<PAGE>

                                 UNITED STATES
                      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, 2000

                                       OR

        [ ]     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 1-6964


                             VERIZON VIRGINIA INC.


     A Virginia Corporation     I.R.S. Employer Identification No. 54-0167060


                600 East Main Street, Richmond, Virginia 23219


                        Telephone Number (804) 225-6300

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


Securities registered pursuant to Section 12(b) of the Act: See attached
Schedule A.

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 WITH REDUCED DISCLOSURE
FORMAT PURSUANT TO GENERAL INSTRUCTION I(2).


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
                                       -----    -----

<PAGE>

                             Verizon Virginia Inc.

                                  SCHEDULE A


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

                                                           Name of each exchange
           Title of each class                              on which registered
-------------------------------------------------         ----------------------

Forty Year 7-1/4% Debentures, due June 1, 2012                 New York Stock
                                                                  Exchange

<PAGE>

                             Verizon Virginia Inc.

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

Item No.                                                                                                       Page
--------                                                                                                       ----
                                          PART I
<S>                                                                                                            <C>
    1.     Business
           (Abbreviated pursuant to General Instruction I(2).)............................................       1
    2.     Properties ....................................................................................       6
    3.     Legal Proceedings .............................................................................       6
    4.     Submission of Matters to a Vote of Security Holders
           (Omitted pursuant to General Instruction I(2).)................................................       6


                                          PART II

    5.     Market for Registrant's Common Equity and Related Stockholder Matters .........................       7
    6.     Selected Financial Data
           (Omitted pursuant to General Instruction I(2).)................................................       7
    7.     Management's Discussion and Analysis of Results of Operations
           (Abbreviated pursuant to General Instruction I(2).) ...........................................       8
    7A.    Quantitative and Qualitative Disclosures About Market Risk.....................................      15
    8.     Financial Statements and Supplementary Data ...................................................      15
    9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..........      15

                                        PART III

           (Omitted pursuant to General Instruction I(2).):
    10.    Directors and Executive Officers of the Registrant ............................................      15
    11.    Executive Compensation ........................................................................      15
    12.    Security Ownership of Certain Beneficial Owners and Management ................................      15
    13.    Certain Relationships and Related Transactions ................................................      15

                                        PART IV

    14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K ..............................      16
</TABLE>


     UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 27, 2001.
<PAGE>

                              Verizon Virginia Inc.

                                     PART I

Item 1.  Business
                                     GENERAL

      Verizon Virginia Inc. is incorporated under the laws of the Commonwealth
of Virginia. Our principal offices are located at 600 East Main Street,
Richmond, Virginia 23219 (telephone number 804-225-6300). We are a wholly owned
subsidiary of Verizon Communications Inc. (Verizon).

      We presently serve a territory consisting of five complete Local Access
and Transport Areas (LATAs) and a part of a sixth LATA. These LATAs are
generally centered on a city or based on some other identifiable common
geography and, with certain limited exceptions, each LATA marks the boundary
within which we have been permitted by the "Modification of Final Judgment"
(MFJ) to provide telephone service.

      We currently provide two basic types of telecommunications services.
First, we transport telecommunications traffic between subscribers located
within the same LATA (intraLATA service), including both local and long distance
services. Local service includes the provision of local exchange (dial-tone),
local private line and directory assistance services. Among other local services
provided are Centrex (central office-based switched telephone service enabling
the subscriber to make both intercom and outside calls) and a variety of special
and custom calling services. Long distance service includes message toll service
(calling service beyond the local calling area) within LATA boundaries, and
intraLATA Wide Area Toll Service (WATS) and 800 services (volume discount
offerings for customers with highly concentrated demand). Second, we provide
exchange access service, which links a subscriber's telephone or other equipment
to the transmission facilities of interexchange carriers which, in turn, provide
telecommunications service between LATAs (interLATA service) to their customers.
We also provide exchange access service to interexchange carriers which provide
intrastate intraLATA long distance telecommunications service, as well as local
exchange access to competitive local exchange carriers for calls within a LATA.
Other services we provide include customer premises wiring and maintenance,
billing and collection, and pay telephone services.


                            BELL ATLANTIC-GTE MERGER

      On June 30, 2000, Bell Atlantic Corporation (Bell Atlantic) and GTE
Corporation (GTE) completed a merger under a definitive merger agreement dated
as of July 27, 1998 and began doing business as Verizon. The merger qualified as
a tax-free reorganization and has been accounted for as a pooling-of-interests
business combination.

                                   OPERATIONS

      We are one of 16 public operating telephone companies owned by Verizon.
Verizon has organized certain telecommunications group functions into marketing
units operating across its operating telephone subsidiaries. The units focus on
specific market segments. Each of the operating telephone subsidiaries,
including the company, remains responsible within its respective service area
for the provision of telephone services, financial performance and regulatory
matters. Verizon's five strategic marketing units are comprised of the
following:

      The Enterprise unit markets communications and information technology and
services to large businesses and to departments, agencies and offices of the
executive, judicial and legislative branches of the federal and state
government. These services include voice switching/processing services (e.g.,
dedicated private lines, custom Centrex, call management, and voice messaging),
end-user networking (e.g., credit and debit card transactions and personal
computer-based conferencing, including data and video), internetworking
(establishing links between the geographically disparate networks of two or more
companies or within the same company), network optimization (disaster avoidance,
911 service, and intelligent vehicle highway systems) and other communications
services such as distance learning, telemedicine, videoconferencing and
interactive multimedia applications. The Enterprise unit also includes Verizon's
Data Solutions Group which provides data transmission and network integration
services (integrating multiple geographically disparate networks into one
system) and Verizon's Strategic Markets unit which operates as a provider of
network monitoring services and telecommunications equipment sales to medium and
large businesses.

      The Retail unit markets communications and information services to
residential customers and to small and medium-sized businesses within our
territory. This unit also provides operator and pay telephone services. The
Retail unit includes


                                       1
<PAGE>

                             Verizon Virginia Inc.

Verizon Avenue, a subsidiary of Verizon that markets to customers located in
multi-tenant buildings and Teleproducts, a subsidiary of Verizon that markets
customer premises equipment to the end-user.

      The Wholesale unit markets (i) switched and special access to the
telephone subsidiaries' local exchange networks, and (ii) billing and collection
services, including recording, rating, bill processing, bill rendering, CLEC
services and wireless interconnection. This unit also includes various technical
planning groups that provide strategic technology and network planning, new
service creation, and emerging business management.

      The Advanced Services unit markets Verizon's long distance, data and
Internet access services. In certain states, Verizon's long distance
subsidiaries operate as a reseller of national and international long-distance
services and provide service in all 50 states to residential and business
customers, including long distance services, calling cards, 800 services and
operator services to its customers. Verizon's Global Networks unit is building a
next generation long distance network using ATM (asynchronous transfer mode)
technology.

      The National Operations unit markets Verizon's Communications and
Construction services that supply installation and repair labor and manages
Verizon's Supply unit that is responsible for the procurement and management of
inventory and supplies for the operating telephone companies, as well as other
subsidiaries. The Supply unit also sells material and logistic services to third
parties.

Telecommunications Act of 1996

       The Telecommunications Act of 1996 (1996 Act) became effective on
February 8, 1996, and replaced the MFJ, a consent decree that arose out of an
antitrust action brought by the United States Department of Justice against
AT&T. In general, the 1996 Act includes provisions that open local exchange
markets to competition and permit Bell Operating Companies, including ours, to
engage in manufacturing and to provide long distance service under prescribed
conditions.

       Under the 1996 Act, our ability to offer in-region long distance services
(that is, services originating in the states where we operate as a local
exchange carrier) is largely dependent on satisfying prescribed requirements.
The requirements include a 14-point "competitive checklist" of steps which we
must take to help competitors offer local services through resale, through
purchase of unbundled network elements (UNEs), or through their own networks. We
must also demonstrate to the Federal Communications Commission (FCC) that entry
into the in-region long distance market would be in the public interest.

       We are unable to predict definitively the impact that the 1996 Act will
ultimately have on our business, results of operations, or financial condition.
The financial impact will depend on several factors, including the timing,
extent and success of competition in our markets, the timing and outcome of
various regulatory proceedings and any appeals, and the timing, extent and
success of our pursuit of new opportunities resulting from the 1996 Act.

In-Region Long Distance

       The Virginia State Corporation Commission (VSCC) has retained the
accounting and consulting firm of KPMG to conduct third party testing of
our operations support systems.

FCC Regulation and Interstate Rates

       We are subject to the jurisdiction of the FCC with respect to interstate
services and related matters. In 2000, the FCC continued to implement reforms to
the interstate access charge system and to implement the "universal service" and
other requirements of the 1996 Act.

Access Charges

       Interstate access charges are the rates long distance carriers pay for
use and availability of our facilities for the origination and termination of
interstate service. The FCC required a phased restructuring of access charges,
from January 1998 until January 2000, pursuant to which we recover
non-usage-sensitive costs from long distance carriers and end-users through flat
rate charges, and usage-sensitive costs from long distance carriers through
usage-based rates.

       On May 31, 2000, the FCC adopted a plan advanced by members of the
industry (The Coalition for Affordable Local and Long Distance Service, or
"CALLS") as a comprehensive five-year plan for regulation of interstate access
charges. The CALLS plan has three main components. First, it establishes a
portable interstate access universal service support of $650 million for the
industry. Of that amount, Verizon expects approximately $340 million to be used
to support interstate access

                                       2

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                             Verizon Virginia Inc.


services in the operating telephone subsidiaries' service territory. This
explicit support replaces implicit support embedded in interstate access
charges. Second, the plan simplifies the patchwork of common line charges into
one subscriber line charge (SLC) and provides for de-averaging of the SLC by
zones and class of customers in a manner that will not undermine comparable and
affordable universal service. Third, the plan sets into place a mechanism to
transition to a set target of $.0055 per minute for switched access services.
Once that target rate is reached, local exchange carriers are no longer required
to make further annual price cap reductions to their switched access prices.

       As of September 14, 2000, Verizon formally elected to participate in the
full five-year term of the CALLS plan. As a result of this decision, price caps
on our interstate access charges will be set according to the conditions of the
FCC order on the CALLS plan. Under the plan, direct end-user access charges are
increased while access charges to long distance carriers are reduced. While the
plan continues the 6.5% (less inflation) annual reductions for most interstate
access charges, it provides for a price freeze when switched access service
prices reach $0.0055 per-minute. As a result of tariff adjustments which became
effective in August 2000, we reached the $0.0055 benchmark.

       The FCC has adopted rules for special access services that provide for
pricing flexibility and ultimately the removal of services from price regulation
when competitive thresholds are met. In order to use these rules, carriers must
forego the ability to take advantage of provisions in the current rules that
provide relief in the event earnings fall below prescribed thresholds. In
November and December 2000, Verizon made filings to obtain this added pricing
flexibility. On March 14, 2001, the FCC released an Order in which it approved
pricing flexibility for 46 Metropolitan Statistical Areas (MSAs) and three
states (Delaware, Vermont and Maryland) served by Verizon. In ten of the MSAs
and the state of Delaware, the services were awarded complete pricing
flexibility and were removed from price regulation. Partial pricing flexibility
was granted in the remaining MSAs and the two other states.

Universal Service

       As a result of a July 1999 decision of the U.S. Court of Appeals,
Verizon's contributions to the universal service fund were reduced by
approximately $107 million annually beginning on November 1, 1999, and
interstate access rates were reduced accordingly because we will no longer have
to recover these contributions in our rates. Last year, the petitions asking the
U.S. Supreme Court to review the court of appeals decision were either withdrawn
or rejected.

       In November 1999, the FCC adopted a new mechanism for providing universal
service support to high cost areas served by large local telephone companies.
This funding mechanism provides additional support for local telephone services
in several states served by Verizon. This system has been supplemented by the
new FCC access charge plan described above.

       On October 18, 2000, Verizon asked the U.S. Supreme Court to dismiss its
pending review of the FCC's use of a theoretical model as one factor to
determine the appropriate size of federal support for a fund for intrastate high
cost areas. The review was no longer necessary because, subsequent to Verizon's
petition to the U.S. Supreme Court, the FCC expressly disclaimed supervisory
authority over the states' universal service activities.

       The FCC is currently considering two modifications to its universal
service programs, both relating to support for rural carriers. The first, a
proposal by an appointed policy task force, would provide additional support for
intrastate services provided by rural carriers. The second, a proposal by a
coalition of rural carriers, would make explicit support for interstate access
services provided by rural carriers. The FCC is likely to address both these
proposals in 2001.

Unbundling of Network Elements

       In November 1999, the FCC announced its decision setting forth new
unbundling requirements, eliminating elements that it had previously required to
be unbundled, limiting the obligation to provide others and adding new elements.
Appeals from this decision are pending.

       In addition to the unbundling requirements released in November 1999, the
FCC released an order in a separate proceeding in December 1999, requiring
incumbent local exchange companies also to unbundle and provide to competitors
the higher frequency portion of their local loop. This provides competitors with
the ability to provision data services on top of incumbent carriers' voice
services. Appeals from this order are also pending.

       In July 2000, the U.S. Court of Appeals for the Eighth Circuit found that
some aspects of the FCC's requirements for pricing UNEs were inconsistent with
the 1996 Act. In particular, it found that the FCC was wrong to require
incumbent


                                       3
<PAGE>

                             Verizon Virginia Inc.

carriers to base these prices not on their real costs but on the imaginary costs
of the most efficient equipment and the most efficient network configuration.
The court upheld the FCC's decision that UNEs be priced based on a forward-
looking cost model which ignores actual historical costs. The U.S. Supreme Court
has accepted this decision for review in a case to be heard in the fall term of
2001. That portion of the court of appeals' decision has been stayed pending
that review.

Compensation for Internet Traffic

       In March 2000, the Washington, D.C. Circuit Court of Appeals reversed and
remanded the FCC's February 1999 order that concluded that calls to the Internet
through Internet service providers (ISPs) do not terminate at the ISP but are
single interstate calls. The court found that the FCC had inadequately explained
why these Internet calls were not two calls. Under the FCC's decision, it was
left to carrier agreements and state regulators to determine which traffic is
subject to reciprocal compensation. The FCC is currently considering a new order
to address the issue in light of the court remand.

State Regulation of Rates and Services

       The VSCC regulates our intrastate rates and services and other matters.

       Effective in 1995, the VSCC approved an alternative regulatory plan that
regulates our noncompetitive services on a price cap basis and does not regulate
our competitive services. The plan includes a moratorium on rate increases for
basic local telephone service until 2001 and eliminates regulation of profits.
In its November 1999 order approving the Bell Atlantic-GTE merger, the VSCC
conditioned its approval by extending the moratorium on rate increases for basic
local services to 2004.

Competition

       Legislative changes, including provisions of the 1996 Act discussed above
under the section "Telecommunications Act of 1996," regulatory changes and new
technology are continuing to expand the types of available communications
services and equipment and the number of competitors offering such services. We
anticipate that these industry changes, together with the rapid growth, enormous
size and global scope of these markets, will attract new entrants and encourage
existing competitors to broaden their offerings. Current and potential
competitors in telecommunication services include long distance companies, other
local telephone companies, cable companies, wireless service providers, foreign
telecommunications providers, electric utilities, Internet service providers and
other companies that offer network services. Many of these companies have a
strong market presence, brand recognition and existing customer relationships,
all of which contribute to intensifying competition and may affect our future
revenue growth. In addition, a number of major industry participants have
announced mergers, acquisitions and joint ventures which could substantially
affect the development and nature of some or all of our markets.

Local Exchange Services

       The ability to offer local exchange services has historically been
subject to regulation by state regulatory commissions. Applications from
competitors to provide and resell local exchange services have been approved in
the jurisdiction in which we operate. The 1996 Act has significantly increased
the level of competition in our local exchange markets.

       One of the purposes of the 1996 Act was to ensure, and accelerate, the
emergence of competition in local exchange markets. Toward this end, the 1996
Act requires most existing local exchange carriers (incumbent local exchange
carriers, or ILECs), including our company, to permit potential competitors
(competitive local exchange carriers, or CLECs) to:

       . purchase service from the ILEC for resale to CLEC customers
       . purchase unbundled network elements from the ILEC, and/or
       . interconnect the CLEC's network with the ILEC's network.

       The 1996 Act provides for arbitration by the state public utility
commission if an ILEC and a CLEC are unable to reach agreement on the terms of
the arrangement sought by the CLEC.

       Our negotiations with various CLECs, and arbitrations before our state
regulator, have continued. We expect that these agreements, and the 1996 Act,
will continue to lead to substantially increased competition in our local
exchange markets in 2001 and subsequent years. We believe that this competition
will be both on a facilities basis and in the form of resale by CLECs of our
service. Under the various agreements and arbitrations discussed above, we are
generally required to sell our services to CLECs at discounts from the prices we
charge our retail customers.


                                       4
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                             Verizon Virginia Inc.

IntraLATA Toll Services

       IntraLATA toll calls originate and terminate within the same LATA, but
generally cover a greater distance than a local call. State regulatory
commissions rather than federal authorities generally regulate these services.
The VSCC permits other carriers to offer intraLATA toll services within the
state.

       Until the implementation of "presubscription," we completed intraLATA
toll calls unless the customer dialed a code to access a competing carrier.
Presubscription changed this dialing method and enabled customers to make these
toll calls using another carrier without having to dial an access code. We
implemented presubscription in May 1999.

       Implementation of presubscription for intraLATA toll services has had a
material negative effect on intraLATA toll service revenues. However, the
negative effect has been partially mitigated by an increase in intraLATA network
access revenues.

Alternative Access

       A substantial portion of our revenues from business and government
customers is derived from a relatively small number of large, multiple-line
subscribers.

       We face competition from alternative communications systems, constructed
by large end-users, interexchange carriers and alternative access vendors, which
are capable of originating and/or terminating calls without the use of our
plant. The FCC's orders requiring us to offer collocated interconnection for
special and switched access services have enhanced the ability of such
alternative access providers to compete with us.

       Other potential sources of competition include cable television systems,
shared tenant services and other noncarrier systems which are capable of
bypassing our local plant, either partially or completely, through substitution
of special access for switched access or through concentration of
telecommunications traffic on fewer of our lines.

Wireless Services

       Wireless services also constitute potential sources of competition to our
wireline telecommunications services, especially as wireless carriers continue
to lower their prices to end-users. Wireless telephone services employ analog
and digital technology that allows customers to make and receive telephone calls
from any location using small handsets, and can also be used for data
transmission.

Public Telephone Services

       We face increasing competition in the provision of pay telephone services
from other providers. In addition, the growth of wireless communications
decreases usage of public telephones.

Operator Services

       Alternative operator services providers have entered into competition
with our operator services product line.



                                    EMPLOYEES

       As of December 31, 2000, we had approximately 7,600 employees.


                                       5
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                             Verizon Virginia Inc.

Item 2.  Properties

                                     GENERAL

      Our principal properties do not lend themselves to simple description by
character and location. Our investment in plant, property and equipment
consisted of the following at December 31:

<TABLE>
<CAPTION>

                                                                                                    2000             1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>              <C>
Central office equipment                                                                            48%              47%
Outside communications plant                                                                        37               39
Land and buildings                                                                                   6                6
Furniture, vehicles and other work equipment                                                         6                6
Other                                                                                                3                2
                                                                                        ----------------------------------
                                                                                                   100%             100%
                                                                                        ==================================
</TABLE>

      "Central office equipment" consists of switching equipment, transmission
equipment and related facilities. "Outside communications plant" consists
primarily of aerial cable, underground cable, conduit and wiring, and telephone
poles. "Land and buildings" consists of land and land improvements, and
principally central office buildings. "Furniture, vehicles and other work
equipment" consists of public telephone instruments and telephone equipment,
furniture, office equipment, motor vehicles and other work equipment. "Other"
property consists primarily of plant under construction, capital leases,
capitalized computer software costs and leasehold improvements.

      All of our properties, located in the state of Virginia, are generally in
good operating condition and are adequate to satisfy the needs of our business.

      Our customers are served by electronic switching systems that provide a
wide variety of services. Our network is in a transition from an analog to a
digital network, which provides the capabilities to furnish advanced data
transmission and information management services. At December 31, 2000,
approximately 98% of the access lines were served by digital capability.


                              CAPITAL EXPENDITURES

      We have been making and expect to continue to make significant capital
expenditures to meet the demand for communications services and to further
improve such services. Capital expenditures were approximately $719 million in
2000, $549 million in 1999 and $571 million in 1998. Capital expenditures
exclude additions under capital lease. Our total investment in plant, property
and equipment was approximately $7.4 billion at December 31, 2000, $6.8 billion
at December 31, 1999, and $6.4 billion at December 31, 1998, including the
effect of retirements, but before deducting accumulated depreciation.



Item 3.  Legal Proceedings

         There were no proceedings reportable under Item 3.


Item 4.  Submission of Matters to a Vote of Security Holders

         (Omitted pursuant to General Instruction I(2).)


                                       6
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                             Verizon Virginia Inc.

                                    PART II


Item 5.  Market for Registrant's Common Equity and Related Stockholder
         Matters

         Not applicable.


Item 6.  Selected Financial Data

         (Omitted pursuant to General Instruction I(2).)


                                       7
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                             Verizon Virginia Inc.


Item 7.  Management's Discussion and Analysis of Results of Operations
         (Abbreviated pursuant to General Instruction I(2).)

      This discussion should be read in conjunction with the Financial
Statements and Notes to Financial Statements listed in the index set forth on
page F-1.

      The communications services we provide are subject to regulation by the
Virginia State Corporation Commission (VSCC) with respect to intrastate rates
and services and certain other matters. For a further discussion of the company
and our regulatory plan, see Item 1 - "Description of Business."


RESULTS OF OPERATIONS
---------------------

      We reported net income of $453.8 million in 2000, compared to net income
of $430.0 million in 1999.

      Our results for 2000 and 1999 were affected by special items. The special
items in both periods include our allocated share of charges from Verizon
Services Corp. (Verizon Services), an affiliate that provides centralized
services on a contract basis.

      The following table shows how special items are reflected in our condensed
statements of income for each period:

<TABLE>
<CAPTION>

                                                                                                         (Dollars in Millions)
Years Ended December 31,                                                                              2000                1999
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                  <C>                <C>
Operating Revenues
   Regulatory contingency                                                                            $  .2              $ ---
                                                                                            ------------------------------------
Operations and Support Expenses
  Bell Atlantic-GTE merger direct incremental costs                                                   12.2                ---
  Bell Atlantic-GTE merger severance costs                                                            12.8                ---
  Bell Atlantic-GTE merger transition costs                                                            7.0                ---
  Bell Atlantic-GTE merger related costs                                                                .2                ---
  Bell Atlantic-NYNEX merger transition costs                                                          ---               15.2
  Other charges and special items                                                                     11.2                ---
                                                                                            ------------------------------------
                                                                                                      43.4               15.2
                                                                                            ------------------------------------
Interest Expense
   Regulatory contingency                                                                               .1                ---
                                                                                            ------------------------------------
Net impact on pre-tax income                                                                         $43.7              $15.2
                                                                                            ====================================
</TABLE>

      What follows is a further explanation of the nature of these special
items.

Completion of Mergers

      On June 30, 2000, Bell Atlantic and GTE completed a merger under a
definitive merger agreement dated as of July 27, 1998. Under the terms of the
agreement, GTE became a wholly owned subsidiary of Bell Atlantic. With the
closing of the merger, the combined company began doing business as Verizon
Communications. The merger qualified as a tax-free reorganization and has been
accounted for as a pooling-of-interests business combination. Under this method
of accounting, Bell Atlantic and GTE are treated as if they had always been
combined for accounting and financial reporting purposes.

      In August 1997, Bell Atlantic and NYNEX completed a merger of equals under
a definitive merger agreement entered into on April 21, 1996 and amended on July
2, 1996. Under the terms of the amended agreement, NYNEX became a wholly owned
subsidiary of Bell Atlantic. The merger qualified as a tax-free reorganization
and has been accounted for as a pooling-of-interests.


                                       8
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                             Verizon Virginia Inc.

Merger-Related Charges

Direct Incremental Costs

      Direct incremental costs related to the Bell Atlantic-GTE merger of $12.2
million (including $11.9 million allocated from Verizon Services) include
compensation, professional services and other costs. Compensation includes
retention payments to employees that were contingent on the close of the merger.
Professional services include investment banking, legal, accounting, consulting
and other advisory fees incurred to obtain federal and state regulatory
approvals and take other actions necessary to complete the merger. Other
includes costs incurred to obtain shareholder approval of the merger, register
securities and communicate with shareholders, employees and regulatory
authorities regarding merger issues. Substantially all of the Bell Atlantic-GTE
merger direct incremental costs have been paid as of December 31, 2000.

Employee Severance Costs

      Employee severance costs related to the Bell Atlantic-GTE merger of $12.8
million (including $9.4 million allocated from Verizon Services), as recorded
under SFAS No. 112, "Employers' Accounting for Postemployment Benefits,"
represent the benefit costs for the separation of management employees who are
entitled to benefits under pre-existing separation plans. The separations either
have or are expected to occur as a result of consolidations and process
enhancements within our company. Accrued postemployment benefit liabilities for
those employees are included in our balance sheets as a component of Accounts
Payable and Accrued Liabilities - Other.

Transition Costs

      In addition to the direct merger-related and severance costs discussed
above, from the date of the Bell Atlantic-GTE merger, we expect to incur
transition costs over the next several years related to the Bell Atlantic-GTE
merger. These costs will be incurred to integrate systems, consolidate real
estate, relocate employees and meet certain regulatory conditions of the merger.
They also include costs for advertising and other costs to establish the Verizon
brand. Transition costs related to the Bell Atlantic-GTE merger were $7.0
million in 2000 (including $6.7 million allocated from Verizon Services).

      In connection with the Bell Atlantic-NYNEX merger, we recorded transition
costs of $15.2 million in 1999 (including $13.9 million allocated from Verizon
Services) associated with intergrating the operations of Bell Atlantic and
NYNEX.

Other Initiatives

      During the second quarter of 2000, we also recorded a $.2 million charge
for other actions in relation to the Bell Atlantic-GTE merger. This charge was
related to the write-off of duplicate assets.

Other Charges and Special Items

Regulatory Contingency

      In the second quarter of 2000, we recognized a charge for a regulatory
matter totaling $.3 million. We recorded a reduction to operating revenue in the
amount of $.2 million and a charge to interest expense of $.1 million. This
matter relates to a specific issue currently under investigation by the Federal
Communications Commission (FCC). We believe that it is probable that the
ultimate resolution of this matter will result in refunds to our customers,
including interest.

Other Items

      In the second quarter of 2000, we recorded other charges and special items
totaling approximately $11.2 million. These charges included costs for the
write-off of accounts receivable, legal contingencies and other miscellaneous
items.

      These and other items affecting the comparison of our results of
operations for the years ended December 31, 2000 and 1999 are discussed in the
following sections.

Results of Operations

      We have one reportable segment, which provides domestic wireline
telecommunications services. You can find additional information about segment
reporting in Note 14 to the financial statements.


                                       9
<PAGE>

                             Verizon Virginia Inc.

OPERATING REVENUE STATISTICS
----------------------------

<TABLE>
<CAPTION>

                                                                                     2000            1999         % Change
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>              <C>             <C>
At Year-End
Access Lines in Service (in thousands)*
  Residence                                                                         2,269           2,268            ---%
  Business                                                                          1,543           1,495            3.2
  Public                                                                               38              42           (9.5)
                                                                             -------------------------------
                                                                                    3,850           3,805            1.2
                                                                             ===============================
For the Year
Access Minutes of Use (in millions)                                                18,271          17,529            4.2%
                                                                             ===============================
</TABLE>


* 1999 reflects a restatement of access lines in service


OPERATING REVENUES
------------------
(Dollars in Millions)
<TABLE>
<CAPTION>

Years Ended December 31                                                                                2000           1999
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                <C>            <C>
Local services                                                                                     $1,412.0       $1,388.8
Network access services                                                                               853.8          742.3
Long distance services                                                                                 42.6           57.0
Other services                                                                                        182.9          162.3
                                                                                            --------------------------------
Total                                                                                              $2,491.3       $2,350.4
                                                                                            ================================
</TABLE>

LOCAL SERVICES

                                                Increase
--------------------------------------------------------------------------------
      2000 - 1999                          $23.2         1.7%
--------------------------------------------------------------------------------

      Local service revenues are earned from the provision of local exchange,
local private line, wire maintenance, voice messaging and value-added services.
Value-added services are a family of services that expand the utilization of the
network, including products such as Caller ID, Call Waiting and Return Call.
Local services also include wholesale revenues from unbundled network element
(UNE) platforms, certain data transport revenues, and wireless interconnection
revenues.

      Local service revenues increased in 2000 primarily due to higher usage of
our network facilities. This growth was generated, in part, by an increase in
access lines in service of 1.2% from December 31, 1999. Local service revenue
growth also reflects higher customer demand and usage of our value-added
services and our data transport and digital services. Growth in local service
revenue was partially offset by discounted price offerings on certain
installation services and the effect of resold and UNE platforms.


                                      10

<PAGE>

                             Verizon Virginia Inc.


NETWORK ACCESS SERVICES

                                                   Increase
--------------------------------------------------------------------------------
      2000 - 1999                              $111.5        15.0%
--------------------------------------------------------------------------------

      Network access revenues are earned from end-user subscribers and from long
distance and other competing carriers who use our local exchange facilities to
provide usage services to their customers. Switched access revenues are derived
from fixed and usage-based charges paid by carriers for access to our local
network. Special access revenues originate from carriers and end-users that buy
dedicated local exchange capacity to support their private networks. End-user
access revenues are earned from our customers and from resellers who purchase
dial-tone services.

      Network access revenue growth in 2000 was mainly attributable to higher
customer demand, as reflected by growth in access minutes of use of 4.2% from
the same period in 1999. Volume growth also reflects a continuing expansion of
the business market, particularly for high-capacity, high-speed digital
services. In 2000, demand for special access services increased, reflecting a
greater utilization of our network. Higher network usage by alternative
providers of intraLATA toll services and higher end-user revenues attributable
to an increase in access lines in service further contributed to revenue growth
this year.

      In addition, network access revenues included higher revenues received
from customers for the recovery of local number portability costs. Network
access revenues also included the effect of a reversal of an accrual from a
prior period as the result of the favorable resolution of a federal regulatory
matter.

      Volume-related growth was largely offset by price reductions associated
with federal price cap filings and other regulatory decisions. The FCC regulates
rates that we charge long distance carriers and end-user subscribers for
interstate access services. We are required to file new access rates with the
FCC each year. In July 2000, we implemented the Coalition for Affordable Local
and Long Distance Service (CALLS) plan. Rates included in the July 2000 CALLS
plan will be in effect through June 2001. You can find additional information on
FCC rulemakings concerning federal access rates, universal service and
unbundling network elements in Item 1- "Description of Business, Operations -
FCC Regulation and Interstate Rates." In addition, revenue was reduced by a
special charge for a contingency associated with a regulatory matter, as
described in the Results of Operations section.


LONG DISTANCE SERVICES

                                                   (Decrease)
--------------------------------------------------------------------------------
      2000 - 1999                              ($14.4)      (25.3)%
--------------------------------------------------------------------------------

      Long distance revenues are earned primarily from calls made to points
outside a customer's local calling area, but within our service area (intraLATA
toll). IntraLATA toll calls originate and terminate within the same LATA, but
generally cover a greater distance than a local call. These services are
regulated by the VSCC except where they cross state lines. Other long distance
services that we provide include 800 services and Wide Area Telephone Service
(WATS).

      The decline in long distance revenues in 2000 was principally caused by
the competitive effects of presubscription, which enables customers to make
intraLATA toll calls using a competing carrier without having to dial an access
code. The negative effect of presubscription on long distance revenues was
partially mitigated by increased network access services for usage of our
network by alternative service providers. In response to presubscription, we
have implemented customer win-back and retention initiatives that include toll
calling discount packages and product bundling offers. These revenue reductions
were offset, in part, by additional revenue generated by higher calling volumes.


                                      11
<PAGE>

                             Verizon Virginia Inc.

OTHER SERVICES

                                                     Increase
--------------------------------------------------------------------------------
      2000 - 1999                               $20.6        12.7%
--------------------------------------------------------------------------------

      Our other services include such services as billing and collections for
long distance carriers and affiliates, facilities rentals to affiliates and
nonaffiliates, collocation for competitive local exchange carriers, usage of
separately priced (unbundled) components of our network by competitive local
exchange carriers, public (coin) telephone, customer premises equipment (CPE)
and sales of materials and supplies to affiliates. Other services revenues also
include fees paid by customers for nonpublication of telephone numbers and
multiple white page listings and fees paid by an affiliate for usage of our
directory listings.

      Other services revenues increased in 2000 primarily due to higher payments
received for the purchase of unbundled network elements and from competitive
local exchange carriers for interconnection of their networks with our network.
Higher customer late payment charges also contributed to the increase in
revenue. These increases were partially offset by lower revenues from CPE
services provided to government customers and from our billing and collection
services.


OPERATING EXPENSES
------------------
(Dollars in Millions)


OPERATIONS AND SUPPORT

                                                     Increase
--------------------------------------------------------------------------------
      2000 - 1999                               $76.8         6.9%
--------------------------------------------------------------------------------

      Operations and support expenses consist of employee costs and other
operating expenses. Employee costs consist of salaries, wages and other employee
compensation, employee benefits and payroll taxes. Other operating expenses
consist of contract services including centralized services expenses allocated
from Verizon Services, rent, network software costs, operating taxes other than
income, the provision for uncollectible accounts receivable, and other costs.

      The increase in operations and support expenses was primarily attributable
to merger-related costs and other special items recorded in 2000. Operations and
support expenses were further increased by annual salary and wage increases for
management and non-management employees and the effect of higher workforce
levels. Other items contributing to the increase, but to a lesser extent, were
higher interconnection and related costs associated with reciprocal compensation
arrangements with competitive local exchange and other carriers to terminate
calls on their network, higher centralized services expenses allocated from
Verizon Services and an increase in the provision for uncollectible accounts
receivable.

      These increases were partially offset by a decline in pension and benefit
costs. The decline in pension and benefit costs was chiefly due to favorable
pension plan investment returns and changes in actuarial assumptions. These
factors were partially offset by changes in certain plan provisions, increased
health care costs caused by inflation, as well as benefit improvements provided
for under a new contract with certain employees. In 2000, Verizon Communications
executed a new contract with the union representing our employees. The contract
provides for annual wage increases of 4 percent, 3 percent and 5 percent,
beginning in August 2000. Customer service representatives received an
additional 4 percent wage increase. Pension benefits for active employees will
increase by 5 percent on July 1, 2001, 5 percent on July 1, 2002 and 4 percent
on July 1, 2003. The contract also includes team-based incentive awards for
meeting higher service, performance and other standards, increased funding for
work and family programs, improvements to health and other benefits and certain
provisions relating to overtime, access to work and employment security. In
addition, all union-represented employees were granted options to purchase 100
shares of Verizon Communications' common stock.


                                      12
<PAGE>

                             Verizon Virginia Inc.

DEPRECIATION AND AMORTIZATION

                                                   Increase
--------------------------------------------------------------------------------
      2000 - 1999                               $20.1         4.2%
--------------------------------------------------------------------------------

      Depreciation and amortization expense increased in 2000 principally due to
growth in depreciable telephone plant as a result of increased capital
expenditures for higher growth services. This increase was partially offset by
the effect of lower rates of depreciation and amortization.


OTHER INCOME, NET

                                                     Increase
--------------------------------------------------------------------------------
      2000 - 1999                               $.5          33.3%
--------------------------------------------------------------------------------

      The change in other income, net, was primarily attributable to additional
interest income associated with the settlement of a tax-related matter in 2000.
Other items contributing to the change were an increase in the income recognized
from our investment in SMS/800 under the equity method, nonperformance fees
received from a vendor and higher interest income associated with our short-term
investments. These increases were substantially offset by losses recognized from
our investment in Verizon Advanced Data Inc. under the equity method.


INTEREST EXPENSE

                                                   Increase
--------------------------------------------------------------------------------
      2000 - 1999                                $9.2        13.3%
--------------------------------------------------------------------------------

      Interest expense includes costs associated with borrowings and capital
leases, net of interest capitalized as a cost of acquiring or constructing plant
assets.

      Interest expense increased in 2000 primarily due to higher levels of
average short-term debt with an affiliate and higher interest rates associated
with this debt. Interest expense was also impacted by additional interest costs
associated with a regulatory contingency, as described in the Results of
Operations section. These factors were partially offset by higher capitalized
interest costs resulting from higher levels of average telephone plant under
construction.

      See Note 5 to the financial statements for additional information about
our debt.


EFFECTIVE INCOME TAX RATES

      For the Years Ended December 31
--------------------------------------------------------------------------------
      2000                                           38.5%
--------------------------------------------------------------------------------
      1999                                           38.8%
--------------------------------------------------------------------------------

      The effective income tax rate is the provision for income taxes as a
percentage of income before the provision for income taxes. Our effective income
tax rate was lower in 2000 principally due to non-recurring deferred income tax
benefits recorded in 2000, slightly offset by equity losses associated with our
investment in Verizon Advanced Data Inc. for which we do not recognize income
tax benefits.

      You can find a reconciliation of the statutory federal income tax rate to
the effective income tax rate for each period in Note 10 to the financial
statements.


                                      13
<PAGE>

                             Verizon Virginia Inc.


OTHER MATTERS
-------------

Recent Accounting Pronouncements - Derivatives and Hedging Activities

      In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
statement requires that all derivatives be measured at fair value and recognized
as either assets or liabilities in our balance sheet. Changes in the fair values
of derivative instruments not used as hedges will be recognized in earnings
immediately. Changes in the fair values of derivative instruments used
effectively as hedges will be recognized either in earnings for hedges of
changes in fair value or in Other Comprehensive Income (Loss) for hedges of
changes in cash flows. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings.

      In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," which amended SFAS No.
133. The amendments in SFAS No. 138 address certain implementation issues and
relate to such matters as the normal purchases and normal sales exception, the
definition of interest rate risk, hedging recognized
foreign-currency-denominated assets and liabilities, and intercompany
derivatives.

      Effective January 1, 2001, we will adopt SFAS No. 133 and SFAS No. 138.
The initial impact of adoption on our financial statements will not be material.
The ongoing effect of adoption on our financial statements will be determined
each quarter by several factors, including the specific hedging instruments in
place and their relationships to hedged items, as well as market conditions at
the end of each period.


                                      14
<PAGE>

                             Verizon Virginia Inc.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

      We are exposed to interest rate risk in the normal course of our business.
The majority of our debt is fixed rate debt and we did not have any derivatives
as of December 31, 2000 and 1999. Our short-term borrowings from an affiliate
expose our earnings to changes in short-term interest rates since the interest
rate charged on such borrowings is typically fixed for less than one month.

      The following table summarizes the fair values of our long-term debt as of
December 31, 2000 and 1999. The table also provides a sensitivity analysis of
the estimated fair values of these financial instruments assuming
100-basis-point upward and downward parallel shifts in the yield curve. The
sensitivity analysis did not include the fair values of our short-term
borrowings from an affiliate since they are not significantly affected by
changes in market interest rates.

<TABLE>
<CAPTION>

                                                                                                 December 31
                                                                                     -------------------------------------
(Dollars in Millions)                                                                       2000               1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>                <C>
Fair value of long-term debt                                                              $924.7             $900.6
Fair value assuming a +100-basis-point shift                                               863.4              837.9
Fair value assuming a -100-basis-point shift                                               988.7              968.5
</TABLE>

Item 8.      Financial Statements and Supplementary Data

             The information required by this Item is set forth on Pages F-1
             through F-22.


Item 9.      Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosure

             The information required by this item regarding a change in
             accountants is included in a Current Report on Form 8-K dated
             September 7, 2000.


                                    PART III

Item 10.     Directors and Executive Officers of Registrant

             (Omitted pursuant to General Instruction I(2).)


Item 11.     Executive Compensation

             (Omitted pursuant to General Instruction I(2).)


Item 12.     Security Ownership of Certain Beneficial Owners and Management

             (Omitted pursuant to General Instruction I(2).)


Item 13.     Certain Relationships and Related Transactions

             (Omitted pursuant to General Instruction I(2).)



                                      15
<PAGE>

                             Verizon Virginia Inc.

                                     PART IV

Item 14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K

         (a) The following documents are filed as part of this report:

             (1)  Financial Statements

                        See Index to Financial Statements and Financial
                        Statement Schedule appearing on Page F-1.

             (2)  Financial Statement Schedules

                        See Index to Financial Statements and Financial
                        Statement Schedule appearing on Page F-1.

             (3)  Exhibits

                        Exhibits identified in parentheses below, on file with
                        the Securities and Exchange Commission (SEC), are
                        incorporated herein by reference as exhibits hereto.

             3a         Certificate of Incorporation of the registrant, as
                        amended July 28, 1977. (Exhibit 3a to the registrant's
                        Annual Report on Form 10-K for the year ended December
                        31, 1985, File No. 1-6964.)

                        3a(i)  Certificate of Amendment to the registrant's
                               Certificate of Incorporation, as amended August
                               24, 1990. (Exhibit 3a(i) to the registrant's
                               Annual Report on Form 10-K for the year ended
                               December 31, 1990, File No. 1-6964.)

                       3a(ii)  Certificate of Amendment to the registrant's
                               Certificate of Incorporation, adopted December
                               31, 1993 and filed January 13, 1994. (Exhibit
                               3a(ii) to the registrant's Annual Report on Form
                               10-K for the year ended December 31, 1993, File
                               No. 1-6964.)

                       3a(iii) Articles of Amendment of Articles of
                               Incorporation, adopted June 30, 2000. (Exhibit
                               3a(iii) to the registrant's Quarterly Report on
                               Form 10-Q for the quarter ended June 30, 2000,
                               File No. 1-6964.)

             3b         By-Laws of the registrant, as amended December 31, 1996.
                        (Exhibit 3b to the registrant's Annual Report on Form
                        10K for the year ended December 31, 1996, File No.
                        1-6964.)

                        3b(i) Consent of Sole Stockholder of Verizon Virginia
                        Inc., dated December 31, 1996. (Exhibit 3b(i) to the
                        registrant's Annual Report on Form 10K for the year
                        ended December 31, 1996, File No. 1-6964.)

             4          No instrument which defines the rights of holders of
                        long-term debt of the registrant is filed herewith
                        pursuant to Regulation S-K, Item 601(b)(4)(iii)(A).
                        Pursuant to this regulation, the registrant hereby
                        agrees to furnish a copy of any such instrument to the
                        SEC upon request.

             10a        Agreement among Verizon Services Corp. and the Verizon
                        Communications Inc. telephone subsidiaries, dated
                        November 7, 1983. (Exhibit 10b to Verizon Communications
                        Inc. Annual Report on Form 10-K for the year ended
                        December 31, 1993, File No. 1-8606.)

             23a        Consent of Independent Auditors.

             23b        Consent of Independent Accountants.


         (b) Reports on Form 8-K:

                        There were no Current Reports on Form 8-K filed during
                        the quarter ended December 31, 2000.


                                      16
<PAGE>

                             Verizon Virginia Inc.

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                      Verizon Virginia Inc.



Date :  March 30, 2001                By    /s/ Edwin F. Hall
                                         ------------------------
                                                Edwin F. Hall
                                                Controller




Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.

<TABLE>
<CAPTION>

Signature                                   Title                               Date
---------                                   -----                               ----
<S>                                        <C>                                  <C>
/s/ Robert W. Woltz, Jr.                    President and Director              March 30, 2001
-----------------------------------         (Principal Executive Officer)
    Robert W. Woltz, Jr.


/s/ Edwin F. Hall                           Controller                          March 30, 2001
---------------------------------------     (Principal Financial Officer)
    Edwin F. Hall


/s/ Christopher M. Creager                  Director                            March 30, 2001
--------------------------------
    Christopher M. Creager


/s/ Lydia R. Pulley                         Director                            March 30, 2001
---------------------------------------
    Lydia R. Pulley
</TABLE>


                                      17
<PAGE>

                             Verizon Virginia Inc.


        Index to Financial Statements and Financial Statement Schedule


                                                                            Page
                                                                            ----

Report of Independent Auditors - Ernst & Young LLP .......................   F-2

Report of Independent Accountants - PricewaterhouseCoopers LLP ...........   F-3

Statements of Income
     For the years ended December 31, 2000, 1999 and 1998 ................   F-4

Balance Sheets - December 31, 2000 and 1999 ..............................   F-5

Statements of Changes in Shareowner's Investment
     For the years ended December 31, 2000, 1999 and 1998 ................   F-7

Statements of Cash Flows
     For the years ended December 31, 2000, 1999 and 1998.................   F-8

Notes to Financial Statements ............................................   F-9

Schedule II - Valuation and Qualifying Accounts
     For the years ended December 31, 2000, 1999 and 1998.................  F-22


Financial statement schedules other than that listed above have been omitted
because such schedules are not required or applicable.

                                      F-1
<PAGE>

                            Verizon Virginia Inc.

                        REPORT OF INDEPENDENT AUDITORS



The Board of Directors and Shareowner
Verizon Virginia Inc.

We have audited the accompanying balance sheet of Verizon Virginia Inc. (the
Company) as of December 31, 2000 and the related statements of income,
shareowner's investment, and cash flows for the year then ended. Our audit also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides 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 Verizon Virginia Inc. at
December 31, 2000, and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.


/s/  Ernst & Young LLP


New York, New York
February 1, 2001

                                      F-2
<PAGE>

                             Verizon Virginia Inc.


                       REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareowner of
Verizon Virginia Inc.

In our opinion, the 1999 and 1998 financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Verizon Virginia Inc. at December 31, 1999, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States of America. In addition, in our opinion, the 1999 and 1998
financial statement schedule listed in the accompanying index presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and the financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. We have not
audited the financial statements of Verizon Virginia Inc. for any period
subsequent to December 31, 1999.

As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for computer software costs in accordance with AICPA
Statement of Position No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" effective January 1, 1999.



/s/ PricewaterhouseCoopers LLP



New York, New York
February 14, 2000

                                      F-3
<PAGE>

                             Verizon Virginia Inc.

                              STATEMENTS OF INCOME
                         For the Years Ended December 31
                              (Dollars in Millions)

<TABLE>
<CAPTION>

                                                                                         2000            1999           1998
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>            <C>            <C>
OPERATING REVENUES (including $53.8, $36.7
   and $29.2 from affiliates)                                                        $2,491.3        $2,350.4       $2,201.8
                                                                                ---------------------------------------------

OPERATING EXPENSES
   Operations and support (including $549.0, $505.5
        and $537.9 to affiliates)                                                     1,182.2         1,105.4        1,150.1
   Depreciation and amortization                                                        495.1           475.0          448.9
                                                                                ---------------------------------------------
                                                                                      1,677.3         1,580.4        1,599.0
                                                                                ---------------------------------------------

OPERATING INCOME                                                                        814.0           770.0          602.8

OTHER INCOME, NET (including $(2.5), $.5 and $0 from affiliates)                          2.0             1.5            7.0

INTEREST EXPENSE (including $17.2, $4.7 and $7.5 to affiliate)                           78.6            69.4           67.6
                                                                                ---------------------------------------------

INCOME BEFORE PROVISION FOR INCOME TAXES                                                737.4           702.1          542.2

PROVISION FOR INCOME TAXES                                                              283.6           272.1          210.0
                                                                                ---------------------------------------------

NET INCOME                                                                            $ 453.8         $ 430.0        $ 332.2
                                                                                =============================================
</TABLE>

                       See Notes to Financial Statements.

                                      F-4
<PAGE>

                             Verizon Virginia Inc.

                                 BALANCE SHEETS
                              (Dollars in Millions)


                                     ASSETS
                                     ------

<TABLE>
<CAPTION>

                                                                                                    December 31
                                                                                      --------------------------------------
                                                                                                 2000                1999
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                  <C>
CURRENT ASSETS
Short-term investments                                                                       $   38.6            $   33.6
Accounts receivable:
  Trade and other, net of allowances for uncollectibles of $37.6 and $29.6                      596.3               482.6
  Affiliates                                                                                     41.2                43.9
Material and supplies                                                                             8.0                 7.4
Prepaid expenses                                                                                 25.4                28.4
Deferred income taxes                                                                             5.1                  .1
Other                                                                                            68.1                 3.9
                                                                                      -------------------------------------
                                                                                                782.7               599.9
                                                                                      ------------------ -------------------

PLANT, PROPERTY AND EQUIPMENT                                                                 7,370.3             6,833.4
Less accumulated depreciation                                                                 4,264.2             3,931.0
                                                                                      --------------------------------------
                                                                                              3,106.1             2,902.4
                                                                                      ------------------ -------------------

PREPAID PENSION ASSET                                                                           103.7                13.5
                                                                                      --------------------------------------

OTHER ASSETS                                                                                    263.7                53.8
                                                                                      --------------------------------------

TOTAL ASSETS                                                                                 $4,256.2            $3,569.6
                                                                                      ======================================
</TABLE>


                       See Notes to Financial Statements.

                                      F-5
<PAGE>

                             Verizon Virginia Inc.

                                BALANCE SHEETS
                             (Dollars in Millions)


                    LIABILITIES AND SHAREOWNER'S INVESTMENT
                    ---------------------------------------

<TABLE>
<CAPTION>

                                                                                                  December 31
                                                                                    -----------------------------------------
                                                                                                 2000                 1999
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>                  <C>
CURRENT LIABILITIES
Debt maturing within one year:
   Note payable to affiliate                                                                 $  500.4             $   97.4
   Other                                                                                          2.6                  1.3
Accounts payable and accrued liabilities:
   Affiliates                                                                                   147.8                190.5
   Other                                                                                        351.8                348.2
Other current liabilities                                                                       132.9                 69.3
                                                                                    -----------------------------------------
                                                                                              1,135.5                706.7
                                                                                    -----------------------------------------

LONG-TERM DEBT                                                                                  944.8                943.6
                                                                                    -----------------------------------------

EMPLOYEE BENEFIT OBLIGATIONS                                                                    283.9                290.4
                                                                                    -----------------------------------------

DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes                                                                           294.8                207.2
Unamortized investment tax credits                                                               11.1                 12.6
Other                                                                                           146.5                 40.2
                                                                                    -----------------------------------------
                                                                                                452.4                260.0
                                                                                    -----------------------------------------

COMMITMENTS AND CONTINGENCIES (Notes 4 and 13)

SHAREOWNER'S INVESTMENT
Common stock - one share, without par value, owned by parent                                    873.7                873.7
Reinvested earnings                                                                             565.9                495.5
Accumulated other comprehensive loss                                                              ---                  (.3)
                                                                                    -----------------------------------------
                                                                                              1,439.6              1,368.9
                                                                                    -----------------------------------------

TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT                                                $4,256.2             $3,569.6
                                                                                    =========================================
</TABLE>

                      See Notes to Financial Statements.

                                      F-6
<PAGE>

                             Verizon Virginia Inc.

               STATEMENTS OF CHANGES IN SHAREOWNER'S INVESTMENT
                        For the Years Ended December 31
                             (Dollars in Millions)

<TABLE>
<CAPTION>

                                                                                2000               1999               1998
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                <C>                <C>
COMMON STOCK
   Balance at beginning of year                                             $  873.7           $  873.7           $  873.7
                                                                     --------------------------------------------------------
   Balance at end of year                                                      873.7              873.7              873.7
                                                                     --------------------------------------------------------

REINVESTED EARNINGS
   Balance at beginning of year                                                495.5              320.5              140.0
   Net income                                                                  453.8              430.0              332.2
   Dividends paid to Verizon Communications                                   (384.0)            (255.1)            (152.0)
   Other                                                                          .6                 .1                 .3
                                                                     --------------------------------------------------------
   Balance at end of year                                                      565.9              495.5              320.5
                                                                     --------------------------------------------------------

ACCUMULATED OTHER COMPREHENSIVE LOSS
   Balance at beginning of year                                                  (.3)               (.2)               ---
   Minimum pension liability adjustment                                           .3                (.1)              (.2)
                                                                     --------------------------------------------------------
   Balance at end of year                                                        ---                (.3)              (.2)
                                                                     --------------------------------------------------------

TOTAL SHAREOWNER'S INVESTMENT                                               $1,439.6           $1,368.9           $1,194.0
                                                                     ========================================================

COMPREHENSIVE INCOME
   Net income                                                               $  453.8           $  430.0           $  332.2
   Minimum pension liability adjustment                                           .3                (.1)               (.2)
                                                                     --------------------------------------------------------
TOTAL COMPREHENSIVE INCOME                                                  $  454.1           $  429.9           $  332.0
                                                                     ========================================================
</TABLE>

                      See Notes to Financial Statements.

                                      F-7
<PAGE>

                             Verizon Virginia Inc.

                            STATEMENTS OF CASH FLOWS
                         For the Years Ended December 31
                              (Dollars in Millions)

<TABLE>
<CAPTION>

                                                                                    2000             1999             1998
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                       $ 453.8          $ 430.0          $ 332.2
Adjustments to reconcile net income to net cash provided by
   Operating activities:
     Depreciation and amortization                                                 495.1            475.0            448.9
     Employee retirement benefits                                                  (90.6)           (40.5)           (27.9)
     Deferred income taxes, net                                                     89.0             68.7             27.7
     Provision for uncollectible accounts                                           35.3             22.7             16.0
     Equity loss/(income) from affiliate                                             2.5              (.5)             ---
     Dividends received from affiliate                                                .6               .5              ---
     Changes in current assets and liabilities:
       Accounts receivable                                                        (146.3)           (64.8)           (34.3)
       Material and supplies                                                         (.6)             3.6              4.5
       Other assets                                                                (61.2)           (28.6)            (2.1)
       Accounts payable and accrued liabilities                                    (19.7)            25.5            (13.7)
       Other current liabilities                                                    63.9              2.5              4.7
     Other items, net                                                              (61.4)           (33.9)           (32.9)
                                                                           --------------------------------------------------
Net cash provided by operating activities                                          760.4            860.2            723.1
                                                                           ---------------- ---------------- ----------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments                                                (38.6)           (33.6)           (45.4)
Proceeds from sale of short-term investments                                        33.6             31.3             40.1
Capital expenditures                                                              (718.7)          (548.9)          (571.3)
Other, net                                                                         (61.2)           (24.8)             ---
                                                                           --------------------------------------------------
Net cash used in investing activities                                             (784.9)          (576.0)          (576.6)
                                                                           --------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments capital lease obligations                                      (1.4)            (1.2)            (1.2)
Net change in note payable to affiliate                                            403.0            (19.2)             5.9
Dividends paid                                                                    (384.0)          (255.1)          (152.0)
Net change in outstanding checks drawn on controlled
   disbursement accounts                                                             6.9             (8.7)              .8
                                                                           --------------------------------------------------
Net cash provided by/(used in) financing activities                                 24.5           (284.2)          (146.5)
                                                                           --------------------------------------------------

NET CHANGE IN CASH                                                                   ---              ---              ---

CASH, BEGINNING OF YEAR                                                              ---              ---              ---
                                                                           --------------------------------------------------

CASH, END OF YEAR                                                                $   ---          $   ---          $   ---
                                                                           ==================================================
</TABLE>

                      See Notes to Financial Statements.

                                      F-8
<PAGE>

                              Verizon Virginia Inc.

                          NOTES TO FINANCIAL STATEMENTS

1.    DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

      Verizon Virginia Inc. is a wholly owned subsidiary of Verizon
Communications Inc. (Verizon Communications). We presently serve a territory
consisting of five complete Local Access and Transport Areas (LATAs) and part of
a sixth LATA in the state of Virginia. We have one reportable segment which
provides domestic wireline telecommunications services. We currently provide two
basic types of telecommunications services. First, we transport
telecommunications traffic between subscribers located within the same LATA
(intraLATA service), including both local and long distance services. Local
service includes voice and data transport, enhanced and custom calling features,
directory assistance and private lines. Long distance service includes message
toll service within LATA boundaries and intraLATA Wide Area Toll Service/800
services. Second, we provide exchange access service, which links a subscriber's
telephone or other equipment to the transmission facilities of interexchange
carriers which, in turn, provide telecommunications service between LATAs
(interLATA service) to their customers. We also provide exchange access service
to interexchange carriers which provide intrastate intraLATA long distance
telecommunications service, as well as local exchange access to competitive
local exchange carriers for calls within a LATA. Other services we provide
include customer premises wiring and maintenance, billing and collection and pay
telephone services.

Basis of Presentation

      We prepare our financial statements under generally accepted accounting
principles which require management to make estimates and assumptions that
affect reported amounts and disclosures. Actual results could differ from those
estimates.

      We have a 1.98% ownership interest in SMS/800, a venture that is jointly
owned by the Bell Operating Companies. SMS/800 administers the centralized
national database system associated with toll free numbers. We use the equity
method of accounting for our investment in SMS/800.

      Our investment in Verizon Advanced Data Inc. (VADI), an affiliated company
which provides new exchange access services, is accounted for using the equity
method of accounting. At December 31, 2000, our ownership interest in VADI was
14.53%.

      We have reclassified certain amounts from prior periods to conform with
our current presentation.

Revenue Recognition

      We recognize revenues when services are rendered based on usage of our
local exchange network and facilities. For other products and services, revenues
are generally recognized when services are rendered or products are delivered to
customers.

      We adopted the provisions of the Securities and Exchange Commission (SEC)
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," in the fourth quarter, retroactive to January 1, 2000, as required
by the SEC. As a result of the adoption of SAB No. 101, we now defer
nonrecurring service activation revenues and costs and amortize them over the
expected term of the customer relationship. Previously, these revenues and costs
were recognized when the activation service was performed. This change in
accounting did not have a material impact on our results of operations for 2000.
Our balance sheet at December 31, 2000 includes deferred activation costs as a
component of Current assets - other ($58.5 million) and Other Assets ($103.9
million) and deferred activation revenues as a component of Current liabilities
- other ($58.5 million) and Deferred credits and other liabilities - other
($103.9 million).

Maintenance and Repairs

      We charge the cost of maintenance and repairs, including the cost of
replacing minor items not constituting substantial betterments, to Operations
and Support Expenses.

                                      F-9
<PAGE>

                             Verizon Virginia Inc.

Cash and Cash Equivalents

      We consider all highly liquid investments with a maturity of 90 days or
less when purchased to be cash equivalents, except cash equivalents held as
short-term investments. Cash equivalents are stated at cost, which approximates
market value.

Short-term Investments

      Our short-term investments consist of cash equivalents held in trust to
pay for certain employee benefits. Short-term investments are stated at cost,
which approximates market value.

Material and Supplies

      We include in inventory new and reusable materials which are stated
principally at average original cost, except that specific costs are used in the
case of large individual items.

Plant and Depreciation

      We state plant, property, and equipment at historical cost. Depreciation
expense is principally based on the composite group remaining life method and
straight-line composite rates. This method provides for the recognition of the
cost of the remaining net investment in telephone plant, less anticipated net
salvage value, over the remaining asset lives. This method requires the periodic
revision of depreciation rates. We used the following asset lives:

      Average Lives (in years)
      -------------------------------------------------------------------------
      Buildings                                                         30
      Central office equipment                                         5 - 10
      Outside communications plant                                    16 - 50
      Furniture, vehicles and other                                    3 - 12

      When we replace or retire depreciable telephone plant, we deduct the
carrying amount of such plant from the respective accounts and charge
accumulated depreciation.

      We capitalize interest associated with the acquisition or construction of
plant assets. Capitalized interest is reported as a cost of plant and a
reduction in interest expense.

Computer Software Costs

      We capitalize the cost of internal-use software which has a useful life in
excess of one year in accordance with Statement of Position (SOP) No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Subsequent additions, modifications or upgrades to internal-use
software are capitalized only to the extent that they allow the software to
perform a task it previously did not perform. Software maintenance and training
costs are expensed in the period in which they are incurred. Also, we capitalize
interest associated with the development of internal-use software. Capitalized
computer software costs are amortized using the straight-line method over a
period of 3 to 5 years. The effect of adopting SOP No. 98-1 for Verizon
Communications was an increase in net income of approximately $560 million in
1999.

      Prior to adopting SOP No. 98-1, we capitalized initial right-to-use fees
for central office switching equipment, including initial operating system and
initial application software costs. For non-central office equipment, only the
initial operating system software was capitalized. Subsequent additions,
modifications, or upgrades of initial software programs, whether operating or
application packages, were expensed as incurred.

Income Taxes

      Verizon Communications and its domestic subsidiaries, including us, file a
consolidated federal income tax return.

      Current and deferred tax expense is determined by applying the provisions
of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes" to each subsidiary as if it were a separate taxpayer.

                                      F-10
<PAGE>

                             Verizon Virginia Inc.

      We use the deferral method of accounting for investment tax credits earned
prior to the repeal of investment tax credits by the Tax Reform Act of 1986. We
also defer certain transitional credits earned after the repeal. We amortize
these credits over the estimated service lives of the related assets as a
reduction to the Provision for Income Taxes.

Advertising Costs

      We expense advertising costs as they are incurred.

Stock-Based Compensation

      We participate in stock-based employee compensation plans sponsored by
Verizon Communications. Verizon Communications accounts for stock-based employee
compensation plans under Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations and
follows the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation."

Employee Benefit Plans

      We participate in the Verizon Communications benefit plans. Under these
plans, pension and postretirement health care and life insurance benefits earned
during the year as well as interest on projected benefit obligations are accrued
currently. Prior service costs and credits resulting from changes in plan
benefits are amortized over the average remaining service period of the
employees expected to receive benefits

Recent Accounting Pronouncements - Derivatives and Hedging Activities

      In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
statement requires that all derivatives be measured at fair value and recognized
as either assets or liabilities in our balance sheet. Changes in the fair values
of derivative instruments not used as hedges will be recognized in earnings
immediately. Changes in the fair values of derivative instruments used
effectively as hedges will be recognized either in earnings for hedges of
changes in fair value or in Other Comprehensive Income (Loss) for hedges of
changes in cash flows. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings.

      In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," which amended SFAS No.
133. The amendments in SFAS No. 138 address certain implementation issues and
relate to such matters as the normal purchases and normal sales exception, the
definition of interest rate risk, hedging recognized
foreign-currency-denominated assets and liabilities, and intercompany
derivatives.

      Effective January 1, 2001, we will adopt SFAS No. 133 and SFAS No. 138.
The initial impact of adoption on our financial statements will not be material.
The ongoing effect of adoption on our financial statements will be determined
each quarter by several factors, including the specific hedging instruments in
place and their relationships to hedged items, as well as market conditions at
the end of each period.


2.    COMPLETION OF MERGERS

      On June 30, 2000, Bell Atlantic and GTE completed a merger under a
definitive merger agreement dated as of July 27, 1998. Under the terms of the
agreement, GTE became a wholly owned subsidiary of Bell Atlantic. With the
closing of the merger, the combined company began doing business as Verizon
Communications. The merger qualified as a tax-free reorganization and has been
accounted for as a pooling-of-interests business combination. Under this method
of accounting, Bell Atlantic and GTE are treated as if they had always been
combined for accounting and financial reporting purposes.

      In August 1997, Bell Atlantic and NYNEX completed a merger of equals under
a definitive merger agreement entered into on April 21, 1996 and amended on July
2, 1996. Under the terms of the amended agreement, NYNEX became a wholly owned
subsidiary of Bell Atlantic. The merger qualified as a tax-free reorganization
and has been accounted for as a pooling-of-interests.

                                      F-11
<PAGE>

                             Verizon Virginia Inc.


      The following table summarizes the one-time charges incurred for each
merger. Amounts for 2000 pertain to the Bell Atlantic-GTE merger. Transition
costs for 1999 and 1998 pertain to the Bell Atlantic-NYNEX merger.

<TABLE>
<CAPTION>
                                                                                                     (Dollars in Millions)
  Years Ended December 31,                                                              2000          1999           1998
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>          <C>            <C>
  Direct incremental costs                                                             $12.2         $ ---          $ ---
  Employee severance costs                                                              12.8           ---            ---
  Transition costs                                                                       7.0          15.2           11.1
                                                                              ---------------------------------------------
  Total Merger-Related Costs                                                           $32.0         $15.2          $11.1
                                                                              =============================================
<CAPTION>
      The following table provides a reconciliation of the liabilities associated with Bell Atlantic-GTE merger-related costs,
Bell Atlantic-NYNEX merger-related costs and other charges and special items described below:

                                                                                                             (Dollars in Millions)
                                                                1998                         1999                             2000
                              ----------------------------------------------------------------------------------------------------
                                                                                                   Charged            Asset
                                                                                                        to           Write-
                                                       Asset                         Asset         Expense             offs    End
                              Beginning           Write-offs  End of            Write-offs   End        or              and     of
                                of Year  Payments  and Other    Year  Payments   and Other   Year  Revenue  Payments  Other   Year
                              ----------------------------------------------------------------------------------------------------
<S>                              <C>      <C>       <C>       <C>      <C>       <C>       <C>      <C>      <C>      <C>    <C>
  Merger-Related
  Direct incremental costs       $ ---    $ ---      $---     $ ---     $---      $ ---     $ ---   $12.2    $(12.2)  $ ---  $ ---
  Employee severance costs        12.9     (1.9)      2.4      13.4      (.6)      (1.8)     11.0    12.8      (9.7)    (.8)  13.3
  Other Initiatives
  Write-down of fixed assets
   and real estate
   consolidation                   1.1      ---       ---       1.1      ---       (1.1)      ---     ---       ---     ---    ---
  Write-off of duplicate
   assets                          ---      ---       ---       ---      ---        ---       ---      .2       ---     ---     .2
  Other charges and
   special items                  12.1     (3.3)      ---       8.8      ---        ---       8.8     ---       ---    (8.8)   ---
                              ----------------------------------------------------------------------------------------------------
                                 $26.1    $(5.2)     $2.4     $23.3     $(.6)     $(2.9)    $19.8   $25.2   $(21.9)   $(9.6) $13.5
                              ----------------------------------------------------------------------------------------------------
</TABLE>

Merger-Related Charges

Direct Incremental Costs

      Direct incremental costs related to the Bell Atlantic-GTE merger of $12.2
million (including $11.9 million allocated from Verizon Services) include
compensation, professional services and other costs. Compensation includes
retention payments to employees that were contingent on the close of the merger.
Professional services include investment banking, legal, accounting, consulting
and other advisory fees incurred to obtain federal and state regulatory
approvals and take other actions necessary to complete the merger. Other
includes costs incurred to obtain shareholder approval of the merger, register
securities and communicate with shareholders, employees and regulatory
authorities regarding merger issues. Substantially all of the Bell Atlantic-GTE
merger direct incremental costs have been paid as of December 31, 2000.

Employee Severance Costs

      Employee severance costs related to the Bell Atlantic-GTE merger of $12.8
million (including $9.4 million allocated from Verizon Services), as recorded
under SFAS No. 112, "Employers' Accounting for Postemployment Benefits,"
represent the benefit costs for the separation of management employees who are
entitled to benefits under pre-existing separation plans. The separations either
have or are expected to occur as a result of consolidations and process
enhancements within our company. Accrued postemployment benefit liabilities for
those employees are included in our balance sheets as a component of Accounts
Payable and Accrued Liabilities - Other.

      In 1997, employee severance costs related to the Bell Atlantic-NYNEX
merger were approximately $11 million (including approximately $8 million
allocated from Verizon Services), as recorded under SFAS No. 112 and relate to
the separation of management employees during 1999, 1998 and 1997. Accrued
postemployment benefit liabilities were included in our balance sheets as a
component of Employee Benefit Obligations at December 31, 1999. There is no
remaining severance liability as of December 31, 2000.

Transition Costs

      In addition to the direct merger-related and severance costs discussed
above, from the date of the Bell Atlantic-GTE merger, we expect to incur
transition costs over the next several years related to the Bell Atlantic-GTE
merger. These costs will be incurred to integrate systems, consolidate real
estate, relocate employees and meet certain regulatory conditions of the merger.
They also include costs for advertising and other costs to establish the Verizon
brand. Transition costs related to the Bell Atlantic-GTE merger were $7.0
million in 2000 (including $6.7 million allocated from Verizon Services).

                                      F-12
<PAGE>

                             Verizon Virginia Inc.

      In connection with the Bell Atlantic-NYNEX merger, we recorded transition
costs of $15.2 million in 1999 (including $13.9 million allocated from Verizon
Services) and $11.1 million in 1998 (including $8.0 million allocated from
Verizon Services) associated with integrating the operations of Bell Atlantic
and NYNEX.

Other Initiatives

      During the second quarter of 2000, we also recorded a $.2 million charge
for other actions in relation to the Bell Atlantic-GTE merger. This charge was
related to the write-off of duplicate assets.

      During 1997, we recorded other charges and special items totaling
approximately $39 million (pre-tax) in connection with consolidating operations
and combining organizations, and for other special items arising during the
year. These charges were comprised of the following significant items.

Write-down of Assets and Real Estate Consolidation

      In the third quarter of 1997, we recorded pre-tax charges of approximately
$23 million for the write-down of obsolete fixed assets and for the cost of
consolidating redundant real estate properties. As part of the Bell Atlantic-
NYNEX merger integration planning, a review was conducted of the carrying values
of long-lived assets. This review included estimating remaining useful lives and
cash flows and identifying assets to be abandoned. As a result of these reviews,
we recorded a charge of approximately $22 million for the write-off of assets.
These assets primarily included computers and other equipment used to transport
data for internal purposes. None of these assets are being held for disposal.

     In connection with the Bell Atlantic-NYNEX merger integration efforts, Bell
Atlantic consolidated real estate to achieve a reduction in the total square
footage of building space that it utilizes. We recorded a charge of
approximately $1 million in the third quarter of 1997 related to this
initiative.

Regulatory Contingencies and Other Special Items

     In 1997, we also recorded reductions to operating revenues and charges to
operating expenses totaling approximately $16 million (pre-tax), which consisted
of the following:

     .    Revenue reductions consisted of approximately $15 million for federal
          regulatory matters. These matters relate to specific issues that are
          currently under investigation by federal regulatory commissions. We
          believe that it is probable that the ultimate resolution of these
          pending matters will result in refunds to our customers.

     .    Charges to operating expenses totaled approximately $1 million for
          other post-merger initiatives.


3.    PLANT, PROPERTY AND EQUIPMENT

      The following table displays the details of plant, property and equipment,
which is stated at cost:

<TABLE>
<CAPTION>
                                                                                                 December 31
                                                                                    --------------------------------------
  (Dollars in Millions)                                                                           2000               1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>                <C>
Land                                                                                          $   22.0           $   22.0
Buildings                                                                                        436.9              405.6
Central office equipment                                                                       3,517.5            3,183.6
Outside communications plant                                                                   2,736.1            2,633.5
Furniture, vehicles and other work equipment                                                     451.7              431.6
Other                                                                                             91.1               70.2
Construction-in-progress                                                                         115.0               86.9
                                                                                    --------------------------------------
                                                                                               7,370.3            6,833.4
Accumulated depreciation                                                                      (4,264.2)          (3.931.0)
                                                                                    --------------------------------------
Total                                                                                        $ 3,106.1          $ 2,902.4
                                                                                    ======================================
</TABLE>

                                      F-13
<PAGE>

                             Verizon Virginia Inc.

4.    LEASES

      We lease certain facilities and equipment for use in our operations under
both capital and operating leases. We incurred initial capital lease obligations
of $300 thousand in 2000, $24 thousand in 1999 and $6 thousand in 1998.

      Capital lease amounts included in plant, property and equipment are as
follows:

<TABLE>
<CAPTION>

                                                                                               December 31
                                                                                  ----------------------------------------
(Dollars in Millions)                                                                          2000                  1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>                 <C>
Capital leases                                                                                  $23.7               $19.9
Accumulated amortization                                                                        (10.9)               (9.6)
                                                                                  ----------------------------------------
Total                                                                                           $12.8               $10.3
                                                                                    ======================================
</TABLE>

      Total rent expense amounted to $44.2 million in 2000, $42.5 million in
1999, and $58.4 million in 1998. Of these amounts, $24.6 million in 2000, $26.1
million in 1999 and $44.4 million in 1998, were lease payments to affiliated
companies.

      This table displays the aggregate minimum rental commitments under
noncancelable leases for the periods shown at December 31, 2000:

<TABLE>
<CAPTION>

(Dollars in Millions)
Years                                                                              Capital Leases      Operating Leases
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                   <C>
2001                                                                                        $ 4.7                 $ 6.3
2002                                                                                          3.3                   4.7
2003                                                                                          3.2                   4.1
2004                                                                                          3.2                   2.3
2005                                                                                          3.1                   1.5
Thereafter                                                                                   11.6                   2.1
                                                                                  ----------------------------------------
Total minimum rental commitments                                                             29.1                 $21.0
                                                                                                      ====================
Less interest and executory costs                                                            12.4
                                                                                  -------------------
Present value of minimum lease payments                                                      16.7
Less current installments                                                                     2.6
                                                                                  -------------------
Long-term obligation at December 31, 2000                                                   $14.1
                                                                                  ===================

<CAPTION>

5.    DEBT

      Debt Maturing Within One Year

      Debt maturing within one year consists of the following at December 31:

(Dollars in Millions)                                                                                 2000         1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                  <C>            <C>
Note payable to affiliate (VNFC)                                                                     $500.4         $97.4
Long-term debt maturing within one year                                                                 2.6           1.3
                                                                                               ---------------------------
Total debt maturing within one year                                                                  $503.0         $98.7
                                                                                               ===========================

Weighted average interest rate for note payable outstanding at year-end                                 6.6%          5.9%
                                                                                               ===========================
</TABLE>

      We have a contractual agreement with an affiliated company, Verizon
Network Funding Corporation (VNFC), for the provision of short-term financing
and cash management services. VNFC issues commercial paper and obtains bank
loans to fund the working capital requirements of Verizon Communications'
network services subsidiaries, including us, and invests funds in temporary
investments on their behalf.

                                      F-14
<PAGE>
                            Verizon Virginia Inc.

Long-Term Debt

      Long-term debt consists principally of debentures that we have issued.
Interest rates and maturities of the amounts outstanding are as follows at
December 31:

<TABLE>
<CAPTION>
                                                                         Interest
  Description                                                                Rate     Maturity         2000         1999
--------------------------------------------------------------------------------------------------------------------------
                                                                                                  (Dollars in Millions)
<S>                                                                      <C>          <C>             <C>          <C>
Ten year debenture                                                         7 1/8%      2002           $100.0       $100.0
Thirty-nine year debenture                                                 5 1/4       2005             50.0         50.0
Twelve year debenture                                                      6 1/8       2005            100.0        100.0
Forty year debenture                                                       5 5/8       2007             65.0         65.0
Forty year debenture                                                       6 3/4       2008             70.0         70.0
Twenty year debenture                                                      7 5/8       2012            100.0        100.0
Forty year debenture                                                       7 1/4       2012             50.0         50.0
Thirty year debenture                                                      7 7/8       2022            100.0        100.0
Thirty-one year debenture                                                  7 1/4       2024             75.0         75.0
Thirty-two year debenture                                                  7           2025            125.0        125.0
Forty year debenture                                                       8 3/8       2029            100.0        100.0
                                                                                                --------------------------
                                                                                                       935.0        935.0
Unamortized discount and premium, net                                                                   (4.3)        (4.5)
Capital lease obligations - average rate 9.1% and 9.4%                                                  16.7         14.4
                                                                                                --------------------------
Total long-term debt, including current maturities                                                     947.4        944.9
Less maturing within one year                                                                            2.6          1.3
                                                                                                --------------------------
Total long-term debt                                                                                  $944.8       $943.6
                                                                                                ==========================
</TABLE>

      Our long-term debt outstanding at December 31, 2000 includes $235.0
million that is callable. The call prices range from 101.23% to 100.0% of face
value, depending upon the remaining term to maturity of the issue.


6.    FINANCIAL INSTRUMENTS

Concentrations of Credit Risk

      Financial instruments that subject us to concentrations of credit risk
consist primarily of short-term investments and trade receivables.
Concentrations of credit risk with respect to trade receivables other than those
from AT&T are limited due to the large number of customers. We generated
revenues from services provided to AT&T (primarily network access and billing
and collection) of $187.2 million in 2000, $186.0 million in 1999 and $182.9
million in 1998.

Fair Value of Financial Instruments

      The table below provides additional information about our material
financial instruments at December 31:

<TABLE>
<CAPTION>
  Financial Instrument                                   Valuation Method
---------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>
 Note payable to affiliate (VNFC) and short-term         Carrying amounts
   investments
 Debt (excluding capital leases)                         Future cash flows discounted at current rates
<CAPTION>
                                                                       2000                             1999
                                                         ------------------------------------------------------------------
                                                                Carrying                         Carrying
                                                                  Amount       Fair Value          Amount       Fair Value
---------------------------------------------------------------------------------------------------------------------------
                                                                               (Dollars in Millions)
<S>                                                             <C>              <C>             <C>            <C>
 Debt                                                           $1,431.1         $1,425.1        $1,027.9           $998.0
</TABLE>

                                      F-15
<PAGE>

                             Verizon Virginia Inc.

7.    COMPREHENSIVE INCOME

      Comprehensive income consists of net income and other gains and losses
affecting shareowner's investment that, under generally accepted accounting
principles, are excluded from net income.

      The change in other comprehensive loss, net of income tax expense
(benefit), is as follows:

<TABLE>
<CAPTION>
                                                                                          Years ended December 31
                                                                                   ---------------------------------------
(Dollars in Millions)                                                                     2000          1999         1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>          <C>           <C>
Other comprehensive loss:
  Minimum pension liability adjustment (net of income taxes $.1, $0 and $(.1))             $ .3        $ (.1)       $ (.2)
                                                                                   ---------------------------------------
                                                                                           $ .3        $ (.1)       $ (.2)
                                                                                   =======================================
</TABLE>

      Accumulated other comprehensive loss is comprised of the following:

<TABLE>
<CAPTION>
                                                                                                       December 31
                                                                                                --------------------------
(Dollars in Millions)                                                                                   2000         1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                    <C>          <C>
Accumulated other comprehensive loss:
  Minimum pension liability adjustment                                                                 $ ---        $ (.3)
                                                                                                --------------------------
                                                                                                       $ ---        $ (.3)
                                                                                                ==========================
</TABLE>

8.    STOCK INCENTIVE PLANS

      We participate in stock-based compensation plans sponsored by Verizon
Communications. Verizon Communications applies APB Opinion No. 25 and related
interpretations in accounting for the plans and has adopted the disclosure-only
provisions of SFAS No. 123. If Verizon Communications had elected to recognize
compensation expense based on the fair value at the grant dates for 1998 and
subsequent awards consistent with the provisions of SFAS No. 123, our net income
would have been changed to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                                              Years ended December 31
                                                                                        ----------------------------------
(Dollars in Millions)                                                                     2000          1999         1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>           <C>          <C>
Net income:
  As reported                                                                           $453.8        $430.0       $332.2
  Pro forma                                                                              448.7         426.6        328.4
</TABLE>

      The pro forma net income amounts were determined using the Black-Scholes
option-pricing model based on the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                                                                          2000          1999         1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>           <C>         <C>
Dividend yield                                                                            3.3%          3.4%         3.9%
Expected volatility                                                                      27.5%         20.0%        18.4%
Risk-free interest rate                                                                   6.2%          5.3%         5.6%
Expected lives (in years)                                                                  6             6            6
</TABLE>

      The weighted average value of options granted was $13.09 per option during
2000, $11.58 per option during 1999 and $7.36 per option during 1998.


9.    EMPLOYEE BENEFITS

      We participate in the Verizon Communications benefit plans. Verizon
Communications maintains noncontributory defined benefit pension plans for
substantially all employees. The postretirement healthcare and life insurance
plans for our retirees and their dependents are both contributory and
noncontributory and include a limit on the company's share of cost for recent
and future retirees. We also sponsor defined contribution savings plans to
provide opportunities for eligible employees to save for retirement on a
tax-deferred basis and to encourage employees to acquire and maintain an equity
interest in Verizon Communications.

                                      F-16
<PAGE>

                             Verizon Virginia Inc.

      The structure of Verizon Communications' benefit plans does not provide
for the separate determination of certain disclosures for our company. The
required information is provided on a consolidated basis in Verizon
Communications' Annual Report on Form 10-K for the year ended December 31, 2000.

Pension and Other Postretirement Benefits

      Pension and other postretirement benefits for the majority of our
employees are subject to collective bargaining agreements. Modifications in
benefits have been bargained from time to time, and Verizon Communications may
also periodically amend the benefits in the management plans.

Benefit Cost

<TABLE>
<CAPTION>
                                                                                                 Years ended December 31
                                                                                        ----------------------------------
                                                                  Pension                      Healthcare and Life
                                                     ---------------------------------------------------------------------
(Dollars in Millions)                                      2000       1999        1998        2000        1999       1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>        <C>         <C>         <C>           <C>        <C>
 Net periodic benefit (income) cost                      $(90.0)    $(44.4)     $(35.1)     $(1.0)        $4.3       $7.1
</TABLE>

      Amounts recognized on the balance sheets consist of:

<TABLE>
<CAPTION>
                                                                                                             December 31
                                                                                        ----------------------------------
                                                                  Pension                      Healthcare and Life
                                                     ---------------------------------------------------------------------
(Dollars in Millions)                                            2000             1999              2000             1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>               <C>              <C>
 Prepaid pension asset                                         $103.7            $13.5               ---              ---
 Employee benefit obligations                                    (5.8)            (6.5)          $(260.0)         $(265.7)
 Other assets                                                     ---               .3               ---              ---
 Accumulated other comprehensive loss                             ---               .4               ---              ---
</TABLE>

      The changes in benefit obligations from year to year were caused by a
number of factors, including changes in actuarial assumptions (see Assumptions)
and plan amendments.

Assumptions

      The actuarial assumptions used are based on market interest rates, past
experience, and management's best estimate of future economic conditions.
Changes in these assumptions may impact future benefit costs and obligations.
The weighted-average assumptions used in determining expense and benefit
obligations are as follows:

<TABLE>
<CAPTION>

                                                                     Pension                    Healthcare and Life
                                                          -----------------------------------------------------------------
                                                              2000        1999      1998       2000        1999       1998
---------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>         <C>       <C>        <C>         <C>        <C>
Discount rate at end of year                                7.75%       8.00%     7.00%      7.75%       8.00%      7.00%
Long-term rate of return on plan assets for the year        9.25        9.00      8.90       9.25        9.00       8.90
Rate of future increases in compensation at end of year     5.00        4.00      4.00       4.00        4.20       4.00
Medical cost trend rate at end of year                                                       5.00        5.50       6.00
   Ultimate (year 2001)                                                                      5.00        5.00       5.00
Dental cost trend rate at end of year                                                        3.50        3.50       3.50
   Ultimate (year 2002)                                                                      3.00        3.00       3.00
</TABLE>

Savings Plans and Employee Stock Ownership Plans

      Substantially all of our employees are eligible to participate in savings
plans maintained by Verizon Communications. Verizon Communications maintains two
leveraged employee stock ownership plans (ESOPs) for its employees of the former
Bell Atlantic Companies. Under these plans, a certain percentage of eligible
employee contributions are matched with shares of Verizon Communications' common
stock. Verizon Communications recognizes leveraged ESOP cost based on the
modified shares allocated method for these leveraged ESOPs that held securities
before December 15, 1989. We recognize our proportionate share of total ESOP
cost based on our matching obligation attributable to our participating
employees. We recorded total savings plan costs of $8.2 million in 2000, $5.3
million in 1999 and $4.2 million in 1998.

                                      F-17
<PAGE>

                             Verizon Virginia Inc.

10.   INCOME TAXES

      The components of income tax expense are presented in the following table:

<TABLE>
<CAPTION>
                                                                                          Years ended December 31
                                                                                   ---------------------------------------
(Dollars in Millions)                                                                     2000          1999         1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>           <C>          <C>
Current:
    Federal                                                                             $164.4        $171.8       $153.9
    State and local                                                                       30.2          31.6         28.4
                                                                                   ---------------------------------------
                                                                                         194.6         203.4        182.3
                                                                                   ---------------------------------------
Deferred:
    Federal                                                                               76.7          59.9         25.9
    State and local                                                                       13.8          10.8          4.3
                                                                                   ---------------------------------------
                                                                                          90.5          70.7         30.2
                                                                                   ---------------------------------------
                                                                                         285.1         274.1        212.5
Investment tax credits                                                                    (1.5)         (2.0)        (2.5)
                                                                                   ---------------------------------------
Total income tax expense                                                                $283.6        $272.1       $210.0
                                                                                   =======================================
</TABLE>

      The following table shows the primary reasons for the difference between
the effective income tax rate and the statutory federal income tax rate:

<TABLE>
<CAPTION>
                                                                                          Years ended December 31
                                                                                   ---------------------------------------
                                                                                          2000          1999         1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>           <C>          <C>
Statutory federal income tax rate                                                       35.0%         35.0%        35.0%
Investment tax credits                                                                   (.1)          (.2)         (.3)
State income taxes, net of federal tax benefits                                          3.9           3.9          3.9
Other, net                                                                               (.3)           .1           .1
                                                                                   ---------------------------------------
Effective income tax rate                                                               38.5%         38.8%        38.7%
                                                                                   =======================================
</TABLE>

      Deferred taxes arise because of differences in the book and tax bases of
certain assets and liabilities. Significant components of deferred tax
liabilities (assets) are shown in the following table:

<TABLE>
<CAPTION>
                                                                                                       December 31
                                                                                                --------------------------
(Dollars in Millions)                                                                                   2000         1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                  <C>          <C>
Deferred tax liabilities:
  Depreciation                                                                                       $ 371.3      $ 373.5
  Software                                                                                              25.6          8.3
  Other                                                                                                 35.6         38.4
                                                                                                --------------------------
                                                                                                       432.5        420.2
                                                                                                --------------------------
Deferred tax assets:
  Employee benefits                                                                                    (92.8)      (151.8)
  Allowance for uncollectible accounts                                                                 (24.4)       (10.8)
  Other                                                                                                (25.6)       (50.1)
                                                                                                --------------------------
                                                                                                      (142.8)      (212.7)
                                                                                                --------------------------
Net deferred tax liability                                                                           $ 289.7      $ 207.5
                                                                                                ==========================
</TABLE>

      Deferred tax assets include approximately $159 million at December 31,
2000 and $168 million at December 31, 1999, related to postretirement benefit
costs recognized under SFAS No. 106. This deferred tax asset will gradually be
realized over the estimated lives of current retirees and employees.

                                      F-18
<PAGE>

                             Verizon Virginia Inc.

11.   ADDITIONAL FINANCIAL INFORMATION

      The tables below provide additional financial information related to our
financial statements:

<TABLE>
<CAPTION>
                                                                                                       December 31
                                                                                                --------------------------
(Dollars in Millions)                                                                                   2000         1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                  <C>          <C>
 BALANCE SHEETS:
 Accounts payable and accrued liabilities:
   Accounts payable - other                                                                          $238.3       $224.9
   Accounts payable - affiliates                                                                      145.1        190.0
   Accrued taxes                                                                                       24.0         47.9
   Accrued vacation pay                                                                                31.2         28.3
   Accrued expenses                                                                                    37.9         26.9
   Interest payable - other                                                                            20.4         20.2
   Interest payable - affiliate                                                                         2.7           .5
                                                                                                --------------------------
                                                                                                     $499.6       $538.7
                                                                                                ==========================
 Other current liabilities:
   Advance billings and customer deposits                                                            $ 74.5       $ 69.0
   Deferred income taxes                                                                                ---           .3
   Other                                                                                               58.4          ---
                                                                                                --------------------------
                                                                                                     $132.9       $ 69.3
                                                                                                ==========================
<CAPTION>
                                                                                          Years ended December 31
                                                                                  ----------------------------------------
(Dollars in Millions)                                                                    2000          1999          1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>           <C>           <C>
 STATEMENTS OF CASH FLOWS:
 Cash paid during the year for:
   Income taxes, net of amounts refunded                                               $221.5        $171.1        $178.7
   Interest, net of amounts capitalized                                                  75.9          68.9          66.8

 STATEMENTS OF INCOME:
 Interest expense incurred, net of amounts capitalized                                   78.6          69.4          67.6
 Capitalized interest                                                                     7.5           4.0           8.6
 Advertising expense                                                                      2.9          12.4          14.3
</TABLE>

      Advertising expense includes $2.9 million in 2000, $12.4 million in 1999
and $13.9 million in 1998 allocated to us by Verizon Services Corp.

      At December 31, 2000 and 1999, $23.3 million and $16.4 million of bank
overdrafts were classified as accounts payable.


12.   TRANSACTIONS WITH AFFILIATES

      Our financial statements include transactions with Verizon Services Corp.
(Verizon Services), Verizon Network Funding Corporation (VNFC), Verizon
Communications, and various other affiliates.

      We have contractual arrangements with Verizon Services for the provision
of various centralized services. These services are divided into two broad
categories. The first category is comprised of network related services which
generally benefit only Verizon Communications' operating telephone subsidiaries,
including us. These services include administration, marketing, product
advertising, sales, information systems, network technology planning, labor
relations, and staff support for various network operations. The second category
is comprised of overhead and support services which generally benefit all
subsidiaries of Verizon Communications. Such services include corporate
governance and staff support in finance, external affairs, legal and corporate
secretary, media relations, employee communications, corporate advertising,
human resources, and treasury. Costs may be either directly assigned to one
subsidiary or allocated to more than one subsidiary based on functional reviews
of the work preformed.

      We recognize interest expense in connection with contractual arrangements
with VNFC to provide short-term financing, investing and cash management
services to us (see Note 5).

                                      F-19
<PAGE>

                             Verizon Virginia Inc.

      Operating revenues include obligations to affiliates in connection with an
interstate revenue sharing arrangement with Verizon Communications' operating
telephone subsidiaries. Other operating revenues and expenses include
miscellaneous items of income and expense resulting from transactions with other
affiliates, primarily rental of facilities and equipment.

      In December 2000, we transferred our advanced data assets, with a net book
value of approximately $32 million, for a 14.53% indirect ownership interest in
Verizon Advanced Data Inc. (VADI). VADI is an affiliated company which provides
new exchange access services. In connection with our investment, we record
equity income/(losses).

      In June 1999, Bell Atlantic Full Services Channel, Inc., an affiliate,
sold its ownership interest in SMS/800 to us and the other operating telephone
companies of Verizon Communications at its fair value in accordance with a
Federal Communications Commission order. SMS/800 is a venture jointly held by
the Bell Operating Companies that administers the centralized national database
system associated with toll free numbers. Our ownership percentage has increased
to 1.98% as a result of the merger of SBC Communications Inc. and Ameritech
Corporation. We paid $80,635 to receive a 1.58% ownership interest in SMS/800.
In connection with our investment, we record equity income and receive cash
dividends.

      We also paid cash dividends to our parent, Verizon Communications.

      Transactions with affiliates are summarized as follows:

<TABLE>
<CAPTION>
                                                                                        Years ended December 31
                                                                               -------------------------------------------
(Dollars in Millions)                                                                   2000           1999          1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>            <C>            <C>
 Operating revenues:
   Interstate revenue sharing from affiliates                                        $(25.5)        $(25.5)        $(25.5)
   Other revenue from affiliates                                                        79.3           62.2          54.7
                                                                               -------------------------------------------
                                                                                        53.8           36.7          29.2
                                                                               -------------------------------------------
 Operating expenses:
   Verizon Services - network                                                          211.8          201.4         260.7
   Verizon Services - other                                                            274.0          240.9         199.2
   Other                                                                                63.2           63.2          78.0
                                                                               -------------------------------------------
                                                                                       549.0          505.5         537.9
                                                                               -------------------------------------------

 Other income:
   Equity income from SMS/800                                                            1.2             .5           ---
   Equity loss from VADI                                                                (3.7)           ---           ---
                                                                               -------------------------------------------
                                                                                        (2.5)            .5           ---
                                                                               -------------------------------------------

 Interest expense to VNFC                                                               17.2            4.7           7.5

 Dividends paid to Verizon Communications                                              384.0          255.1         152.0

 Dividends received from SMS/800                                                          .6             .5           ---
</TABLE>

      Outstanding balances with affiliates are reported on the balance sheets at
December 31, 2000 and 1999 as Accounts Receivable - Affiliates, Note Payable to
Affiliate, and Accounts Payable and Accrued Liabilities - Affiliates.


13.   COMMITMENTS AND CONTINGENCIES

      Various legal actions and regulatory proceedings are pending to which we
are a party. We have established reserves for specific liabilities in connection
with regulatory and legal matters which we currently deem to be probable and
estimable. We do not expect that the ultimate resolution of pending regulatory
and legal matters in future periods will have a material effect on our financial
condition, but it could have a material effect on our results of operations.

      Several federal regulatory matters may require us to refund a portion of
the revenues collected in the current and prior periods. The outcome of each
pending matter, as well as the time frame within which each will be resolved, is
not presently determinable.

      Federal and state regulatory conditions to the Bell Atlantic - GTE merger
include certain commitments to, among other things, promote competition and the
widespread deployment of advanced services, while helping to ensure that

                                      F-20
<PAGE>

                             Verizon Virginia Inc.

consumers continue to receive high-quality, low cost telephone services. In some
cases, there are significant penalties associated with not meeting these
commitments. The cost of satisfying these commitments could have a significant
impact on net income in future periods.


14.   SEGMENT INFORMATION

      We have one reportable segment, which provides domestic wireline
telecommunications services. Specifically, we provide local telephone services
including voice and data transport, enhanced and custom calling features,
network access, directory assistance and private lines. In addition, we provide
customer premises equipment distribution, billing and collection and pay
telephone services.


15.   QUARTERLY FINANCIAL INFORMATION (unaudited)

<TABLE>
<CAPTION>
                                                                   Operating            Operating
Quarter Ended                                                       Revenues               Income           Net Income
------------------------------------------------------------------------------------------------------------------------
                                                                             (Dollars in Millions)
<S>                                                                <C>                  <C>                 <C>
2000:
March 31                                                             $ 600.2                $221.5               $126.3
June 30*                                                               627.3                 201.3                116.6
September 30                                                           627.7                 202.0                112.0
December 31                                                            636.1                 189.2                 98.9
                                                         ---------------------------------------------------------------
Total                                                               $2,491.3                $814.0               $453.8
                                                         ===============================================================

1999:
March 31                                                            $  558.9                $175.8               $ 97.1
June 30                                                                595.1                 199.5                111.5
September 30                                                           600.2                 202.2                113.3
December 31                                                            596.2                 192.5                108.1
                                                         ---------------------------------------------------------------
Total                                                               $2,350.4                $770.0               $430.0
                                                         ===============================================================
</TABLE>

*Results of operations for the second quarter of 2000 include costs related to
the Bell Atlantic - GTE merger.

                                      F-21
<PAGE>

                             Verizon Virginia Inc.

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
              For the Years Ended December 31, 2000, 1999 and 1998
                              (Dollars in Millions)

<TABLE>
<CAPTION>
                                                                  Additions
                                                      ----------------------------------
                                        Balance at                          Charged to
                                      Beginning of        Charged to    Other Accounts        Deductions    Balance at End
Description                                 Period          Expenses           Note(a)          Note (b)         of Period
---------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                 <C>           <C>                   <C>           <C>
Allowance for Uncollectible
Accounts Receivable:

Year 2000                                      $29.6             $35.6             $26.8             $54.4             $37.6

Year 1999                                      $28.1             $21.4             $35.1             $55.0             $29.6

Year 1998                                      $27.6             $15.9             $36.9             $52.3             $28.1


Merger-Related Costs:

Year 2000                                      $19.8             $25.2             $ ---             $31.5             $13.5

Year 1999                                      $23.3             $ ---             $ ---              $3.5             $19.8

Year 1998                                      $26.1             $ ---             $ ---              $2.8             $23.3
</TABLE>

(a)      (1) Allowance for Uncollectible Accounts Receivable includes amounts
         previously written off which were credited directly to this account
         when recovered, and (2) accruals charged to accounts payable for
         anticipated uncollectible charges on purchases of accounts receivable
         from others which we billed.

(b)      Amounts written off as uncollectible, utilized or paid.

                                      F-22
<PAGE>

Form 10-K for 2000
File No. 1-6964
Page 1 of 1

                                 EXHIBIT INDEX


Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission (SEC), are incorporated herein by reference as exhibits
hereto.


Exhibit Number (Referenced to Item 601 of Regulation S-K)
---------------------------------------------------------

3a         Certificate of Incorporation of the registrant, as amended July 28,
           1977. (Exhibit 3a to the registrant's Annual Report on Form 10-K for
           the year ended December 31, 1985, File No. 1-6964.)

           3a(i)   Certificate of Amendment to the registrant's Certificate of
                   Incorporation, as amended August 24, 1990. (Exhibit 3a(i) to
                   the registrant's Annual Report on Form 10-K for the year
                   ended December 31, 1990, File No. 1-6964.)

           3a(ii)  Certificate of Amendment to the registrant's Certificate of
                   Incorporation, adopted December 31, 1993 and filed January
                   13, 1994. (Exhibit 3a(ii) to the registrant's Annual Report
                   on Form 10-K for the year ended December 31, 1993, File No.
                   1-6964.)

           3a(iii) Articles of Amendment of Articles of Incorporation, adopted
                   June 30, 2000. (Exhibit 3a(iii) to the registrant's Quarterly
                   Report on Form 10-Q for the quarter ended June 30, 2000, File
                   No. 1-6964.)

3b         By-Laws of the registrant, as amended December 31, 1996. (Exhibit 3b
           to the registrant's Annual Report on Form 10K for the year ended
           December 31, 1996, File No. 1-6964.)

           3b(i)  Consent of Sole Stockholder of Verizon Virginia Inc., dated
                  December 31, 1996. (Exhibit 3b(i) to the registrant's Annual
                  Report on Form 10K for the year ended December 31, 1996, File
                  No. 1-6964.)

4          No instrument which defines the rights of holders of long-term debt
           of the registrant is filed herewith pursuant to Regulation S-K, Item
           601(b)(4)(iii)(A). Pursuant to this regulation, the registrant hereby
           agrees to furnish a copy of any such instrument to the SEC upon
           request.

10a        Agreement among Verizon Services Corp. and the Verizon Communications
           Inc. telephone subsidiaries, dated November 7, 1983. (Exhibit 10b to
           Verizon Communications Inc. Annual Report on Form 10-K for the year
           ended December 31, 1993, File No. 1-8606.)

23a        Consent of Independent Auditors.

23b        Consent of Independent Accountants.