Financial Statements [1999/Q1]

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
Special-Purpose Unaudited Consolidated Financial Statements
As of March 31, 1999 and 1998

 MANVILLE PERSONAL INJURY SETTLEMENT TRUST
The consolidated financial statements included herein are unaudited. In the opinion of the management of the Trust, the accompanying consolidated financial statements present fairly, subject to normal year-end adjustments, the consolidated net claimants’ equity as of March 31, 1999 and 1998 and the consolidated changes in net claimants’ equity and cash flows for the three months ended March 31, 1999 and 1998 presented on the special-purpose basis of accounting described in Note 2, which accounting methods have been applied on a consistent basis.

________________________________
David T. Austern
General Counsel and Secretary

 MANVILLE PERSONAL INJURY SETTLEMENT TRUST
STATEMENTS OF NET CLAIMANTS’ EQUITY
AS OF MARCH 31, 1999 AND 1998

                            1999 1998
ASSETS:
                Cash equivalents and investments (Notes 1 & 2)
                         Available-for-sale non-JM
                                     Restricted (Note 8) $49,504,121 $50,365,080
                                     Unrestricted non-JM 948,270,936 936,370,317
                                                   Total 997,775,057 986,735,397
                         Other available-for-sale
                                     JM common stock 2,154,992,648 1,622,654,764
                         Held-to-maturity securities
                                     Trust Second Bond 27,619,056 24,677,649
                                                  Total cash equivalents and investments 3,180,386,761 2,634,067,810
                Accrued interest and dividend receivables 16,213,394 13,732,874
                Deposits and other assets 233,717 111,231
                         Total assets 3,196,833,872 2,647,911,915
LIABILITIES:
                Accrued expenses 4,757,947 2,460,509
                Unpaid claims (Notes 4, 6 & Exh. III)
                         Settled Pre-Class Action complaint 2,396,220 2,593,762
                         Outstanding Offers – Post Class Action complaint 39,214,813 39,431,111
                Contribution and indemnity claims payable
                         (Notes 4, 8 and Exh. III) 7,960,824 9,745,281
                Lease commitments payable (Note 5) 2,995,843 3,480,012
                         Total liabilities 57,325,647 57,710,675
NET CLAIMANTS’ EQUITY (Note 6) $3,139,508,225 $2,590,201,240

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
STATEMENTS OF CHANGES IN NET CLAIMANTS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998

         
                  1999
       
                   1998
NET CLAIMANTS’ EQUITY,
          BEGINNING OF PERIOD $3,046,568,587 $2,251,315,376
ADDITIONS TO NET CLAIMANTS’ EQUITY:
          JM dividend 7,495,627 5,141,084
          Reimbursement by JM of prior years foreign
income taxes
355,523
          Trust Second  Bond accretion 766,690 685,038
          Non-JM investment income (Exh. I) 12,213,046 15,852,527
          Net unrealized gains on non-JM available-for-sale
securities
19,130,553
          Net Reduction in outstanding claim offers 13,692,287
          Decrease in lease commitments payable 148,041 112,041
           Unrealized gain on JM stock 101,503,276          329,350,720
                 Total additions 136,174,490 370,271,963
DEDUCTIONS FROM NET CLAIMANTS’ EQUITY:
          Operating and dispute resolution expenses (Exh. II) 3,458,031 2,442,010
          Management expenses for investments in JM 905,222 133,151
          Net increase in outstanding claim offers              2,498,003
          Net unrealized losses on non-JM available-for-sale securities 638,776
          Claims settled 37,375,836 25,940,274
         Contribution and indemnity claims settled 856,987 382,661
                    Total deductions 43,234,852 31,396,099
NET CLAIMANTS’ EQUITY,
          END OF PERIOD $3,139,508,225 $2,590,191,240

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
STATEMENTS OF CASH FLOWS FOR THE
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998

1999 1998
CASH INFLOWS:
          JM dividends $7,495,627 $5,141,084
          Reimbursement by JM of prior years foreign income taxes                      $355,523
          Investment receipts 13,174,556 15,655,626
          Investment receipts on escrow accounts (Note 8) 77,885 60,454
                    Total cash inflows 21,103,591 20,857,164
CASH OUTFLOWS:
          Claim payments made 37,408,656 26,063,738
          Contribution and indemnity claim payments 1,371,538 9,184,429
                    Total cash claim payments 38,780,194 35,248,167
          Disbursements for Trust operating, dispute resolution,
             and asset management 3,638,579 2,727,917
                    Total cash outflows 42,418,773 37,976,084
NET CASH OUTFLOWS (21,315,182) (17,118,920)
          Net unrealized gains (losses) on non-JM securities
                    available-for-sale securities (638,776) 19,130,553
          Change in deposits and other assets 50,981 6,110
NET INCREASE (DECREASE) IN CASH EQUIVALENTS AND
          NON-JM INVESTMENTS AVAILABLE-FOR-SALE (21,902,977) 2,017,743
CASH EQUIVALENTS AND NON-JM INVESTMENTS
          AVAILABLE-FOR-SALE, BEGINNING OF PERIOD 1,019,678,034 984,717,654
CASH EQUIVALENTS AND NON-JM INVESTMENTS
          AVAILABLE-FOR-SALE, END OF PERIOD $997,775,057 $986,735,397

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1999 AND 1998

 

(1)    DESCRIPTION OF THE TRUST

The Manville Personal Injury Settlement Trust (the Trust), organized pursuant to the laws of the state of New York with its office in Katonah, New York, was established pursuant to the Manville Corporation (Manville) Second Amended and Restated Plan of Reorganization (the Plan). The Trust was formed to assume Manville’s liabilities resulting from pending and potential litigation involving (i) individuals exposed to asbestos who have manifested asbestos-related diseases or conditions, (ii) individuals exposed to asbestos who have not yet manifested asbestos-related diseases or conditions and (iii) third-party asbestos-related claims against Manville for indemnification or contribution. Upon consummation of the Plan, the Trust assumed liability for existing and future asbestos health claims. The Trust had initial funding and will receive ongoing fixed and contingent funding as described below under “Funding of the Trust.” The Trust’s funding is dedicated solely to the settlement of asbestos health claims and the related costs thereto, as defined in the Plan. The Trust was consummated on November 28, 1988.

In December 1998 the Trust formed a wholly-owned corporation, the Claims Resolution Management Corporation (CRMC), to provide the Trust claim processing and settlement services. CRMC began operations on January 1, 1999 in Fairfax, Virginia. The accounts of the Trust and CRMC have been consolidated for financial reporting purposes.

Funding of the Trust

The Trust was initially funded from the following sources:

  • Manville provided $150 million in cash plus $5.4 million in accrued interest. At consummation, the Trust was required to transfer approximately $27.5 million to the Manville Property Damage Settlement Trust.
  • Insurance settlement proceeds totaling $695 million, which included $72 million in interest thereon.
  • 24,000,000 shares of Manville Common Stock (50% of Manville Common Stock outstanding at consummation).
  • 7,200,000 shares of a new Series A Convertible Preferred Stock of Manville. In December 1992, these shares were converted into 72,000,000 shares of Manville Common Stock.
  • A $50 million interest-bearing note receivable (the Trust Note) payable in equal installments in 1990 and 1991. In December 1989, Manville prepaid the Trust Note. The payment included the $50 million in principal and $8.1 million in accrued interest.
  • Up to $1.65 billion pursuant to the terms of a bond (the Trust Bond). The Trust Bond initially provided for semi-annual installments of $37.5 million commencing in 1991 and ending in 2012. In 1994, the Trust Bond was prepaid by Manville.
  • Up to $150 million pursuant to the terms of a second bond (the Trust Second Bond). The Trust Second Bond requires Manville to pay the Trust $37.5 million semi-annually in the years 2013 and 2014. Amounts payable by Manville under the Trust Second Bond may be deferred to the extent that funds are not required for settlement of liquidated asbestos health claims, with all such deferred amounts payable in the event of need. The Trust Second Bond bears no interest during its term.
  • Up to 20% of Manville’s profits as defined in the Plan, payable beginning in 1992 with respect to the prior year’s profits (the Profit Sharing Rights). In April 1996, the Profit Sharing Rights were exchanged for an additional 32,527,110 shares of Manville Common Stock.

Manville Stock Interests

In March 1996, Manville changed its name to Schuller Corporation (Schuller). In May 1997, Schuller changed its name to Johns Manville Corporation (JM). On April 13, 1998 JM purchased 3.6 million shares of its common stock from the Trust at $13 per share, the average of the closing prices between March 12 and April 8, 1998. The Trust received $46.8 million from the sale of the JM common stock. After giving effect to the transaction, the Trust owns 124,927,110 shares of JM common stock or approximately 79% of outstanding shares.

(2) SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The Trust’s financial statements are prepared using special-purpose accounting methods that differ from generally accepted accounting principles (GAAP). The special-purpose accounting methods were adopted in order to better communicate to the beneficiaries of the Trust the amount of equity available for payment of current and future claims. These special-purpose accounting methods are enumerated as follows:

  1. The financial statements are prepared using the accrual basis of accounting.
  2. The funding received from JM and its liability insurers has been recorded directly to net claimants’ equity. These funds do not represent income of the Trust. Settlement offers for asbestos health claims are reported as deductions in net claimants’ equity and do not represent expenses of the Trust.
  3. Costs of non-income producing assets, which will be exhausted during the life of the Trust and are not available for satisfying claims, are expensed as they are incurred. These costs include acquisition costs of computer hardware, software, software development, office furniture and leasehold improvements.
  4. Future fixed liabilities and contractual obligations entered into by the Trust are recorded directly against net claimants’ equity. Accordingly, the future minimum rental commitments outstanding at period end for non-cancelable operating leases, net of any sublease agreements, have been recorded as deductions to net claimants’ equity.
  5. The liability for unpaid claims reflected in the statements of net claimants’ equity represents settled but unpaid claims and outstanding settlement offers. Post-Class Action complaint claims’ liability is recorded once a settlement offer is made to the claimant (Note 4) at the amount equal to the expected pro rata payment. No liability is recorded for future claim filings and filed claims on which no settlement offer has been made. Net claimants’ equity represents funding available to pay present and future claims on which no fixed liability has been recorded.
  6. Available-for-sale securities are recorded at market. Held-to-maturity securities are recorded at amortized cost. All interest and dividend income, as well as net realized gains/losses, on non-JM available-for-sale securities are included in non-JM investment income on the statements of changes in net claimants’ equity. Net unrealized gains/losses are recorded as a separate component on the statements of changes in net claimants’ equity.

The preparation of financial statements in conformity with the special-purpose accounting methods described above requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions to net claimants’ equity during the reporting period. Actual results could differ from those estimates. The most significant estimates with regard to these financial statements relate to unpaid claims, as discussed in Notes 4 and 6.

(b) JM Common Stock Interest

The Trust’s stock interests represent a majority stock interest in JM. The accounts of JM have not been consolidated in the accompanying financial statements because: (i) JM stock interests are held by the Trust in order to pay asbestos health claims, and as such, the investment is likely to be temporary; and (ii) the objective of the financial statements is to communicate the equity available over the life of the Trust to current and future claimants. Thus, the Trust believes that recording these stock interests at current market value is appropriate.

At consummation, the Trust’s stock interests were recorded at market value. Subsequent changes in their market values are shown separately as unrealized appreciation/depreciation in the carrying value of JM common stock in the statements of changes in net claimants’ equity. The market value of the JM common stock held by the Trust is recorded by using the closing price of JM common stock on the New York Stock Exchange on the last day of the appropriate reporting period. As of March 31, 1999 and 1998, that price was $17.25 and $12.625 per share, respectively. Nevertheless, the Trust may not realize this value as a result of potential illiquidity in the public sale of a major position in JM common stock without disruption to the public market. Further, any premium that might be obtained upon a private sale of a controlling interest in JM may also impact this value.

The Trust and JM announced on January 25, 1999 that they will undertake a review of strategic alternatives available to maximize JM’s shareholder value. On April 20, 1999, JM and the Trust announced that discussions between their financial advisors and potentially interested parties did not result in a satisfactory offer for the sale or merger of the company. JM and the Trust are continuing to explore other options, including a secondary offering by the Trust and a buyback of stock by JM.

(c) Trust Second Bond

The Trust Second Bond is reported using a discount rate of 11.75% as agreed upon in the Bond Repurchase Agreement dated September 22, 1994 between the Trust and JM. The discount rate has not been adjusted to reflect current interest rates or other market conditions since its market value is not readily ascertainable.

(d) Cash Equivalents and Non-JM Investments

In 1997 the Trust adopted a new investment policy which provided for greater diversification of the Trust’s investment holdings. At March 31, 1999 and 1998 the Trust has recorded all its non-JM investment securities at market value, as follows:

                                                                       1999                                             1998         
     Cost     Market      Cost     Market
Restricted
   Cash equivalents $3,281,093 $3,281,093 $32,290,265 $32,289,545
   U.S. Govt. oblig. 11,309,969 11,309,350   16,239,336   16,298,287
   Corporate and other debts   5,421,324   5,420,713     1,777,248     1,777,248
   Equities – U.S. 23,983,568 29,492,965   __________   _________
Total $43,995,954 $49,504,121 $50,306,849 $50,365,080

 

Unrestricted
   Cash equivalents $152,939,748 $152,939,748 $197,532,554 $197,532,554
   U.S. govt. obligations 301,470,071 300,127,880 447,212,061 447,441,623
   Foreign govt. obligations 100,276,369 102,884,894 84,048,360 84,127,419
   Corporate and other debt 194,153,361 193,330,004 30,576,254 30,371,090
   Equities – U.S. 87,111,946 130,263,423 83,574,271 114,663,177
   Equities – International 56,868,825 68,724,987 51,627,941 62,234,454
                Total $892,720,220 $948,270,936 $894,571,441 $936,370,317

The maturities of the Trust’s non-JM available-for-sale securities at market value (excluding cash
equivalents) are as follows:

Less Than
1 Year
After 1 Year
Through 5 Years
After 5 Years
Through 10 years
After 10 Yrs
U.S. govt. obligations $119,654,783 $58,955,910 $10,042,393 $122,784,144
Foreign govt. obligations 15,127,381 20,221,355 53,633,991 13,902,167
Corporate and other debt 2,562,562 95,050,185 65,568,311 35,569,659
                Total $137,344,726 $174,227,450 $129,244,695 $172,255,970

The Trust invests in two types of derivative financial instruments. Equity index futures are used as strategic substitutions to cost effectively replicate the underlying index of its domestic equity investment fund. At March 31, 1999, the fair value of these instruments was approximately $3.1 million and was included in non-JM investments available-for-sale on the statement of net claimants’ equity. Foreign currency forwards are utilized for both currency translation purposes and to hedge against the currency risk inherent in foreign bond issues. At March 31, 1999, the Trust held at market value approximately $143.9 million in sell currency forward contracts offset by approximately $140.2 million in buy currency forward contracts. The unrealized gains on these outstanding currency forward contracts of approximately $3.7 million is principally offset by corresponding unrealized losses due to currency exchange on the underlying securities being hedged. These amounts are recorded in the statement of changes in net claimants’ equity at March 31, 1999

(e) Fixed Assets

The cost of non-income producing assets that will be exhausted during the life of the Trust and are not available for satisfying claims are expensed as incurred. Since inception these costs, net of disposals, include:

                    Acquisition of furniture and equipment $    726,029
                    Acquisition of computer hardware and
software
   1,273,062
                    Leasehold improvements         42,011
                                                          Total $ 2,041,102

These items have not been recorded as assets, but rather as direct deductions to net claimants’ equity in the accompanying financial statements. The cost of fixed assets, net of proceeds on disposals, that were expensed during the three months ended March 31, 1999 and 1998 was approximately $62,300 and $24,400, respectively.

Depreciation expense related to asset acquisitions using generally accepted accounting principles would have been approximately $46,000 and $35,500 for the three months ended March 31, 1999 and 1998, respectively.

(f) JM Dividends

Beginning in September 1996, the JM Board of Directors has declared regular quarterly dividends. JM dividends are reported as additions to net claimants’ equity.

(3)    LITIGATION

During March 1999, the Trust and the Maritime Asbestosis Legal Clinic (MALC) reached a settlement agreement in the litigation brought by MALC against the Trust in response to the Trust’s disqualifying approximately 27,000 of MALC’s claims due to inadequate documentation and lacking credibility and reliability. The settlement’s terms are confidential, but provided that certain MALC claims would be paid and others would have to be refiled.

In December 1997, the Trust filed a civil action in the United States District Court for the Eastern District of New York (the Court) against seven tobacco companies to recover reimbursements for all past sums paid by the Trust to individuals whose asbestos disease or illness was caused in whole or in part, or was increased in severity, by the smoking-related illness which the tobacco defendants caused. The defendants have filed answers denying the allegations in the complaint. This case is in the early stages of discovery and it is too early to estimate the amount, if any, of any recovery.

In September 1998, the Trust was sued by certain Maryland claimants who allege that the Trust violated the terms of the Trust Distribution Process with respect to certain medical audit procedures. The complaint asked the Court to order the Trust to cease its medical audit program, requested the immediate payment of certain claims, and also sought an independent review of certain of the Trust’s financial actions and the dismissal of the Trustees and four Trust employees. The Trust filed an answer which denied the allegations of the complaint and also filed a counterclaim seeking judicial approval of the medical audit program. Seven additional lawsuits concerning the medical audit procedures were filed by attorneys who alleged they represented Trust beneficiaries. In addition, two interventions by Class Action representatives (Note 4) were filed.

Following several days of trial the Court dismissed the claims against the Trustees and Trust employees.

The parties are in settlement discussions that may significantly impact the process for medically auditing claims in the future, as well as, some claims which have already been medically audited. It is too early to estimate financial impact of a possible settlement, but management believes that any settlement will not materially affect outstanding settlement offers as the Trust does not record a liability until an offer has been made.

(4)    UNPAID CLAIMS

The Trust distinguishes between claims that were resolved prior to the filing of the class action complaint on November 19, 1990 and claims resolved after the filing of that complaint. Claims resolved prior to the complaint (Pre-Class Action Claims) were resolved under various payment plans, all of which called for 100% payment of the full liquidated amount without interest over some period of time. However, between July 1990 and February 1995, payments on all claims except qualified exigent health and hardship claims were stayed by the Courts. By Order of the Courts on July 22, 1993 (which became final on January 11, 1994), a plan submitted by the Trust was approved to immediately pay, subject to claimant approval, a discounted amount on Pre-Class Action Claims, in full satisfaction of these claims. The discount amount taken, based on the claimants who accepted the Trust’s discounted offer, was approximately $135 million.

The unpaid liability for the Post-Class Action claims represents outstanding offers made in First-in, First-out (FIFO) order to claimants eligible for settlement after November 19, 1990. Under the TDP (Note 6), claimants receive an initial pro rata payment equal to 10% of the liquidated value of their claim. The Trust remains liable for the unpaid portion of the liquidated amount only to the extent that assets will be available after paying all claimants the established pro rata share of their claims. The Trust makes these offers in the form of a check made payable to the claimant and/or claimant’s counsel. If the offer is accepted, the check is deposited, a Trust release is completed and the claim is recorded as settled. An unpaid claim liability is recorded once an offer is made. The unpaid claim liability remains on the Trust’s books until accepted or expiration of the offer after 180 days. A claimant may request that an offer be extended for an additional 180 days.

Pursuant to the Stipulation of Settlement, the Trust is obligated to pay approximately $63 million plus investment earnings on funds set aside for contribution and indemnity claims occurring before July 25, 1994. To date the Trust has paid approximately $58.5 million under this obligation.

(5) COMMITMENTS AND CONTINGENCIES

Operating Leases

In September 1993, the Trust executed a 5-year lease through December 1998 for its offices in Fairfax, Virginia. The lease was extended for an additional 5 years beginning at the expiration of the current lease during 1997. Effective January 1, 1999, the Trust assigned its rights under the lease to CRMC conditioned upon the Trust’s guarantee of future lease payments.

Future minimum rental commitments under this operating lease, as of December 31, 1998 are as follows:

                                              Calendar Year        Amount
                                    1999       444,124
                                    2000       609,930
                                    2001       628,228
                                    2002       647,075
                                     2003       666,486
                                      Total $ 2,995,843

This obligation has been recorded as a liability at face value in the accompanying financial statements.

(6)     NET CLAIMANTS’ EQUITY

A class action complaint was filed on behalf of all Trust beneficiaries on November 19, 1990, seeking to restructure the methods by which the Trust administers and pays claims. On July 25, 1994, the parties signed a Stipulation of Settlement that included a revised Trust Distribution Process (the TDP). The TDP prescribes certain procedures for distributing the Trust’s limited assets, including pro rata payments and initial determination of claim value based on scheduled diseases and values. The Court approved the settlement in an order dated January 19, 1995. Though six appeals were filed with the Court of Appeals, no stay was granted and the Trust implemented the TDP payment procedures effective February 21, 1995. On February 21, 1996, the Court of Appeals affirmed the decision.

Prior to the commencement of the class action in 1990, the Trust filed a motion for a determination that its assets constitute a “limited fund” for purposes of Federal Rules of Civil Procedure 23(b)(1)(B). The Courts adopted the findings of the Special Master that the Trust is a “limited fund”. In part, the limited fund finding concludes that there is a substantial probability that estimated future assets of the Trust are and will be insufficient to pay in full all claims that have been and will be asserted against the Trust.

The TDP contains certain procedures for the distribution of the Trust’s limited assets. Under the TDP, the Trust forecasts its anticipated annual sources and uses of cash until the last projected future claim has been paid. A pro rata payment percentage is calculated such that the Trust will have no remaining assets or liabilities after the last future claimant receives his/her pro rata share.

The Trust has conducted its own research and monitored studies prepared by the Courts’ appointee regarding the valuation of Trust assets and liabilities. Based on this valuation, the TDP provides for an initial 10% payment of the liquidated value of current and future claims. Accordingly, the Trust has reported Post-Class Action Claims at 10% of their liquidated value. The 10% pro rata payment represents the Trust’s best estimate of funds available over the life of the Trust to pay claims settled under the TDP. The Trust will continue to monitor this estimate based on changes in settlement practices and changes in future projected values of Trust assets and liabilities and make any necessary changes in the pro rata payment percentage as required under the TDP.

(7) EMPLOYEE BENEFIT PLANS

The Trust established a tax-deferred employee savings plan under Section 401 (k) of the Internal Revenue Code, with an effective date of January 1, 1988. The plan allows employees to defer a percentage of their salaries within limits set by the Internal Revenue Code with the Trust matching contributions by employees of up to 6% of their salaries. The total employer contributions and expenses under the plan were approximately $32,900 and $61,400 for the three months ended March 31, 1999 and 1998, respectively.

(8) RESTRICTED ASSETS

In order to avoid the high costs of director and officer liability insurance and with the approval of the United States Bankruptcy Court for the Southern District of New York, the Trust established a segregated security fund of $30,000,000 and, with the additional approval of the United States District Court for the Southern and Eastern Districts of New York, an escrow fund of $3,000,000 from the assets of the Trust, which are devoted exclusively to securing the obligations of the Trust to indemnify the former and current Trustees and officers, employees, agents and representatives of the Trust. In addition, a $15,000,000 escrow and security fund was established to secure the obligations of the Trust to exclusively indemnify the current Trustees, whose access to the other security funds is subordinated to the former Trustees. Upon the final order in the Class Action litigation (Note 4), the $15,000,000 escrow and security fund was reduced by $5,000,000. Pursuant to Section 5.07 of the plan, Trustees are entitled to a lien on the segregated security and escrow funds to secure the payment of any amounts payable to them through such indemnification. Accordingly, in total $43 million has been transferred from the Trust’s bank accounts to separate escrow accounts and pledge and security agreements have been executed perfecting those interests. The investment earnings on these escrow accounts accrue to the benefit of the Trust and are recorded as unrestricted investments.

Pursuant to the Stipulation of Settlement, the Trust funded separate investment accounts for two of the sub-class beneficiaries. During 1996, one of these accounts was fully disbursed and the remaining balance for the other account at March 31, 1999 is $6.5 million. This balance and the $43 million of self-insurance funds described above, have been reported as restricted investments.

(9)    INCOME TAXES

For Federal income tax purposes, JM has elected for the qualified assets of the Trust to be taxed as a “Designated Settlement Fund.” Income and expenses associated with these qualified assets of the Trust are taxed in accordance with Section 468B of the Internal Revenue Code. JM is obligated to indemnify the Trust for any income tax liability imposed upon the Trust, and accordingly, no liability or income tax provision has been recorded for the Trust. JM is not obligated to pay the federal and state income taxes of CRMC and the provision for income taxes on Exhibit II is the responsibility of CRMC.

To the extent that JM has a residual interest in any assets of the Trust or such assets represent stock or indebtedness of JM, the income and expenses attributable to such assets are taxed as if these assets were in a “Grantor Trust.” In addition, for tax purposes the Trust has segregated at times certain non-JM available-for-sale securities that are held in a Grantor Trust Account. Consequently, income and expenses associated with these assets are included in the income tax return of JM (the Grantor) and are not part of the Designated Settlement Fund.

(10)     PROOF OF CLAIMS FILED

Proof of claim forms have been filed with the Trust as follows:

                     As of
3/31/99
                       As of
3/31/98
Claims filed                   401,594                   374,753
Voided claims (1)                  (13,655)                   (13,583)
Currently disqualified (2)                  (23,778)                   (27,532)
Expired offers (3)                  (28,695)                   (24,086)
            Active claims                   336,466                     309,552
Settled claims                 (203,712)                  (174,838)
Claims currently eligible for settlement                   131,754                    134,714

(1) Claim filings that are permanently ineligible due to duplication of filing, withdrawal or missing critical information.

(2) Claim filings on hold until representation or content problems are resolved. (Note 3)

(3) Claims that received a Trust offer, but failed to respond within the offer acceptance period.
A claim may be reactivated upon written request and is eligible for a new offer at the end of
the FIFO queue.

The following exhibits are provided in accordance with Article 3.02 (d) (iii) of the Manville Personal Injury Settlement Trust Agreement.

12/31/98

Exhibit I   Non-JM Investment Income for the Three Months Ended March 31, 1999
and 1998

Exhibit II  Operating and Dispute Resolution Expenses for the Three Months Ended
March 31, 1999 and 1998

Exhibit III, Page 1 – Schedule of Liquidated Claims Since Consummation (November 28,
1988) Through December 31, 1998


Exhibit III, Page 2 – Page 2 – Schedule of Liquidated Claims for the Three Months
Ended March 31, 1999

                                                                                                                                   EXHIBIT I

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
NON-JM INVESTMENT INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998


1999

1998
NON-JM INVESTMENT INCOME
         Interest $11,143,475 $11,987,103
         Dividends 762,546 605,220
         Net realized gains 863,175 3,546,212
                     Total non-JM investment income 12,769,196 16,138,535
          Investment expenses (556,150) (286,008)
TOTAL $12,213,046 $15,852,527

The accompanying notes are an integral part of this exhibit.

                                                                                                                                        EXHIBIT II

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
OPERATING AND DISPUTE RESOLUTION EXPENSES FOR THE
THREE MONTHS ENDED MARCH 31,  1999 AND 1998


1999

1998
OPERATING EXPENSES:
        Personnel costs $1,676,234 $1,570,594
      Office general and administrative 346,770 247,733
      Travel and meetings 70,959 39,741
      Board of Trustees 94,145 89,340
      Professional fees 1,128,763 408,476
      Net fixed asset purchases 62,272 24,389
      Computer and other EDP costs 34,002 34,261
         Total operating expenses 3,413,145 2,414,534
DISPUTE RESOLUTION EXPENSES:
      Litigation defense 1,426 25,776
      Arbitration 3,460 1,700
          Total dispute resolution expenses 4,886 27,476
PROVISION FOR INCOME TAXES 40,000
                 TOTAL $3,458,031 $2,442,010

The accompanying notes are an integral part of this exhibit.

                                                                                                 EXHIBIT III, Page 1 of 2                                                                                                           

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
SCHEDULE OF LIQUIDATED CLAIMS
SINCE CONSUMMATION (NOVEMBER 28, 1988)
THROUGH DECEMBER 31, 1998


Number

Amount
Average
Payment Amount
Trust Liquidated Claims
     Pre-Class Action Complaint
             November 19, 1990 and Before-
     Liquidated Claim Value 27,612 $1,188,382,855
     Present Value Discount (1)      ($134,990,193)
     Net Settlements 27,612 $1,053,392,662
     Payments (27,444) ($1,051,270,144)     $38,307
     Unpaid Balance 168 $2,089,698
     Post-Class Action Complaint
               After November 19, 1990-
     Offers Made at Full Liquidated Amount 188,046 $8,804,729,690
     Reduction in Claim Value (2) ________ ($7,923,978,756)
     Net Offer Amount 188,046 880,750,934
     Payments (176,100) (841,536,121)      $4,779
     Offers Outstanding 11,946 $39,214,813
Manville Liquidated Claims (3)
     Liquidated Claim Value 174 $25,253,142
     Payments (158) (24,946,620)
     Unpaid Balance 16 $306,522
Co-Defendant Liquidated Claims (4)
     Liquidated Claim Value $84,926,539
     Investment Receipts (5) 2,386,469
     Payments (79,352,184)
     Unpaid Balance $7,960,824

1)    The unpaid liability for Pre-Class Action Complaint claims has been reduced based upon a plan approved by the Courts in
January, 1994 which requires the Trust to offer to pay a discounted amount in full satisfaction of the unpaid  claim amount.

(2)   Under the TDP, Post Class Action Complaint claims have been reported at 10% of their liquidated value.

(3)    Manville Liquidated Claims refers to Liquidated AH Claims (as defined in the Plan) which the Trust has paid or accrued as
payable pursuant to an order of the United States Bankruptcy Court  for the Southern District of New York dated January 27, 1987.

(4)    Number of personal injury claimants not identifiable.

(5)    Investment receipts of separate investment escrow account established for the sub-class beneficiaries per the Stipulation of
Settlement, net of income taxes.

                                              The accompanying notes are an integral part of this exhibit.

                                                                                            EXHIBIT III , Page 2 of  2
                                                                                                                 

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
SCHEDULE OF LIQUIDATED  CLAIMS
FOR THE THREE MONTHS ENDED MARCH 31, 1999


Number

Amount
Average
Payment Amount
Trust Liquidated Claims
     Pre-Class Action Complaint
             November 19, 1990 and Before-
             Payable as of December 31, 1998 168 $2,122,518
             Settled
            Present Value Discount
            Paid (1) ($32,820)
            Payable as of March 31, 1999 168 $2,089,698
     Post-Class Action Complaint
             After November 19, 1990- (2)
             Offers Outstanding as of December 31, 1998 17,066 $52,907,100
             Net Offers Made (3) 4,643 23,683,549
             Offers Accepted/Paid (9,763) (37,375,836) $3,828
             Offers Outstanding as of March 31, 1999 11,946 $39,214,813
Manville Liquidated Claims
             Payable as of December 31, 1998 16 $306,522
             Settled 0 0
             Paid 0 0
             Payable as of March 31, 1999 16 $306,522
Co-Defendant Liquidated Claims (4)
             Payable as of December 31, 1998 $8,397,490
             Settled 856,987
             Investment Receipts (5) 77,885
             Paid (1,371,538)
             Payable as of March 31, 1999 $7,960,824

(1)    During the period the dollar amount of paid claims includes fully and partially paid claims. The number of paid claims
represents only fully paid claims.

(2)    Under the TDP, Post Class Action Complaint claims have been reported at 10% of their liquidated value.

(3)    Represents payment offers made during the period net of rejected and expired offers.

(4)    Number of personal injury claimants not identifiable.

(5)    Investment receipts of separate investment escrow account established for the sub-class beneficiaries per the
stipulation of settlement, net of income taxes.