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, 1998.
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 are prepared in accordance with the
financial reporting requirements of ERISA and are attached hereto, including a
Consent of Independent Public Auditors with respect to Form S-8 for 1998.
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 17, 1999
<PAGE>
USG CORPORATION
INVESTMENT PLAN
REPORT ON AUDITED
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
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<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available
for Benefits 2
Statements of Changes in Net Assets
Available for 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 statements of net assets available for
benefits of the USG Corporation Investment Plan as of December 31, 1998
and 1997, and the related statements of changes in net assets available
for 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 financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for benefits
of the Plan as of December 31, 1998 and 1997, and the changes in net
assets available for benefits for the years then ended in conformity with
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedules
of investments held at year end as of December 31, 1998, and reportable
transactions for the year ended December 31, 1998, are presented for
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. These
supplemental schedules are the responsibility of the Plans management.
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.
/s/ Hill, Taylor LLC
- --------------------
March 17, 1999
<PAGE>
<TABLE> USG CORPORATION INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
1998
--------------------------------------------------------------------------------------------
USG COMMON STABLE EQUITY SMALL CAP
STOCK VALUE INDEX BALANCED GROWTH EQUITY
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments at
Market 39,561,118 129,354,354 68,948,314 21,338,447 44,834,896 6,094,338
Receivables:
Employer contributions
receivable 1,393,893 3,954,607 2,409,869 859,750 2,133,028 376,659
Employee loans
receivable --- --- --- --- --- ---
Interest and
dividend receivable 6,002 22,790 --- --- --- ---
Pending transactions due
to loans --- --- --- --- --- ---
-------------------------------------------------------------------------------------------------
Total Receivables 1,399,895 3,977,397 2,409,869 859,750 2,133,028 376,659
-------------------------------------------------------------------------------------------------
Total Assets 40,961,013 133,331,751 71,358,183 22,198,197 46,967,924 6,470,997
-------------------------------------------------------------------------------------------------
LIABILITIES:
Accrued Administrative
Fees 4,790 27,617 8,553 2,657 5,400 719
------------------------------------------------------------------------------------------------
Total Liabilities 4,790 27,617 8,553 2,657 5,400 719
------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $40,956,223 $133,304,134 $71,349,630 $22,195,540 $46,962,524 $6,470,278
================================================================================================
INTERNATIONAL FORFEITURE INVESTMENT
EQUITY BOND & CASH PLAN
FUND FUND ACCOUNT LOANS TOTAL
---- ---- ------- ----- -----
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at
Market 2,462,450 5,656,053 $856,708 $ --- 319,106,678
Receivables:
Employer contributions
receivable 197,871 154,371 (540,000) --- 10,940,048
Employee loans
receivable --- --- --- 16,465,003 16,465,003
Interest and
dividend receivable --- 27,209 4,275 --- 60,276
Pending transactions due
to loans --- --- --- 68,400 68,400
----------------------------------------------------------------------------
Total Receivables 197,871 181,580 (535,725) 16,533,403 27,533,727
----------------------------------------------------------------------------
Total Assets 2,660,321 5,837,633 320,983 16,533,403 346,640,405
----------------------------------------------------------------------------
LIABILITIES:
Accrued Administrative
Fees 316 637 (28,490) --- 22,199
-----------------------------------------------------------------------------
Total Liabilities 316 637 (28,490) --- 22,199
-----------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $2,660,005 $5,836,996 $349,473 $16,533,403 $346,618,206
=============================================================================
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
USG CORPORATION INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (Continued)
DECEMBER 31, 1998 AND 1997
1997
---------------------------------------------------------------------------------------------
USG COMMON STABLE GOVERNMENT EQUITY
STOCK VALUE INVESTMENT INDEX BALANCED GROWTH
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments at
Market $29,734,432 $121,189,170 --- $49,954,109 $17,415,648 $32,629,299
Receivables:
Employer contributions
receivable 1,234,871 4,309,048 --- 2,304,557 847,104 2,110,024
Employee loans
receivable --- --- --- --- --- ---
Employee contributions
receivable --- --- --- --- --- ---
Interest and
dividend receivable 7,687 34,171 --- --- --- ---
Pending transactions due
to loan repayments --- (38) --- (8) --- ---
Total Receivables 1,242,558 4,343,181 --- 2,304,549 847,104 2,110,024
----------------------------------------------------------------------------------------------
Total Assets 30,976,990 125,532,351 --- 52,258,658 18,262,752 34,739,323
----------------------------------------------------------------------------------------------
LIABILITIES:
Accrued Administrative
Fees 3,837 24,167 --- 6,665 2,341 4,496
---------------------------------------------------------------------------------------------
Total Liabilities 3,837 24,167 --- 6,665 2,341 4,496
---------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $30,973,153 $125,508,184 --- $52,251,993 $18,260,411 $34,734,827
=============================================================================================
SMALL CAP INTERNATIONAL FORFEITURE INVESTMENT
EQUITY EQUITY BOND & CASH PLAN
FUND FUND FUND ACCOUNT LOANS TOTAL
---- ---- ---- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments at
Market $5,692,313 $2,907,015 $2,586,322 $498,437 $ --- 262,606,745
Receivables:
Employer contributions
receivable 358,813 182,162 79,881 (350,000) --- 11,076,460
Employee loans
receivable --- --- --- --- 13,799,534 13,799,534
Employee contributions
receivable --- --- --- 150,707 --- 150,707
Interest and
dividend receivable --- --- 11,699 3,416 --- 56,973
Pending transactions due
to loan repayments 13,683 --- --- --- (13,637) ---
Total Receivables 372,496 182,162 91,580 (195,877) 13,785,897 25,083,674
---------------------------------------------------------------------------------------------
Total Assets 6,064,809 3,089,177 2,677,902 302,560 13,785,897 287,690,419
---------------------------------------------------------------------------------------------
LIABILITIES:
Accrued Administrative
Fees 776 396 316 60,780 --- 103,774
--------------------------------------------------------------------------------------------
Total Liabilities 776 396 316 60,780 --- 103,774
--------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $6,064,033 $3,088,781 $2,677,586 $241,780 $13,785,897 $287,586,645
============================================================================================
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
USG CORPORATION INVESTMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998
---------------------------------------------------------------------------------------------
USG COMMON STABLE EQUITY SMALL CAP
STOCK VALUE INDEX BALANCED GROWTH EQUITY
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $30,973,153 $125,508,184 $52,251,993 $18,260,411 $34,734,827 $6,064,033
---------------------------------------------------------------------------------------------
(DEDUCT):
Corporation contributions 1,920,200 5,561,690 3,312,703 1,193,364 2,953,379 535,663
Employee contributions 3,188,310 8,611,931 5,654,292 2,025,294 5,043,717 1,026,959
---------------------------------------------------------------------------------------------
5,108,510 14,173,621 8,966,995 3,218,658 7,997,096 1,562,622
---------------------------------------------------------------------------------------------
Income from investments:
Dividend income 83,195 --- 865,418 2,243,748 2,576,354 (135,676)
Interest income 101,008 7,669,673 13 4 10 121
Realized gain (loss) on
sale of investments (5,023,627) --- 5,112,640 631,038 2,342,456 (109,370)
Unrealized appreciation
for the year 6,343,112 --- 9,034,583 134,463 4,682,192 294,937
----------------------------------------------------------------------------------------------
1,503,688 7,669,673 15,012,654 3,009,253 9,601,012 50,012
----------------------------------------------------------------------------------------------
Benefit payments and
participant withdrawals (1,039,834) (13,057,751) (2,160,816) (1,404,678) (1,477,362) (229,059)
Participants' elections for
transfers between funds
or forfeitures 4,730,695 1,037,071 (2,368,150) (834,154) (3,725,803) (975,098)
Net fund transactions (265,468) (1,704,679) (262,430) (24,148) (109,969) 6,159
due to loans
Administrative expenses (54,521) (321,985) (90,616) (29,802) (57,277) (8,391)
---------------------------------------------------------------------------------------------
Net increase in
assets during the year 9,983,070 7,795,950 19,097,637 3,935,129 12,227,697 406,245
---------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $40,956,223 $133,304,134 $71,349,630 $22,195,540 $46,962,524 $6,470,278
=============================================================================================
INTERNATIONAL FORFEITURE INVESTMENT
EQUITY BOND CASH PLAN
FUND FUND ACCOUNT LOANS TOTAL
---- ---- ------- ----- -----
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $3,088,781 $2,677,586 $241,780 $13,785,897 $287,586,645
-----------------------------------------------------------------------------
ADD (DEDUCT):
Corporation contributions 282,533 201,868 (542,220) --- 15,419,180
Employee contributions 538,225 290,078 --- --- 26,378,806
-----------------------------------------------------------------------------
820,758 491,946 (542,220) --- 41,797,986
-----------------------------------------------------------------------------
Income from investments:
Dividend income 20,396 217,947 10 --- 5,871,392
Interest income 1 15,513 40,999 1,240,388 9,067,730
Realized gain (loss) on
sale of investments (102,611) 214,907 --- --- 3,065,433
Unrealized appreciation
for the year (131,243) (90,524) --- --- 20,267,520
-----------------------------------------------------------------------------
(213,457) 357,843 41,009 1,240,388 38,272,075
-----------------------------------------------------------------------------
Benefit payments and
participant withdrawals (137,998) (179,241) (19,437) (922,558) (20,628,734)
Participants' elections for
transfers between funds
or forfeitures (893,242) 2,572,383 456,298 --- ---
Net fund transactions (494) (77,809) 9,162 2,429,676 ---
due to loans
Administrative expenses (4,343) (5,712) 162,881 --- (409,766)
-------------------------------------------------------------------------------
Net increase in
assets during the year (428,776) 3,159,410 107,693 2,747,506 59,031,561
-------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $2,660,005 $5,836,996 $349,473 16,533,403 $346,618,206
===============================================================================
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
USG CORPORATION INVESTMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (Continued)
YEARS ENDED DECEMBER 31, 1998 AND 1997
1997
-----------------------------------------------------------------------------------------------
USG COMMON STABLE GOVERNMENT EQUITY
STOCK VALUE INVESTMENT INDEX BALANCED GROWTH
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<CAPTION>
<S> <C> <C> <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 $12,489,997 $21,666,547
------------------------------------------------------------------------------------------------
ADD (DEDUCT):
Corporation contributions 1,398,324 7,271,245 --- 2,661,254 975,838 2,447,597
Employee contributions 2,318,484 8,686,104 255,572 4,547,491 1,777,307 4,527,844
------------------------------------------------------------------------------------------------
3,716,808 15,957,349 255,572 7,208,745 2,753,145 6,975,441
------------------------------------------------------------------------------------------------
Income from investments:
Dividend income --- --- --- 1,077,313 1,383,387 2,423,257
Interest income 39,948 7,640,952 119,041 156 489 149
Realized gain (loss) on
sale of investments (6,243,322) --- --- 1,997,354 338,031 897,796
Unrealized appreciation
for the year 14,736,995 --- --- 8,598,712 1,303,551 2,692,456
------------------------------------------------------------------------------------------------
8,533,621 7,640,952 119,041 11,673,535 3,025,458 6,013,658
------------------------------------------------------------------------------------------------
Benefit payments and
participant withdrawals (887,421) (9,282,155) (163,334) (1,725,328) (877,034) (1,199,424)
Participants' elections for
transfers between funds
or forfeitures 1,224,705 (13,227,162) (5,029,568) 2,713,611 977,761 1,568,768
Net fund transactions (227,047) (5,055,099) 20,294 (499,609) (96,160) (266,530)
due to loans
Administrative expenses (19,144) (143,181) --- (35,736) (12,756) (23,633)
------------------------------------------------------------------------------------------------
Net increase in
assets during the year 12,341,522 (4,109,296) (4,797,995) 19,335,218 5,770,414 13,068,280
------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $30,973,153 $125,508,184 --- $52,251,993 $18,260,411 $34,734,827
================================================================================================
SMALL CAP INTERNATIONAL FORFEITURE INVESTMENT
EQUITY EQUITY BOND CASH PLAN
FUND FUND FUND ACCOUNT LOANS TOTAL
---- ---- ---- ------- ----- -----
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year --- --- --- $69,590 $7,142,180 $227,332,195
------------------------------------------------------------------------------------------------
ADD (DEDUCT):
Corporation contributions 406,637 207,461 85,896 (350,000) --- 15,104,252
Employee contributions 307,799 163,543 40,361 --- --- 22,624,505
------------------------------------------------------------------------------------------------
714,436 371,004 126,257 (350,000) --- 37,728,757
------------------------------------------------------------------------------------------------
Income from investments:
Dividend income 243,301 318,159 113,909 --- --- 5,559,326
Interest income --- 1 12 26,663 566,254 8,393,665
Realized gain (loss) on
sale of investments 32,151 (36,009) 5,986 --- --- (3,008,013)
Unrealized appreciation
for the year (271,521) (470,957) (27,803) --- --- 26,561,433
-----------------------------------------------------------------------------------------------
3,931 (188,806) 92,104 26,663 566,254 37,506,411
-----------------------------------------------------------------------------------------------
Benefit payments and
participant withdrawals (37,806) (24,679) (8,568) (28,952) (362,067) (14,596,768)
Participants' elections for
transfers between funds
or forfeitures 5,423,697 2,963,455 2,475,697 909,036 --- ---
Net fund transactions (36,655) (30,154) (6,672) (241,898) 6,439,530 ---
due to loans
Administrative expenses (3,570) (2,039) (1,232) (142,659) --- (383,950)
------------------------------------------------------------------------------------------------
Net increase in
assets during the year 6,064,033 3,088,781 2,677,586 172,190 6,643,717 60,254,450
------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $6,064,033 $3,088,781 $2,677,586 $241,780 $13,785,897 $287,586,645
================================================================================================
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
USG CORPORATION
INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
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 15% (9% for highly compensated employees) of their
eligible pay to the Plan through payroll deductions on a before-tax
basis during the year effective January 1, 1998, 12% from July 1,
1997 to December 31, 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 A.
The International Equity Fund is invested in the Templeton Foreign
Fund - Class A.
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, 1998, the Stable Value Fund was primarily composed of
group annuity contracts maintained by Aetna Life & Casualty Company,
Bankers Trust, Monumental 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.
The Plan was amended effective January 1, 1999 to provide for
immediate eligibility and enrollment to join the Plan for newly
hired employees and current employees who are in their one year
waiting period as of January 1, 1999, unless the employee elects not
to join the Plan.
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 five members appointed by the Corporation.
Administrative expenses and other fees of the Plan are shared by the
Corporation and the participants.
At December 31, 1998 and 1997, there were approximately 8,932 and
9,013 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 financial statements of the
Plan are prepared under the accrual method of accounting.
Contributions to the Plan are made throughout the year and
adjustments are made to the financial statements to accrue for the
portion of annual contributions unpaid at year-end.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets,
liabilities, and changes therein, and disclosure of contingent
assets and liabilities. Actual results could differ from those
estimates.
The Plans investments are stated at market value except for its
group annuity contracts with insurance companies, which are valued
at contract value because they are fully benefit responsive. For
example, participants may ordinarily direct the withdrawal or
transfer of all or a portion of their investment at contract value.
There are no reserves against contract value for credit risk of the
contract issuers. Market value and cost are equal for the group
annuity contracts and short-term investments. Shares of registered
investment companies are valued at quoted market prices which
represent the net asset value of shares held by the Plan at year-
end. The Company stock is valued at its quoted market price.
Participant loans receivable are valued at cost which approximates
fair value.
Purchases and sales of securities are recorded on a trade-date
basis. Interest income is recorded on the accrual basis. Dividends
are recorded on the ex-dividend date. Realized gains or losses on
the sale of investments are calculated based upon the historical
average cost of the investments. Unrealized appreciation or
depreciation of investments of the Plan represents the change
between years in the difference between the market value and cost of
the investments.
The guaranteed investment contracts in the Stable Value Fund earned
guaranteed interest at rates varying from 4.33% to 6.80% at December
31, 1998. The rates for 1997 ranged from 5.66% to 6.80%. The
guaranteed investment contracts earnings are calculated net of
administrative fees.
For the USG Common Stock Fund, cost was $50,887,831 and $47,478,648
as of December 31, 1998 and 1997, respectively. For the Equity
Index Fund, market value exceeded cost by $26,834,737 and
$17,800,155 at December 31, 1998, and 1997, respectively. For the
Balanced Fund, market value exceeded cost by $2,124,574 and
$1,990,111 at December 31, 1998, and 1997, respectively. For the
Growth Fund, market value exceeded cost by $11,579,622 and
$6,897,431 at December 31, 1998 and 1997, respectively. For the
Small Cap Equity Fund, market value exceeded cost at December 31,
1998, by $23,416 and cost was greater than market value by $271,521
at December 31, 1997. Cost exceeded market value for the
International Equity Fund, by $602,200 and $470,957 at December 31,
1998, and 1997, respectively. For the Bond Fund, cost exceeded
market value by $118,327 and $27,803 at December 31, 1998, and 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
statements of net assets available for 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 statements of changes in net
assets available for benefits.
Benefits are recorded when paid.
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.
<PAGE>
6. INVESTMENTS
The following is a summary of the Plan's investments as well as
the net realized and unrealized appreciation (depreciation) for
1998 and 1997:
<TABLE>
December 31, 1998 DECEMBER 31, 1997
----------------- -----------------
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 $37,948,896 $ 1,319,485 $28,148,393 $ 8,493,673
Vanguard Index
Trust 68,948,314 14,147,223 49,954,109 10,596,066
Fidelity Puritan
Fund 21,338,448 765,501 17,415,648 1,641,582
IDS New Dimension
Fund 44,834,896 7,024,648 32,629,299 3,590,252
Franklin Small Cap
Growth Fund 6,094,338 185,567 5,692,313 ( 239,370)
Templeton Foreign
Fund 2,462,450 ( 233,854) 2,907,015 ( 506,966)
PIMCO Total Return
Fund 5,656,053 124,383 2,586,297 ( 21,817)
--------------------------------------------------------
SUB-TOTAL 187,283,395 23,332,953 139,333,074 23,553,420
--------------------------------------------------------
INVESTMENTS AT
FAIR VALUE
DETERMINED BY
OTHER THAN
QUOTED MARKET
PRICE:
Mortgages,
Notes,
Contracts 125,741,562 --- 116,977,010 ---
Collective
Short-Term
Investment
Fund 6,081,721 --- 6,296,661 ---
--------------------------------------------------------
SUB-TOTAL 131,823,283 --- 123,273,671 ---
--------------------------------------------------------
TOTAL
INVESTMENTS $319,106,678 $ 23,332,953 $262,606,745 $ 23,553,420
========================================================
</TABLE>
<TABLE>
At December 31, 1998 and 1997, the following investments exceeded 5% of
the net assets available for the Plan benefits:
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
USG Corporation Common Stock $37,948,896 $28,148,393
Allstate Insurance Company
Contract 77032 22,018,078 22,953,629
Jackson National Life Insurance
Contract S-1129-1 22,965,801 23,438,942
SunAmerica Life Insurance
Company, GAC 4653 23,611,436 22,070,890
Vanguard Index Trust 68,948,314 49,954,109
IDS New Dimension Fund 44,834,896 32,629,299
Fidelity Puritan Fund 21,338,448 17,415,648
</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.
<PAGE>
<TABLE>
SCHEDULE I
USG CORPORATION
INVESTMENT PLAN
SCHEDULE OF INVESTMENTS HELD AT YEAR END
DECEMBER 31, 1998
PRINCIPAL
AMOUNT/NUMBER OF FAIR
SHARES COST VALUE
------ ---- -----
COMMON STOCK
<CAPTION>
<S> <C> <C> <C>
USG Corporation 745,009 $ 50,887,831 $ 37,948,896
Vanguard Index Trust 610,973 42,113,577 68,948,314
Fidelity Puritan Fund 1,063,201 19,213,874 21,338,448
IDS New Dimension Fund 1,554,339 33,255,274 44,834,896
Franklin Small Cap
Growth Fund 270,019 6,070,922 6,094,338
Templeton Foreign Fund 293,498 3,064,650 2,462,450
------------------------------------------
TOTAL COMMON STOCK 154,606,128 181,627,342
---------------------------
CORPORATE BONDS
PIMCO Total Return Fund 536,627 5,774,380 5,656,053
-----------------------------------------
CONTRACTS
Aetna Life & Casualty
Company, GAC 14603 $ 3,242,043 3,242,043 3,242,043
Bankers Trust, GAC 97-157 $ 11,735,619 11,735,619 11,735,619
Monumental Life Insurance
Company, GAC ADA00259TR $ 14,643,944 14,643,944 14,643,944
Jackson National Insurance
Company, GAC 1125 $ 7,121,536 7,121,536 7,121,536
John Hancock Mutual Life
Insurance Co., GAC 8396-1 $ 6,041,954 6,041,954 6,041,954
John Hancock Mutual Life
Insurance Co., GAC 9532 $ 11,331,471 11,331,471 11,331,471
State Street Bank & Trust,
Contract 98203 $ 2,025,714 2,025,714 2,025,714
SunAmerica Life Insurance
Company, GAC 4653 $ 23,611,436 23,611,436 23,611,436
Transamerica Life
& Annuity, GAC 76879 $ 1,003,966 1,003,966 1,003,966
Allstate Insurance Company
Contract 77032 $ 22,018,078 22,018,078 22,018,078
Jackson National Insurance Co.
Contract S-1129-1 $ 22,965,801 22,965,801 22,965,801
---------------------------------------------
TOTAL CONTRACTS $125,741,562 125,741,562 125,741,562
---------------------------------------------
SHORT-TERM INVESTMENTS
Collective Short-Term
Investment Fund $ 6,081,721 6,081,721 6,081,721
---------------------------------------------
TOTAL INVESTMENTS $292,203,791 $319,106,678
----------------------------
</TABLE>
USG CORPORATION
INVESTMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
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
-------- --------- ----- ----- -----
None.
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 17, 1999, appearing in the USG Corporation
Investment Plan Annual Report on Form 11-K for the year ended December 31, 1998,
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, 1998,
or performed any audit procedures subsequent to the date of our report.
/s/ Hill, Taylor LLC
- --------------------
Chicago, Illinois
March 17, 1999
