SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-2755
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
GTE HOURLY SAVINGS PLAN
GTE CORPORATION
ONE STAMFORD FORUM
STAMFORD, CONNECTICUT 06904
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
GTE Hourly Savings Plan:
We have audited the accompanying statements of net assets available for
plan benefits, with fund information of the GTE Hourly Savings Plan as of
December 31, 1997 and 1996, and the related statement of changes in net
assets available for plan benefits, with fund information for the year ended
December 31, 1997. These financial statements are the responsibility of the
Plan Administrator. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for plan benefits
of the Plan as of December 31, 1997 and 1996, and the changes in net assets
available for plan benefits for the year ended December 31, 1997 in
conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The fund information in the
statements of net assets available for plan benefits and statement 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 fund information 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.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
June 22, 1998
<TABLE>
GTE HOURLY SAVINGS PLAN
STATEMENT of Net Assets Available for Plan Benefits, WITH FUND INFORMATION
DECEMBER 31, 1997
(thousands of dollars)
<CAPTION>
Investments Employee Employer Total
in Master Trust Receivables Receivable Assets
<S> <C> <C> <C> <C>
FIDELITY FUNDS:
Equity-Income Fund $ 66,140 $ 229 $ - $ 66,369
Overseas Fund 18,155 89 - 18,244
U.S. Equity Index Collective Trust Fund 86,068 209 - 86,277
Retirement Government Money Market Portfolio 53,234 356 - 53,590
Magellan Fund 102,869 402 - 103,271
Conservative Strategy Portfolio 99,636 118 - 99,754
Conservative Growth Strategy Portfolio 36,561 117 - 36,678
Moderate Growth Strategy Portfolio 57,675 227 - 57,902
Long-Term Growth Strategy Portfolio 46,391 190 - 46,581
Aggressive Growth Strategy Portfolio 9,478 77 - 9,555
OTHER FUNDS:
MAS Fixed Income Portfolio 1,425 6 - 1,431
Morgan Stanley Inst. Equity Growth Portfolio 11,018 54 - 11,072
Templeton Inst. Foreign Equity Fund 3,561 21 - 3,582
Templeton Inst. Emerging Markets Fund 2,098 16 - 2,114
Warburg Pincus Emerging Growth Fund 3,486 20 - 3,506
GTE Stock Portfolio 553,151 562 23,214 576,927
PAYSOP Fund (Note 5) 281,239 - - 281,239
Loan Fund 72,496 - - 72,496
Total $1,504,681 $2,693 $23,214 $1,530,588
The accompanying notes are an integral part of this financial statement.
GTE HOURLY SAVINGS PLAN
STATEMENT of Net Assets Available for Plan Benefits, WITH FUND INFORMATION
DECEMBER 31, 1996
(thousands of dollars)
<CAPTION>
Investments Employee Employer Total
in Master Trust Receivables Receivable Assets
<S> <C> <C> <C> <C>
FIDELITY FUNDS:
Equity-Income Fund $ 47,010 $ 182 $ - $ 47,192
Overseas Fund 18,846 94 - 18,940
U.S. Equity Index Collective Trust Fund 60,974 140 - 61,114
Retirement Government Money Market Portfolio 46,819 388 - 47,207
Magellan Fund 86,899 372 - 87,271
Conservative Strategy Portfolio 110,865 118 - 110,983
Conservative Growth Strategy Portfolio 33,704 126 - 33,830
Moderate Growth Strategy Portfolio 46,620 195 - 46,815
Long-Term Growth Strategy Portfolio 39,752 175 - 39,927
OTHER FUNDS:
GTE Stock Portfolio 528,150 545 22,303 550,998
PAYSOP Fund (Note 5) 266,801 - - 266,801
Loan Fund 66,828 - - 66,828
Total $1,353,268 $2,335 $22,303 $1,377,906
The accompanying notes are an integral part of this financial statement.
GTE HOURLY SAVINGS PLAN
STATEMENT of CHANGES IN Net Assets Available for Plan Benefits, WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
(thousands of dollars)
<CAPTION>
Fidelity Funds
U.S. Equity Retirement
Equity- Index Government
Income Overseas Collective Money Market Magellan
Fund Fund Trust Fund Portfolio Fund
<S> <C> <C> <C> <C> <C>
Interest and Dividends $ 3,585 $ 886 $ - $ 2,543 $ 6,575
Net Investment Gain (Loss) (Note 2) 11,153 989 20,722 - 14,829
Contributions (Note 3):
Employee 5,512 2,331 4,799 9,386 9,763
Employer - - - - -
Transfers (To) From Other Plans (Note 5) (1,675) (869) (3,591) (2,140) (3,373)
Net Transfers Between Funds 5,934 (2,562) 8,734 2,759 (4,526)
Participant Loans:
Repayments 1,339 588 1,009 4,526 2,802
Withdrawals (1,570) (619) (1,584) (3,320) (3,009)
Withdrawals and Terminations (5,101) (1,440) (4,926) (7,371) (7,061)
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS DURING THE YEAR 19,177 (696) 25,163 6,383 16,000
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT BEGINNING OF YEAR 47,192 18,940 _61,114 47,207 87,271
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT END OF YEAR $66,369 $18,244 $86,277 $53,590 $103,271
The accompanying notes are an integral part of this financial statement.
GTE HOURLY SAVINGS PLAN
STATEMENT of CHANGES IN Net Assets Available for Plan Benefits, WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
(thousands of dollars)
<CAPTION>
Fidelity Funds
Conservative Moderate Long-Term Aggressive
Conservative Growth Growth Growth Growth
Strategy Strategy Strategy Strategy Strategy
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Interest and Dividends $ - $ - $ - $ - $ -
Net Investment Gain (Loss) (Note 2) 6,671 4,077 8,621 7,243 856
Contributions (Note 3):
Employee 3,101 3,000 5,656 4,811 1,335
Employer - - - - -
Transfers (To) From Other Plans (Note 5) (3,509) (1,076) (1,468) (1,995) (87)
Net Transfers Between Funds (5,688) 281 1,892 (477) 7,678
Participant Loans:
Repayments 944 821 1,327 1,094 239
Withdrawals (2,130) (873) (1,328) (1,099) (223)
Withdrawals and Terminations (10,618) (3,382) (3,613) (2,923) (243)
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS DURING THE YEAR (11,229) 2,848 11,087 6,654 9,555
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT BEGINNING OF YEAR 110,983 33,830 46,815 39,927 -
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT END OF YEAR $99,754 $36,678 $57,902 $46,581 $9,555
The accompanying notes are an integral part of this financial statement.
GTE HOURLY SAVINGS PLAN
STATEMENT of CHANGES IN Net Assets Available for Plan Benefits, WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
(thousands of dollars)
<CAPTION>
Other Funds
Morgan Stanley Templeton Templeton Warburg
MAS Fixed Inst. Equity Inst. Foreign Inst. Emerging Pincus
Income Growth Equity Markets Emerging
Portfolio Portfolio Fund Fund Growth Fund
<S> <C> <C> <C> <C> <C>
Interest and Dividends $ 86 $ 1,415 $ 159 $ 118 $ 207
Net Investment Gain (Loss) (Note 2) (8) 552 74 (639) 83
Contributions (Note 3):
Employee 101 1,056 420 354 301
Employer - - - - -
Transfers (To) From Other Plans (Note 5) (18) (228) (49) (106) 3
Net Transfers Between Funds 1,301 8,575 3,073 2,470 2,977
Participant Loans:
Repayments 17 209 84 63 62
Withdrawals (23) (183) (68) (79) (74)
Withdrawals and Terminations (25) (324) (111) (67) (53)
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS DURING THE YEAR 1,431 11,072 3,582 2,114 3,506
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT BEGINNING OF YEAR - - - - -
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT END OF YEAR $1,431 $11,072 $3,582 $2,114 $3,506
The accompanying notes are an integral part of this financial statement.
GTE HOURLY SAVINGS PLAN
STATEMENT of CHANGES IN Net Assets Available for Plan Benefits, WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
(thousands of dollars)
<CAPTION>
Other Funds
GTE
Stock PAYSOP Loan
Portfolio Fund Fund Total
<S> <C> <C> <C> <C>
Interest and Dividends $ 19,923 $ 7,057 $ 5,175 $ 47,729
Net Investment Gain (Loss) (Note 2) 73,217 33,020 - 181,460
Contributions (Note 3):
Employee 14,606 - - 66,532
Employer 23,227 - - 23,227
Transfers (To) From Other Plans (Note 5) (20,971) 2,023 (3,561) (42,690)
Net Transfers Between Funds (31,975) (446) - -
Participant Loans:
Repayments 18,429 - (33,553) -
Withdrawals (23,741) - 39,923 -
Withdrawals and Terminations (46,786) (27,216) (2,316) (123,576)
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS DURING THE YEAR 25,929 14,438 5,668 152,682
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT BEGINNING OF YEAR 550,998 266,801 66,828 1,377,906
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT END OF YEAR $576,927 $281,239 $72,496 $1,530,588
The accompanying notes are an integral part of this financial statement.
</TABLE>
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(1) Description of the Plan:
Eligibility
The GTE Corporation ("GTE") GTE Hourly Savings Plan (the "Plan") is a
defined contribution plan under the Employee Retirement Income Security Act
of 1974 ("ERISA"). The Plan provides eligible employees of GTE and its
subsidiaries ("Participating Affiliates") with a convenient way to save for
both medium and long-term needs.
The Plan is generally available to any eligible employee as defined by
the plan document, of GTE or a Participating Affiliate, who either is in a
unit covered by a collective bargaining agreement that provides for
participation in the Plan, or is a nonunion hourly-paid employee that GTE or
a Participating Affiliate has agreed, by resolution of its board of
directors, to co-sponsor under the Plan. To the extent expressly provided
in any written separation policy of GTE or a Participating Affiliate,
eligible employee also includes any former employee of GTE or a
Participating Affiliate who is receiving salary continuation payments
pursuant to the separation policy.
An individual's active participation in the Plan shall terminate when
the individual ceases to be an eligible employee; but, the individual shall
remain a participant until the entire account balance under the Plan has
been distributed or forfeited.
Vesting and Investment Choices
Matching contributions vest immediately upon death, disability,
retirement, attainment of age 65 or five years of service with GTE or a
Participating Affiliate. For participants with less than five years of
service, matching contributions vest 50% immediately and 50% 24 months after
the contributions were made. Forfeitures of a participant's account due to
termination prior to 100% vesting are used to reduce GTE's future
contributions.
Each participant directs their contributions to be invested in one of
the following current investment options: five Fidelity funds, five
Fidelity strategy portfolios, five other funds and portfolios, the GTE stock
portfolio or in any combination of these funds and portfolios. Participants
are permitted to make changes to their investment choices on a daily basis.
A description of the investment choices follows:
a. Fidelity Equity-Income Fund - invests primarily in corporate
common and preferred stock, with up to 20% of the fund invested
in bonds and convertible securities.
b. Fidelity Overseas Fund - invests primarily in foreign
securities whose principal activities are outside the United
States and also invests in public and private bonds (both
foreign and domestic), bank deposits and money market
instruments denominated in United States dollars or foreign
currencies.
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
c. Fidelity U.S. Equity Index Collective Trust Fund - invests
in commingled funds seeking to provide results that correspond
to the total return performance of common stocks publicly traded
in the United States as represented by the Standard & Poor's 500
Composite Stock Price Index.
d. Fidelity Retirement Government Money Market Portfolio -
invests in high-quality money market instruments and obligations
issued or guaranteed by the United States government or its
agencies.
e. Fidelity Magellan Fund - invests primarily in stocks and
securities convertible into common stock of United States and
foreign companies and in high yield securities, options and
futures contracts related to securities in the portfolio.
f. Fidelity Conservative Strategy Portfolio - invests 100% of
its assets in an underlying portfolio of fixed-income
securities, including investment contracts and bonds.
g. Fidelity Conservative Growth Strategy Portfolio - invests
approximately 75% of its assets in a portfolio of fixed-income
securities including investment contracts and bonds, with the
remaining 25% invested in a portfolio of United States equities.
h. Fidelity Moderate Growth Strategy Portfolio - invests
approximately 50% of its assets in a portfolio of United States
equities. The remaining 50% is invested in a portfolio of
fixed-income securities, including investment contracts and
bonds.
i. Fidelity Long-Term Growth Strategy Portfolio - invests
approximately 75% of its assets in a portfolio of equity
securities consisting of a combination of United States equities
(50%) and international equities (25%). The remaining 25% is
invested in a portfolio of fixed-income securities, including
investment contracts and bonds.
j. Fidelity Aggressive Growth Strategy - invests 70% of its
assets in equities of United States companies with
capitalizations ranging from large to small. The remaining 30%
is invested in companies in both developed and emerging markets.
k. MAS Fixed Income Portfolio - invests in a variety of bonds
including United States government or agency securities,
corporate bonds, international bonds and mortgage securities.
l. Morgan Stanley Institutional Equity Growth Portfolio -
invests at least 65% of its assets in equity securities,
including common and preferred stocks, convertible securities,
and rights and warrants to purchase common stocks. Up to 25% of
the funds assets may be invested in foreign securities.
m. Templeton Institutional Foreign Equity Fund - invests at
least 65% of its assets in equity securities, which include
common and preferred stock, securities convertible into common
and preferred stock and warrants or rights to subscribe to or
purchase such securities. Up to 35% may be invested in debt
securities.
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
n. Templeton Institutional Emerging Markets Fund - invests at
least 65% of its assets in emerging market equity securities.
The fund considers countries having emerging markets to be all
countries that are generally considered to be developing or
emerging countries by the international financial community. Up
to 35% of the funds assets may be invested in debt securities.
o. Warburg Pincus Emerging Growth Fund - invests at least 65%
of its assets in common stocks or warrants of emerging growth
companies. Emerging growth companies are small or medium-sized
companies that have passed their start-up phase and show
positive earnings and prospects of achieving significant profit
and gain in a relatively short period of time.
p. GTE Stock Portfolio - invests principally in GTE common
stock, but may also invest a portion in short-term money market
instruments.
q. PAYSOP Fund - comprised of GTE common stock and a small
amount of cash. The only participant directed funds are those
which were contributed by participants between the years 1979
and 1982. All other contributions were made by GTE. Participants
cannot borrow from this fund; however, its balance is used to
determine a maximum loan amount available to participants.
The Savings Plan Committee may, at its sole discretion, eliminate,
and/or change the underlying composition of any of the investment options,
and may add other funds as a current investment option.
Participant Loans
A loan feature is available to participants which permits borrowing up
to 50% of a participant's vested balance, subject to certain limitations.
The primary assets of the Loan Fund are promissory notes executed by
participants who have taken loans.
Interest rates on loans are equal to the prime interest rate on the
first business day of each calendar quarter. Participant loans are
withdrawn proportionately from the participants' investment accounts. When
loans are repaid, the principal and interest are reinvested according to the
participants' current investment choices. Short-term loans are from six
months to five years; long-term loans for the purchase of a primary
residence are from five to twenty years.
Master Trust
The Plan participates in the GTE Master Savings Trust (the "Master
Trust") and, along with the GTE Savings Plan ("Savings Plan") owns a
percentage of the assets in the Master Trust. These percentages are based
on a pro rata share of the Master Trust assets. At December 31, 1997 and
1996, the Plan owned approximately 22% of the assets in the Master Trust.
Interest and dividends along with net investment gains or losses are
allocated to the Plan on a daily basis based upon the Plan's participation
in the various investment funds and portfolios that comprise the Master
Trust as a percentage of the total participation in such funds and
portfolios (see Note 6).
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Trustee
Fidelity Management Trust Company (the "Trustee") has been designated
as the Trustee under the Plan and is responsible for the investment,
reinvestment, control and disbursement of the funds and portfolios of the
Plan. Expenses of administering the Plan and related funds and portfolios,
including fees and expenses of the Trustee, are charged to the participants'
accounts. GTE Service Corporation, a subsidiary of GTE, is the plan
administrator.
Plan Modification
GTE reserves the right to terminate, modify, alter or amend the Plan
at any time, provided that no such change shall permit any of the funds to
be used for any purpose other than the exclusive benefit of the
participants. In the event of termination or discontinuance of the Plan by
GTE, participants' interest in their accounts will become fully vested.
Effective January 1, 1997, participants may elect to have dividends on
GTE common stock paid in cash rather than reinvested in the Plan. Also, GTE
has enhanced the Plan to 16 investment choices from the 10 prior investment
choices. The investment choices added are as follows: The Fidelity
Aggressive Growth Strategy, MAS Fixed Income Portfolio, Morgan Stanley
Institutional Equity Growth Portfolio, Templeton Institutional Foreign
Equity Fund, Templeton Institutional Emerging Market Fund and Warburg Pincus
Emerging Growth Fund.
(2) Accounting Policies:
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles which require that estimates
and assumptions be made that affect reported amounts. Actual results could
differ from those estimates. Certain reclassifications have been made to
prior-year data to conform to the current year presentation.
Investments are generally stated at market value determined from
publicly stated price information, if available; otherwise, the estimated
fair value is used. Guaranteed investment contracts are stated at cost plus
accrued interest. Net investment gains and losses include both unrealized
gains and losses on investments held by the Plan at year end as well as
realized gains and losses on investments sold during the year. Net
unrealized and net realized gains and losses are based on the changes in
value of the investments at the beginning of the Plan year or at the time of
purchase if acquired during the Plan year. For 1997, the GTE Stock
Portfolio, had a realized loss of $10.4 million and an unrealized gain of
$83.6 million.
(3) Contributions:
The Plan is funded by employee contributions up to a maximum of 16% of
compensation and by company matching contributions in shares of GTE common
stock ranging from 50% to 75%, depending on the collective bargaining
agreement, of the initial 6% of the participants' contributions not
withdrawn during the Plan year. The company matching contributions are
credited following the close of each calendar year to the accounts of
participants who have not terminated their active participation. Participant
contributions may be before tax ("Elective Contributions") or from currently
taxed compensation ("After Tax Contributions"). Each participant's Elective
Contributions for the 1997 Plan year was limited to $9,500. The total amount
of Elective Contributions, After-Tax Contributions and company matching
contributions and certain forfeitures that may be allocated to a Plan
HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
participant for the 1997 Plan year was limited to the lesser of (i) $30,000
or (ii) 25% of the participant's total compensation; and the compensation on
which such GTE contributions were based was limited to $160,000.
GTE matching contributions are made in GTE common stock and in
general, participants cannot redirect these shares into other investment
choices. For the 1997 Plan year, total company matching contributions of
430,130 shares of GTE common stock were made with a market value at date of
contribution of $23.2 million.
(4) Tax Status:
The Plan is a qualified profit sharing plan under Sections 401(a),
401(k) and 501 of the Internal Revenue Code of 1986, as amended, ("the
Code") and consequently is exempt from income tax. Management has received
a determination letter from the Internal Revenue Service to the effect that
the Plan, as amended, qualifies under Sections 401(a), 401(k), and 501 of
the Code.
(5) Transfers (To) From Other Plans:
In 1997, transfers out of the Plan consist primarily of assets
of participants who became eligible to participate in the Savings Plan.
Effective November 15, 1996, a portion of the GTE Consolidated
Employee Stock Ownership Plan (the "PAYSOP") was merged into the Plan.
Accordingly, approximately 5.4 million shares of GTE common stock with an
approximate market value of $242 million and a small amount of cash was
transferred into the Plan. All participants in the PAYSOP are fully vested.
The only participant directed funds are those which were contributed by
participants between 1979 and 1982. All other contributions, in the form of
GTE common shares, were made by GTE. Participants may elect to reinvest
dividends or receive them in cash. Participants cannot borrow from this
account; however, the balance is used to determine a maximum loan amount
available to participants.
(6) GTE Master Savings Trust:
The plans participating in the Master Trust include the GTE Savings
Plan; GTE Hourly Savings Plan; AGCS Savings Plan (limited participation) and
AGCS Hourly Savings Plan (limited participation). Effective June 30, 1997
AGCS elected to terminate its limited participation in the Master Trust.
Accordingly its net assets were transferred to the AGCS Master Trust.
In the Master Trust, funds are invested in contracts with insurance
companies which represented 68% of the conservative pool consisting of 71
investment contracts held with 25 insurance companies. These insurance
companies, excluding Mutual Benefit Life Insurance Company ("Mutual
Benefit") discussed below, were rated AA- or better by Standard & Poor's as
of December 31, 1997 and 1996. The contracts are included in the financial
statements at contract value, approximately $603 million, which approximates
fair value, as reported by the insurance companies.
Contract value represents contributions made under the contract, plus
earnings, less withdrawals and administrative expenses. Investment
contracts are normally set at a fixed rate through maturity, which is also
the minimum crediting interest rate. Limitations on guarantees for normal
investment contracts are dependent on the creditworthiness of the insurance
company. Synthetic investment contracts ("Synthetics") are determined by an
internal rate of return calculation
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
that equates market value and book value at the expected average life of the
securities. The Synthetics interest rate is reset quarterly but has no
minimum crediting rate. Limitations on Synthetics are dependent upon the
credit quality of the underlying securities.
The investment contracts had average yields of 6.8% and 7.0% at
December 31, 1997 and 1996, respectively. The crediting interest rate for
the investment contracts, excluding Mutual Benefit, had a range from 5.56%
to 7.45% and 5.28% to 8.56% at December 31, 1997 and 1996 respectively. The
investment contracts have scheduled maturities from January 6, 1998 to March
5, 2002.
At December 31, 1997, the income pool had an investment contract with
Mutual Benefit which represented approximately 5% of the conservative pool's
investments and approximately 1% of the Master Trust investments. At
December 31, 1997, this investment is carried at contract value of $40.7
million in the Master Trust. On July 15, 1991, the Board of Directors of
Mutual Benefit asked the New Jersey Department of Insurance to place Mutual
Benefit into rehabilitation. On January 15, 1993, Mutual Benefit filed its
First Amended Plan of Rehabilitation which was approved by the Superior
Court of New Jersey effective May 2, 1994. GTE participated in the plan and
received a new contract which preserves principal and extends maturities,
with minimum interest and premium payments over the rehabilitation period.
During 1997 the contract was credited with interest at 6.35% for the period
from January 1, 1997 to June 30, 1997; and at 9.75% for the period from July
1, 1997 to December 31, 1997. In each subsequent year, the contract balance
will earn an annual rate of interest that can be adjusted each year, or more
often under certain circumstances, and will be determined by a formula based
on the investment performance of the assets which support the GTE contract.
There is no reserve held for resolution of the rehabilitation.
The following schedules reflect the Master Trust net investments by
fund as of December 31, 1997 and 1996 and investment income for the year
ended December 31, 1997:
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31,
Investments in Master Trust: 1997 1996
(thousands of dollars)
Fidelity funds:
Equity - Income Fund $ 405,308 $
303,235
Overseas Fund 113,064
125,478
U.S. Equity Index Collective Trust Fund 358,229
241,454
Retirement Government Money Market Portfolio 157,201
137,236
Magellan Fund 521,831
454,381
Conservative Strategy Portfolio 427,254
481,725
Conservative Growth Strategy Portfolio 260,408
257,709
Moderate Growth Strategy Portfolio 417,013
379,793
Long-Term Growth Strategy Portfolio 333,442
312,522
Aggressive Growth Strategy Portfolio 58,325 -
Other funds:
MAS Fixed Income Portfolio 11,355 -
Morgan Stanley Inst. Equity Growth Portfolio 58,832 -
Templeton Inst. Foreign Equity Fund 29,604 -
Templeton Inst. Emerging Markets Fund 12,377 -
Warburg Pincus Emerging Growth Fund 26,805 -
GTE Stock Portfolio 1,659,221
1,651,259
ESOP Shares Fund Allocated 373,446
288,215
ESOP Shares Fund Unallocated 761,520
741,506
PAYSOP Fund 557,894
539,904
Loan Fund 197,161
183,536
Total $6,740,290
$6,097,953
GTE HOURLY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
Year Ended December 31, 1997
Dividends Net Investment
& Interest Gain (Loss)
Investment Income in Master Trust: (thousands of dollars)
Fidelity funds:
Equity - Income Fund $ 22,112 $
69,651
Overseas Fund 5,583
6,352
U.S. Equity Index Collective Trust Fund -
83,950
Retirement Government Money Market Portfolio 7,347 -
Magellan Fund 33,433
75,792
Conservative Strategy Portfolio -
28,895
Conservative Growth Strategy Portfolio -
30,379
Moderate Growth Strategy Portfolio -
65,966
Long-Term Growth Strategy Portfolio -
54,231
Aggressive Growth Strategy Portfolio -
5,850
Other funds:
MAS Fixed Income Portfolio 663 (68)
Morgan Stanley Inst. Equity Growth Portfolio 7,590
2,886
Templeton Inst. Foreign Equity Fund 1,327 603
Templeton Inst. Emerging Markets Fund 715
(3,674)
Warburg Pincus Emerging Growth Fund 1,581 994
GTE Stock Portfolio 57,233
221,627
ESOP Shares Fund Allocated 13,840 65,288
ESOP Shares Fund Unallocated 28,991 80,508
PAYSOP Fund 13,755
68,447
Loan Fund 14,066
- -
Total $208,236
$857,677
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.
GTE HOURLY SAVINGS PLAN
(Name of Plan)
Date June 26, 1998 By Paul R.
Shuell
(Paul R. Shuell)
Vice President and Controller
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 11-K into GTE
Corporation's previously filed Registration Statements on Form S-8
(File Nos. 33-65025 and 33-46612).
ARTHUR ANDERSEN LLP
Stamford, Connecticut
June 26, 1998
