<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 0-17506
--------------------------
A: Full title of the plan:
UST INC.
EMPLOYEES' SAVINGS PLAN
B: Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
UST INC.
100 West Putnam Avenue
Greenwich, Connecticut 06830
<PAGE> 2
UST Inc.
Employees' Savings Plan
Audited Financial Statements and Schedules
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
<PAGE> 3
UST Inc.
Employees' Savings Plan
(the "Plan")
Audited Financial Statements and Schedules
Years ended December 31, 1997 and 1996
Index
Report of Independent Auditors...............................................1
Audited Financial Statements
Statement of Net Assets Available for Benefits..........................2
Statement of Changes in Net Assets Available for Benefits...............4
Notes to Financial Statements...........................................6
Supplemental Schedules
Schedule of Assets Held for Investment Purposes........................12
Schedule of Reportable Transactions....................................14
<PAGE> 4
Report of Independent Auditors
To the Participants of the
UST Inc.
Employees' Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the UST Inc. Employees' Savings Plan (the "Plan") as of December 31, 1997 and
1996, 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 at
December 31, 1997 and 1996, and the changes in its 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 accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1997, and reportable
transactions for the year then ended, 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 information by fund
in the statement of net assets available for benefits and the statement of
changes in net assets available for benefits is presented for purposes of
additional analysis rather than to present the net assets available for benefits
and changes in net assets available for benefits of each fund. The supplemental
schedules and information by fund have been subjected to the auditing procedures
applied in our 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.
Ernst & Young LLP
May 1, 1998
1
<PAGE> 5
UST Inc.
Employees' Savings Plan
Statement of Net Assets Available for Benefits
December 31, 1997
<TABLE>
<CAPTION>
Information by Fund
-------------------------------------------------------------------------------------
Funds Participant Total
Fund A Fund B C and D Fund E Fund F Loan Fund All Funds
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments (Notes 1 and 4):
Common stock of UST Inc.-at fair value
(cost: $25,846,522) $87,372,222 $ 87,372,222
Group trust funds--
At fair value:
Common stock (cost: $7,501,038) $15,786,605 15,786,605
Short-term investments $ 2,329,922 1,025,816 3,355,738
Balanced Fund (cost: $3,957,078) $4,295,260 4,295,260
Small Company Fund (cost: $5,841,467) $7,207,607 7,207,607
At contract value:
Guaranteed investment contracts 15,091,365 15,091,365
Participant loans receivable $3,860,724 3,860,724
-------------------------------------------------------------------------------------
Total investments 17,421,287 15,786,605 88,398,038 4,295,260 7,207,607 3,860,724 136,969,521
-------------------------------------------------------------------------------------
Contributions receivable:
Participants 129,792 149,883 87,376 61,865 111,078 539,994
Employer 1,287 313,283 314,570
Accrued income receivable 7,252 21,139 28,391
Interfund receivables (payables), net 157,179 72,615 (475,427) 282,441 57,349 (94,157) --
-------------------------------------------------------------------------------------
Total assets 17,716,797 16,009,103 88,323,270 4,639,566 7,376,034 3,787,706 137,852,476
-------------------------------------------------------------------------------------
Liabilities
Due to participants 87,791 30,621 1,153,902 14,173 27,351 5,915 1,319,753
Due to trustee 7,618 4,805 26,813 1,573 2,448 43,257
-------------------------------------------------------------------------------------
Total liabilities 95,409 35,426 1,180,715 15,746 29,799 5,915 1,363,010
-------------------------------------------------------------------------------------
Net assets available for benefits $17,621,388 $15,973,677 $87,142,555 $4,623,820 $7,346,235 $3,781,791 $136,489,466
=====================================================================================
<CAPTION>
Valuation
Units Per Unit Amount
-------------------------------------------------------------------------------------
Net assets available for benefits
Fund A 1,218,744 $14.46 $ 17,621,388
Fund B 321,608 49.67 15,973,677
Funds C and D 2,359,030 36.94 87,142,555
Fund E 276,511 16.72 4,623,820
Fund F 397,411 18.49 7,346,235
Participant Loan Fund 3,781,791 1.00 3,781,791
------------
$136,489,466
============
</TABLE>
See notes to financial statements.
2
<PAGE> 6
UST Inc.
Employees' Savings Plan
Statement of Net Assets Available for Benefits
December 31, 1996
<TABLE>
<CAPTION>
Information by Fund
---------------------------------------------------------------------------------------
Funds Participant Total
Fund A Fund B C and D Fund E Fund F Loan Fund All Funds
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments (Notes 1 and 4):
Common stock of UST Inc.-at fair value
(cost: $25,862,396) $81,137,869 $ 81,137,869
Group trust funds--
At fair value:
Common stock (cost: $4,687,958) $9,660,734 9,660,734
Short-term investments $ 988,620 1,065 14,780 1,004,465
Balanced Fund (cost: $2,229,590) $2,407,810 2,407,810
Small Company Fund (cost: $5,863,489) $7,090,248 7,090,248
At contract value:
Guaranteed investment contracts 16,193,209 16,193,209
Participant loans receivable $3,793,532 3,793,532
---------------------------------------------------------------------------------------
Total investments 17,181,829 9,661,799 81,152,649 2,407,810 7,090,248 3,793,532 121,287,867
---------------------------------------------------------------------------------------
Contributions receivable:
Participants 120,675 88,459 104,402 36,164 119,646 469,346
Employer 592 282,977 283,569
Accrued income receivable 1,747 61 1,274 20 67 20,326 23,495
Interfund receivables (payables), net 152,905 128,933 (470,064) 5,007 97,419 85,800 --
---------------------------------------------------------------------------------------
Total assets 17,457,748 9,879,252 81,071,238 2,449,001 7,307,380 3,899,658 122,064,277
---------------------------------------------------------------------------------------
Liabilities
Due to participants 79,363 6,171 201,405 1,580 14,400 3,057 305,976
Due to trustee 10,917 3,194 18,412 141 422 33,086
---------------------------------------------------------------------------------------
Total liabilities 90,280 9,365 219,817 1,721 14,822 3,057 339,062
---------------------------------------------------------------------------------------
Net assets available for benefits $17,367,468 $9,869,887 $80,851,421 $2,447,280 $7,292,558 $3,896,601 $121,725,215
---------------------------------------------------------------------------------------
Valuation
Units Per Unit Amount
---------------------------------------------------------------------------------------
Net assets available for benefits
Fund A 1,273,894 $13.63 $ 17,367,468
Fund B 262,825 37.55 9,869,887
Funds C and D 2,496,956 32.38 80,851,421
Fund E 175,863 13.92 2,447,280
Fund F 413,891 17.62 7,292,558
Participant Loan Fund 3,896,601 1.00 3,896,601
------------
$121,725,215
============
</TABLE>
See notes to financial statements.
3
<PAGE> 7
UST Inc.
Employees' Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Information by Fund
-----------------------------------------------------------------------------------------
Funds Participant Total
Fund A Fund B C and D Fund E Fund F Loan Fund All Funds
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
Investment income
Dividends on common stock of UST Inc. $ 3,889,834 $ 3,889,834
Interest and other dividends $1,089,029 $ 2,414 23,211 $ 435,198 $ 2,345 1,552,197
Interest on participant loans $ 259,564 259,564
-----------------------------------------------------------------------------------------
1,089,029 2,414 3,913,045 435,198 2,345 259,564 5,701,595
Net realized and unrealized appreciation in
fair value of investments:
Common stock of UST Inc. 10,053,096 10,053,096
Group trust funds 3,610,100 166,325 250,371 4,026,796
-----------------------------------------------------------------------------------------
Investment income, net 1,089,029 3,612,514 13,966,141 601,523 252,716 259,564 19,781,487
-----------------------------------------------------------------------------------------
Contributions
Participants 1,753,932 1,553,391 1,458,002 645,129 1,426,145 6,836,599
Employer 10,806 3,763,909 3,774,715
-----------------------------------------------------------------------------------------
1,764,738 1,553,391 5,221,911 645,129 1,426,145 10,611,314
-----------------------------------------------------------------------------------------
Total additions to net assets 2,853,767 5,165,905 19,188,052 1,246,652 1,678,861 259,564 30,392,801
-----------------------------------------------------------------------------------------
Deductions from net assets
Participant distributions 3,070,042 1,407,927 9,517,375 206,609 711,368 332,055 15,245,376
Administrative expenses 99,785 46,842 208,461 9,887 18,199 383,174
-----------------------------------------------------------------------------------------
Total deductions from net assets 3,169,827 1,454,769 9,725,836 216,496 729,567 332,055 15,628,550
-----------------------------------------------------------------------------------------
Net increase (decrease) prior to
interfund transfers (316,060) 3,711,136 9,462,216 1,030,156 949,294 (72,491) 14,764,251
Interfund transfers, net 569,980 2,392,654 (3,171,082 1,146,384 (895,617) (42,319) --
-----------------------------------------------------------------------------------------
Increase (decrease) in net assets
available for benefits 253,920 6,103,790 6,291,134 2,176,540 53,677 (114,810) 14,764,251
Net assets available for benefits:
Beginning of year 17,367,468 9,869,887 80,851,421 2,447,280 7,292,558 3,896,601 121,725,215
-----------------------------------------------------------------------------------------
End of year $17,621,388 $15,973,677 $87,142,555 $4,623,820 $7,346,235 $3,781,791 $136,489,466
=========================================================================================
</TABLE>
See notes to financial statements.
4
<PAGE> 8
UST Inc.
Employees' Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Information by Fund
---------------------------------------------------------------------------------------
Funds Participant Total
Fund A Fund B C and D Fund E Fund F Loan Fund All Funds
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
Investment income
Dividends on common stock of UST Inc. $ 3,760,537 $ 3,760,537
Interest and other dividends $ 1,065,557 $ 1,032 10,094 $ 203,646 $ 784 1,281,113
Interest on participant loans $ 243,500 243,500
---------------------------------------------------------------------------------------
1,065,557 1,032 3,770,631 203,646 784 243,500 5,285,150
Net realized and unrealized appreciation
(depreciation) in fair value of investments:
Common stock of UST Inc. (2,686,019) (2,686,019)
Group trust funds 1,732,460 52,761 157,849 1,943,070
---------------------------------------------------------------------------------------
Investment income, net 1,065,557 1,733,492 1,084,612 256,407 158,633 243,500 4,542,201
---------------------------------------------------------------------------------------
Contributions
Participants 1,962,955 1,179,593 1,537,478 472,002 1,471,098 6,623,126
Employer 7,427 3,865,260 3,872,687
---------------------------------------------------------------------------------------
1,970,382 1,179,593 5,402,738 472,002 1,471,098 10,495,813
---------------------------------------------------------------------------------------
Total additions to net assets 3,035,939 2,913,085 6,487,350 728,409 1,629,731 243,500 15,038,014
---------------------------------------------------------------------------------------
Deductions from net assets
Participant distributions 3,759,084 1,369,355 10,598,041 318,644 664,241 225,507 16,934,872
Administrative expenses 79,488 26,209 169,983 5,528 13,301 294,509
---------------------------------------------------------------------------------------
Total deductions from net assets 3,838,572 1,395,564 10,768,024 324,172 677,542 225,507 17,229,381
---------------------------------------------------------------------------------------
Net (decrease) increase prior to
interfund transfers (802,633) 1,517,521 (4,280,674) 404,237 952,189 17,993 (2,191,367)
Interfund transfers, net (229,155) 980,941 (2,678,050) 321,058 1,523,430 81,776 --
---------------------------------------------------------------------------------------
(Decrease) increase in net assets
available for benefits (1,031,788) 2,498,462 (6,958,724) 725,295 2,475,619 99,769 (2,191,367)
Net assets available for benefits:
Beginning of year 18,399,256 7,371,425 87,810,145 1,721,985 4,816,939 3,796,832 123,916,582
---------------------------------------------------------------------------------------
End of year $17,367,468 $9,869,887 $80,851,421 $2,447,280 $7,292,558 $3,896,601 $121,725,215
=======================================================================================
</TABLE>
See notes to financial statements.
5
<PAGE> 9
UST Inc.
Employees' Savings Plan
Notes to Financial Statements
Years Ended December 31, 1997 and 1996
1. Significant Accounting Policies
The financial statements of the Plan have been prepared in accordance with
generally accepted accounting principles and, as such, include amounts based on
judgments and estimates made by management, which may differ from actual
results.
Investments in common stock of UST Inc. (the Company) are stated at fair value
of $36.94 per share at December 31, 1997. (At May 1, 1998 UST Inc. common stock
had a fair value of $27.38 per share.) Group trust funds investments are also
stated at fair value. The change in the difference between the fair value and
the cost of such investments is reflected as unrealized appreciation
(depreciation) in the aggregate fair value of investments. The realized
appreciation in the aggregate fair value of investments is the difference
between the proceeds received and the average cost of the investments sold. The
guaranteed investment contracts, which are benefit responsive, are stated at
contract value which approximates fair value. Participant loans receivable are
valued at outstanding balances, which approximates fair value.
Interest and dividend income for Fund B group trust investments are included in
the net realized and unrealized appreciation (depreciation) caption on the
Statement of Changes in Net Assets Available for Benefits.
Securities traded on a national securities exchange are valued at the last
reported sales price on the last business day of the year. Investments traded in
the over-the-counter market and listed securities for which no sale was reported
on that date are valued at the average of the last reported bid and ask prices.
The fair value of the participation units owned by the Plan in group trust funds
is based on quoted redemption value on the last business day of the Plan year.
In the event that the Plan is terminated, participants receive the fair value of
their accounts.
2. Description of Plan
The Plan is a defined contribution employee benefit plan established to
encourage and assist employees to adopt a regular savings program and to help
provide additional security for retirement. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
The Plan is a trusteed plan administered by the UST Inc. Employee Benefits
Administration Committee (EBAC). Wachovia Bank, N.A. is the trustee for the
Plan.
Employees are eligible to participate in the Plan the first day of the month
following the date a year of service has been completed. A year of service shall
be met upon completion of at least 1,000 hours of service during a 12-month
consecutive period measured from the employees' date of hire.
6
<PAGE> 10
UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1997 and 1996
2. Description of Plan (continued)
The majority of participants may make an aggregate contribution to the Plan of
2% to 12% (in 1/2% increments) of base pay on a before-tax or after-tax basis,
of which the first 6% is subject to a 100% matching contribution by the Company.
Employees of Stimson Lane Ltd. (Stimson Lane) who are participants of the Plan
may make an aggregate contribution to the Plan of 2% to 12% (in 1/2% increments)
of base pay on a before-tax or after-tax basis, of which the first 3% of such
contribution is subject to a 50% matching contribution by the Company.
In compliance with federal tax law, the maximum annual contribution for a
participant for the plan years presented is limited to the lesser of $30,000 or
25% of compensation and the maximum annual before-tax contribution was limited
to $9,500 in 1997 and 1996. The maximum amount of compensation taken into
account under the Plan for any participant was limited to $160,000 in 1997 and
$150,000 in 1996.
In accordance with the Plan, participants can direct the investment of their
contributions between Fund A (a fixed income fund, as defined), Fund B (an index
fund, as defined), Fund C (common stock of UST Inc.), Fund E (a balanced fund,
as defined) and Fund F (a small company fund, as defined). The Plan allows
participants who invest in more than one fund to allocate their contributions in
multiples of 5% per fund. This method permits Plan participants to change their
existing account balances by transferring amounts from any one
participant-directed fund to any other such fund. During 1997, unit prices for
contributions to and withdrawals from funds A, B, C, E and F ranged from $13.70
to $14.46, from $38.49 to $49.67, from $26.13 to $36.94, from $14.27 to $16.72
and from $14.38 to $19.52, respectively.
Effective November 1, 1996, the Plan was amended to eliminate current
restrictions concerning transactions in the Plan by participants who are
determined to be subject to the short-swing profit recovery rules of Section 16
of the Securities and Exchange Act of 1934, as amended, and to add that such
participants will not be permitted to make elections resulting in an intra-plan
transfer which involves the Company's common stock funds or in a cash
distribution funded by a volitional disposition of the Company's common stock if
such elections are made less than six months after the last election to engage
in an "opposite-way" election, as defined in the Plan.
Company matching contributions were reduced by any forfeited amounts. Such
forfeitures (1997--$54,623; 1996--$55,749) remain in Fund D and are applied to
reduce employer contributions. At the discretion of the UST Inc. Board of
Directors (the Board), additional matching contributions may be made by the
Company. For the years ended December 31, 1997 and 1996, no additional
discretionary contributions were made. Company matching contributions are
invested in common stock of UST Inc. and are deposited in Fund D. Employees aged
59 1/2 years or older can direct investment of Company matching contributions in
Fund A rather than Fund D. Employee contributions are always 100% vested, while
vesting of the Company's contributions generally occurs over a period of five
years at a rate of 20% for each year of service. Months during which a
participant is eligible to participate in the Plan, but chooses not to, do not
count toward vesting. Participants become 100% vested upon death or attainment
of age 55.
7
<PAGE> 11
UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1997 and 1996
2. Description of Plan (continued)
The Plan includes a loan feature for participants who are currently employed by
the Company enabling them to borrow from their vested plan balance. Participants
may not obtain a loan if they (i) already have two outstanding loans under the
Plan or (ii) have obtained a loan from the Plan within the six-month period
immediately preceding the application for a new loan. The term of the loan can
range from one to five years as elected by the participant. Loan repayments are
made in equal installments of principal and interest by automatic payroll
deductions starting two months after the effective date of the loan. The maximum
amount the participant can borrow is the lesser of 50% of their vested interest
in the Plan or $50,000 less the highest outstanding loan balance over the
previous twelve months. The minimum loan amount is $1,000. The loan interest
rate is determined on a monthly basis and is equal to the prime rate published
in the Wall Street Journal on the first business day of the calendar month. The
interest rate is fixed for the term of the loan. In the event a participant
defaults on a Plan loan, the entire unpaid balance of the loan shall become due
and payable immediately.
Participants in the Plan are not subject to federal income tax on amounts
contributed to the Plan by the Company or on amounts that such participants
contribute to the Plan on a before-tax basis until such time that their
participating interest in the Plan is distributed to them. A participant is
subject to tax on the amount by which the distribution paid exceeds the amount
contributed on an after-tax basis to the Plan.
Expenses incurred to administer the Plan are paid from Plan assets to the extent
permissible under applicable law. All costs and expenses with regard to the
purchase or sale of investments are paid by the Plan.
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100 percent vested in their accounts.
The foregoing description of the Plan provides only general information.
Participants should refer to the Summary Plan Description (SPD) for a more
complete description of the Plans provisions. Copies of the SPD are available
from the Company's Employee Benefits Department.
3. Participants Interests
A participants interest in the Plan is based on "Units of Participation", the
value of which is calculated monthly for each fund based on the aggregate fair
value of the funds investments at each month end. The value of a unit for Funds
A, B, E and F is determined by dividing the fair value of each Fund by the total
number of its outstanding units. The unit value for Funds C and D is equal to
the fair value of one share of common stock of the Company. The Participant Loan
Fund unit value is $1.
A participant obtaining a distribution from the Plan receives the fair value of
their account. If a participant leaves the Company before becoming fully vested
in the employers contributions to the Plan (value of Fund D), the participant
will forfeit the nonvested portion of the employers contributions. Under the
provisions of the Plan, a participant may, at the discretion of the EBAC, be
permitted to (i) contribute to the Plan certain distributions received from
another qualified employee benefit plan or (ii) direct the trustee of such other
plan to make a trust-to-trust transfer to the Plan of the participants account
in such other plan.
8
<PAGE> 12
UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1997 and 1996
3. Participants Interests (continued)
As of December 31, 1997 and 1996, there were 1,873 and 1,941 participants in the
Plan, respectively. The number of participants in each fund at December 31 was
as follows:
<TABLE>
<CAPTION>
Fund 1997 1996
---- ---- ----
<S> <C> <C>
A 1,097 1,162
B 1,081 930
C 899 1,007
D 1,840 1,831
E 630 498
F 915 928
Participant Loan 565 624
</TABLE>
The accounting records for Funds C and D are combined, and are not separately
maintained between these two funds. Separate participant records are, however,
maintained for each Fund. A summary of such participant records for 1997 and
1996 follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------- -------------------------------------------
Fund C Fund D Total Fund C Fund D Total
-------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Participants $ 1,458,002 $ 1,458,002 $ 1,537,478 $ 1,537,478
Employer $ 3,763,909 3,763,909 $ 3,865,260 3,865,260
-------------------------------------------- -------------------------------------------
Total Contributions 1,458,002 3,763,909 5,221,911 1,537,478 3,865,260 5,402,738
Investment income 2,389,975 11,576,166 13,966,141 321,832 762,780 1,084,612
Administrative expenses (208,461) (208,461) (169,983) (169,983)
Participant distributions (1,656,690) (7,860,685) (9,517,375) (1,383,033) (9,215,008) (10,598,041)
Interfund transfers, net (2,301,225) (869,857) (3,171,082) (2,502,326) (175,724) (2,678,050)
-------------------------------------------- -------------------------------------------
Net increase (decrease) (318,399) 6,609,533 6,291,134 (2,196,032) (4,762,692) (6,958,724)
Net assets available for benefits:
Beginning of year 12,719,027 68,132,394 80,851,421 14,915,059 72,895,086 87,810,145
-------------------------------------------- -------------------------------------------
End of year $12,400,628 $74,741,927 $87,142,555 $12,719,027 $68,132,394 $80,851,421
============================================ ===========================================
Units:
Beginning of year 392,805 2,104,151 2,496,956 446,894 2,184,122 2,631,016
============================================ ===========================================
End of year 335,697 2,023,333 2,359,030 392,805 2,104,151 2,496,956
============================================ ===========================================
</TABLE>
9
<PAGE> 13
UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1997 and 1996
4. Investments
The fair and contract values, as determined by quoted market prices, of
individual investments that represent 5% or more of net assets available for
benefits are as follows:
<TABLE>
<CAPTION>
December 31
-----------------------
1997 1996
---- ----
<S> <C> <C>
UST Inc. Common Stock; 1997 - 2,365,375 shares;
1996 - 2,506,189 shares $87,372,222 $81,137,869
State Street Bank & Trust Company; Common Stock
Fund; 1997 - 99,127 shares; 1996 - 80,908 shares 15,786,605 9,660,734
John Hancock Special Equities Fund;
1997 - 272,396 shares; 1996 - 282,368 shares 7,207,607 7,090,248
State Street Bank & Trust Company; Guaranteed
Investment Contract Fund; 1997 - 15,091,365 units;
1996 - 16,193,209 units 15,091,365 16,193,209
</TABLE>
Fund A (the fixed income fund, as defined) includes fully benefit responsive
investment contracts with insurance companies and other financial institutions.
Benefit responsive contracts consist of contributions made under the contract
and interest at the contract rate and provide contract value payments for
participant distributions, loans and investment transfers as allowed by the
Plan. There are exceptions for payments to participants who, as a result of a
company event, cease to be employed by the Company. A company event includes a
significant early retirement program, divestiture or other company action that
could be construed as causing increased plan payments to participants.
The interest rates are set at the time of purchase and provide a stated rate of
interest on the principal and accrued interest balance over the life of the
contract. The weighted-average yield for all guaranteed investment contracts was
6.5% in 1997 and 6.2% in 1996. The weighted-average crediting interest rate for
all guaranteed investment contracts was 6.6% at December 31, 1997 and 6.3% at
December 31, 1996.
5. Federal Income Tax Status
The Internal Revenue Service has ruled that the Plan qualifies under Section
401(a) and 401(k) of the Internal Revenue Code (IRC) and, therefore, the trust
which holds the assets of the Plan is not subject to tax under Section 501(a) of
the IRC. The EBAC is not aware of any course of action or series of events that
have occurred that might adversely affect the Plans qualified status.
10
<PAGE> 14
UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1997 and 1996
6. Year 2000 Issue (unaudited)
The year 2000 issue relates to computer system programs which may not properly
recognize the change in date years from 1999 to 2000. As a result of this time
sensitivity of existing software, any business entity is at risk for possible
system failure or miscalculations causing disruptions of operations.
The Company has developed a plan to modify its internal information systems to
be ready for the year 2000 and has begun converting critical data processing
systems. The project also includes determining whether third party service
providers have reasonable plans in place to become year 2000 compliant. The
Company currently expects the project to be completed by mid 1999. The Company
does not expect this project to have any effect on plan operations.
11
<PAGE> 15
Supplemental Schedules
<PAGE> 16
UST Inc.
Employees' Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower, Rate of Interest, Par or Total All Funds
Lessor or Similar Party Maturity Value Cost Fair Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UST Inc. 2,365,375 shares --
Common Stock $25,846,522 $87,372,222
------------------------------------------
Group Trust Funds:
State Street Bank and Trust Company 99,127 shares--
Common Stock Fund 7,501,038 15,786,605
------------------------------------------
State Street Bank and Trust Company 2,329,922 units -- Yield
Enhanced Short-term
Investment Fund 2,329,922 2,329,922
State Street Bank and Trust Company 1,025,816 shares--
Short-term Investment Fund 1,025,816 1,025,816
------------------------------------------
Total 3,355,738 3,355,738
------------------------------------------
American Balanced Fund 273,932 shares --
Investment Fund 3,957,078 4,295,260
------------------------------------------
John Hancock Special Equities Fund 272,396 shares--
Investment Fund 5,841,467 7,207,607
------------------------------------------
State Street Bank and Trust Company
Guaranteed Investment Contracts:
Allstate Life Insurance Company 268,613 units, 5.35%,
due June 30, 1998 268,613 268,613
Allstate Life Insurance Company 1,055,169 units, 6.66%,
due October 1, 2001 1,055,169 1,055,169
Capital Holding Corp. 1,733,717 units, 5.98%,
due September 30, 1998 1,733,717 1,733,717
Capital Holding Corp. 627,621 units, 6.73%,
due December 31, 1998 627,621 627,621
Capital Holding Corp. 555,234 units, 6.78%,
due December 29, 2000 555,234 555,234
Continental Assurance 843,469 units, 8.18%,
due December 30, 1998 843,469 843,469
Continental Assurance 894,327 units, 6.49%,
due April 2, 2001 894,327 894,327
Hartford Life Insurance Company 260,292 units, 6.03%,
due December 31, 1997 260,292 260,292
</TABLE>
12
<PAGE> 17
UST Inc.
Employees' Savings Plan
Schedule of Assets Held for Investment Purposes (continued)
December 31, 1997
<TABLE>
<CAPTION>
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower, Rate of Interest, Par or Total All Funds
Lessor or Similar Party Maturity Value Cost Fair Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John Hancock Life Insurance Company 1,033,146 units, 6.72%,
due July 1, 2002 $ 1,033,146 $ 1,033,146
John Hancock Life Insurance Company 1,047,842 units, 7.12%,
due April 1, 2002 1,047,842 1,047,842
Metropolitan Life Insurance Company 1,085,662 units, 6.80%,
due June 30, 2000 1,085,662 1,085,662
New York Life Insurance Company 633,214 units, 7.75%,
due March 31, 1999 633,214 633,214
New York Life Insurance Company 1,473,648 units, 6.50%,
due September 30, 1999 1,473,648 1,473,648
Principal Mutual Life Insurance Company 759,894 units, 6.05%,
due June 30, 1999 759,894 759,894
Principal Mutual Life Insurance Company 635,076 units, 7.85%,
due June 30, 1999 635,076 635,076
The Life Insurance Company of Virginia 251,118 units, 5.33%,
due March 31, 1998 251,118 251,118
The Life Insurance Company of Virginia 825,163 units, 6.82%,
due September 29, 2000 825,163 825,163
Transamerica 1,108,160 units, 7.08%,
due December 31, 2000 1,108,160 1,108,160
--------------------------------------
Total 15,091,365 15,091,365
--------------------------------------
Participant Loans Receivable 3,860,724 3,860,724
--------------------------------------
Total Investments $65,453,932 $136,969,521
======================================
</TABLE>
13
<PAGE> 18
UST Inc.
Employees' Savings Plan
Schedule of Reportable Transactions
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Number
Identity of Purchase Selling Net of
Party Involved Description of Asset Price (1) Price (1) Cost of Asset Gain Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Category (iii)--A series of transactions in excess of 5 percent of Plan assets
State Street Bank and Short-term Investment Fund
Trust Company Shares:
18,329,034 $18,329,034 $18,329,034 - 198
17,319,595 $17,319,595 17,319,595 - 145
State Street Bank and Yield Enhanced Short-term
Trust Company Investment Fund Shares:
6,414,417 6,414,417 6,414,417 - 45
5,072,583 5,072,583 5,072,583 - 12
UST Inc. Common Stock-Shares:
88,023 2,600,250 2,600,250 - 11
228,837 6,418,992 2,616,124 $3,802,868 18
</TABLE>
There were no Category (i), (ii) or (iv) reportable transactions during 1997.
(1) Purchase and selling prices are equal to fair value at dates of acquisition
and disposition, respectively.
14
<PAGE> 19
Consent of Independent Auditors
We consent to the incorporation by reference in Post-Effective Amendment No. 4
to the Registration Statement (Form S-8 No. 2-72410) pertaining to the
Employees' Savings Plan of UST Inc. of our report dated May 1, 1998, with
respect to the financial statements and schedules of the UST Inc. Employees'
Savings Plan included in this Annual Report (Form 11-K) for the year ended
December 31, 1997.
ERNST & YOUNG LLP
Stamford, Connecticut
May 15, 1998
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the UST
Inc. Employee Benefits Administration Committee has duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
UST INC. EMPLOYEES SAVINGS PLAN
/s/ ALTON W. ADAMS
__________________________________
Alton W. Adams
Chairman, UST Inc. Employee Benefits
Administration Committee
Dated: May 15, 1998
