Financial Statements [2001/Q2]

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
Special-Purpose Unaudited Consolidated Financial Statements
As of June 30, 2001 and 2000

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 June 30, 2001 and 2000 and the consolidated changes in net claimants’ equity and cash flows for the three months and six months ended June 30, 2001 presented on the special-purpose basis of accounting described in Note 2, which accounting methods have been applied on a consistent basis.

/s/ Mark E. Lederer       
Mark E. Lederer
Chief Financial Officer

 

 

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
CONSOLIDATED STATEMENTS OF NET CLAIMANTS’ EQUITY
AS OF JUNE 30, 2001 AND 2000

                           2001 2000
ASSETS:
                Cash equivalents and investments (Notes 1 & 2)
                         Available-for-sale non-JM
                                     Restricted (Note 8) $72,153,018 $43,253,001
                                     Unrestricted non-JM 2,093,317,805 834,839,224
                                                   Total 2,165,470,823 878,092,225
                         Other available-for-sale
                                     JM common stock 1,514,820,394
                                                  Total cash equivalents and investments 2,165,470,823 2,392,912,619
                Accrued interest and dividend receivables 10,626,320 14,777,251
                Deposits and other assets 126,806 236,332
                         Total assets 2,176,223,949 2,407,926,202
LIABILITIES:
                Accrued expenses (Note 1) 4,813,780 5,499,330
                Unpaid claims (Notes 4, 6 & Exh. III)
                         Settled Pre-Class Action complaint 1,029,773 1,420,673
                         Outstanding Offers – Post Class Action complaint 32,870,330 68,606,132
                Contribution and indemnity claims payable
                         (Notes 4, 8 and Exh. III) 10,997 253,215
                Lease commitments payable (Note 5) 1,596,411 2,194,049
                         Total liabilities 40,321,291 77,973399
NET CLAIMANTS’ EQUITY (Note 6) $2,135,902,658 $2,329,952,803

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN NET CLAIMANTS’ EQUITY
AS OF  JUNE  30, 2001 AND 2000

Three Months
Ended 6/30/01
Six Months
Ended 6/30/01
NET CLAIMANTS’ EQUITY,
          BEGINNING OF PERIOD $2,104,227,366 $2,154,502,680
ADDITIONS TO NET CLAIMANTS’ EQUITY:
          Reimbursement by JM of prior years foreign income taxes 124,601
          Payment for assumption of income tax liability 90,000,000
          Non-JM investment income (Exh. I) 19,137,663 34,484,590
          Realized gain on sale of JM stock 1,232,982,811
          Net reduction in outstanding claim offers 10,347,185 45,602,088
          Net unrealized gains on non-JM available-for-sale securities 54,806,959
         Decrease in lease  commitments payable 156,532 300,056
                 Total additions 84,448,339 1,403,494,146
DEDUCTIONS FROM NET CLAIMANTS’ EQUITY:
          Operating  expenses (Exh. II) 7,503,868 14,612,888
          Management expenses for investments in JM 105,629
         Claims settled 45,269,179 151,945,755
          Contribution and indemnity claims settled 1,003,630
          Net unrealized losses on non-JM available-for-sale securities 15,377,006
          Unrealized loss on JM stock 1,239,049,260
                    Total deductions 52,773,047 1,422,094,168
NET CLAIMANTS’ EQUITY,
          END OF PERIOD $2,135,902,658 $2,135,902,658

The accompanying notes are an integral part of these statements.    

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000

Three Months Ended 6/30/01 Six Months Ended 6/30/01
CASH INFLOWS
          JM dividends $6,763,849
          Reimbursement by JM of prior years foreign income taxes 124,601
          Payment for assumption of income tax liability 90,000,000
          Sale of JM stock 1,329,000,647
          Investment receipts 18,745,038 31,782,690
          Change in deposits and other assets 12,282 148,680
          Investment receipts on escrow accounts (Note 8) 11,462 15,464
                    Total cash inflows 18,768,782 1,457,835,931
CASH OUTFLOWS
          Claim payments made 45,330,479 152,262,655
          Contribution and indemnity claim payments 120,846 1,221,474
                    Total cash claim payments 45,451,325 153,484,129
          Disbursements for Trust operating, dispute resolution
             and asset management expenses 17,053,650 28,601,704
                    Total cash outflows 62,504,975 182,085,833
NET CASH INFLOWS (OUTFLOWS) (43,736,193) 1,275,750,098
NON-CASH CHANGES
          Net unrealized gains (losses) on non-JM
                    available-for-sale securities 54,806,959 (15,377,006)
NET INCREASE  (DECREASE) IN CASH EQUIVALENTS AND
          NON-JM INVESTMENTS AVAILABLE-FOR-SALE 11,070766 1,260,373,092
CASH EQUIVALENTS AND NON-JM INVESTMENTS
          AVAILABLE-FOR-SALE, BEGINNING OF PERIOD 2,154,400,057 905,097,731
CASH EQUIVALENTS AND NON-JM INVESTMENTS
          AVAILABLE-FOR-SALE, END OF PERIOD $2,165,470,823 $2,165,470,823

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2001 AND 2000

 

(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 with claim processing and settlement services. Prior to January 1, 1999, the Trust provided its own 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. All significant balances and transactions between the Trust and CRMC have been eliminated in consolidation.

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). On February 26, 2001, all of the remaining shares of the Manville Common Stock were sold.
  • 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.
  • Up to $150 million pursuant to the terms of a second bond (the Trust Second Bond). The Trust Second Bond required Manville to pay the Trust $37.5 million semi-annually in the years 2013 and 2014. On June 30, 1999 the Trust Second Bond was prepaid.
  • 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

On December 19, 2000, JM entered into a definitive merger agreement pursuant to which Berkshire Hathaway, Inc. (Berkshire) agreed to acquire all of the outstanding shares of JM for $13 per share in cash. In addition, the Trust in a separate agreement with Berkshire agreed to tender its shares of JM. On December 28, 2000 JM repurchased 10.5 million shares of its common stock from the Trust for $136.5 million, reflecting the purchase price of $13 per share in the transaction with Berkshire. On February 26, 2001 the Trust tendered all its shares and received $1.3 billion for its remaining 102,230,819 shares of JM common stock, net of transaction costs of approximately $12.5 million. In addition, JM paid the Trust $90 million in settlement of JM’s obligation for future income taxes of the Trust

(2) SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The Trust’s financial statements are prepared using special-purpose accounting methods that differ from accounting principles generally accepted in the United States.  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. Realized gains on JM common stock and unrealized gains and losses on non-JM available-for-sale securities are recorded as separate components on the statements of changes in net claimants’ equity.

Realized gains/losses on both non-JM available-for-sale-securities and JM  common stock are  recorded based on the security’s original cost.   At the time a security is sold, all previously recorded  unrealized holding gains/losses are reversed and recorded net, as a component of other unrealized gains/losses in the accompanying statements of net claimants’ equity.

(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 were held by the Trust in order to pay asbestos health claims, and as such, the investment was 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 then current market value was appropriate.

At consummation of JM’s bankruptcy, the Trust’s stock interests were recorded at market value. Subsequent changes in their market values are shown separately as unrealized gains or losses in the carrying value of JM common stock in the statements of changes in net claimants’ equity. Prior to the sale of the Trust’s JM stock, the market value of the JM common stock held by the Trust was recorded by using the closing price of JM common stock on the New York Stock Exchange composite transactions on the last day of the appropriate reporting period. As of  June 30, 2001 the price was $13.4375 per share.

(c) Cash Equivalents and Non-JM Investments

At June 30, 2001 and 2001, the Trust has recorded all i ts non-JM investment securities at market value, as follows:.

2001 2000
     Cost     Market      Cost     Market
Restricted
   Cash equivalents $685,019 $685,019 $3,508,150 $3,508,150
   U.S. Govt. obligations 11,648,344 11,886,569 11,121,964 10,994,013
   Corporate and other debt 7,901,720 8,020,632 7,238,128 7,174,469
   Equities – U.S. 44,620,297 51,560,798 11,858,485 21,576,009
                 Total $64,855,380 $72,153,018 $33,727,087 $43,253,001
Unrestricted
  Cash equivalents $461,517,050 $461,517,051 $92,294,968 $92,294,968
   U.S. govt. obligations 308,473,182 310,888,136 192,088,921 190,177,889
   Foreign govt. obligations 108,850,049 104,491,558
   Corporate and other debt 342,961,528 345,422,211 217,834,382 211,604,548
   Equities – U.S. 874,162,266 893,844,717 95,491,625 150,520,423
   Equities – International 83,113,633 81,645,690 64,782,255 85,749,838
                Total $2,070,227,659 $2,093,317,805 $771,342,200 $834,839,224

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 June 30, 2001, the fair value of these instruments was approximately $0.6 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 equity issues.  At June 30, 2001, the Trust held at market value approximately $131.8 million in sell currency forward contracts offset by approximately $131.1 million in buy currency forward contracts.  The unrealized gain on these outstanding currency forward contracts of approximately $0.7 million is principally offset by corresponding unrealized gains due to currency exchange on the underlying securities being hedged.  These amounts are recorded in the statement of net claimants’ equity at June 30, 2001.

(d) 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    $762,131
Acquisition of computer hardware and software $1,565,755
Computer software development (in progress) $1,157,683
Leasehold improvements       $42,965
Total $3,528,534

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 and six months ended June 30, 2001 was approximately $870,400 and $1,175,900,
respectively.

Depreciation expense related to asset acquisitions using accounting principles principles generally accepted in the United States would have been approximately $31,400 and $72,200 for the three and six months ended June 30, 2001.

(e)    JM Dividends

Beginning in August 1996, the JM Board of Directors declared regular quarterly dividends of $.03 per share, the first time such dividends were declared since 1982. In August 1997, the dividend was increased to $.04 per share and in August 1998 to $.06 per share. The Trust received its last dividend payment in January 2001.  Such dividends are reported as additional to net claimants’ equity.

(3)    LITIGATION

During 1997, the Trustees filed a complaint in the U.S. District Court for the Eastern District of New York (the Court) on behalf of the Trust against seven tobacco manufacturers (“Falise I”), pursuant to which the Trust sought contribution and indemnification for claims paid and to be paid in which a portion of the claimant’s injury was caused by smoking. In November 1999, the Court dismissed Falise I on jurisdictional grounds and during the same month, the Trust filed a second complaint (“Falise II”) which alleged the same causes of action as in Falise I and, in addition, violations of the Federal RICO Act.

On December 4, 2000, the jury trial of Falise II began in the Court. On January 25, 2001, the Court declared a mistrial because the jury was unable to reach a verdict after six days of deliberation. Following extensive research and consultation with the Trust’s trial and appellate counsel, on July 6, 2001 the Trust and the Falise II defendants moved to dismiss the case with prejudice.

(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 court order 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, a Trust release is completed, the check is deposited 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. As of June 30, 2001, principally all amounts have been paid..

(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 initial lease. 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 June 30, 2001 are as follows:

Calendar Year Amount
2001 313,061
2002 631,969
2003 651,381
Total $1,596415

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.

Prior to the implementation of the TDP, the Trust 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 provided for an initial 10% payment of the liquidated value of current and estimated future claims.(pro rata payment percentage).  As required by the TDP, the Trust has periodically re-estimated the values of its projected assets and liabilities to determine whether a revised pro rata payment percentage should be applied in the future.  The most recent re-estimate began in 2000 and was concluded in June of 2001.  Following its review and consultation with the Selected Counsel for the Beneficiaries (SCB), the Legal Representative of Future Claimants (Legal Representative) and Special Advisor to the Trust (Special Advisor), the Trust proposed to the SCB and Future Representative that the pro rata payment percentage be reduced from 10% to 5%, beginning with claims generally filed after October of 2000.  The SCB and Future Representative have until August 06, 2001 to comment on the Trust’s proposed decision.  Thereafter, if their consents are not provided, the TDP provides for such dispute to be resolved by binding arbitration.   In the interim, the SCB and Legal Representative have consented to the Trust’s request that, pending a final resolution of this issue and without prejudice to their rights to dispute the issue in binding arbitration, the Trust may make offers and pay claims based upon a 5% pro rata payment percentage.  As of June 30, 2001, all outstanding offers, if accepted, will be paid based upon a 10% pro rata payment percentage.

As required under the TDP, the Trust will continue to periodically update its estimate of the pro rata payment percentage based on updated assumptions regarding its future assets and liabilities and, if appropriate, proposed additional changes in the pro rata payment percentage.

(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 $77,000 and $155,000 for the three and six  months ended June 30, 2001 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. As June 30, 2001 both of these accounts have been fully disbursed.

As a condition of the tax agreement between JM and the Trust discussed in Note 9 below, the Trust was required to transfer $30 million in cash to an escrow account to pay its future income tax obligations post settlement of the transaction. The escrow account balance may be increased or decreased over time. As of June 30, 2001, securities with a market value of $29.1 million were held by an escrow agent in accordance with the agreement. These funds 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 (DSF). Income and expenses associated with the DSF are taxed in accordance with Section 468B of the Internal Revenue Code, which obligates JM to pay for any federal income tax liability imposed upon the DSF. In addition, pursuant to an agreement between JM and the Trust, JM is obligated to pay for any income tax liability. However, as discussed in Note 1, at the consummation of the tender offer transaction on February 26, 2001, JM paid the Trust $90 million to settle their obligation to the Trust. In return, the Trust terminated JM’s contractual liability for income taxes of the DSF and agreed to indemnify JM in respect for all future income taxes of the Trust. JM remained liable for the Trust’s income taxes through February 26, 2001. The statutory income tax rate for the DSF is 15%.

The Trust accounts for income taxes in accordance with the Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes.” SFAS No. 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the book and tax basis of assets and liabilities. As of June 30, 2001, the Trust has recorded a net deferred tax asset of $29,000, representing temporary timing differences primarily for CRMC’s accrued vacation and deferred compensation. The deferred asset is included in deposits and other assets in the accompanying consolidated statement of net claimants’ equity.

(10) PROOF OF CLAIMS FILED

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

As of 6/30/01 As of 6/30/00
Claims filed 542,725 449,259
Voided claims (1) (39,597) (36,993)
Currently disqualified (2) (808) (1,335)
Expired offers (3) (44,071) (38,118)
            Active claims 458,249 372,813
Settled claims (374,824) (309.770)
Claims currently eligible for settlement 83,425 63,043

(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.

(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.

Exhibit I   Consolidated Non-JM Investment Income for the Three Months Ended June 30, 2001 and 2000

Exhibit II  Consolidated Operating Expenses for the Three Ended  June 30, 2001 and 2000

Exhibit III, Page 1 – Schedule of Liquidated Claims Since Consummation (November 28, 1988) Through June 30, 2001

Exhibit III, Page 2 – Schedule of Liquidated Claims for the Quarter Ended June 30, 2001

                                                                                                                                            EXHIBIT I

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
CONSOLIDATED NON-JM INVESTMENT INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000

Three Months Ended 6./30/01 Six Months Ended 6/30/01
NON-JM INVESTMENT INCOME
         Interest $18,552,542 $30,793,344
         Dividends (Note 2(e)) 3,183,367 5,204,938
         Net realized gains (2,017,966) (547,458)
                     Total non-JM investment income 19,717,943 35,450,824
          Investment expenses (580,280) (966,234)
TOTAL $19,137,663 $34,484,590

The accompanying notes are an integral part of this exhibit.

                                                                                                                       EXHIBIT II

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
CONSOLIDATED OPERATING  EXPENSES
FOR THE THREE ENDED JUNE 30, 2001 AND 2000

Three Months Ended 6/.30/01 Six Months Ended 6/30/01
OPERATING EXPENSES:
      Personnel costs $1,759,900 $3,695,466
      Office general and administrative 330,951 669,581
      Travel and meetings 87,891 241,873
      Board of Trustees 206,650 435,384
      Professional fees 2,015,105 5,410,134
      Net fixed asset purchases 870,448 1,175,927
      Computer and other EDP costs 19,998 46,198
      Dispute resolution 3,200 3,600
TOTAL OPERATING EXPENSES    5,294,143 11,678,163
      Income tax provision 2,209,725 2,934,725
                  TOTAL $7,503,868 $14,612,888

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 JUNE 30, 2001


Number

Amount
Average
Payment Amount
Trust Liquidated Claims
     Pre-Class Action Complaint
             November 19, 1990 and Before-
     Liquidated Claim Value 27,609 $1,188,264,972
     Present Value Discount (1) ______ (135,306,535)
     Net Settlements 27,609 1,052,958,437
     Payments (27,565) (1,051,928,664) $38,162
     Unpaid Balance 44 $1,029,773
     Post-Class Action Complaint
               After November 19, 1990-
     Offers Made at Full Liquidated Amount 354,480 $15,469,290,920
     Reduction in Claim Value (2) ______ (13,922,083,863)
     Net Offer Amount 354,480 1,547,207,057
     Payments (347,215) (1,514,336,727) $4,361
     Offers Outstanding 7,265 $32,870,330
Manville Liquidated Claims (3)
     Liquidated Claim Value 158 $24,946,620
     Payments (158) (24,946,620)
     Unpaid Balance 0 $0
Co-Defendant Liquidated Claims (4)
     Liquidated Claim Value $93,435,949
     Investment Receipts (5) 2,623,919
     Payments (96,048,871)
     Unpaid Balance $10,997

(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 ENDED JUNE 30, 2001


Number

Amount
Average
Payment Amount
Trust Liquidated Claims
     Pre-Class Action Complaint
            November 19, 1990 and Before-
            Payable as of March 31, 2000 52 $1,091,073
            Paid (1) (7) (61,300)
            Payable as of  March 31, 2001 45 $1,029,773
     Post-Class Action Complaint
             After November 19, 1990- (2)
          Offers Outstanding as of March 31, 2000 10,702 $43,217,515
             Net Offers Made (3) 5,308 34,921,994
             Offers Accepted (8,745) (45,269,179) $5,177
          Offers Outstanding as of March 31, 2001 7,265 $32,870,330
Co-Defendant Liquidated Claims
         Payable as of  March 31, 2000 $120,380
            Settled
             Investment Receipts (4) 11,463
             Paid (120,846)
         Payable as of  June 30, 2001 $10,997

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