<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[ X ] Annual Report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 (Fee Required)
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 __________________
ITT 401 (K) RETIREMENT SAVINGS PLAN
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
777 WESTCHESTER AVENUE, WHITE PLAINS, N.Y. 10604
- --------------------------------------------------------------------------------
<PAGE> 2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the ITT
401(k) Retirement Savings Plan Committee has duly caused this annual report to
be signed on its behalf by the undersigned hereunto duly authorized.
ITT 401(k) Retirement Savings Plan
Date June 29, 1999 /s/ Ronald C. Brown
------------------------------
(Signature)
RONALD C. BROWN ITT 401(k)
Retirement Savings Plan
Committee Secretary
2
<PAGE> 3
ITT 401(k) RETIREMENT SAVINGS PLAN
DECEMBER 31, 1998
TABLE OF CONTENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 4
FINANCIAL STATEMENTS:
Statement of Net Assets Available for Plan Benefits as of
December 31, 1998 5
Statement of Net Assets Available for Plan Benefits as of
December 31, 1997 6
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1998 7
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1997 8
NOTES TO FINANCIAL STATEMENTS 9
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES as of
December 31, 1998 - ITEM 27a 16
SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED
DECEMBER 31, 1998 - ITEM 27d 17
EXHIBIT 23 - CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 19
</TABLE>
3
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the ITT 401(k) Retirement Savings Plan Committee:
We have audited the accompanying statements of net assets available for plan
benefits of the ITT 401(k) Retirement Savings Plan (the "Plan") as of December
31, 1998 and 1997, and the related statements of changes in net assets available
for plan benefits for the years ended December 31, 1998 and 1997. These
financial statements and the schedules described below are the responsibility of
the Plan Administrator. 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 of the ITT
401(k) Retirement Savings Plan as of December 31, 1998 and 1997, and the changes
in its net assets available for plan benefits for the years ended December 31,
1998 and 1997, 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 Schedule of Assets Held
for Investment Purposes and Schedule of 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. The Fund Information in the
statements of net assets available for plan benefits and the statements of
changes in net assets available for plan benefits is presented for purposes 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.
/s/ Arthur Andersen LLP
Phoenix, Arizona,
June 28, 1999.
4
<PAGE> 5
ITT 401(k) RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NON
PARTICIPANT
DIRECTED PARTICIPANT DIRECTED
----------- ----------------------------------------------------------------------
-----------------------------------------------------------------------------------
STARWOOD STARWOOD
COMMON COMMON EQUITY FIXED ITT INDUSTRIES
STOCK STOCK INDEX INCOME BALANCED COMMON STOCK
FUND FUND FUND FUND FUND FUND
(FUND A) (FUND A) (FUND B) (FUND C) (FUND D) (FUND F)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at Fair Value:
Starwood Common Stock
2,589,934 shares....................... $23,696 $35,064 $ -- $ -- $ -- $ --
ITT Industries Common Stock
288,437 shares......................... -- -- -- -- -- 11,465
ITT Hartford Common Stock
583,067 shares......................... -- -- -- -- -- --
Loans Receivable from Participants.......... -- -- -- -- -- --
Investments in Securities of
Unaffiliated Issuers...................... 471 698 67,608 32,957 10,989 407
------------------------------------------------------------------------------
Total Investments........................... 24,167 35,762 67,608 32,957 10,989 11,872
Dividends and Interest Receivable........... 156 232 -- 183 -- 48
Contributions Receivable.................... 208 307 220 166 43 --
Receivables from the Sale of Securities..... -- -- 111 -- 57 208
------------------------------------------------------------------------------
Total Assets.............................. 24,531 36,301 67,939 33,306 11,089 12,128
------------------------------------------------------------------------------
LIABILITIES:
Accounts Payable............................ 239 353 -- -- -- --
Accrued Administrative Expenses............. 14 20 28 14 5 5
------------------------------------------------------------------------------
Total Liabilities......................... 253 373 28 14 5 5
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net Assets Available For Plan Benefits...... $24,278 $35,928 $67,911 $33,292 $11,084 $12,123
==============================================================================
PARTICIPANT DIRECTED
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
ITT HARTFORD
COMMON STOCK
FUND INTERNATIONAL GROWTH
(FUND G) LOAN FUND BOND FUND EQUITY FUND EQUITY FUND TOTAL
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at Fair Value:
Starwood Common Stock
2,589,934 shares....................... $ -- $ -- $ -- $ -- $ -- $ 58,760
ITT Industries Common Stock
288,437 shares......................... -- -- -- -- -- 11,465
ITT Hartford Common Stock
583,067 shares......................... 31,996 -- -- -- -- 31,996
Loans Receivable from Participants.......... -- 10,324 -- -- -- 10,324
Investments in Securities of
Unaffiliated Issuers...................... 1,208 -- 8,087 4,957 64,474 191,856
-------------------------------------------------------------------------------
Total Investments........................... 33,204 10,324 8,087 4,957 64,474 304,401
Dividends and Interest Receivable........... 141 -- -- -- -- 760
Contributions Receivable.................... -- -- 47 33 311 1,335
Receivables from the Sale of Securities..... 508 -- -- 1 -- 885
-------------------------------------------------------------------------------
Total Assets.............................. 33,853 10,324 8,134 4,991 64,785 307,381
-------------------------------------------------------------------------------
LIABILITIES:
Accounts Payable............................ -- -- 68 -- 68 728
Accrued Administrative Expenses............. 15 -- 3 1 25 130
-------------------------------------------------------------------------------
Total Liabilities......................... 15 -- 71 1 93 858
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net Assets Available For Plan Benefits...... $33,838 $10,324 $8,063 $4,990 $64,692 $306,523
===============================================================================
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
ITT CORPORATION 401(k) RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NON
PARTICIPANT
DIRECTED PARTICIPANT DIRECTED
----------- ----------------------------------------------------------------------
-----------------------------------------------------------------------------------
ITT ITT
COMMON COMMON EQUITY FIXED ITT INDUSTRIES
STOCK STOCK INDEX INCOME BALANCED COMMON STOCK
FUND FUND FUND FUND FUND FUND
(FUND A) (FUND A) (FUND B) (FUND C) (FUND D) (FUND F)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at Fair Value:
Starwood Common Stock:
1,635,253 shares....................... $58,224 $76,888 $ -- $ -- $ -- $ --
ITT Industries Common Stock:
506,803 shares......................... -- -- -- -- -- 15,901
ITT Hartford Common Stock:
493,233 shares......................... -- -- -- -- -- --
Loans Receivable from Participants.......... -- -- -- -- -- --
Investments in Securities of
Unaffiliated Issuers...................... 298 394 62,680 38,417 13,409 321
------------------------------------------------------------------------------
Total Investments........................... 58,522 77,282 62,680 38,417 13,409 16,222
Dividends and Interest Receivable........... 3 3 -- 191 -- 78
Contributions Receivable.................... 516 257 274 190 67 --
Receivables from the Sale of Securities..... 198 262 -- -- -- --
------------------------------------------------------------------------------
Total Assets................................ 59,239 77,804 62,954 38,798 13,476 16,300
------------------------------------------------------------------------------
LIABILITIES:
Accounts Payable............................ -- -- 184 -- 47 --
Accrued Administrative Expenses............. 23 30 26 16 6 7
------------------------------------------------------------------------------
Total Liabilities......................... 23 30 210 16 53 7
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net Assets Available for Plan Benefits...... $59,216 $77,774 $62,744 $38,782 $13,423 $16,293
==============================================================================
PARTICIPANT DIRECTED
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
ITT HARTFORD
COMMON STOCK
FUND INTERNATIONAL GROWTH
(FUND G) LOAN FUND BOND FUND EQUITY FUND EQUITY FUND TOTAL
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at Fair Value:
Starwood Common Stock:
1,635,253 shares....................... $ -- $ -- $ -- $ -- $ -- $135,112
ITT Industries Common Stock:
506,803 shares......................... -- -- -- -- -- 15,901
ITT Hartford Common Stock:
493,233 shares......................... 46,149 -- -- -- -- 46,149
Loans Receivable from Participants.......... -- 11,168 -- -- -- 11,168
Investments in Securities of
Unaffiliated Issuers...................... 852 -- 7,047 4,053 41,568 169,039
-------------------------------------------------------------------------------
Total Investments........................... 47,001 11,168 7,047 4,053 41,568 377,369
Dividends and interest Receivable........... 202 -- -- -- -- 477
Contributions Receivable.................... -- -- 49 39 319 1,711
Receivables from the Sale of Securities..... -- -- -- -- 196 656
-------------------------------------------------------------------------------
Total Assets................................ 47,203 11,168 7,096 4,092 42,083 380,213
-------------------------------------------------------------------------------
LIABILITIES:
Accounts Payable............................ -- -- 56 1 -- 288
Accrued Administrative Expenses............. 18 -- 3 2 17 148
-------------------------------------------------------------------------------
Total Liabilities......................... 18 -- 59 3 17 436
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net Assets Available for Plan Benefits...... $47,185 $11,168 $7,037 $4,089 $42,066 $379,777
===============================================================================
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE> 7
ITT 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NON
PARTICIPANT
DIRECTED PARTICIPANT DIRECTED
---------------------- -----------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
ITT STARWOOD STARWOOD ITT
COMMON COMMON ITT COMMON COMMON EQUITY FIXED INDUSTRIES
STOCK STOCK STOCK STOCK INDEX INCOME BALANCED COMMON STOCK
FUND FUND FUND FUND FUND FUND FUND FUND
(FUND A (FUND A) (FUND A) (FUND A) (FUND B) (FUND C) (FUND D) (FUND F)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions to Net Assets
Attributed to:
Rollover Distributions, net......... $ -- $ (677) $ -- $ (1,003) $ (11,084) $ (7,176) $ (6,221) $ (2,335)
Investment Income:
Net Realized Gains................ 12,376 1,745 18,313 2,582 10,555 -- 719 5,836
Unrealized Appreciation
(Depreciation).................. (9,873) (32,533) (14,609) (48,141) 5,767 -- (881) (2,421)
Interest.......................... 11 116 16 172 -- 2,006 -- 28
Dividends......................... 145 1,649 215 2,441 -- -- 1,114 227
Interest on Participant Loans....... 14 52 21 78 178 95 33 --
Repayment of Participant Loans...... 80 302 118 448 1,016 590 230 --
Terminated Loan Principal........... -- -- -- -- -- -- -- --
Contributions:
Participants...................... 460 1,620 681 2,396 6,774 4,378 1,698 --
Company........................... 816 3,818 1,207 5,649 58 46 33 --
----------------------------------------------------------------------------------------------
Total Contributions............. 1,276 5,438 1,888 8,045 6,832 4,424 1,731 --
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Total Additions............... 4,029 (23,908) 5,962 (35,378) 13,264 (61) (3,275) 1,335
----------------------------------------------------------------------------------------------
Deductions from Net Assets
Attributed to:
Transfer of Assets Upon Merger...... (60,924) 56,952 (80,303) 84,275 -- -- -- --
Interfund Transfers (net)........... (1,563) (2,766) (2,312) (4,093) 1,394 4,023 3,895 (2,449)
Withdrawals and Distributions....... (582) (5,243) (860) (7,756) (7,831) (8,572) (2,623) (2,952)
Loans to Participants............... (152) (559) (226) (826) (1,321) (661) (264) (33)
Administrative Expenses............. (24) (198) (35) (294) (339) (219) (72) (71)
----------------------------------------------------------------------------------------------
Total Deductions.............. (63,245) 48,186 (83,736) 71,306 (8,097) (5,429) 936 (5,505)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Net Increase (Decrease)............. (59,216) 24,278 (77,774) 35,928 5,167 (5,490) (2,339) (4,170)
----------------------------------------------------------------------------------------------
Net Assets Available for Benefits:
Beginning of Period............... 59,216 -- 77,774 -- 62,744 38,782 13,423 16,293
----------------------------------------------------------------------------------------------
End of Period..................... $ -- $24,278 $ -- $35,928 $67,911 $33,292 $11,084 $12,123
==============================================================================================
PARTICIPANT DIRECTED
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
ITT HARTFORD
COMMON STOCK
FUND INTERNATIONAL GROWTH
(FUND G) LOAN FUND BOND FUND EQUITY FUND EQUITY FUND TOTAL
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additions to Net Assets Attributed to:
Rollover Distributions, net................. $ (7,707) $ -- $(1,547) $(1,278) $ (3,390) $ (42,418)
Investment Income:
Net Realized Gains........................ 17,031 -- 15 180 438 69,790
Unrealized Appreciation
(Depreciation).....................z.... (9,651) -- (441) 266 9,492 (103,025)
Interest.................................. 85 -- -- -- -- 2,434
Dividends................................. 623 -- 641 -- 5,445 12,500
Interest on Participant Loans............... -- -- 36 24 277 808
Repayment of Participant Loans.............. -- (4,525) 190 123 1,428 --
Terminated Loan Principal................... -- (2,878) -- -- -- (2,878)
Contributions:
Participants.............................. -- -- 1,289 1,116 9,380 29,792
Company................................... -- -- 10 19 57 11,713
-------------------------------------------------------------------------------
Total Contributions..................... -- -- 1,299 1,135 9,437 41,505
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Total Additions....................... 381 (7,403) 193 450 23,127 (21,284)
-------------------------------------------------------------------------------
Deductions from Net Assets Attributed to:
Transfer of Assets Upon Merger.............. -- -- -- -- -- --
Interfund Transfers (net)................... (4,777) -- 1,889 1,180 5,579 --
Withdrawals and Distributions............... (8,640) -- (797) (554) (3,754) (50,164)
Loans to Participants....................... (102) 6,559 (216) (147) (2,052) --
Administrative Expenses..................... (209) -- (43) (28) (274) (1,806)
-------------------------------------------------------------------------------
Total Deductions...................... (13,728) 6,559 833 451 (501) (51,970)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net Increase (Decrease)..................... (13,347) (844) 1,026 901 22,626 (73,254)
-------------------------------------------------------------------------------
Net Assets Available for Benefits:
Beginning of Period....................... 47,185 11,168 7,037 4,089 42,066 379,777
-------------------------------------------------------------------------------
End of Period............................. $33,838 $10,324 $ 8,063 $ 4,990 $64,692 $ 306,523
==============================================================================
</TABLE>
The accompanying notes are an integral part of this statement.
7
<PAGE> 8
ITT 401(k) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NON
PARTICIPANT
DIRECTED PARTICIPANT DIRECTED
----------- -------------------------------------------------------------
----------- -------------------------------------------------------------
ITT COMMON ITT COMMON EQUITY FIXED ITT INDUSTRIES
STOCK STOCK INDEX INCOME BALANCED COMMON STOCK
FUND FUND FUND FUND FUND FUND
(FUND A) (FUND A) (FUND B) (FUND C) (FUND D) (FUND F)
----------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additions to Net Assets
Attributed to:
Rollover Contributions, Net..... $ -- $ 94 $ 159 $ 77 $ -- $ 71
Investment Income:
Net Realized Gains............ 955 1,334 3,841 -- 280 1,762
Unrealized Appreciation
(Depreciation).............. 23,915 31,691 11,611 -- 672 2,050
Interest...................... 60 85 -- 2,251 -- 30
Dividends..................... -- -- -- -- 990 326
Interest on Participant Loans... -- 187 159 109 29 --
Repayment of Participant Loans.. -- 892 894 688 132 --
Terminated Loan Principal....... -- -- -- -- -- --
Contributions:
Participants.................. -- 6,530 7,050 5,024 1,662 --
Company....................... 11,008 1,736 51 50 26 --
------------------------------------------------------------------------
Total Contributions.......... 11,008 8,266 7,101 5,074 1,688 --
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Additions........... 35,938 42,549 23,765 8,199 3,791 4,239
------------------------------------------------------------------------
Deductions from Net Assets
Attributed to:
Interfund Transfers (net)....... -- 7,222 (1,252) (1,271) 2,908 (2,175)
Withdrawals and Distributions... -- (5,792) (3,662) (6,546) (720) (1,174)
Loans to Participants........... (700) (1,176) (1,656) (980) (244) (111)
Administrative Expenses......... (174) (244) (238) (165) (47) (65)
------------------------------------------------------------------------
Total Deductions............. (874) 10 (6,808) (8,962) 1,897 (3,525)
------------------------------------------------------------------------
------------------------------------------------------------------------
Net Increase (Decrease)......... 35,064 42,559 16,957 (763) 5,688 714
------------------------------------------------------------------------
Net Assets Available for Benefits:
Beginning of Period............ 24,152 35,215 45,787 39,545 7,735 15,579
------------------------------------------------------------------------
End of Period.................. $59,216 $77,774 $62,744 $38,782 $13,423 $16,293
========================================================================
<CAPTION>
PARTICIPANT DIRECTED
----------- -------------------------------------------------------------
----------- -------------------------------------------------------------
ITT HARTFORD INTER-
COMMON STOCK NATIONAL GROWTH
FUND EQUITY EQUITY
(FUND G) LOAN FUND BOND FUND FUND FUND TOTAL
------------ -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additions to Net Assets
Attributed to:
Rollover Contributions, Net..... $ 68 $ -- $ -- $ -- $ -- $ 469
Investment Income:
Net Realized Gains............ 3,739 -- 18 161 709 12,799
Unrealized Appreciation
(Depreciation).............. 9,933 -- 90 (17) (1,873) 78,072
Interest...................... 92 -- -- -- -- 2,518
Dividends..................... 826 -- 413 -- 8,459 11,014
Interest on Participant Loans... -- -- 25 15 187 711
Repayment of Participant Loans.. -- (3,871) 155 78 1,032 --
Terminated Loan Principal....... -- (459) -- -- -- (459)
Contributions:
Participants.................. -- -- 1,313 1,046 8,633 31,258
Company....................... -- -- 5 17 53 12,946
------------------------------------------------------------------------
Total Contributions.......... -- -- 1,318 1,063 8,686 44,204
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Additions........... 14,658 (4,330) 2,019 1,300 17,200 149,328
------------------------------------------------------------------------
Deductions from Net Assets
Attributed to:
Interfund Transfers (net)....... (3,312) -- (91) 1,074 (3,103) --
Withdrawals and Distributions... (3,224) -- (779) (294) (2,255) (24,446)
Loans to Participants........... (320) 7,814 (300) (160) (2,167) --
Administrative Expenses......... (177) -- (28) (17) (168) (1,323)
------------------------------------------------------------------------
Total Deductions............. (7,033) 7,814 (1,198) 603 (7,693) (25,769)
------------------------------------------------------------------------
------------------------------------------------------------------------
Net Increase (Decrease)......... 7,625 3,484 821 1,903 9,507 123,559
------------------------------------------------------------------------
Net Assets Available for Benefits:
Beginning of Period............ 39,560 7,684 6,216 2,186 32,559 256,218
------------------------------------------------------------------------
End of Period................... $47,185 $11,168 $ 7,037 $4,089 $42,066 $379,777
========================================================================
</TABLE>
The accompanying notes are an Integral part of this statement.
8
<PAGE> 9
ITT 401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
($ IN THOUSANDS)
Note 1 - Description of the Plan:
ITT Corporation ("ITT" or the "Company") sponsors the ITT 401(k) Retirement
Savings Plan (the "Plan"). On February 23, 1998, as a result of the acquisition
of ITT by Starwood Hotels & Resorts Worldwide, Inc. ("Starwood"), ITT became a
wholly owned subsidiary of Starwood (the "Merger"). Each outstanding share of
ITT common stock held by the Plan was converted into 1.543 shares of Starwood
common stock ("Starwood Common Stock"). As of February 24, 1998, all outstanding
securities of ITT were de-listed from trading on the New York Stock Exchange
("NYSE"). The Starwood Common Stock trades on the NYSE under the ticker symbol
"HOT". As of the date of the Merger, employer and employee contributions
directed to the common stock fund were invested in Starwood Common Stock.
Prior to October 1, 1996, the Plan was known as the ITT Corporation
Investment and Savings Plan for Salaried Employees (the "Old Plan"). The Old
Plan was established for the purpose of continuing the participation of ITT's
salaried employees following the distribution from ITT Industries, Inc.
described below. On December 19, 1995, ITT Industries Inc. distributed to its
shareholders (the "Distribution") one share of ITT Corporation common stock, one
share of ITT Industries, Inc. common stock and one share of ITT Hartford
Corporation common stock for each share of common stock held. Shares in these
three companies are held in Fund A, Fund F and Fund G, respectively.
Effective October 1, 1996, the Caesars 401(k) Retirement Savings Plan (the
"Caesars Plan") was merged into the Plan and the assets under the Caesars Plan
were transferred to the Plan.
The following description of the Plan provides only general information.
Participants should refer to the Plan agreement for a more complete description
of the Plan's provisions. Information with regard to eligibility, contributions,
distributions, vesting, trustees, withdrawals, restoration, loans, fund
redistribution and definitions of all terms are contained in that document.
General
The Plan is a defined contribution plan covering all full-time salaried
employees and some part-time employees of ITT who have one year of service, or
who have fulfilled the requisite eligibility requirements for employees on a
temporary or less than full-time basis and are paid from a payroll maintained in
the continental United States, Hawaii, Puerto Rico or the U.S. Virgin Islands.
All employees formerly eligible for participation in the Old Plan and the
Caesars Plan were immediately eligible for participation in the Plan. Employees
who were in the process of satisfying the eligibility requirements of the Old
Plan on September 30, 1996 automatically became eligible for participation on
January 1, 1997. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA").
9
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS (Continued)
($ IN THOUSANDS)
Contributions
A participant in the Plan may generally elect to contribute 2% to 16% of
compensation (regular remuneration including payroll processed tips,
commissions, overtime and shift differentials, but excluding bonuses), in whole
percentages on a before-tax basis. A participant who is a highly compensated
employee may be limited to less than 16% due to certain Internal Revenue Code
restrictions. With respect to an employee who became a participant on or after
October 1, 1996, other than employees who were participants of the Caesars Plan
on September 30, 1996, such participant shall automatically begin to contribute
on a before-tax basis at a rate of 2% of base salary, unless such participant
affirmatively elects otherwise. After-tax contributions are not allowed. Plan
participants who are bona fide residents of Puerto Rico may contribute up to 10%
of base salary not in excess of $7,500.
An amount equal to 50% of a participant's Basic Pre-Tax Savings contributions to
the Plan is matched by ITT up to the first 5% of compensation. In addition, ITT
contributes 1% of compensation to the Plan as a Retirement Contribution for each
eligible employee even if the employee elects not to contribute to the Plan.
Company contributions are automatically invested in the Starwood Stock Fund,
except that a participant who is 55 years or older may choose to reallocate his
or her past and future Company contributions and related investment earnings to
other Plan investment funds in accordance with Plan rules.
Rollover Distributions or Contributions, net
Rollover distributions or contributions, net are transfers of participant
assets to or from another qualified plan.
Administrative Expenses
Generally, trust fund assets are used to pay for the administrative expenses of
the Plan. These expenses include, but are not limited to, investment management,
Trustee, recordkeeper and audit fees. Plan administrative expenses which are not
paid by the Plan, if any, are paid by ITT.
Participant Accounts
Each participant's account is credited with the participant's and ITT's matching
contribution and allocations of Plan earnings and are charged with an allocation
of administrative expenses. Allocations are based on participant earnings or
account balances. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's vested account.
10
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS (Continued)
($ IN THOUSANDS)
Vesting
Participants are immediately vested in their contributions plus earnings
thereon. Vesting in the company matching contributions begins one year after
employment at 20% and increases 20% each year until the fifth year of employment
when 100% is vested. Participants of the Caesars Plan on September 30, 1996,
become 100% vested in the plan if they terminate employment on or after age 55.
Notwithstanding the foregoing statement, a participant becomes fully vested in
his or her company-matched contributions upon his or her retirement, disability,
death or upon reaching age 65, or the complete discontinuance of company
contributions.
As of December 31, 1998, the cumulative company contributions, including those
made to the Caesars Plan, made on behalf of all participants including a
pro-rata share of investment income, were as follows:
<TABLE>
<S> <C>
Vested $93,715
Nonvested 1,227
-------
$94,942
=======
</TABLE>
Investment Options
Participant directed investment options include the following:
Fund A - A fund invested primarily in Starwood Common Stock.
Fund B - A fund invested in a portfolio of common stocks, all of which are
included in the Standard and Poor's 500 Composite Stock Index, with the
objective of providing investment results which will approximate the
performance of the S&P 500 (the "Equity Index Fund").
Fund C - A fund, together with the earnings thereon, invested in a
diversified portfolio consisting of fixed income investments and
agreements in support of capital preservation and liquidity (the "Fixed
Income Fund").
Fund D - A fund invested through an actively managed portfolio of the
following asset classes: equity securities, fixed income securities and
cash equivalents (the "Balanced Fund").
Fund F - A fund invested primarily in common stock of ITT Industries,
Inc., attributable to the Distribution.
Fund G - A fund invested primarily in common stock of ITT Hartford Group,
Inc., attributable to the Distribution.
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (Continued)
($ IN THOUSANDS)
Investment Options continued
Contributions for participant savings may be invested, in whole percentages, in
any one or more of Funds A, B, C and D previously described or in the following
additional funds, as elected by the participant. Investments in Funds F and G
continue to be limited to dividends thereon.
Bond Fund - A fund invested primarily in fixed income obligations such as
government and private bonds, debentures, notes, mortgages, certificates
of deposit money market funds and other investments including short-term
obligations.
International Equity Fund - A fund invested primarily in securities of
non-U.S. issuers and securities whose principal markets are outside the
U.S.
Growth Equity Fund - An aggressive growth fund invested primarily in
mid-sized company common stocks with favorable prospects for above average
growth in market value.
Each participant may directly change the investment of his or her interest in
the Plan at any time, through an automated voice response system maintained by
Buck Consultants, the Recordkeeper.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50% of their vested account balance.
Loan transactions are treated as a transfer from (to) the participants'
investment funds. Loan terms were from one to five years or up to 15 years for
the purchase of a primary residence prior to October 1, 1996, and are one year
to 54 months or up to 25 years for the purchase of a primary residence effective
as of October 1, 1996. The loans are secured by the balance in the participants
account and bear interest at approximately one percent over the prime rate, as
determined by the Plan Committee at the time of the loan. Repayment of principal
and related interest is made ratably through payroll deductions.
Payment of Benefits
Upon termination of employment due to death, disability, retirement or other
reasons, a participant may elect to receive either a lump sum amount equal to
the value of the participant's vested interest in his or her account or, subject
to certain conditions, annual installments over a period not greater than twenty
years. Participants may also elect to defer distributions subject to certain
conditions.
Forfeitures
Forfeitures of the nonvested contributions are applied to reduce future ITT
contributions. At December 31, 1998, forfeited nonvested accounts totaled $189.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (Continued)
($ IN THOUSANDS)
Note 2- Summary of Accounting Policies:
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of
accounting.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Plan administrator to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results may differ from those estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Stocks are valued at their
quoted market price. Participant loan receivable is valued at cost which
approximated fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
Payment of Benefits
Benefits are recorded when paid.
Note 3 - Federal Income Tax:
The Internal Revenue Service has determined and informed ITT by a letter dated
February 17, 1998, that the Plan and related trust are designed in accordance
with applicable sections of the Internal Revenue Code (IRC). The Plan has been
amended since receiving the determination letter. However, the Plan
administrator and the Plan tax counsel believe that the Plan is designed and is
currently being operated in compliance with the applicable requirements of the
IRC. Therefore, ITT believes that the Plan was qualified and the related trust
was tax exempt for the years ended December 31, 1998 and 1997.
Note 4 - Plan Merger and Termination:
On April 1, 1999 the ITT 401(k) Retirement Savings Plan was merged into the
Starwood Hotels & Resorts Worldwide, Inc. Starsaver 401(k) Plan, and
subsequently amended and restated effective April 1, 1999 as the Starwood Hotels
& Resorts Worldwide, Inc. Savings and Retirement Plan ("New Plan"). As a result
of the Merger and adoption of the New Plan, the Trustee of the ITT 401(k)
Retirement Savings Plan was removed, all assets and liabilities were merged into
the assets and liabilities of the trust maintained to pay benefits under the New
Plan, and no further contributions will be made to the ITT 401(k) Retirement
Savings Plan. American Express Trust Company was assigned as Trustee and
Recordkeeper of the New Plan effective April 1, 1999.
Although it has not expressed any intent to do so, Starwood has the right under
the New Plan to suspend, reduce, or partially or completely discontinue its
contributions at any time and to terminate the New Plan, the trust agreement and
the trust thereunder subject to the provisions of ERISA. In the event of the New
Plan termination or partial termination or complete discontinuance of
contributions, the interest of participants in their company contributions shall
automatically become nonforfeitable. Additionally, any forfeitures that have not
been used as company contributions to the New Plan at the time of termination
will be credited pro rata to the accounts of all participants in accordance with
New Plan provisions.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (Continued)
($ IN THOUSANDS)
Note 5 - Reconciliation of Financial Statements to Form 5500:
The following is a reconciliation of net assets available for plan benefits per
the financial statements to the Form 5500:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Net assets available for plan benefits per
the financial statements 306,523 $ 379,777
Amounts allocated to withdrawing
participants (1,250) (1,329)
--------- ---------
Net assets available for plan benefits
per the Form 5500 305,273 $ 378,448
========= =========
</TABLE>
The following is a reconciliation of withdrawals and distributions paid to
participants per the financial statements to the Form 5500:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
Withdrawals and Distributions per
the financial statements $(50,164)
Add: Terminated loan principal 2,878
Add: Amounts allocated to withdrawing
participants at December 31, 1998 1,250
Less: Amounts allocated to withdrawing
participants at December 31, 1997 (1,329)
--------
Withdrawals and Distributions
per the Form 5500 $(47,365)
========
</TABLE>
Amounts allocated to withdrawing participants are recorded as withdrawals on the
Form 5500 and represent benefit claims that have been processed and approved for
payment prior to December 31, 1998 and December 31, 1997 but not yet paid as of
that date.
14
<PAGE> 15
Note 6 - Party-in-Interest Transactions:
Certain Plan investments are held in funds managed by Bankers Trust Company.
Bankers Trust Company is the Trustee as defined by the Plan and, therefore,
these transactions qualify as party-in-interest transactions. Fees paid and
accrued by the Plan for Trustee and investment management services provided by
Bankers Trust amounted to $219 for the year ended December 31, 1998. In
addition, certain Plan investments are Starwood Common Stock. As ITT is the Plan
Sponsor, these transactions qualify as party-in-interest transactions.
Note 7 - Investments:
Investments with current values (or historical values for GIC investments) that
represent 5% or more of the Plan's net assets available for benefits as of
December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
1998
------
<S> <C>
Starwood Common Stock,
2,589,934 shares 58,760
ITT Hartford Group Inc., common
stock, 583,067 shares 31,996
Equity Index Fund, 2,241,936 shares 67,608
Fixed Income Fund, Open End GIC 32,525
Growth Equity Fund, 1,929,775 shares 64,474
<CAPTION>
1997
------
<S> <C>
Starwood Common Stock,
1,635,253 shares 135,112
ITT Hartford Group, Inc., common
stock, 493,233 shares 46,149
Equity Index Fund, 2,673,837 shares 62,680
Fixed Income Fund, Open End GIC 38,416
Growth Equity Fund, 1,522,616 shares 41,567
</TABLE>
<PAGE> 16
ITT 401(k) RETIREMENT SAVINGS PLAN
LINE 27a - SCHEDULE OF ASSETS EIN 88-0340591
HELD FOR INVESTMENT PURPOSES PN 003
AS OF DECEMBER 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(a) (b) Identity of Issue, (c) Description of investment including (d) Cost (e) Current Value
Borrower, Lessor or maturity date, rate of interest,
Similar Party collateral, par or maturity value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Bankers Trust Company BT Pyramid Discretionary Cash Fund $ 249 $ 249
* Bankers Trust Company BT Pyramid Directed Account Cash Fund 2,967 2,967
* Bankers Trust Company BT Pyramid Open End GIC Fund 32,525 32,525
Hartford Life Insurance ITT Hartford GA-5833 S/A BI 38,100 67,608
Company 2,241,936 shares
Guardian International 300,815 units 4,641 4,957
(Non U.S.) Equity Fund
Dodge & Cox Balanced Fund 168,497 units 10,908 10,989
Dreyfus A BDS Plus Inc 577,611 shares of Common Stock 8,405 8,087
ITT Hartford Group Inc 583,067 shares of Common Stock 6,506 31,996
ITT Industries Inc 288,437 shares of Common Stock 3,284 11,465
* Starwood 2,589,934 shares of Common Stock 93,885 58,760
20th Century Ultra Investors 1,929,775 shares of Common Stock 58,514 64,474
Fund
The Plan Participant Loans, interest rates 12,251 10,324
ranging from 9.25% to 9.50% -------- ---------
Account Total $272,235 $304,401
======== =========
</TABLE>
* Represents party-in-interest to the Plan
<PAGE> 17
ITT 401(k) RETIREMENT SAVINGS PLAN
EIN #88-0340591
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Identity of Party Description of Asset Purchase Selling Price Cost of Asset Current Net Gain or
Involved Price Value of (Loss)
Asset on
Transaction
Date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bankers Trust Company BT Pyramid Open End $136,806 $ N/A $ N/A $136,806 $ N/A
GIC Fund
Bankers Trust Company BT Pyramid Open End N/A 140,364 140,364 140,364 N/A
GIC Fund
Hartford Life ITT Hartford GA-5833 15,334 N/A N/A 15,334 N/A
Insurance Company S/A BI
Hartford Life ITT Hartford GA-5833 N/A 26,728 16,173 26,728 10,555
Insurance Company S/A BI
ITT Hartford Group Inc. Hartford Financial Services N/A 21,532 4,501 21,532 17,031
Group Inc. Common Stock
ITT Corporation ITT Corporation New N/A 95,539 64,939 95,539 30,600
20th Century Ultra 20th Century Ultra 25,948 N/A N/A 25,948 N/A
Investors Fund Inventors Fund
20th Century Ultra 20th Century Ultra N/A 12,972 12,534 12,972 438
Investors Fund Inventors Fund
Dodge & Cox Balanced Fund 9,693 N/A N/A 9,693 N/A
Dodge & Cox Balanced Fund N/A 11,950 11,232 11,950 718
Starwood Hotels & Starwood Hotels & Resorts 103,819 N/A N/A 103,819 N/A
Resorts Worldwide Inc. Resorts Worldwide, Inc.
Common Stock
Starwood Hotels & Starwood Hotels & Resorts N/A 9,848 8,905 9,848 943
Resorts Worldwide Inc. Resorts Worldwide, Inc.
Common Stock
</TABLE>
Expenses incurred with transactions were immaterial and there were no lease
rentals.
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
EX-23- - Consent of Independent Public Accountants
</TABLE>
<PAGE> 1
19 Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the ITT 401(k) Retirement Savings Plan Committee:
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 11-K, into ITT Corporation's previously filed
Registration Statement on Form S-8 (File No. 33-64817) and Starwood Hotels
& Resorts Worldwide, Inc.'s previously filed Registration Statements
on Form S-8 (File Nos. 333-58141 and 333-75947).
Phoenix, Arizona
June 28, 1999
