<PAGE> 1
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, 1998
GTE SAVINGS PLAN
GTE CORPORATION
1255 CORPORATE DRIVE
IRVING, TEXAS 75038
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
GTE Savings Plan:
We have audited the accompanying statements of net assets available for
plan benefits of the GTE 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 fund information referred to below, 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, 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.
Our audits were performed for the purpose of forming an opinion on the
basic 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
Dallas, Texas
June 18, 1999
<PAGE> 3
GTE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1998
(thousands of dollars)
<TABLE>
<CAPTION>
Investments
in Master Employee Employer Notes
Trust Receivables Receivables Total Assets Payable Net Assets
----------- ----------- ----------- ------------ -------- ----------
PARTICIPANT DIRECTED FIDELITY FUNDS:
<S> <C> <C> <C> <C> <C> <C>
Equity-Income Fund $ 344,066 $ 729 $ -- $ 344,795 $ -- $ 344,795
Overseas Fund 96,395 267 -- 96,662 -- 96,662
U.S. Equity Index Collective Trust Fund 368,447 719 -- 369,166 -- 369,166
Retirement Government Money Market Portfolio 125,288 351 -- 125,639 -- 125,639
Magellan Fund 562,152 1,227 -- 563,379 -- 563,379
Conservative Strategy Portfolio 336,120 269 -- 336,389 -- 336,389
Conservative Growth Strategy Portfolio 238,495 348 -- 238,843 -- 238,843
Moderate Growth Strategy Portfolio 406,977 760 -- 407,737 -- 407,737
Long-Term Growth Strategy Portfolio 326,904 797 -- 327,701 -- 327,701
Aggressive Growth Strategy Portfolio 58,835 413 -- 59,248 -- 59,248
PARTICIPANT DIRECTED OTHER FUNDS:
MAS Fixed Income Portfolio 27,237 57 -- 27,294 -- 27,294
Morgan Stanley Inst. Equity Growth Portfolio 73,343 273 -- 73,616 -- 73,616
Templeton Inst. Foreign Equity Fund 27,551 92 -- 27,643 -- 27,643
Templeton Inst. Emerging Markets Fund 7,641 54 -- 7,695 -- 7,695
Warburg Pincus Emerging Growth Fund 32,258 145 -- 32,403 -- 32,403
GTE Stock Portfolio 573,196 853 -- 574,049 -- 574,049
PAYSOP Fund 17,055 -- -- 17,055 -- 17,055
NONPARTICIPANT DIRECTED OTHER FUNDS:
GTE Stock Portfolio 780,713 -- 2,681 783,394 -- 783,394
PAYSOP Fund 303,701 -- -- 303,701 -- 303,701
Loan Fund 129,115 -- -- 129,115 -- 129,115
ESOP Shares Fund Allocated (Note 4) 526,409 -- -- 526,409 -- 526,409
ESOP Shares Fund Unallocated (Note 4) 877,872 -- 46,194 924,066 554,694 369,372
---------- ------ ----------- ---------- -------- ----------
Total $6,239,770 $7,354 $ 48,875 $6,295,999 $554,694 $5,741,305
========== ====== =========== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE> 4
GTE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1997
(thousands of dollars)
<TABLE>
<CAPTION>
Investments
in Master Employee Employer Notes
Trust Receivables Receivable Total Assets Payable Net Assets
----------- ----------- ----------- ------------ -------- ----------
PARTICIPANT DIRECTED FIDELITY FUNDS:
<S> <C> <C> <C> <C> <C> <C>
Equity-Income Fund $ 339,168 $ 698 $ -- $ 339,866 $ -- $ 339,866
Overseas Fund 94,909 297 -- 95,206 -- 95,206
U.S. Equity Index Collective Trust Fund 272,161 558 -- 272,719 -- 272,719
Retirement Government Money Market Portfolio 103,967 303 -- 104,270 -- 104,270
Magellan Fund 418,962 1,037 -- 419,999 -- 419,999
Conservative Strategy Portfolio 327,618 264 -- 327,882 -- 327,882
Conservative Growth Strategy Portfolio 223,847 341 -- 224,188 -- 224,188
Moderate Growth Strategy Portfolio 359,338 709 -- 360,047 -- 360,047
Long-Term Growth Strategy Portfolio 287,051 770 -- 287,821 -- 287,821
Aggressive Growth Strategy Portfolio 48,847 335 -- 49,182 -- 49,182
PARTICIPANT DIRECTED OTHER FUNDS:
MAS Fixed Income Portfolio 9,930 23 -- 9,953 -- 9,953
Morgan Stanley Inst. Equity Growth Portfolio 47,814 175 -- 47,989 -- 47,989
Templeton Inst. Foreign Equity Fund 26,043 91 -- 26,134 -- 26,134
Templeton Inst. Emerging Markets Fund 10,279 65 -- 10,344 -- 10,344
Warburg Pincus Emerging Growth Fund 23,319 106 -- 23,425 -- 23,425
GTE Stock Portfolio 449,224 774 -- 449,998 -- 449,998
PAYSOP Fund 15,402 -- -- 15,402 -- 15,402
NONPARTICIPANT DIRECTED OTHER FUNDS:
GTE Stock Portfolio 656,846 -- 13,849 670,695 -- 670,695
PAYSOP Fund 261,253 -- -- 261,253 -- 261,253
Loan Fund 124,665 -- -- 124,665 -- 124,665
ESOP Shares Fund Allocated (Note 4) 373,446 -- -- 373,446 -- 373,446
ESOP Shares Fund Unallocated (Note 4) 761,520 -- -- 761,520 554,694 206,826
---------- ------ --------- ---------- -------- ----------
Total $5,235,609 $6,546 $ 13,849 $5,256,004 $554,694 $4,701,310
========== ====== ========= ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE> 5
GTE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
(thousands of dollars)
<TABLE>
<CAPTION>
Participant Directed Fidelity Funds
--------------------------------------------------------------------------------
U.S. Equity Retirement
Equity-Income Overseas Index Collective Government Money
Fund Fund Trust Fund Market Portfolio Magellan Fund
------------- -------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Interest and Dividends $ 19,985 $ 1,875 $ -- $ 5,750 $ 25,817
Net Investment Gain (Loss) (Note 2) 20,589 9,849 80,576 -- 114,593
Contributions (Note 3):
Employee 20,212 7,828 18,111 8,802 31,030
Employer -- -- -- -- --
Transfers From (To) Other Plans (Note 7) 1,322 303 1,499 4,735 1,775
Net Transfers Between Funds (27,448) (10,929) 19,751 23,080 4,991
Participant Loans:
Repayments 4,314 1,851 3,301 3,137 7,236
Withdrawals (3,958) (1,573) (3,139) (3,080) (7,398)
Interest Expense -- -- -- -- --
Withdrawals and Terminations (30,087) (7,748) (23,652) (21,055) (34,664)
------------- -------- --------------- ---------------- ------------
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS DURING THE YEAR 4,929 1,456 96,447 21,369 143,380
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT BEGINNING OF YEAR 339,866 95,206 272,719 104,270 419,999
------------- -------- --------------- ---------------- ------------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT END OF YEAR $ 344,795 $ 96,662 $ 369,166 $ 125,639 $ 563,379
============= ======== =============== ================ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE> 6
GTE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
(thousands of dollars)
<TABLE>
<CAPTION>
Participant Directed Fidelity Funds
--------------------------------------------------------------------------------
Conservative Aggressive
Conservative Growth Moderate Growth Long-Term 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) 21,166 25,921 61,758 52,433 6,615
Contributions (Note 3):
Employee 7,556 9,432 20,303 21,753 10,494
Employer -- -- -- -- --
Transfers From (To) Other Plans (Note 7) 521 236 1,558 1,744 1,335
Net Transfers Between Funds 15,569 2,614 (6,565) (16,781) (4,668)
Participant Loans:
Repayments 2,284 2,405 4,727 4,051 1,327
Withdrawals (2,625) (2,195) (4,285) (3,787) (1,184)
Interest Expense -- -- -- -- --
Withdrawals and Terminations (35,964) (23,758) (29,806) (19,533) (3,853)
------------ ------------ --------------- ---------------- ---------
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS DURING THE YEAR 8,507 14,655 47,690 39,880 10,066
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT BEGINNING OF YEAR 327,882 224,188 360,047 287,821 49,182
------------ ------------ --------------- ---------------- ---------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT END OF YEAR $ 336,389 $ 238,843 $ 407,737 $ 327,701 $ 59,248
============ ============ =============== ================ =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE> 7
GTE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
(thousands of dollars)
<TABLE>
<CAPTION>
Participant Directed Other Funds
-------------------------------------------------------------------------------
Morgan Stanley Warburg
MAS Fixed Inst. Equity Templeton Inst. Templeton Inst. Pincus
Income Growth Foreign Equity Emerging Emerging
Portfolio Portfolio Fund Markets Fund Growth Fund
--------- --------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Interest and Dividends $ 1,778 $ 4,128 $ 1,902 $ 177 $ --
Net Investment Gain (Loss) (Note 2) (629) 5,864 453 (1,864) 1,714
Contributions (Note 3):
Employee 1,044 6,811 2,630 1,598 3,621
Employer -- -- -- -- --
Transfers From (To) Other Plans (Note 7) 213 585 89 51 309
Net Transfers Between Funds 16,248 13,289 (949) (2,215) 4,984
Participant Loans:
Repayments 147 1,158 447 295 562
Withdrawals (132) (1,060) (280) (131) (415)
Interest Expense -- -- -- -- --
Withdrawals and Terminations (1,328) (5,148) (2,783) (560) (1,797)
--------- --------------- ---------------- --------------- ------------
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS DURING THE YEAR 17,341 25,627 1,509 (2,649) 8,978
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT BEGINNING OF YEAR 9,953 47,989 26,134 10,344 23,425
--------- --------------- ---------------- --------------- ------------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT END OF YEAR $ 27,294 $ 73,616 $ 27,643 $ 7,695 $ 32,403
========= =============== ================ =============== ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE> 8
GTE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
(thousands of dollars)
<TABLE>
<CAPTION>
Participant Directed Nonparticipant Directed Other Funds
Other Funds
-------------------------- --------------------------------------
GTE Stock GTE Stock
Portfolio PAYSOP Fund Portfolio PAYSOP Fund Loan Fund
--------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Interest and Dividends $ 14,198 $ 425 $ 19,368 $ 7,590 $ 9,805
Net Investment Gain (Loss) (Note 2) 152,699 3,698 158,538 70,747 --
Contributions (Note 3):
Employee 22,260 -- -- -- --
Employer -- -- 3,021 -- --
Transfers From (To) Other Plans (Note 7) 12,775 95 -- -- 917
Net Transfers Between Funds (27,862) (556) -- -- --
Participant Loans:
Repayments 10,105 -- 13,783 -- (61,130)
Withdrawals (10,199) -- (13,911) -- 59,352
Interest Expense -- -- -- -- --
Withdrawals and Terminations (49,925) (2,009) (68,100) (35,889) (4,494)
--------- ----------- --------- ----------- ---------
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS DURING THE YEAR 124,051 1,653 112,699 42,448 4,450
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT BEGINNING OF YEAR 449,998 15,402 670,695 261,253 124,665
--------- ----------- --------- ----------- ---------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT END OF YEAR $ 574,049 $ 17,055 $ 783,394 $ 303,701 $ 129,115
========= =========== ========= =========== =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE> 9
GTE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
(thousands of dollars)
<TABLE>
<CAPTION>
Nonparticipant Directed Other Funds
-----------------------------------------
ESOP Shares ESOP Shares
Fund Fund
Allocated Unallocated Total
----------- ----------- -----------
<S> <C> <C> <C>
Interest and Dividends $ 14,394 $ 25,876 $ 153,068
Net Investment Gain (Loss) (Note 2) 141,808 176,902 1,103,430
Contributions (Note 3):
Employee -- -- 193,485
Employer -- 53,429 56,450
Transfers From (To) Other Plans (Note 7) (173) -- 29,889
Net Transfers Between Funds 37,252 (39,805) --
Participant Loans:
Repayments -- -- --
Withdrawals -- -- --
Interest Expense -- (53,856) (53,856)
Withdrawals and Terminations (40,318) -- (442,471)
----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS DURING THE YEAR 152,963 162,546 1,039,995
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT BEGINNING OF YEAR 373,446 206,826 4,701,310
----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT END OF YEAR $ 526,409 $ 369,372 $ 5,741,305
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE> 10
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(1) Description of the Plan:
Eligibility
-----------
The GTE Corporation ("GTE") GTE 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.
Eligible employee generally means an employee of GTE or a Participating
Affiliate, but does not include any of the following:
a. an individual in a unit covered by a collective bargaining agreement
between GTE or one or more Participating Affiliates and a collective
bargaining agent;
b. an individual paid by the hour unless GTE or a Participating Affiliate
has agreed to become a co-sponsor under the Plan for such employees;
c. an active participant in any other tax-qualified retirement plan of GTE
or a Participating Affiliate that includes a cash or deferred arrangement
qualified under Code section 401(k);
d. a nonresident alien with no United States source income from GTE;
e. a "leased employee" within the meaning of the Internal Revenue Code
Section 414(n);
f. an individual who is not paid directly by GTE or a Participating
Affiliate; and
g. an individual whose employment contract excludes participation in 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 Participating
Affiliate. For participants with less than five years of
<PAGE> 11
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (continued)
service, matching contributions vest 50% immediately and 50% 24 months
after the end of the Plan year for which the contributions were made.
Effective May 18, 1999 the vesting provision for the Plan changed. See Note
8 "GTE merger with Bell Atlantic Corporation" for details. 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 income-producing
equity securities, with at least 65% of the funds total assets invested in
these 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.
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.
<PAGE> 12
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (continued)
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 Portfolio 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 foreign 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.
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.
<PAGE> 13
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (continued)
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 Accounts
- --------------------
Each participant's account is credited with the participant's contribution
and allocations of (1) Company matching contributions, (2) rollover
contributions and (3) Plan income. Allocations are based on participant account
balances. The benefit to which a participant is entitled is the benefit that can
be provided from the participant's vested account balance.
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 Hourly Savings Plan ("Hourly 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, 1998 and 1997, the Plan owned
approximately 77% and 78% of the assets in the Master Trust, respectively.
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 9).
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 including the
payment of principal and interest on the Employee Stock Ownership Plan's (the
"ESOP") notes payable (see Note 4). Expenses of administering the Plan and
related funds and portfolios, including fees and expenses of the Trustee, are
charged to the participants' accounts pro rata. GTE Service Corporation, a
subsidiary of GTE, is the plan administrator.
<PAGE> 14
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
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
certain 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 conformity with
generally accepted accounting principles which requires management to make
estimates and assumptions that affect reported amounts of assets, liabilities,
and changes therein, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates. Certain reclassifications have been
made to prior-year data to conform to current year presentation.
Investments are stated at market value determined from publicly stated
price information obtained from the New York Stock Exchange at or near the close
of business. Investments are recorded on the trade date. Guaranteed investment
contracts are stated at cost plus accrued interest or contract value. 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
1998, the GTE Stock Portfolio had an unrealized gain of $286.6 million and a
realized gain of $24.6 million. For the same period, the combined ESOP Shares
Fund had an unrealized gain of $314.9 million and a realized gain of $3.8
million.
Benefits are recorded when paid. Benefits are payable in a lump sum cash
payment unless a participant elects, in writing, one of the three optional forms
of benefit payment which include: (1) a lump sum in GTE shares for investments
in the GTE Stock Portfolio, with the balance in cash; (2) annual, semiannual,
quarterly, or monthly installments in cash of approximately equal amounts to be
paid out for a period of 2 to 20 years, as selected by the participant; or (3)
for those participants eligible to receive their distribution in installments as
described in (2) above, a pro rata portion of each installment payment in GTE
shares for investments in the GTE Stock Portfolio, with the balance of each
installment in cash.
(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
equivalent in value to 75% of the initial 6% of the participants' contributions
of eligible compensation each payroll period not withdrawn or distributed 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. Effective May 18, 1999 the company
matching provisions for the Plan changed. See Note 8 "GTE merger with Bell
Atlantic Corporation"for details. Participant contributions may be before tax
("Elective Contributions") or from currently taxed compensation ("After-Tax
Contributions").
<PAGE> 15
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Each participant's Elective Contributions for the 1998 Plan year was limited to
$10,000. The total amount of Elective Contributions, After-Tax Contributions and
company matching contributions and certain forfeitures that may be allocated to
a Plan participant for the 1998 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 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
1998 Plan year, total company matching contributions of 1,355,352 shares of GTE
common stock were made with a market value at date of contribution of $90.2
million. These contributions included an allocation of 1,315,078 ESOP shares
with a market value of $87.5 million and accrued contributions of GTE common
stock of 40,274 shares with a market value of $2.7 million.
(4) Employee Stock Ownership Plan:
An Employee Stock Ownership Plan (the "ESOP") was established within the
Plan. In 1989, the ESOP borrowed $700 million to acquire, at market value, 24.6
million shares of GTE common stock which will be used to meet a substantial
portion of the estimated employer contributions to the Plan through 2004. GTE
and the Participating Affiliates also make annual cash contributions to the ESOP
which, when combined with dividends on the GTE common stock held by the ESOP,
are sufficient to repay the principal and interest on the loans which have 10
and 15-year terms. As the ESOP makes loan payments, a percentage of the GTE
common stock held by the ESOP will be allocated to the participants' accounts in
the form of company matching contributions.
GTE received a ruling from the Internal Revenue Service in 1996 permitting
a tax deduction in 1997 and beyond, for dividends on certain GTE common stock in
the PAYSOP fund that are used to pay the Plan's ESOP debt. The deduction is
limited to reinvested dividends on GTE common stock in its PAYSOP fund credited
to participants' accounts prior to August 5, 1989.
Debt service payments for 1998 totaled $100 million. The interest component
was funded from $41 million of dividends accumulated on the GTE stock held by
the ESOP, $6 million of PAYSOP fund dividends, and $7 million of cash
contributions. The principal component, due on January 2, 1999, was funded by an
accrued Company contribution of $46 million. At December 31, 1998, 12.4 million
shares of GTE common stock in the ESOP Shares Fund were held as collateral for
the ESOP loans.
The borrowings of the ESOP are as follows:
<TABLE>
<CAPTION>
Interest Maturity
Rates Dates 1998 1997
-------- -------- -------- --------
(thousands of dollars)
<S> <C> <C> <C> <C>
Series A 9.48% 1999 $ 46,194 $ 46,194
Series B 9.73% 2000-2005 508,500 508,500
-------- --------
$554,694 $554,694
======== ========
</TABLE>
<PAGE> 16
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Maturities of the outstanding loans are as follows:
<TABLE>
<CAPTION>
Maturity 1998
Date Amount
---- ------
(thousands of dollars)
<S> <C>
1999 $ 46,194
2000 55,231
2001 65,316
2002 76,596
2003 89,194
Thereafter 222,163
-------
Total $554,694
========
</TABLE>
GTE has guaranteed all principal and interest payments on the ESOP
borrowings in the event of default by the Plan.
(5) Related Party Transactions:
Certain Plan investments are shares of mutual funds managed by the Trustee.
Therefore, those transactions qualify as party-in-interest, but they are subject
to an exemption to the party-in-interest rules. Fees paid by the Plan for the
investment management services amounted to $769,640 for the 1998 Plan year.
(6) 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 dated April 29, 1998, 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.
(7) Transfers from (to) Other Plans:
In 1998, transfers into the Plan consisted of $12 million rolled into the
Plan from other qualified plans, $15 million of assets from two acquired
companies, and approximately $3 million of assets of participants in the Hourly
Plan who became eligible to participate in the Plan.
(8) GTE merger with Bell Atlantic Corporation:
On July 27, 1998, GTE and Bell Atlantic entered into a merger agreement
providing for a combination of the two companies. Under terms of the agreement,
which was unanimously approved by the boards of directors of both companies, GTE
shareholders will receive 1.22 shares of Bell Atlantic stock for each GTE share
they own. The merger is subject to regulatory approvals.
On May 18, 1999, GTE shareholders approved the merger. As a result of the
affirmation, certain protective change in control provisions were triggered
which will remain in effect for at least one year. These provisions include: 1)
past and future company matching contributions become immediately vested as soon
as they are posted to participants' accounts, 2) participants do not have to be
employed on the last day of the Plan year to be eligible for the match, and 3)
company matching contributions will be posted to participants' accounts on a
monthly basis. However, they will not be available for withdrawals, loans, etc.,
until early the following year, since funding does not occur until the ESOP loan
payment is made at year end. The Plan will continue in its current form for at
least one year, however, company matching contributions after the merger is
completed may be made in shares of the combined company stock.
<PAGE> 17
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - (continued)
(9) GTE Master Savings Trust:
The plans participating in the Master Trust include the GTE Savings Plan
and the GTE Hourly Savings Plan.
In the Master Trust, funds are invested in guaranteed income contracts
which represented 65% of the conservative pool consisting of 65 investment
contracts held with 23 insurance companies and financial institutions. Standard
& Poor's as of December 31, 1998 and 1997 rated these insurance companies A and
AA- or better, respectively. The contracts are included in the financial
statements at contract value, approximately $630 million and $603 million, which
approximates fair value, as reported by the insurance companies at December 31,
1998 and 1997, respectively.
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 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 7.14% and 6.80% at December
31, 1998 and 1997, respectively. The crediting interest rate for the investment
contracts had a range from 5.60% to 8.06% and 5.56% to 7.45% at December 31,
1998 and 1997 respectively. The investment contracts have scheduled maturities
from April 15, 1999 to November 3, 2003. No valuation reserve was recorded at
December 31, 1998 and 1997 to adjust contract amounts.
The following schedules reflect the Master Trust net investments by fund as
of December 31, 1998 and 1997 and investment income for the year ended
December 31, 1998:
<PAGE> 18
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
December 31,
-------------------------
Investments in Master Trust: 1998 1997
---- ----
(thousands of dollars)
Fidelity funds:
- ---------------
<S> <C> <C>
Equity - Income Fund $ 416,640 $ 405,308
Overseas Fund 115,669 113,064
U.S. Equity Index Collective Trust Fund 481,136 358,229
Retirement Government Money Market Portfolio 190,236 157,201
Magellan Fund 705,251 521,831
Conservative Strategy Portfolio 435,108 427,254
Conservative Growth Strategy Portfolio 280,303 260,408
Moderate Growth Strategy Portfolio 476,466 417,013
Long-Term Growth Strategy Portfolio 382,397 333,442
Aggressive Growth Strategy Portfolio 72,144 58,325
Other funds:
- ------------
MAS Fixed Income Portfolio 30,452 11,355
Morgan Stanley Inst. Equity Growth Portfolio 90,653 58,832
Templeton Inst. Foreign Equity Fund 31,490 29,604
Templeton Inst. Emerging Markets Fund 9,658 12,377
Warburg Pincus Emerging Growth Fund 36,808 26,805
GTE Stock Portfolio 2,065,709 1,659,221
ESOP Shares Fund Allocated 526,409 373,446
ESOP Shares Fund Unallocated 877,872 761,520
PAYSOP Fund 658,335 557,894
Loan Fund 208,527 197,161
---------- ----------
Total $8,091,263 $6,740,290
========== ==========
</TABLE>
<PAGE> 19
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
----------------------------
Dividends Net Investment
& Interest Gain (Loss)
---------- --------------
Investment Income in Master Trust: (thousands of dollars)
Fidelity funds:
- ---------------
<S> <C> <C>
Equity - Income Fund $ 24,103 $ 24,565
Overseas Fund 2,249 11,712
U.S. Equity Index Collective Trust Fund -- 105,350
Retirement Government Money Market Portfolio 8,696 --
Magellan Fund 32,337 143,311
Conservative Strategy Portfolio -- 27,492
Conservative Growth Strategy Portfolio -- 30,324
Moderate Growth Strategy Portfolio -- 71,905
Long-Term Growth Strategy Portfolio -- 61,059
Aggressive Growth Strategy Portfolio -- 8,030
Other funds:
- ------------
MAS Fixed Income Portfolio 1,992 (699)
Morgan Stanley Inst. Equity Growth Portfolio 5,091 7,232
Templeton Inst. Foreign Equity Fund 2,169 492
Templeton Inst. Emerging Markets Fund 224 (2,260)
Warburg Pincus Emerging Growth Fund -- 1,977
GTE Stock Portfolio 52,524 470,999
ESOP Shares Fund Allocated 14,394 141,808
ESOP Shares Fund Unallocated 25,876 176,902
PAYSOP Fund 16,789 151,424
Loan Fund 15,724 --
-------- -----------
Total $202,168 $ 1,431,623
======== ===========
</TABLE>
<PAGE> 20
GTE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(10) Assets Held for Investment:
As of December 31, 1998 and 1997 the net asset value of the
investments included in the financial statements consists of the
following:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1998 1997
---- ----
Net Net
Asset Asset
Value Units Value Units
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Fidelity funds:
---------------
Equity - Income Fund $ 55.55 6,193,819 $ 52.41 6,471,450
Overseas Fund 35.98 2,679,130 32.54 2,916,678
U.S. Equity Index Collective Trust Fund 34.84 10,575,410 27.06 10,057,703
Retirement Government Money Market Portfolio 1.00 125,288,297 1.00 103,967,381
Magellan Fund 120.82 4,652,805 95.27 4,397,625
Conservative Strategy Portfolio 14.82 22,683,832 13.88 23,603,812
Conservative Growth Strategy Portfolio 18.27 13,053,945 16.33 13,707,768
Moderate Growth Strategy Portfolio 22.24 18,299,352 18.92 18,992,502
Long-Term Growth Strategy Portfolio 24.07 13,581,439 20.29 14,147,480
Aggressive Growth Strategy Portfolio 13.53 4,348,517 11.91 4,101,391
Other funds:
------------
MAS Fixed Income Portfolio 11.71 2,325,868 11.92 833,040
Morgan Stanley Inst. Equity Growth Portfolio 19.05 3,849,994 16.94 2,822,549
Templeton Inst. Foreign Equity Fund 17.76 1,551,366 17.36 1,500,241
Templeton Inst. Emerging Markets Fund 8.31 919,504 10.37 991,315
Warburg Pincus Emerging Growth Fund 39.97 807,070 37.77 617,433
GTE Stock Portfolio 19.42 69,711,551 15.14 73,060,070
PAYSOP Fund 14.52 22,085,115 11.26 24,567,537
ESOP Shares Fund Allocated 39.85 13,209,762 30.90 12,085,962
</TABLE>
<PAGE> 21
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 SAVINGS PLAN
----------------
(Name of Plan)
Date June 25, 1999 By Paul R. Shuell
--------------------- -----------------------------
(Paul R. Shuell)
Vice President and Controller
<PAGE> 22
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
23.1 Consent of Arthur Andersen LLP
<PAGE> 1
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 Statement on Form S-8 (File No. 33-20178).
ARTHUR ANDERSEN LLP
Dallas, Texas
June 25, 1999
