1st Quarter 2000

Financial Statements

HIGHLIGHTS OF THE 1ST QUARTER 2000 FILING


CONTENTS:

FINANCIAL SUMMARY
CLAIM OPERATIONS
Offers and Settlements
Individual Evaluation Process
New Claim Filings
LEGAL ISSUES
ASSET MANAGEMENT


FINANCIAL SUMMARY

Operating expenses for the three months ended March 31, 2000 were approximately $6.1 million, compared to $3.5 million for the same period in 1999. The increase in operating expenses is attributable to litigation expenses associated with the Trust’s lawsuit against the cigarette manufacturers. Other operating costs, excluding litigation costs, were slightly less in the First Quarter of 2000 than the same period in 1999. For the First Quarter of 2000, the Trust incurred approximately $3.4 million in tobacco litigation costs compared to approximately $300,000 for the First Quarter of 1999. During the First Quarter of 1999, the Trust spent approximately $500,000 on the Adams litigation that was settled in April 1999. Asset management expenses relating to the Trust’s majority share holdings in Johns Manville Corporation (“JM”) were approximately $100,000 during the First Quarter of 2000 compared to $900,000 for the same period in 1999.

Net Claimants’ Equity decreased for the quarter ended March 2000 by approximately $400 million principally due to a decrease in the market value of the JM common stock of approximately $370 million and claims payments of almost $70 million. The more significant additions to Net Claimants’ Equity during the period were the receipt of $13 million in non-JM investment income, almost $7 million of JM dividends and unrealized gains on non-JM securities of $8 million. Also the reduction of outstanding offers during the First Quarter of 2000 increased Net Claimants’ Equity by approximately $21 million.

During the quarter ended March 31, 2000, the Trust paid almost $70 million and settled over 17,000 claims compared to $37 million in claim payments on 9,700 claims during the First Quarter of 1999. Since implementation of the Trust Distribution Process (“TDP”) in early 1995, the Trust has paid over $1.15 billion in claim payments to TDP claimants and settled over 266,000 TDP claims. For that period, operating expenses, excluding class action and JM asset management expenses, represent 4.8% of all claim payments.

As of March 31, 2000, the Trust had approximately $947 million in cash equivalents and investments, exclusive of the Trust’s investment in JM securities (valued at $1.2 billion as of March 31, 2000), and $2.07 billion in Net Claimants’ Equity.

CLAIM OPERATIONS

Offers and Settlements

During the First Quarter, the Trust made 18,432 offers and settled 17,121 claims for total payments of close to $70 million. The average settlement amount was $4,085. On March 31, 2000, the Trust had approximately 72,000 unsettled active claims, which was 10,000 fewer than at year end and almost 60,000 fewer than the first quarter ended March 31, 1999. Within the unsettled active claim population, 53% are claims with outstanding offers or deficiency notices and 47% of the claims require an action by the Trust. In addition, 34,700 claims are deactivated awaiting a response from counsel.

Under the Adams Settlement the claim population was divided into Retrospective Audit Claims (claims filed before April 10, 1999) and Prospective Audit Claims (claims filed on or after April 10, 1999). With the exception of about 4,500 claims being held as a result of disputes among claimants’ attorneys over attorney representation, claims subject to the Retrospective Audit have received at least one offer or denial notice, pursuant to the Adams Settlement. Under the terms of Adams, claims which could be subject to a prospective audit are to be held until an agreement is reached among the Trust, the Selected Counsel for the Beneficiaries (“SCB”) and the Representative of the Future Claimants. In February 2000, pursuant to an agreement among the Trust, the SCB and the Futures Representative, the Trust began making offers on Prospective Audit Claims. An ongoing review of these claims may result in the establishment of audit procedures to be agreed to by the parties. On March 31, 2000 the Trust had 19,880 claims received after April 10, 1999 which have not yet been assigned a Scheduled Value category. The Trust anticipates that these claims will be eligible to receive their first offer within six months.

Processing issues remain outstanding concerning the interpretation and application of the reporting requirements of Pulmonary Function Testing results for specific claim populations under the Adams Settlement. After discussions with the SCB and the Futures Representative, the Trust will be working directly with the firms involved to resolve these issues.

Individual Evaluation Process

While the majority of claimants settle their claims by accepting the Scheduled Value Offer, a small percentage opt for Individual Evaluation (“IE”) if the claim does not meet the criteria of any of the seven Scheduled Value categories or if the claimants believe the claim has a value higher than the Scheduled Value. On March 31, 2000, the Trust had 2,245 outstanding requests for IE, of which almost 60% were claims denied for not meeting the criteria of one of the seven Scheduled Value categories. During First Quarter 2000, the Trust received 134 new requests for IE and resolved 431.

New Claim Filings

During the first three months of 2000, CRMC received about 10,400 new claim filings compared to 5,700 receipts during the same three month period of 1999, and 8,900 in the first three months of 1998. Approximately 160 firms have filed claims during the First Quarter of 2000 and 11 firms accounted for 60% of that total. Twelve firms have filed more than 200 claims, and approximately 100 have filed 25 or fewer. Since inception, the Trust has received 438,800 claims. Excluding claims that have been permanently disqualified from processing (i.e. void claims), approximately 402,000 potentially valid claims have been filed with the Trust since its inception. Two charts are attached. “Chart 1: Total POC Filings, 1998-2000” compares this year’s monthly claim filing volumes against the comparable months of 1998 and 1999. “Chart 2: Total POC Filings by Month – Feb.1997-Mar. 2000” shows claim volumes along a monthly continuum.

At the end of March 2000, there were 34,740 expired offers. This compares to 28,700 expired offers at the end of March 1999. About 76% of currently expired offers were denials (i.e., category zero) at the time of expiration.

LEGAL ISSUES

Discovery in the litigation filed by the Trust against seven cigarette manufacturers continued during the First Quarter, with the CRMC General Counsel’s Office taking an increasingly active role in the discovery in the case. July 5, 2000 has been scheduled by the Court as the trial date.

Beauchemin v. Manville Personal Injury Settlement, a case which challenges the Trust’s application of pulmonary function test standards, is continuing. The Trust is represented in this matter by the CRMC’s General Counsel’s Office. Settlement negotiations have taken place and are continuing.

As of the end of the First Quarter, there were 324 pending claims in the Trust’s Alternative Dispute Resolution (“ADR”) program, as compared to 231 claims at the end of 1999. Two hundred and fifteen of these claims were awaiting claimants’ position papers to be submitted to arbitrators and seven additional claims were awaiting claimants’ rebuttal statements to be submitted to arbitrators.

ASSET MANAGEMENT

As of March 31, 2000, total assets were approximately $2.2 billion of which the Trust’s ongoing investment in the common stock of JM was approximately $1.2 billion (based upon a March 31, 2000 closing price of $10.625), or 55% of total assets. The remaining nearly $1 billion or 44% of assets were invested in a diversified portfolio of domestic and international equities ($284 million or 13% of total assets) and fixed income securities ($678 million or 31% of total assets). Total equities represent 69% of total assets contrasted with 75% as of a year ago, principally as a result of a decline in JM’s stock price. The Trust has ample liquidity to fund all outstanding offers as well as anticipated offers for the foreseeable future. The Trustees, and their advisors are continuing to actively explore alternative means to further enhance and preserve the Trust Estate.

Pursuant to the Trust Distribution Process (“TDP”), the Trust pays only a percentage of the liquidated value of its settlements. As required by the TDP, the Trust is obligated to review this pro rata percentage, currently 10%, at least every three years. The projection involves forecasting the value of Trust assets and liabilities until the end of the life of the Trust when the last claim is expected to be filed, presently estimated to be 2049. An informal review of these projections has continued throughout the period. Since the last formal estimate was made in 1997, the Trustees have directed the staff to prepare an updated estimate for their review later this year. As in the past, the Trustees and staff will consult with Selected Counsel for the Beneficiaries and the Legal Representative for Future Claimants regarding the analysis.


To obtain a complete copy of the quarterly filing, please contact Manville Trust in care of:  inquiry@claimsres.com.