SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(Mark one)
X Annual Report pursuant to 15(d) of the Securities Exchange
- -----
Act of 1934 (Fee required)
For the fiscal year ended December 31, 1997.
OR
Transition report pursuant to Section 15(d) of the
- -----
Securities Exchange Act of 1934 (No fee required)
For the transition period from to
Commission file number 1-8864.
A. Full title of the Plan:
USG CORPORATION INVESTMENT PLAN (Formerly USG
CORPORATION INVESTMENT PLAN FOR SALARIED EMPLOYEES)
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
USG CORPORATION, 125 SOUTH FRANKLIN STREET, CHICAGO,
ILLINOIS 60606
<PAGE>
REQUIRED INFORMATION
Financial Statements:
Plan financial statements and schedules prepared in accordance with the
financial reporting requirements of ERISA attached hereto, including a Consent
of Independent Public Auditors with respect to Form S-8 for 1997.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
members of the Pension and Investment Committee administering the Plan have duly
caused this annual report to be signed by the undersigned thereunto duly
authorized.
USG CORPORATION INVESTMENT PLAN
By: /s/ Harold E. Pendexter, Jr.
--------------------------------
H. E. Pendexter, Jr.,
Member of Pension and Investment
Committee
Date: March 14, 1998
<PAGE>
USG CORPORATION
INVESTMENT PLAN
REPORT ON AUDITED
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
TABLE OF CONTENTS
PAGE
<CAPTION>
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statement of Net Assets Available
for Plan Benefits 2
Statement of Changes in Net Assets
Available for Plan Benefits 4
Notes to Financial Statements 6
SUPPLEMENTAL SCHEDULES:
I. Schedule of Investments Held
at Year End 13
II. Schedule of Reportable Transactions 14
</TABLE>
<PAGE>
MEMBER OF THE MEMBER OF THE
ILLINOIS CPA AMERICAN INSTITUTE
SOCIETY OF CERTIFIED
PUBLIC ACCOUNTANTS
Hill, Taylor LLC
CERTIFIED PUBLIC ACCOUNTANTS
116 South Michigan Avenue - 11th Floor
Chicago, Illinois 60603
312-332-4964
Fax: 312-332-0181
INDEPENDENT AUDITORS' REPORT
PENSION AND INVESTMENT COMMITTEE
USG CORPORATION
We have audited the accompanying statement of net assets available for plan
benefits of the USG Corporation Investment Plan as of December 31, 1997 and
1996, and the related statement of changes in net assets available for plan
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 1997 and 1996, and the changes in net assets available for plan
benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of investments
held at year end as of December 31, 1997, and reportable transactions for the
year ended December 31, 1997, are presented for purposes of complying with the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974 and are not a required part
of the basic financial statements. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
March 23, 1998
<PAGE>
<TABLE>
USG CORPORATION INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1997 AND 1996
1997
------------------------------------------------------------------------------------------
USG COMMON STABLE GOVERNMENT
STOCK VALUE INVESTMENT
FUND FUND FUND
----------------------- ----------------------- ----------------------
<S> <C> <C> <C>
ASSETS:
Investments at
Market $29,734,432 $121,189,170 ---
262,606,745
Receivables:
Employer contributions
receivable 1,234,871 4,309,048 ---
Employee loans
receivable --- --- ---
Employee contributions
receivable --- --- ---
Interest and
dividend receivable 7,687 34,171 ---
Pending transactions due
to loan repayments --- (38) ---
----------------------- ----------------------- ----------------------
Total Receivables 1,242,558 4,343,181 ---
----------------------- ----------------------- ----------------------
Total Assets 30,976,990 125,532,351 ---
----------------------- ----------------------- ----------------------
LIABILITIES:
Accrued Administrative
Fees 3,837 24,167 ---
----------------------- ----------------------- ----------------------
Total Liabilities 3,837 24,167 ---
----------------------- ----------------------- ----------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $30,973,153 $125,508,184 ---
======================= ======================= ======================
</TABLE>
<TABLE>
EQUITY SMALL CAP INTERNATIONAL
INDEX BALANCED GROWTH EQUITY EQUITY
FUND FUND FUND FUND FUND
- ----------------------- ----------------------- ---------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
$49,954,109 $17,415,648 $32,629,299 $5,692,313 $2,907,015
2,304,557 847,104 2,110,024 358,813 182,162
--- --- --- --- ---
--- --- --- --- ---
--- --- --- --- ---
(8) --- --- 13,683 ---
- ----------------------- ----------------------- ---------------------- ----------------------- -----------------------
2,304,549 847,104 2,110,024 372,496 182,162
- ----------------------- ----------------------- ---------------------- ----------------------- -----------------------
52,258,658 18,262,752 34,739,323 6,064,809 3,089,177
- ----------------------- ----------------------- ---------------------- ----------------------- -----------------------
6,665 2,341 4,496 776 396
- ----------------------- ----------------------- ---------------------- ----------------------- -----------------------
6,665 2,341 4,496 776 396
- ----------------------- ----------------------- ---------------------- ----------------------- -----------------------
$52,251,993 $18,260,411 $34,734,827 $6,064,033 $3,088,781
======================= ======================= ====================== ======================= =======================
</TABLE>
<TABLE>
FORFEITURE INVESTMENT
BOND & CASH PLAN
FUND ACCOUNT LOANS TOTAL
---------------------- ----------------------- ----------------------- ---------------------
<S> <C> <C> <C>
$2,586,322 $498,437 $ --- $262,606,745
79,881 (350,000) --- 11,076,460
--- --- 13,799,534 13,799,534
--- 150,707 --- 150,707
11,699 3,416 --- 56,973
--- --- (13,637) ---
---------------------- ----------------------- ----------------------- ---------------------
91,580 (195,877) 13,785,897 25,083,674
---------------------- ----------------------- ----------------------- ---------------------
2,677,902 302,560 13,785,897 287,690,419
---------------------- ----------------------- ----------------------- ---------------------
316 60,780 --- 103,774
---------------------- ----------------------- ----------------------- ---------------------
316 60,780 --- 103,774
---------------------- ----------------------- ----------------------- ---------------------
$2,677,586 $241,780 $13,785,897 $287,586,645
====================== ======================= ======================= =====================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
<TABLE>
USG CORPORATION INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1997 AND 1996
1996
- ----------------------------------------------------------------------------------------------------------------------------
USG COMMON FIXED GOVERNMENT EQUITY
STOCK INCOME INVESTMENT INDEX BALANCED
FUND FUND FUND FUND FUND
-------------- ------------- ------------ ----------- -------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at
Market $19,185,797 $122,884,255 $4,666,089 $32,485,092 $12,295,698
Receivables:
Employer contributions
receivable --- 7,960,213 --- --- ---
Employee loans
receivable --- --- --- --- ---
Interest and
dividend receivable 70 195,452 20,227 5 25
Pending transactions
from participants'
elections for transfers
between funds or
forfeitures --- --- 111,679 431,678 194,274
------- ------- -------
Total Receivables 70 8,155,665 131,906 431,683 194,299
-- --------- ------- ------- -------
Total Assets 19,185,867 131,039,920 4,797,995 32,916,775 12,489,997
---------- ----------- --------- ---------- ----------
LIABILITIES:
Pending transactions
from participants'
elections for transfers
between funds or
forfeitures 554,236 1,422,440 --- --- ---
------- ---------
Total Liabilities 554,236 1,422,440 --- --- ---
------- ---------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $18,631,631 $129,617,480 $4,797,995 $32,916,775 $12,489,997
=========== ============ ========== =========== ===========
</TABLE>
<TABLE>
- -------------------------------------------------------------------
FORFEITURE INVESTMENT
GROWTH CASH PLAN
FUND ACCOUNT LOANS TOTAL
------------ ----------- ------------- ------------
<S> <C> <C> <C>
$20,394,899 $154,061 $ --- $212,065,891
--- (114,318) --- 7,845,895
--- --- 7,840,092 7,840,092
3 704 --- 216,486
1,271,645 29,143 --- 2,038,419
--------- ------ ---------
1,271,648 (84,471) 7,840,092 17,940,892
--------- ------- --------- ----------
21,666,547 69,590 7,840,092 230,006,783
---------- ------ --------- -----------
--- --- 697,912 2,674,588
------- ---------
--- --- 697,912 2,674,588
------- ---------
$21,666,547 $69,590 $7,840,092 $227,332,195
=========== ======= ========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<TABLE>
USG CORPORATION INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- ------------------------------------------------------------------------------------------------------------------------------------
1997
USG COMMON STABLE GOVERNMENT EQUITY
STOCK VALUE INVESTMENT INDEX
FUND FUND FUND FUND
---- ---- ---- ----
<CAPTION>
<S> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $18,631,631 $129,617,480 $4,797,995 $32,916,775
----------- ------------ ---------- -----------
ADD (DEDUCT):
Corporation contributions 1,398,324 7,271,245 --- 2,661,254
Employee contributions 2,318,484 8,686,104 255,572 4,547,491
--------- --------- ------- ---------
3,716,808 15,957,349 255,572 7,208,745
--------- ---------- ------- ---------
Income from investments:
Dividend income --- --- --- 1,077,313
Interest income 39,948 7,640,952 119,041 156
Realized gain (loss) on
sale of investments (6,243,322) --- --- 1,997,354
Unrealized appreciation
for the year 14,736,995 --- --- 8,598,712
---------- ---------
8,533,621 7,640,952 119,041 11,673,535
--------- --------- ------- ----------
Benefit payments and
participant withdrawals (887,421) (9,282,155) (163,334) (1,725,328)
Participants' elections for
transfers between funds
or forfeitures 1,224,705 (13,227,162) (5,029,568) 2,713,611
Net fund transactions (227,047) (5,055,099) 20,294 (499,609)
due to loans
Administrative expenses (19,144) (143,181) --- (35,736)
------- -------- -------
Net increase in
assets during the year 12,341,522 (4,109,296) (4,797,995) 19,335,218
---------- ---------- ---------- ----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $30,973,153 $125,508,184 --- $52,251,993
=========== ============ ===========
</TABLE>
<TABLE>
SMALL CAP INTERNATIONAL FORFEITURE
BALANCED GROWTH EQUITY EQUITY BOND CASH
FUND FUND FUND FUND FUND ACCOUNT
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
$12,489,997 $21,666,547 --- --- --- $69,590
----------- ----------- -------
975,838 2,447,597 406,637 207,461 85,896 (350,000)
1,777,307 4,527,844 307,799 163,543 40,361 ---
--------- --------- ------- ------- ------
2,753,145 6,975,441 714,436 371,004 126,257 (350,000)
--------- --------- ------- ------- ------- --------
1,383,387 2,423,257 243,301 318,159 113,909 ---
489 149 --- 1 12 26,663
338,031 897,796 32,151 (36,009) 5,986 ---
1,303,551 2,692,456 (271,521) (470,957) (27,803) ---
--------- --------- -------- -------- -------
3,025,458 6,013,658 3,931 (188,806) 92,104 26,663
--------- --------- ----- -------- ------ ------
(877,034) (1,199,424) (37,806) (24,679) (8,568) (28,952)
977,761 1,568,768 5,423,697 2,963,455 2,475,697 909,036
(96,160) (266,530) (36,655) (30,154) (6,672) (241,898)
(12,756) (23,633) (3,570) (2,039) (1,232) (142,659)
------- ------- ------ ------ ------ --------
5,770,414 13,068,280 6,064,033 3,088,781 2,677,586 172,190
--------- ---------- --------- --------- --------- -------
$18,260,411 $34,734,827 $6,064,033 $3,088,781 $2,677,586 $241,780
=========== =========== ========== ========== ========== ========
</TABLE>
<TABLE>
INVESTMENT
PLAN
LOANS TOTAL
----- -----
<S> <C>
$7,142,180 $227,332,195
---------- ------------
--- 15,104,252
--- 22,624,505
----------
--- 37,728,757
----------
--- 5,559,326
566,254 8,393,665
--- (3,008,013
--- 26,561,433
----------
566,254 37,506,411
------- ----------
(362,067) (14,596,768
--- ---
6,439,530 ---
--- (383,950)
--------
6,643,717 60,254,450
--------- ----------
$13,785,897 $287,586,645
=========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<TABLE>
USG CORPORATION INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1996
- ------------------------------------------------------------------------------------------------------------------------------------
USG COMMON FIXED GOVERNMENT EQUITY
STOCK INCOME INVESTMENT INDEX
FUND FUND FUND FUND
<CAPTION>
<S> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $15,757,656 $123,960,139 $4,388,498 $22,841,934
----------- ------------ ---------- -----------
ADD (DEDUCT):
Corporation contributions --- 11,859,525 --- ---
Employee contributions 2,142,189 8,635,407 507,642 3,073,532
--------- --------- ------- ---------
2,142,189 20,494,932 507,642 3,073,532
--------- ---------- ------- ---------
Income from investments:
Dividend income --- --- --- 600,693
Interest income 1,698 7,325,085 234,013 665
Realized gain (loss) on
sale of investments (2,078,354) --- --- 808,159
Unrealized depreciation
for the year 4,338,774 --- --- 4,260,634
--------- ---------
2,262,118 7,325,085 234,013 5,670,151
--------- --------- ------- ---------
Benefit payments and
participant withdrawals (996,138) (13,205,907) (315,855) (2,036,392)
Participants' elections for
transfers between funds
or forfeitures (813,112) (7,691,826) (35,878) 3,198,440
Net fund transactions 278,918 (1,264,943) 19,575 169,110
due to loans
Administrative expenses --- --- --- ---
Net increase in
assets during the year 2,873,975 5,657,341 409,497 10,074,841
--------- --------- ------- ----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $18,631,631 $129,617,480 $4,797,995 $32,916,775
=========== ============ ========== ===========
</TABLE>
<TABLE>
FORFEITURE INVESTMENT
BALANCED GROWTH & CASH PLAN
FUND FUND ACCOUNT LOANS TOTAL
---- ---- ------- ----- -----
<CAPTION>
<S> <C> <C> <C> <C>
$9,150,249 $12,484,278 $90,882 $6,351,744 $195,025,380
---------- ----------- ------- ---------- ------------
--- --- (206,658) --- 11,652,867
1,462,446 2,652,956 --- --- 18,474,172
--------- --------- ----------
1,462,446 2,652,956 (206,658) --- 30,127,039
--------- --------- -------- ----------
384,991 148,113 --- --- 1,133,797
1,296 679 4,083 490,824 8,058,343
1,015,612 755,115 --- 1 500,533
114,503 2,651,167 (1) (1) 11,365,076
------- --------- -- -- ----------
1,516,402 3,555,074 4,082 490,824 21,057,749
--------- --------- ----- ------- ----------
(994,371) (954,476) 250 (339,239) (18,842,128)
1,357,547 3,767,950 216,879 --- ---
(2,276) 160,765 --- 638,851 ---
--- --- (35,845) --- (35,845)
------- -------
3,339,748 9,182,269 (21,292) 790,436 32,306,815
--------- --------- ------- ------- ----------
$12,489,997 $21,666,547 $69,590 $7,142,180 $227,332,195
=========== =========== ======= ========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
USG CORPORATION
INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. DESCRIPTION OF THE PLAN
The USG Corporation Investment Plan, also known as the USG Corporation
Investment Plan for Salaried Employees prior to January 1, 1989 ("The Plan"),
was approved by the stockholders of the Corporation on May 11, 1977, and became
effective on July 1, 1977. The Plan was subsequently amended and completely
restated effective as of January 1, 1989 and most recently as of July 1, 1997
("restated Plan"). The amendments and restatements incorporate all prior
amendments to the Plan and make changes to reflect the merger of the USG
Corporation Savings Plan for Hourly Employees and change the name of the Plan to
the USG Corporation Investment Plan, effective January 1, 1989; and to implement
the daily valuation of investments in the participants' accounts at fair market
value on each business day effective July 1, 1997.
The Plan was established to provide a means for eligible hourly and salaried
employees to participate in the earnings of the Corporation, to build a
supplemental retirement fund and to provide additional disability and death
benefits.
The Plan provides, among other things, that participants may contribute up to
12% (9% for highly compensated employees) of their eligible pay to the Plan
through payroll deductions on a before-tax basis during the year effective July
1, 1997, 9% from January 1, 1989 to June 30, 1997, 15% from October 1, 1985 to
December 31, 1988 and 12% prior to October 15, 1985. The amount of distributions
to be made upon withdrawal from the Plan is dependent upon the participant's and
the Corporation's contributions. The Plan requires completion of five years of
credited service in order to be 100% vested in the Corporation contribution.
Employee contributions are always 100% vested. In addition, the Plan contains
provisions under which the entire amount credited to a participant's account is
distributable upon a participant's retirement, disability, or death.
Employee contributions are invested by the Trustee in any one or a combination
of eight funds: (a) common stock of USG Corporation (USG Common Stock Fund), (b)
an equity index fund which provides investment results that are designed to
correspond to the performance of publicly traded common stocks, as represented
by the Standard & Poor's 500 Composite Stock Price Index (Equity Index Fund),
(C) a balanced fund which invests in several broadly diversified asset classes,
including domestic and foreign common stock and bonds, preferred stocks and cash
(Balanced Fund), (d) a growth fund which invests primarily in equity securities
of large market capitalization companies with earnings that are expected to grow
at an above-average rate, but may be further diversified by investment of a
small portion of the assets in domestic bonds, foreign common stocks and bonds,
and cash (Growth Fund), (e) a small cap equity fund which seeks maximum
long-term growth of capital by investing in common stock of rapidly growing U.S.
companies with market capitalization of less than $1 billion at the time of
initial investment (Small Cap Equity Fund), (f) an international equity fund
which seeks long-term capital appreciation through investments in common stock
of established non-U.S. companies (International Equity Fund), (g) a bond fund
which seeks to provide current income and preservation of capital by investing
in investment grade corporate debt securities, government bonds and mortgages in
both U.S. and foreign markets, (Bond Fund) or (h) a managed separate account
which seeks to preserve principal and income while maximizing current income by
investing in a diversified pool of Guaranteed Investment Contracts (GICs),
separate account GICs, synthetic GICs or Structured Investment Contracts (SICs)
and Bank Investment Contracts (BICs) of varying maturity, size and yield (Stable
Value Fund).
Effective July 1, 1997, the Stable Value Fund replaced the Fixed Income Fund and
the Government Investment Fund. All existing balances in the Fixed Income Fund
and the Government Investment Fund were transferred to the Stable Value Fund on
July 1, 1997.
The Equity Index Fund is invested in the Vanguard Institutional Index Fund.
The Balanced Fund is invested in the Fidelity Puritan Fund.
The Growth Fund is invested in the American Express/IDS New Dimensions Fund.
The Small Cap Equity Fund is invested in the Franklin Small Cap Growth Fund -
Class 1.
The International Equity Fund is invested in the Templeton Foreign Fund - Class
1.
The Bond Fund is invested in the PIMCO Total Return Fund Institutional Class.
The Stable Value Fund is managed by PRIMCO Capital Management. At December 31,
1997, the Stable Value Fund (Fixed Income Fund in 1996) was primarily composed
of group annuity contracts maintained by Aetna Life & Casualty Company, Bankers
Trust, Commonwealth Life Insurance Company, Jackson National Life Insurance
Company, Allstate Insurance Company, John Hancock Mutual Life Insurance Company
and SunAmerica Life Insurance Company.
Participants may elect to have their contributions invested in 1% increments in
any fund or combination of funds and to change their contribution rate, suspend
or resume their contributions, change their investment allocations, transfer
their investments from one fund to another and apply for a loan by calling the
USG Investment Plan Connection, an automated telephone service, on any day.
Certain Executive officers of the Corporation must pre-clear any transfer in or
out of the USG Common Stock Fund with the USG Corporate Secretary.
The Corporation made a regular 25% matching contribution up to the first 6%
of the participants' eligible pay contributed to the Plan, credited to the
participants' accounts each pay period.In addition, the Corporation also made an
annual profit sharing matching contribution of up to 9% of the participants'
eligible pay contributed to the Plan based on achievement of at least 80% of the
corporate consolidated earnings goal for the plan year.
If the Trustee is unable to invest any contributions immediately, the funds are
temporarily invested in short-term investment funds and any earnings in the fund
are credited to the participants' accounts.
The Plan funds are administered under the terms of a Trust agreement with The
Northern Trust Company. The Trust agreement provides, among other things, that
the Trustee shall keep account of all investments, receipts and disbursements
and other transactions and shall provide annually a report setting forth such
transactions and the status of the funds at the end of the period.
The Plan is administered by the Pension and Investment Committee, which consists
of six members appointed by the Corporation. Administrative expenses and other
fees of the Plan are shared by the Corporation and the participants.
At December 31, 1997 and 1996, there were approximately 9,013 and 9,430
participants in the Plan, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The amounts in the accompanying statements were accumulated from the reports of
the Trustee (Note 1). The statements are prepared on the accrual basis of
accounting. Contributions to the Plan are made throughout the year and
adjustments are made to the statements to accrue for the portion of annual
contributions unpaid at year-end.
All investments of the Plan are valued at market. Unrealized appreciation
(depreciation) of investments of the Plan represents the change between years in
the difference between the market value and cost of the investments.
Realized gains or losses on the sale of investments are calculated based upon
the historical average cost of the investments. Market value and cost are equal
for the group annuity contract and short-term investments.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the plan administrator to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results may differ from those estimates.
The guaranteed investment contracts in the Stable Value Fund earned guaranteed
interest at rates varying from 5.66% to 6.80% at December 31, 1997. The rates
for 1996 ranged from 5.75% to 7.20%. The guaranteed investment contracts
earnings are calculated net of administrative fees.
For the USG Common Stock Fund, cost was $47,478,648 and $53,327,934 as of
December 31, 1997 and 1996, respectively. For the Equity Index Fund, market
value exceeded cost by $17,800,155 and $9,201,443 at December 31, 1997, and
1996, respectively. For the Balanced Fund, market value exceeded cost by
$1,990,111 and $686,560 at December 31, 1997, and 1996, respectively. For the
Growth Fund, market value exceeded cost by $6,897,431 and $4,204,977 at December
31, 1997 and 1996, respectively. Cost exceeded market value by $271,521 for the
Small Cap Equity Fund, $470,957 for the International Equity Fund, and $27,803
for the Bond Fund, at December 31, 1997, respectively. The Small Cap Equity
Fund, International Equity Fund and the Bond Fund were introduced to the Plan on
July 1, 1997.
Pending transactions due to loan repayments represent loan repayments received
from participants by the Trustee before year-end. In order to present the proper
balance of net assets in each fund at year-end, a net receivable or payable was
used to record such pending transactions and are shown on the accompanying
statement of net assets available for plan benefits.
The net amount of transfers in or out of each fund during the year for
participants' elections for transfers between funds and net loan transactions
for the funding of new loans and repayments on existing loans are shown on the
accompanying statement of changes in net assets available for plan benefits.
3. TAX STATUS
The Plan, as amended and restated, effective July 1, 1997, meets the
requirements of Section 401 (a) of the Internal Revenue Code and, accordingly,
its income is exempt from Federal income tax under Section 501 (a). Employer
contributions and the income of the Plan are not taxable to the participants
until distributions are made.
4. EMPLOYER CONTRIBUTIONS
The Corporation will make a formula matching contribution with respect to each
eligible participant only if at least 80% of the Corporation's consolidated
earnings goal is met.
The Corporation formula matching contribution schedule was changed for the 1995
Plan year. Beginning January 1, 1995, each 1% increase in goal attainment from
80% to 100% of goal results in a corresponding 1.5% increase in the profit
sharing match, starting at a 10% match with the attainment of 80% of earnings
goal. Each 1% increase in goal attainment from 100% to 140% of goal will result
in a 1% increase in the profit sharing match, starting from a 40% match with
attainment of 100% of goal earnings. And each 1% increase in goal attainment
above 140% results in a 2% increase in the profit sharing match, starting from
80% matching with attainment of 140% of goal earnings.
Employer contribution amounts forfeited by terminated employees are applied as a
credit against future Corporate contributions or used to pay administrative
expenses and other fees of the plan and are held in the Forfeiture Cash Account.
5. DISTRIBUTION ON TERMINATION OF THE PLAN
In the event of any termination of the Plan, the account balances of all
affected participants shall become non-forfeitable.
6. INVESTMENTS
The following is a summary of the Plan's investments as well as the net realized
and unrealized appreciation (depreciation) for 1997 and 1996:
<TABLE>
December 31, 1997 DECEMBER 31, 1996
------------------------- ----------------------
INVESTMENTS AT
FAIR VALUE NET NET
DETERMINED BY APPRECIATION APPRECIATION
QUOTED MARKET FAIR (DEPRECIATION) FAIR (DEPRECIATION)
PRICE: VALUE IN FAIR VALUE VALUE IN FAIR VALUE
<CAPTION>
<S> <C> <C> <C> <C>
USG Common
Stock $28,148,393 $ 8,493,673 $19,120,158 $ 2,260,420
Vanguard Index
Trust 49,954,109 10,596,066 32,478,696 5,068,792
Fidelity Puritan
Fund 17,415,648 1,641,582 12,256,681 1,130,115
IDS New Dimension
Fund 32,629,299 3,590,252 20,388,050 3,406,282
Franklin Small Cap
Growth Fund 5,692,313 ( 239,370) --- ---
Templeton Foreign
Fund 2,907,015 ( 506,966) --- ---
PIMCO Total Return
Fund 2,586,297 ( 21,817) --- ---
----------- ----------- ----------- -----------
SUB-TOTAL 139,333,074 23,553,420 84,243,585 11,865,609
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
INVESTMENTS AT
FAIR VALUE
DETERMINED BY
OTHER THAN
QUOTED MARKET
PRICE:
<CAPTION>
<S> <C> <C> <C> <C>
Mortgages,
Notes,
Contracts 116,977,010 --- 79,511,775 ---
Collective
Short-Term
Investment
Fund 6,296,661 --- 48,310,531 ---
------------ ------------ ------------ ---------
SUB-TOTAL 123,273,671 --- 127,822,306 ---
------------ ------------ ------------ ---------
TOTAL
INVESTMENTS $262,606,745 $ 23,553,420 $212,065,891 $ 11,865,609
============ ============= ============ ============
</TABLE>
At December 31, 1997 and 1996, the following investments exceeded 5% of the net
assets available for the Plan benefits:
<TABLE>
1997 1996
------------ --------
<CAPTION>
<S> <C> <C>
USG Corporation Common Stock $28,148,393 $19,120,158
Allstate Insurance Company
Contract 77032 22,953,629 -
Jackson National Life Insurance
Contract S-1129-1 23,438,942 -
SunAmerica Life Insurance
Company, GAC 4653 22,070,890 -
SunAmerica Life
Insurance Company, GAC 6317 - 20,630,854
Metropolitan Life Insurance
Company, GAC 13908 - 16,141,476
Provident Life Insurance
Company, GAC 627-05701 - 23,754,071
Vanguard Index Trust 49,954,109 32,478,696
IDS New Dimension Fund 32,629,299 20,388,050
Fidelity Puritan Fund 17,415,648 12,256,681
Collective Short Term
Investment Fund 6,296,661 48,310,531
</TABLE>
7. PARTICIPANT LOANS
Effective October 1, 1993, and as revised on July 1, 1997, a participant can
obtain loans from the Plan. Under the Plan's loan provisions, the maximum loan
allowable is one half of a participant's vested account balance or $50,000,
whichever is less. The minimum loan amount is $1,000. Additional amounts can be
taken in $1 increments. A participant must have a vested account balance of at
least $2,000 before he or she can apply for a loan. The Plan restricts the
participant to no more than two loans outstanding at a time. Most loans can be
repaid by the participant over a five year period, or sooner, in full, with
interest at the prime rate in effect at the time of requesting the loan. A
residential loan can be repaid over a period of up to 30 years. Default on a
loan by a participant is treated as a hardship withdrawal and subject to IRS
penalties.
<TABLE>
SCHEDULE I
USG CORPORATION
INVESTMENT PLAN
SCHEDULE OF INVESTMENTS HELD AT YEAR END
DECEMBER 31, 1997
PRINCIPAL
AMOUNT/NUMBER OF FAIR
SHARES COST VALUE
COMMON STOCK
<CAPTION>
<S> <C> <C> <C>
USG Corporation 574,457 $ 47,478,648 $ 28,148,393
Vanguard Index Trust 557,773 32,153,954 49,954,109
Fidelity Puritan Fund 898,640 15,425,537 17,415,648
IDS New Dimension Fund 1,367,417 25,731,868 32,629,299
Franklin Small Cap
Growth Fund 248,247 5,963,834 5,692,313
Templeton Foreign Fund 292,162 3,377,972 2,907,015
--------- ----------- -----------
TOTAL COMMON STOCK 130,131,813 136,746,777
----------- ------------
CORPORATE BONDS
PIMCO Total Return Fund 243,990 2,614,100 2,586,297
--------- ----------- -----------
CONTRACTS
Aetna Life & Casualty
Company, GAC 14603 $ 3,057,537 3,057,537 3,057,537
Bankers Trust, GAC 97-157 $ 6,159,129 6,159,129 6,159,129
Commonwealth Life Insurance
Company, GAC ADA00259TR $ 10,817,416 10,817,416 10,817,416
Jackson National Insurance
Company, GAC 1125 $ 6,702,513 6,702,513 6,702,513
John Hancock Mutual Life
Insurance Co., GAC 8396-1 $ 6,056,133 6,056,133 6,056,133
John Hancock Mutual Life
Insurance Co., GAC 9532 $ 10,674,426 10,674,426 10,674,426
John Hancock Mutual Life
Insurance Co., GAC 8396 $ 5,046,395 5,046,395 5,046,395
SunAmerica Life Insurance
Company, GAC 4653 $ 22,070,890 22,070,890 22,070,890
Allstate Insurance Company
Contract 77032 $ 22,953,629 22,953,629 22,953,629
Jackson National Insurance Co.
Contract S-1129-1 $ 23,438,942 23,438,942 23,438,942
------------ ----------- -----------
TOTAL CONTRACTS $116,977,010 116,977,010 116,977,010
------------ ----------- -----------
SHORT-TERM INVESTMENTS
Collective Short-Term
Investment Fund $ 6,296,661 6,296,661 6,296,661
------------ ----------- -----------
TOTAL INVESTMENTS $256,019,584 $262,606,745
============ ============
</TABLE>
<TABLE>
USG CORPORATION
INVESTMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
SERIES OF TRANSACTIONS IN THE SAME SECURITY:
TOTAL COST TOTAL CURRENT
DESCRIPTION OF NUMBER OF OF NUMBER OF VALUE OF
SECURITY PURCHASES ASSET SALES SALES
<CAPTION>
<S> <C> <C> <C> <C>
SunAmerica Life
Insurance Co.
GAC 4653 7 22,070,890 1 $21,503,056
Allstate Insurance
Contract 77032 8 25,246,458 21 2,292,829
Jackson National
Insurance Co.
Contract S-1129-1 8 25,439,785 9 2,000,843
Metropolitan Life
Insurance Co.
GAC 13908 - - 1 16,615,657
Provident Life
Insurance Co.
GAC 627-05701 - - 1 24,408,803
</TABLE>
CONSENT OF INDEPENDENT PUBLIC AUDITORS
WITH RESPECT TO FORM S-8
As independent public auditors, we hereby consent to the incorporation by
reference of our report, dated March 23, 1998, appearing in the USG Corporation
Investment Plan Annual Report on Form 11-K for the year ended December 31, 1997,
into USG Corporation's previously filed Registration Statements No. 2-94787,
33-63554 and 33- 9948 on Form S-8. It should be noted that we have not examined
any financial statements of the Investment Plan subsequent to December 31, 1997,
or performed any audit procedures subsequent to the date of our report.
/S/ Hill & Taylor LLC
- ---------------------
Chicago, Illinois
March 23, 1998