Transaction Date or Loss
-------------- -------- ------- -------- ------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C>
NCB Equity Fund $ 0 $84,577,511 $ 0 $38,014,841 $84,577,511 $46,562,670
American Funds' New
Perspective Fund 0 25,591,113 0 19,215,712 25,591,113 6,375,401
KeyTrust EB MaGIC
Fund 0 25,000,000 0 21,616,955 25,000,000 3,383,045
Dodge & Cox Balanced
Fund 0 16,889,996 0 15,485,480 16,889,996 1,404,516
NCB Equity Fund
Non-U.S. Equity 0 36,441,327 0 16,090,647 36,441,327 20,350,680
<FN>
The accompanying notes are an integral part of this schedule.
</TABLE>
- 14 --
<PAGE>
<TABLE>
SCHEDULE II
(Continued)
CENTERIOR ENERGY CORPORATION
EMPLOYEE SAVINGS PLAN
ITEM 27D PART 2 - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Disposed Acquired
---------------------------------- -----------------------------
Gain or
Security Description Sales Proceeds Loss Purchases Cost
- ------------------------------ ---------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Dodge & Cox Balanced Fund 109 $ 25,815,953 $ 1,760,589 115 $ 4,476,799
American Funds'
New Perspective Fund 125 44,808,707 10,674,467 95 3,749,745
NCB Equity Fund 104 134,103,958 73,834,433 126 8,547,540
Key Trust EB MaGIC Fund 104 43,144,149 5,786,131 131 14,760,434
Van Kampen American Capital
Emerging Growth Fund 91 16,490,451 2,742,225 118 2,994,489
Capital EB Money Market Money
Fund 134 10,786,809 0 102 10,883,873
<FN>
The accompanying notes are integral part of this schedule.
</TABLE>
- 15 -
<PAGE>
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation of our report on the financial statements of the
Centerior Energy Corporation Employee Savings Plan dated June 14, 1999,
included in this Form 11-K into FirstEnergy Corp.'s filed Registration
Statement File No. 333-48651.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
June 29, 1999
- 16 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Savings Plan Committee and the administrator of the Centerior
Energy Corporation Employee Savings Plan, has caused this annual report
to be signed on its behalf by the undersigned hereunto duly authorized.
CENTERIOR ENERGY CORPORATION
EMPLOYEE SAVINGS PLAN
June 29, 1999
- -------------
Date
By: /s/ James A. Bowers
-----------------------
James A. Bowers
Chairman
Savings Plan Committee
- 17 -
<PAGE>
June 29, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Centerior Energy Corporation Employee Savings Plan
Gentlemen:
We transmit herewith for electronic filing with the Securities and
Exchange Commission, pursuant to the Securities Act of 1934, as
amended, an annual report on Form 11-K of the Centerior Energy
Corporation Employee Savings Plan.
Please address any comments regarding the above to the undersigned
at 76 S. Main Street, Akron, OH 44308 (330) 384-5504.
Very truly yours,
FIRSTENERGY CORP.
By: /s/ N. C. Ashcom
-------------------
N. C. Ashcom
Corporate Secretary
- 18 -
