<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                ------------------

                                    FORM 10-K

(Mark One)

/X/      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999.

/ /      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from _______________ to ________________.

                         Commission file number 000-22330

                            GST NETWORK FUNDING, INC.

             (Exact Name of Registrant as Specified in its Charter)

             Delaware                                  13-4001870
 (State or other jurisdiction of          (IRS Employer Identification Number)
  incorporation or organization)


                  4001 Main Street, Vancouver, Washington 98663

      (Address of Principal Executive Offices)             (Zip Code)

    Registrant's telephone number, including area code: (360) 356-7100

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                                      None

      THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
       I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K
            WITH THE REDUCED DISCLOSURE FORMAT CONTEMPLATED THEREBY.


<PAGE>


         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/

         Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: At March 27, 2000,
there were outstanding 100 shares of the Registrant's common stock, $.01 par
value per share.


                                    TABLE OF CONTENTS

PART I    Item 1.   Business.............................................   2
          Item 2.   Properties...........................................   2
          Item 3.   Legal Proceedings....................................   2
PART II   Item 5.   Market for Registrant's Common Equity and
                      Related Stockholder Matters........................   2
          Item 7.   Management's Discussion and Analysis of
                      Financial Condition and Results of Operation.......   3
          Item 7A.  Quantitative and Qualitative Disclosures About
                      Market Risk........................................   3
          Item 8.   Financial Statements and Supplementary Data..........   4
          Item 9.   Changes in and Disagreements with Accountants on
                      Accounting and Financial Disclosure................   4
PART IV   Item 14.  Exhibits, Financial Statement Schedules, and
                      Reports on Form 8-K................................   4

SIGNATURES...............................................................   6

INDEX TO FINANCIAL STATEMENTS............................................ F-1

<PAGE>

ITEM 1.   BUSINESS.

OVERVIEW

         GST Network Funding, Inc. ("GST Network") is a special purpose
finance subsidiary of GST Telecommunications, Inc. ("GST"). GST Network was
formed on April 16, 1998 for the purpose of issuing $500.0 million principal
amount at maturity of 10.5% Senior Secured Discount Notes due 2008 (the "1998
Notes") that were sold in a private placement in May 1998 (the "May
Offering") and financing the purchase of telecommunications equipment with
the proceeds of the May Offering. GST Network acts as purchasing agent for
GST USA Inc. ("GST USA"), a wholly owned subsidiary of GST and the parent of
GST Network, and sells to GST USA, the equipment it purchases with the
proceeds from the 1998 Notes.

         GST is a facilities-based integrated communications provider, or
ICP, offering voice, data and Internet services throughout the western United
States. By providing service over its own network facilities, it is able to
lower and control its costs while also developing flexible products to meet
the needs of both small and large business customers. Its current products
include data transport, high-speed Internet access, voice services, including
a bundled offering of local and long distance services, and wholesale
services, including dark fiber and conduit rights.

ITEM 2.  PROPERTIES.

         GST Network neither owns nor leases material properties.

ITEM 3.  LEGAL PROCEEDINGS.

         There are no material legal proceedings to which GST Network is a
party. GST Network knows of no threatened or pending material legal action
against it.

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY
         AND RELATED STOCKHOLDER MATTERS.

         There is no established public trading market for GST Network's common
equity. All of the issued and outstanding shares of such common equity are owned
by GST USA.


                                      -2-

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

         GST Network was formed on April 16, 1998 for the purpose of issuing
the 1998 Notes and financing the purchase of telecommunications equipment.
GST Network acts as purchasing agent for GST USA and sells to GST USA the
equipment it purchases with the proceeds from the 1998 Notes. GST Network has
only a limited operating history.

         As of December 31, 1999, GST Network had purchased approximately
$300.9 million of equipment and holds restricted investments of approximately
$9.8 million restricted for the purchase of equipment. All of such equipment
has been sold to GST USA in exchange for intercompany notes due May 1, 2003
(the Intercompany Notes). Ultimately, such equipment is leased by GST USA to
the various operating subsidiaries of GST.

OPERATIONS

         The operations of GST Network are limited to (i) purchasing
equipment, (ii) selling equipment to GST USA, (iii) receiving payments under
the Intercompany Notes, (iv) making payments of interest and principal on the
1998 Notes, and (v) fulfilling its obligations under the indenture relating
to the 1998 Notes, the pledge agreement relating to the security interest in
the Senior Secured Notes and the registration rights agreement relating to
the 1998 Notes. GST Network satisfied its obligations under such registration
rights agreement in September 1999, upon the consummation of an exchange
offer for the 1998 Notes.

NET LOSS

         Net loss of $8.9 million for the year ended December 31, 1999
includes the following components: (i) interest income of $31.5 million for
the year ended December 31, 1999 relating to interest earned on proceeds from
the May Offering and from interest earned on the Intercompany Notes, (ii)
commitment fee income of $10.7 million earned from GST USA, (iii) interest
expense of $36.8 million relating to the 1998 Notes and (iv) income tax
expense of $14.4 million.

         Net loss of $5.7 million for the period from April 16, 1998 (date of
inception) to December 31, 1998 includes the following components: (i)
interest income of $10.7 million related to interest earned on the proceeds
from the May Offering, (ii) commitment fee income of $14.3 million earned
from GST USA, (iii) interest expense of $22.1 million relating to the 1998
Notes and (iv) income tax expense of $8.5 million. The increases in each of
these components for the year ended December 31, 1999 compared to the period
from April 16, 1998 (date of inception) to December 31, 1998 relates to the
fact that GST Network was not formed until April 1998 and the 1998 Notes were
not offered until May 1998.

ITEM 7A.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

         GST Network has fixed income investments consisting of cash equivalents
and short-term investments in U.S. government debt instruments.


                                      -3-

<PAGE>

         Interest income earned on GST Network's investment portfolio is
affected by changes in the general level of U.S. interest rates. GST network
believes that it is not exposed to significant changes in fair value because
such investments are composed of government debt instruments and the maturities
are short-term. The fair value of each investment approximates amortized cost,
and long term securities have maturities of less than three months.

         GST Network does not use derivative financial instruments to manage its
interest rate risk. GST Network's long-term debt had a book value of $355,587
and $320,997 at December 1999 and 1998, respectively, and a market value of
$242,500 and $239,555 at December 31, 1999 and 1998, respectively.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         See page F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE.

         Not applicable.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
           AND REPORTS ON FORM 8-K.

(a)(1)   Financial Statements:  see the Index to Financial Statements.

         Exhibits:


                                      -4-

<PAGE>

         *3(a)    Certificate of Incorporation of GST Network.
         *3(b)    By-Laws of GST Network.
         *4(a)    Indenture dated as of May 4, 1998, by and among GST Network,
                  GST, GST USA and United States Trust Company of New York.
         *10(a)   Collateral Pledge and Security Agreement dated as of May 4,
                  1998, by and among GST Network, United States Trust Company of
                  New York and the holders of the Notes as defined therein.
         **27     Financial Data Schedule.
--------------------------
*        Incorporated by reference to GST Network's Registration Statement on
         Form S-4 (No.333-60645).
**       Filed herewith.

(b)      Reports on Form 8-K:  None.


                                      -5-

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Vancouver, State of Washington, on the 30th day of March, 2000.

                                  GST NETWORK FUNDING, INC.


                                       By: /s/ Robert A. Ferchat
                                           --------------------------------
                                           Robert A. Ferchat,
                                           Chairman of the Board


                                POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert A. Ferchat and Thomas M. Malone
his true and lawful attorney-in-fact, each acting alone, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign any and all amendments to this report, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes, each acting
alone, may lawfully do or cause to be done by virtue thereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been duly signed by the following persons in the
capacities on March 30, 2000.

       SIGNATURE                           TITLE
       ---------                           -----

/s/ Robert A. Ferchat         Chairman of the Board and Director
---------------------------
      (Robert A. Ferchat)

/s/ Thomas M. Malone          Acting President and Chief Executive Officer
---------------------------   (Principal Executive Officer) and Director
      (Thomas M. Malone)

/s/ George B. Cobbe           Director
---------------------------
      (George B. Cobbe)

/s/ Daniel L. Trampush        Senior Vice President and Chief Financial Officer
---------------------------   (Principal Financial Officer)
      (Daniel L. Trampush)


                                      -6-

<PAGE>

                            GST NETWORK FUNDING, INC.


                          Index to Financial Statements

<TABLE>
<CAPTION>
                                                                                      Page
                                                                                      ----
<S>                                                                                   <C>

Independent Auditors' Report..........................................................F - 2

Balance Sheets at December 31, 1999 and 1998..........................................F - 3

Statements of Operations
     for the year ended December 31, 1999 and the
     period from April 16, 1998 (date of inception)
     to December 31, 1998.............................................................F - 4

Statements of Shareholder's Deficit for the year ended December 31,
     1999 and the period from April 16, 1998 (date of inception)
     to December 31, 1998.............................................................F - 5

Statements of Cash Flows
     for the year ended December 31, 1999 and the
     period from April 16, 1998 (date of inception)
     to December 31, 1998.............................................................F - 6

Notes to Financial Statements.........................................................F - 7
</TABLE>

                                       F-1

<PAGE>

                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Shareholder
GST Network Funding, Inc.:


         We have audited the accompanying balance sheets of GST Network Funding,
Inc. as of December 31, 1999 and 1998, and the related statements of operations,
shareholder's deficit, and cash flows for the year ended December 31, 1999 and
for the period from April 16, 1998 (date of inception) to December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

         We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. 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 financial position of GST Network
Funding, Inc. as of December 31, 1999 and 1998, and the results of its
operations and cash flows for the year ended December 31, 1999 and for the
period from April 16, 1998 (date of inception) to December 31, 1998, in
conformity with accounting principles generally accepted in the United States
of America.

                                          /s/ KPMG LLP

Portland, Oregon
March 17, 2000


                                      F-2
<PAGE>


                            GST NETWORK FUNDING, INC.

                                 Balance Sheets

                      (In thousands, except share amounts)


<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                             -----------------------------
                                                                                1999                1998
                                                                             ---------           ---------
<S>                                                                          <C>               <C>
                                  ASSETS
Restricted investments                                                       $   9,848           $ 230,014
Notes receivable from parent                                                   319,336              71,342
Commitment fees receivable from parent                                          24,942              14,256
Interest receivable from parent                                                  6,851                 852
Deferred financing costs, net                                                    9,182              10,285
                                                                             ---------           ---------
                 Total assets                                                $ 370,159           $ 326,749
                                                                             =========           =========

                      LIABILITIES AND SHAREHOLDER'S DEFICIT

Current liabilities:
     Accrued liabilities                                                     $      18           $      52
     Accrued interest payable                                                        -                 396
     Accrued income taxes payable to parent                                     22,827               8,472
     Other payable to parent                                                     4,306                 519
                                                                             ---------           ---------
                                                                                27,151               9,439
                                                                             ---------           ---------
Long-term debt                                                                 355,587             320,997

Shareholder's deficit:
     Common shares:
        1,000 shares authorized, 100 shares issued and outstanding,
           $.01 par common shares                                                    -                   -
        Additional paid-in capital                                               2,000               2,000
        Accumulated deficit                                                    (14,579)             (5,687)
                                                                             ---------           ---------
                                                                               (12,579)             (3,687)
                                                                             ---------           ---------
                 Total liabilities and shareholder's deficit                 $ 370,159           $ 326,749
                                                                             =========           =========
</TABLE>

See accompanying notes to financial statements.

                                      F-3
<PAGE>


                            GST NETWORK FUNDING, INC.

                            Statements of Operations

                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                     PERIOD FROM
                                                                    APRIL 16, 1998
                                                                       (DATE OF
                                                    YEAR ENDED       INCEPTION) TO
                                                   DECEMBER 31,      DECEMBER 31,
                                                       1999              1998
                                                   ------------     --------------
<S>                                                <C>              <C>
Revenues:
     Interest income                               $ 31,536           $ 10,661
     Commitment fee income                           10,686             14,256
                                                   --------           --------
                 Total revenues                      42,222             24,917
                                                   --------           --------

Operating costs and expenses:
     Interest expense                                36,759             22,132
                                                   --------           --------

                 Income before income taxes           5,463              2,785
                                                   --------           --------
Income tax expense:
     Current                                         14,355              8,472
     Deferred                                             -                  -
                                                   --------           --------
                                                     14,355              8,472
                                                   --------           --------
                 Net loss                          $ (8,892)          $ (5,687)
                                                   ========           ========
</TABLE>

See accompanying notes to financial statements.

                                      F-4
<PAGE>

                            GST NETWORK FUNDING, INC.

                       Statements of Shareholder's Deficit

                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                             COMMON SHARES          ADDITIONAL                             TOTAL
                                           ------------------        PAID-IN         ACCUMULATED        SHAREHOLDER'S
                                           SHARES      AMOUNT        CAPITAL           DEFICIT            DEFICIT
                                           ------      ------       ----------       -----------        -------------
<S>                                        <C>         <C>          <C>              <C>                <C>

Balances, April 16, 1998
  (at date of inception)                    100        $  -          $      1          $      -           $      1

Capital investment by parent                  -           -             1,999                 -              1,999
Net loss                                      -           -                 -            (5,687)            (5,687)
                                           ------      ------       ----------       -----------        -------------
Balances, December 31, 1998                 100           -             2,000            (5,687)            (3,687)

Net loss                                      -           -                 -            (8,892)            (8,892)
                                           ------      ------       ----------       -----------        -------------
Balances, December 31, 1999                 100        $  -          $  2,000          $(14,579)          $(12,579)
                                           ------      ------       ----------       -----------        -------------
                                           ------      ------       ----------       -----------        -------------
</TABLE>

See accompanying notes to financial statements.

                                      F-5
<PAGE>

                            GST NETWORK FUNDING, INC.

                            Statements of Cash Flows

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                         PERIOD FROM
                                                                                        APRIL 16, 1998
                                                                                           (DATE OF
                                                                     YEAR ENDED          INCEPTION) TO
                                                                     DECEMBER 31,        DECEMBER 31,
                                                                        1999                 1998
                                                                     ------------       -------------
<S>                                                                  <C>                <C>
Operations:
     Net loss                                                        $  (8,892)          $  (5,687)
     Adjustments to reconcile net loss to net cash
        provided by operations:
           Amortization of deferred financing costs                      1,103                 735
           Accretion of interest                                        34,590              21,002
           Changes in non-cash operating working capital:
              Commitment fee receivable from parent                    (10,686)            (14,256)
              Interest receivable from parent                           (5,999)               (852)
              Other accrued liabilities                                    (34)                 52
              Accrued interest payable                                    (396)                396
              Accrued income taxes payable to parent                    14,355               8,472
              Other payable to parent                                    3,787                 519
                                                                     ------------       -------------
                    Cash provided by operations                         27,828              10,381
                                                                     ------------       -------------
Investments:
     Change in investments restricted for the
        purchase of property and equipment                             220,166            (230,014)
     Notes receivable from parent                                     (247,994)            (71,342)
                                                                     ------------       -------------
                    Cash used in investing activities                  (27,828)           (301,356)
                                                                     ------------       -------------
Financing:
     Proceeds from long-term debt                                            -             299,995
     Deferred debt financing costs                                           -             (11,020)
     Proceeds from investment by parent                                      -               1,999
                                                                     ------------       -------------
                    Cash provided by financing activities                    -             290,974
                                                                     ------------       -------------
                    Increase (decrease) in cash and cash
                        equivalents                                          -                  (1)

Cash and cash equivalents, beginning of period                               -                   1
                                                                     ------------       -------------
Cash and cash equivalents, end of period                             $       -           $       -
                                                                     ------------       -------------
                                                                     ------------       -------------

</TABLE>

See accompanying notes to financial statements

                                      F-6
<PAGE>

                            GST NETWORK FUNDING, INC.

                          Notes to Financial Statements

                           December 31, 1999 and 1998

                                 (In thousands)




(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         DESCRIPTION OF THE COMPANY

         GST Network Funding, Inc. (the Company) was formed on April 16, 1998.
         The Company is a wholly-owned subsidiary of GST USA, Inc. (GST USA),
         which is a wholly-owned subsidiary of GST Telecommunications, Inc.
         (GST).

         The Company's operations are limited to (i) purchasing equipment, (ii)
         selling equipment to GST USA, (iii) receiving payments under
         intercompany notes, and (iv) making payments of interest and principal
         on the $500,000 aggregate principal amount at maturity of 10.5% Senior
         Secured Discount Notes due 2008 (the Senior Secured Discount Notes).

         RESTRICTED INVESTMENTS

         The Company follows the provisions of Statement of Financial Accounting
         Standards (SFAS) No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT
         AND EQUITY SECURITIES.

         The Company classifies its restricted investments, consisting of
         $9,848 and $230,014 at December 31, 1999 and 1998 respectively, in U.S.
         Treasury securities as available-for-sale. These investments are
         restricted for the purchase and installation of network assets.
         Restricted investments are recorded at amortized cost which
         approximates the fair value of such securities at December 31, 1999
         and 1998.

         DEFERRED FINANCING COSTS

         Deferred financing costs, consisting of legal, accounting and
         underwriting fees related to the May 1998 debt offering, have been
         deferred and are being amortized to interest expense over the life of
         the notes. Amounts amortized totaled $1,103 and $735 for the year ended
         December 31, 1999 and for the period from April 16, 1998 (date of
         inception) to December 31, 1998, respectively. The Company amortizes
         deferred financing costs using the straight-line method.

                                      F-7
<PAGE>

                            GST NETWORK FUNDING, INC.

                      Notes to Financial Statements, Continued

                                 (In thousands)

         INCOME TAXES

         The Company accounts for income taxes under the asset and liability
         method. Under the asset and liability method, deferred income taxes
         reflect the future tax consequences of differences between the tax
         bases of assets and liabilities and their financial reporting amounts
         at each year-end. Deferred tax assets and liabilities are measured
         using enacted tax rates expected to apply to taxable income in the
         years in which those temporary differences are expected to be recovered
         or settled. The effect on deferred tax assets and liabilities of a
         change in the tax rates is recognized in income in the period that
         includes the enactment date. Valuation allowances are established when
         necessary to reduce deferred tax assets to the amounts expected to be
         realized.

         FINANCIAL INSTRUMENTS

         The carrying amounts reported in the balance sheets for accrued
         liabilities approximate fair values due to the short maturity of those
         instruments.

         The carrying value and estimated fair value of the Company's long-term
         debt were $355,587 and $242,500, respectively, at December 31, 1999
         and $320,992 and $239,555, respectively, at December 31, 1998. The
         fair value of the Company's long-term debt was estimated based on
         quoted market prices. The difference between the carrying amount and
         the fair value of long-term debt results from changes in the economic
         conditions of high-yield debt markets from May 4, 1998, when the
         Company sold its debt securities, to December 31, 1998.

         Fair value estimates are made at a specific point in time, based on
         relevant market information about the financial instrument. These
         estimates are subjective in nature and involve uncertainties and
         matters of significant judgment and therefore cannot be determined with
         precision. Changes in assumptions could significantly affect the
         estimates.

         USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenues
         and expenses during the reporting period. Actual results could differ
         from those estimates.

                                      F-8
<PAGE>

                            GST NETWORK FUNDING, INC.

                      Notes to Financial Statements, Continued

                                 (In thousands)


(2)      FINANCING ARRANGEMENTS

         LONG-TERM DEBT

         The Company's long-term debt consists of the following at December 31,
         1999 and 1998:

<TABLE>

                                                                                                  December 31,
                                                                                             ----------------------
                                                                                               1999          1998
                                                                                            ----------    ---------
         <S>                                                                                <C>           <C>
         Senior Secured Discount Notes, interest at 10.5% with semiannual interest
             payments due commencing November 1, 2003, principal due May 1, 2008             $ 355,587    $ 320,997
                                                                                             =========    =========
</TABLE>

         ISSUANCE OF SENIOR SECURED DISCOUNT NOTES

         The Company completed a private placement (the May Offering) under an
         indenture (the Indenture) dated May 4, 1998 of $500,000 aggregate
         principal amount at maturity ($299,995 initial accreted value) of 10.5%
         Senior Secured Discount Notes due 2008 (the Senior Secured Discount
         Notes or the Notes). The Notes were sold at a substantial discount, and
         there will be no accrual of interest prior to May 2003 and no cash
         payment of interest until November 2003. The net proceeds from the sale
         of the Notes, approximately $288,900, are restricted for the
         acquisition of telecommunications equipment and other related costs
         as defined in the Indenture. The Notes are subject to certain debt
         covenants. Pursuant to the Indenture, all purchased equipment will
         be sold to GST USA for use in its telecommunications operations. In
         exchange for the purchased equipment, GST USA will issue to the Company
         intercompany notes due May 1, 2003 (the Intercompany Notes).
         Additionally, in consideration for the Company making the net proceeds
         from the Notes available to GST USA and for the Company facilitating
         the purchase of GST USA's equipment, on each May 1 and November 1, GST
         USA will pay to the Company a commitment fee equal to 4.5% per annum of
         the amount by which the $500,000 principal amount at maturity exceeds
         the amount of the Intercompany Notes then outstanding. The commitment
         fee will be paid semiannually, commencing November 1, 1998, by GST USA
         issuing promissory notes due May 1, 2003 (the Fee Notes) to the Company
         in the amount of such fees. The Fee Notes and Intercompany Notes will
         bear interest at 12.5% per annum, compounding semiannually, and will
         be guaranteed by GST. The Notes are secured by the restricted
         investment securities purchased with the proceeds from the sale of the
         Notes, and will be secured by any equipment purchased with such
         proceeds, the Fee Notes and Intercompany Notes.

         The Indenture provides that GST USA will assume and become a direct
         obligor on the Notes and GST will guarantee the Notes on May 1, 2003,
         or earlier if permitted by the terms of their existing debt. Once
         assumed, the Notes will be senior secured indebtedness of GST USA and
         the note guarantee will be senior unsecured indebtedness of GST.

         The Notes are redeemable at the option of GST USA, in whole or in part,
         at any time, on or after May 1, 2003 initially at 105.25% of their
         principal amount at maturity, plus accrued and unpaid interest,
         declining ratably to 100% on or after May 1, 2006. If on May 1, 2003,
         GST USA is prohibited from assuming all of the Notes, the Company will
         redeem the portion of the Notes that cannot be assumed at 105.25% of
         their principal amount at maturity, plus accrued interest and unpaid
         interest.

                                      F-9
<PAGE>

                            GST NETWORK FUNDING, INC.

                      Notes to Financial Statements, Continued

                                 (In thousands)

         DEBT COVENANTS AND CLASSIFICATION OF LONG-TERM DEBT

         In November 1998, the Company informed the trustee who represents
         the holders of the Notes that it may have violated certain technical
         covenants contained in the Indentures related to such notes. In
         particular, the Company advised the trustee that the transfer to
         Global Light Telecommunications, Inc. (Global) of its interest in a
         telecommunications project to be developed in Mexico may have
         constituted a violation of certain provisions in the indentures.
         In February 1999, the trustee informed the noteholders of the
         potential violations. The noteholders have not declared a default,
         as defined within the indentures of the Notes.

         On September 16, 1999, the Company received $30,000 in cash from Global
         and others in connection with the settlement of various lawsuits and
         has taken other actions to cure the potential technical violations. As
         a result, the Company believes that there is currently no basis on
         which the noteholders could declare a default under the indentures
         relating to the Company's debt issuance. Accordingly, the Company has
         classified the related debt obligation as non-current in the
         accompanying balance sheets.


(3)      RELATED PARTY TRANSACTIONS

         The Company acts as a purchasing agent for GST USA and sells to GST USA
         the equipment it purchases with the proceeds from the May Offering.
         The note receivable from parent of $319,336 and $71,342, at December
         31, 1999 and 1998, respectively, represents equipment purchases for GST
         USA and compounded interest. The note receivable is guaranteed by GST
         and bears interest at 12.5%, compounded semiannually on May and
         November 1, and is payable in full on May 1, 2003. Interest income
         earned on the note receivable from parent totaled $23,877 and $743 for
         the year ended December 31, 1999 and the period from April 16, 1998
         (date of inception) to December 31, 1998, respectively.

         As discussed in note 2, GST USA pays a commitment fee to the Company in
         consideration for the Company facilitating the purchase of equipment
         for GST USA. Commitment fee income totaled $10,686 and $14,256 for the
         year ended December 31, 1999 and the period from April 16, 1998 (date
         of inception) to December 31, 1998, respectively. Interest income on
         the Fee Notes totaled $2,217 and $230 for the year ended December 31,
         1999 and the period from April 16, 1998 (date of inception) to December
         31, 1998, respectively.

         The payable to parent of $4,306 and $519 at December 31, 1999 and, 1998
         respectively, consists of cash advances from GST USA for the purchase
         of equipment and the payment of expenses related to the May Offering.

                                      F-10
<PAGE>

                            GST NETWORK FUNDING, INC.

                      Notes to Financial Statements, Continued

                                 (In thousands)

(4)      INCOME TAXES

         Income tax expense consists of:
<TABLE>
<CAPTION>
                                                                                                  PERIOD FROM APRIL 16, 1998
                                                                                                    (DATE OF INCEPTION) TO
                                                          DECEMBER 31, 1999                            DECEMBER 31, 1998
                                              ----------------------------------------     -----------------------------------------
                                               CURRENT        DEFERRED        TOTAL         CURRENT        DEFERRED        TOTAL
                                              ----------     ----------     ----------     ----------     ----------     ----------
         <S>                                  <C>            <C>            <C>            <C>            <C>            <C>

         Federal.........................     $   14,355     $     ---      $   14,355     $    8,472     $     ---      $    8,472

         State...........................            ---           ---             ---            ---           ---             ---
                                              ----------     ----------     ----------     ----------     ----------     ----------
                                              $   14,355     $     ---      $   14,355     $    8,472     $     ---      $    8,472
                                              ----------     ----------     ----------     ----------     ----------     ----------
                                              ----------     ----------     ----------     ----------     ----------     ----------
</TABLE>

         The provision for income taxes differs from the "expected" amount
         computed by applying the U.S. federal corporate rate as follows:

<TABLE>
<CAPTION>
                                                                  PERIOD FROM
                                                                 APRIL 16, 1998
                                                                    (DATE OF
                                                YEAR ENDED        INCEPTION) TO
                                                DECEMBER 31,       DECEMBER 31,
                                                  1999                1998
                                              --------------     --------------
         <S>                                  <C>                <C>

         Computed "expected"
             income tax benefit..........     $    1,857         $      947

         Effect of change in
             valuation allowance.........         12,498              7,525
                                              --------------     --------------
         Actual tax expense..............     $   14,355         $    8,472
                                              --------------     --------------
                                              --------------     --------------
</TABLE>

       The tax effects of temporary differences that give rise to deferred tax
       assets and deferred tax liabilities at December 31, 1999 and 1998, are
       derived primarily from interest expense not currently deductible for tax
       purposes. Gross deferred tax assets and liabilities amount to $20,023 and
       $-0-, respectively, at December 31, 1999, and $7,525 and $-0-,
       respectively, at December 31, 1998.

       The valuation allowance for deferred tax assets as of December 31, 1999
       and 1998 was $20,023 and $7,525, respectively. The net change in the
       total valuation allowance for the year ended December 31, 1999 and the
       period from April 16, 1998 (date of inception) to December 31, 1998 was
       an increase of $12,498 and an increase of $7,525, respectively.

       The Company files consolidated income tax returns with its parent
       corporation. However, income tax expense (benefit) is computed as if the
       Company filed on a single entity basis. The tax related balance due to
       the parent corporation as of December 31, 1999 and 1998 was $22,827 and
       $8,472, respectively.

                                      F-11