Financial Statements [1998/Q3]

QUARTER ENDED SEPTEMBER 30, 1998

MANVILLE PERSONAL INJURY SETTLEMENT TRUST

The financial statements included herein are unaudited. In the opinion of the management of the Trust, the accompanying financial statements present fairly, subject to normal year-end adjustments, the net claimants’ equity as of September 30, 1998 and 1997 and the changes in net claimants’ equity and cash flows for the three months and nine months ended September 30, 1998 presented on the special-purpose basis of accounting described in Note 2, which accounting methods have been applied on a consistent basis.

Mark E. Lederer
Chief Financial Officer

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
STATEMENTS OF NET CLAIMANTS’ EQUITY
AS OF SEPTEMBER  30, 1998 AND 1997

1998 1997
ASSETS:
                Cash equivalents and investments (Notes 1 & 2)
                         Available-for-sale non-JM
                                     Restricted (Note 8) $49,679,103 $52,508,078
                                     Unrestricted non-JM 945,264,081 948,319,162
                                                   Total 994,943,184 1,000,827,240
                         Other available-for-sale
                                     JM common stock 1,421,045,876 1,453,898,668
                         Held-to-maturity securities
                                     Trust Second Bond 26,106,960 23,326,590
                                                  Total cash equivalents and investments 2,442,096,020 2,478,052,498
                Accrued interest and dividend receivables 16,264,973 12,833,752
                Deposits and other assets 185,584 100,493
                         Total assets 2,458,546,577 2,490,986,743
LIABILITIES:
                Accrued expenses 3,090,431 2,727,422
                Unpaid claims (Note 4, 6 & Exh. III)
                         Settled Pre-Class Action complaint 2,440,792 2,777,876
                         Outstanding Offers – Post Class Action complaint 32,042,422 38,830,841
                Contribution and indemnity claims payable
                         (Notes 4, 8 and Exh. III) 8,944,650 21,234,740
                Lease commitments payable (Note 5) 3,254,853 560,381
                         Total liabilities 49,773,148 66,131,260
NET CLAIMANTS’ EQUITY (Note 6) $2,408,773,429 $2,424,855,483

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 AND NINE MONTHS ENDED
SEPTEMBER 30, 1998

          Three Months
          Ended 9/30/98
       Nine Months
     Ended 9/30/98
NET CLAIMANTS’ EQUITY,
          BEGINNING OF PERIOD $2,896,531,393 $2,251,315,376
ADDITIONS TO NET CLAIMANTS’ EQUITY:
          JM dividend 7,495,627 17,633,795
          Trust Second Bond accretion 724,715 2,114,349
          Non-JM investment income (Exh. I) 21,291,684 51,780,168
          Unrealized net gains (losses) on non-JM available-for-sale
                    securities (22,967,915) 155,816
          Reduction in outstanding claim offers 4,890,686
          Decrease in lease commitments payable 110,968 337,200
          Change in carrying value of JM common stock (460,668,718) 174,541,832
                    Total additions (454,013,639) 251,453,846
DEDUCTIONS FROM NET CLAIMANTS’ EQUITY:
           Operating and dispute resolution expenses (Exh. II) 2,705,510 8,042,971
          Management expenses for investments in JM 123,340 384,991
          Increase in outstanding claim offers 3,087,056
          Claims settled 27,693,821 84,416,320
         Contribution and indemnity claims settled 134,598 1,151,511
                    Total deductions 33,744,325 93,995,793
NET CLAIMANTS’ EQUITY,
          END OF PERIOD $2,408,773,429 $2,408,773,429

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
STATEMENTS OF CASH FLOWS FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998

Three Months
Ended 9/30/98
Nine   Months
Ended 9/30/98
CASH INFLOWS:
          JM dividends $4,997,084 $15,279,252
          Investment receipts 22,013,596 51,849,756
          Sale of JM common stock 0 46,800,000
          Investment receipts on escrow accounts (Note 8) 54,983 129,217
                    Total cash inflows 27,065,663 114,058,225
CASH OUTFLOWS:
          Claim payments made 27,693,821 84,753,404
          Contribution and indemnity claim payments 557,841 10,832,672
                    Total cash claim payments 28,251,662 95,586,076
          Disbursements for Trust operating, dispute resolution,
                    asset management 3,023,074 8,334,190
                    Total cash outflows 31,274,736 103,920,266
NET CASH INFLOWS (4,209,073) 10,137,959
          Net unrealized gains (losses) on non-JM securities
                    available-for-sale (22,967,915) 155,816
          Change in deposits and other assets (78,500) (68,245)
NET INCREASE IN CASH EQUIVALENTS AND
          NON-JM INVESTMENTS AVAILABLE-FOR-SALE (27,255,488) 10,225,530
CASH EQUIVALENTS AND NON-JM INVESTMENTS
          AVAILABLE-FOR-SALE, BEGINNING OF PERIOD 1,022,198,672 984,717,654
CASH EQUIVALENTS AND NON-JM INVESTMENTS
          AVAILABLE-FOR-SALE, END OF PERIOD $994,943,184 $994,943,184

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST

NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 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 Fairfax, Virginia, 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.

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 (PD 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 32.5 million shares of Manville Common Stock.

As provided for in the Plan, upon termination of the Trust, assets then held by the Trust will be transferred to the PD Trust, assuming such trust is then in existence. In connection with a final Property Damage Settlement Agreement that was consummated as of June 6, 1996 among Manville, the PD Trust and the Trust, the PD Trust has relinquished all rights to any assets owned or held by the Trust on or after such date and has released the Trust from any actual or contingent liabilities, duties or obligations arising prior to such date, including under the Plan documents.

Manville Stock Interests

Upon consummation, the Trust received 24,000,000 shares of Manville Common Stock, representing 50% of the outstanding shares of Manville Common Stock at November 28, 1988. The Trust also received 7,200,000 shares of Series A Convertible Preferred Stock. In December 1992, the Series A Convertible Preferred Stock was converted into 72,000,000 shares of Manville Common Stock. In March 1996, Manville changed its name to Schuller Corporation (Schuller). In April of 1996, the Trust completed the exchange of the Profit Sharing Rights for 32,527,110 new shares of 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 relates 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 changes 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 September 30, 1998 and 1997, that price was $11.375 and $11.312 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.

(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 September 30, 1998 the Trust has recorded all its non-JM investment securities at market value. At September 30, 1997 non-JM investments were recorded at amortized cost which approximates market value.

                                                                       1998                                             1997         
     Cost     Market      Cost     Market
Restricted
   Cash equivalents $10,035,511 $10,035,511 $29,660,954 $29,661,342
   U.S. Govt. oblig.   13,219,294   13,400,342   21,437,082   21,467,472
   Corporate and other debts     3,026,663    3,066,455     1,410,042     1,410,618
   Equities – U.S.    25,287,491   23,176,812
Total $51,568,959 $49,679,103 $52,508,078 $52,539,432

 

Unrestricted
   Cash equivalents $198,655,775 $198,655,775 $383,398,756    $383,396,805
   U.S. govt. obligations   413,072,988   420,530,827   307,608,292      308,661,885
   Foreign govt. obligations   102,370,581   100,820,191     78,627,214        80,213,965
   Corporate and other debt     64,561,382     65,845,950     22,724,359        22,685,127
   Equities – U.S.     85,407,861   103,883,892     82,343,178        99,092,059
   Equities – International     56,423,268     55,527,446     51,289,698        56,866,882
                Total $920,491,855 $945,264,081 $978,499,575 $1,003,456,155

Maturity Schedule – Non-JM Available-For-Sale Securities at market value:

Less Than
1 Year
After 1 Year
Through 5 Years
After 5 Years
Through 10 years
After 10 Yrs
U.S. govt. obligations $131,682,715 $176,096,319 $   9,510,223 $116,641,895
Foreign govt. obligations     15,069,096     18,305,252   52,697,687    14,748,155
Corporate and other debt        1,264,218      21,648,622   32,839,729     13,159,836
                Total $148,016,029 $216,050,193 $95,047,639 $144,549,886

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 September 30, 1998, the fair value of these instruments was approximately $2.0 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 September 30, 1998, the Trust held at market value approximately $234.1 million in sell currency forward contracts offset by approximately $238.4 million in buy currency forward contracts. The unrealized losses on these outstanding currency forward contracts of approximately $4.3 million is principally offset by a corresponding unrealized gain due to currency exchange on the underlying securities being hedged. These amounts are recorded in the statement of changes in net claimants’ equity at September 30, 1998.

(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                            $   697,256
Acquisition of computer hardware and software                1,227,539
Leasehold improvements                                                       42,965
            Total                                                                  $1,967,760

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 nine months ended September 30, 1998 was approximately $45,800 and $199,300 respectively.

Depreciation expense related to asset acquisitions using generally accepted accounting principles would have been approximately $51,900 and $144,000 for the three and nine months ended September 30, 1998 respectively.

(f) JM Dividends

Beginning in September 1996, the JM Board of Directors has declared regular quarterly dividends. For the quarter ending September 30, 1998, the Directors declared a quarterly dividend of $.06 per share. Quarterly dividends are reported as additions to net claimants’ equity.

(3)     LITIGATION

During April 1997, the Trust disqualified all of the approximately 27,000 unsettled claims which had been filed by the Maritime Asbestosis Legal Clinic (MALC), with the exception of a few exigent health claims. At the time of the disqualification, the Trust stated that, among other things, the documentation that had been submitted in support of the MALC claims was inadequate and that the claims lacked both credibility and reliability.

In early June 1997, certain MALC claimants filed two essentially identical civil actions against the Trust and the Trustees alleging breach of fiduciary duties and breach of contract and seeking equitable relief. These actions are now pending in the United States District Court for the Eastern District of New York. The Trust and Trustees are contesting this matter and have filed a third party complaint in connection with the case. This litigation does not materially effect Outstanding Offers- Post Class Action Complaint as the Trust does not record a liability for claims until an offer has been made.

In December 1997, the Trust filed a civil action in the United States District Court for the Eastern District of New York 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. Because an answer has not yet been filed nor has discovery been undertaken, it is too early to estimate the amount of any recovery, if any.

In September 1998, the Trust was sued by certain Maryland claimants who allege the Trust has violated the terms of the Trust Distribution Process with respect to certain medical audit procedures. The complaint asks the court to order the Trust to cease its medical audit program, requests the immediate payment of certain claims, and also seeks an independent review of certain of the Trust’s financial actions and the dismissal of the Trustees and four Trust staff members. The Trust has filed an answer which denies the allegations of the complaint and has also filed a counterclaim seeking judicial approval of the medical audit program.

(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 $59 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.

Future minimum rental commitments under this operating lease, as of September 30, 1998 are as follows:

Calendar Year                                            Amount
                        1998                                                $   110,969
1999                                                     592,165
2000                                                     609,930
2001                                                     628,228
2002                                                     647,075
2003                                                     666,486

Total                            $3,254,853

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 which 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 $57,400 and $186,700 for the three and nine months ended September 30, 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 3), 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 September 30, 1998 is $6.7 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.

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
9/30/98
          As of
9/30/97
Claims filed      390,273         359,578
Voided claims (1)      (13,285)           (8,161)
Currently disqualified (2)      (27,948)          (30,331)
Expired offers (3)     (25,990)          (21,537)
            Active claims      323,050         299,549
Settled claims    (188,238)        (163,180)
Claims currently eligible for settlement      134,812         136,369

(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 and Nine Months Ended
September 30, 1998

Exhibit II  Operating and Dispute Resolution Expenses for the Three and Nine Months
Ended September 30, 1998

Exhibit III, Page 1 – Schedule of Liquidated Claims Since Consummation (November 28,
1988) Through September 30, 1998


Exhibit III, Page 2 – Page 2 – Schedule of Liquidated Claims for the Three Months Ended
September 30, 1998

                                                                                                                                   EXHIBIT I

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
NON-JM INVESTMENT INCOME FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998

                               Three Month
Ended 9/30/98
                              Nine Months
Ended 9/30/98
NON-JM INVESTMENT INCOME
         Interest $12,051,767 $36,239,186
         Dividends 823,557 2,420,376
         Net realized gains (losses) 8,905,813 14,512,458
                     Total non-JM investment income 21,781,137 53,172,020
          Investment expenses (489,453) (1,391,852)
NON-JM INVESTMENT INCOME $21,291,684 $51,780,168

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 AND NINE MONTHS ENDED SEPTEMBER 30, 1998

                                       Three Month
Ended 9/30/98
                                    Nine  Month
Ended 9/30/98
OPERATING EXPENSES:
        Personnel costs $1,526,672 $4,698,480
      Office general and administrative 265,715 820,034
      Travel and meetings 54,649 155,146
      Board of Trustees 92,278 291,132
      Professional fees 701,338 1,773,262
      Net fixed asset purchases 45,821 200,334
      Computer and other EDP costs 15,785 59,883
         Total operating expenses 2,702,258 7,998,271
DISPUTE RESOLUTION EXPENSES:
      Litigation defense 852 36,950
      Arbitration 2,400 7,750
          Total dispute resolution expenses 3,252 44,700
                 TOTAL $2,705,510 $8,042,971

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 SEPTEMBER 30, 1998


Number

Amount
Average
Payment Amount
Trust Liquidated Claims
     Pre-Class Action Complaint
             November 19, 1990 and Before-
     Liquidated Claim Value 27,612 $1,189,252,879
     Present Value Discount (1)      ($134,990,193)
     Net Settlements 27,612 $1,054,262,686
     Payments (27,444) ($1,052,128,416)     $38,337
     Unpaid Balance 168 $2,134,270
     Post-Class Action Complaint
               After November 19, 1990-
     Offers Made at Full Liquidated Amount 170,171 $8,126,202,010
     Reduction in Claim Value (2) ________ ($7,313,303,844)
     Net Offer Amount 170,171 $812,898,166
     Payments (160,626) ($780,855,744)      $4,861
     Offers Outstanding 9,545 $32,042,422
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 $82,902,049
     Investment Receipts (5) $2,255,452
     Payments ($76,212,851)
     Unpaid Balance $8,944,650

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 SEPTEMBER 30, 1998


Number

Amount
Average
Payment Amount
Trust Liquidated Claims
     Pre-Class Action Complaint
             November 19, 1990 and Before-
             Payable as of June 30, 1998 168 $2,134,270
            Settled
             Present Value Discount
             Paid (1)
             Payable as of September 30, 1998 168 2,134,270
     Post-Class Action Complaint
             After November 19, 1990- (2)
             Offers Outstanding as of June 30,  1998 7,982 $28,955,366
             Net Offers Made (3) 8,379 $30,780,877
             Offers Accepted (6,816) ($27,693,821)) $4,063
             Offers Outstanding as of September 30, 1998 9,545 $32,042,422
Manville Liquidated Claims
             Payable as of June 30, 1998 16 $306,522
             Settled 0 $0
             Paid 0 $0
             Payable as of September 30, 1998 16 $306,522
Co-Defendant Liquidated Claims (4)
             Payable as of June 30, 1998 $9,312,912
             Settled $134,598
             Investment Receipts (5) $54,981
             Paid ($557,841)
             Payable as of September 30, 1998 $8,944,650

(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.