Financial Statements [1999/Q2]

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
Special-Purpose Unaudited Consolidated Financial Statements
For the Quarter Ended June 30, 1999

 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, 1999 and 1998 and the consolidated changes in net claimants’ equity and cash flows for the three and six months ended June 30, 1999 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 JUNE 30, 1999 AND 1998

                            1999 1998
ASSETS:
                Cash equivalents and investments (Notes 1 & 2)
                         Available-for-sale non-JM
                                     Restricted (Note 8) $49,512,944 $49,624,120
                                     Unrestricted non-JM 960,383,490 972,574,552
                                                   Total 1,009,896,434 1,022,198,672
                         Other available-for-sale
                                     JM common stock 1,733,363,651 1,881,714,594
                         Held-to-maturity securities
                                     Trust Second Bond 25,382,245
                                                  Total cash equivalents and investments 2,743,260,085 2,929,295,511
                Accrued interest and dividend receivables 15,238,464 14,188,083
                Deposits and other assets 151,535 107,085
                         Total assets 2,758,650,084 2,943,590,679
LIABILITIES:
                Accrued expenses 4,667,744 2,984,397
                Unpaid claims (Notes 4, 6 & Exh. III)
                         Settled Pre-Class Action complaint 2,218,400 2,440,792
                         Outstanding Offers – Post Class Action complaint 105,884,916 28,955,366
                Contribution and indemnity claims payable
                         (Notes 4, 8 and Exh. III) 7,159,045 9,312,910
                Lease commitments payable (Note 5) 2,847,802 3,365,821
                         Total liabilities 122,777,907 47,059,286
NET CLAIMANTS’ EQUITY (Note 6) $2,635,872,177 $2,896,531,393

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 SIX MONTHS ENDED JUNE 30, 1999

 Three Months
Ended 6/30/99
Six Months
Ended 6/30/99
NET CLAIMANTS’ EQUITY,
          BEGINNING OF PERIOD $3,139,508,225 $3,046,568,587
ADDITIONS TO NET CLAIMANTS’ EQUITY:
          JM dividend 7,495,626 14,991,253
          Reimbursement by JM of prior years foreign income taxes 355,523
          Trust Second  Bond accretion 5,596,660 6,363,350
          Non-JM investment income (Exh. I) 14,183,735 26,396,781
          Net unrealized gains on non-JM available-for-sale
securities
1,076,477 437,701
          Net Reduction in outstanding claim offers
          Decrease in lease commitments payable 148,041 296,082
                 Total additions 28,500,539 48,840,690
DEDUCTIONS FROM NET CLAIMANTS’ EQUITY:
          Operating and dispute resolution expenses (Exh. II) 5,372,162 8,830,193
          Management expenses for investments in JM 770,254 1,675,476
          Net increase in outstanding claim offers 66,670,103 52,977,816
         Claims settled 35,735,471 73,111,307
          Contribution and indemnity claims settled 1,959,601 2,816,588
         Unrealized loss on JM stock 421,628,996 320,125,720
                    Total deductions 532,136,587 459,537,100
NET CLAIMANTS’ EQUITY,
          END OF PERIOD $2,635,872,177 $2,635,872,177

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
STATEMENTS OF CASH FLOWS FOR THE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999

 Three Months
Ended 6/30/99
 Six Months
Ended 6/30/99
CASH INFLOWS:
          JM dividends $7,495,626 $14,991,253
          Reimbursement by JM of prior years foreign income taxes   $355,523
         Proceeds from Trust Second Bond prepayment 33,215,716 33,215,716
          Investment receipts 15,338,586 28,513,142
          Investment receipts on escrow accounts (Note 8) 8,824 86,709
                    Total cash inflows 56,058,752 77,162,343
CASH OUTFLOWS:
          Claim payments made 35,913,291 73,321,947
          Contribution and indemnity claim payments 2,770,204 4,141,742
                    Total cash claim payments 38,683,495 77,463,689
          Disbursements for Trust operating, dispute resolution,
             and asset management 6,412,541 10,051,120
                    Total cash outflows 45,096,036 87,514,809
NET CASH OUTFLOWS 10,962,716 (10,352,466)
          Net unrealized gains (losses) on non-JM securities
                    available-for-sale securities 1,076,477 437,701
          Change in deposits and other assets 82,184 133,165
NET INCREASE (DECREASE) IN CASH EQUIVALENTS AND
          NON-JM INVESTMENTS AVAILABLE-FOR-SALE 12,121,377 (9,781,600)
CASH EQUIVALENTS AND NON-JM INVESTMENTS
          AVAILABLE-FOR-SALE, BEGINNING OF PERIOD 997,775,057 1,019,678,034
CASH EQUIVALENTS AND NON-JM INVESTMENTS
          AVAILABLE-FOR-SALE, END OF PERIOD $1,009,896,434 $1,009,896,434

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 1999

(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. 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

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.

On July 7, 1999 JM purchase approximately 12.2 million shares of its common stock from the Trust for approximately $166.8 million. Based on an agreement reached between the Trust and JM on June 7, 1999, the shares were purchased at the average closing price of JM’s common stock for the 20 business days beginning June 8, 1999 and ending July 6, 1999. On June 30, 1999 the Trust owned 124,927,110 shares of JM common stock. After giving effect to the transaction, the Trust owns 112,730,819 shares of JM common stock or approximately 77% 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. 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.

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 composite transactions on the last day of the appropriate reporting period. As of June 30, 1999 and 1998, that price was $13.8725 and $15.0625 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.

(c) Trust Second Bond

On June 30, 1999 JM prepaid the Trust Second Bond using an agreed upon discount rate of 10.6% as part of the June 7, 1999 agreement between the Trust and JM (Note 1). The Trust Second Bond was previously 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.

(d) Cash Equivalents and Non-JM Investments

In 1997, the Trust adopted a new investment policy that provided for greater diversification of the Trust’s investment holdings. At June 30, 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 $1,148,800 $1,148,800 $27,340,425 $27,340,425
   U.S. Govt. oblig. 12,168,140 12,087,792 16,302,771 16,302,771
   Corporate and other debts 4,864,987 4,818,043 5,980,924 5,980,924
   Equities – U.S. 24,048,461 31,458,309   __________   _________
Total $42,230,388 $49,512,944 $49,624,120 $49,624,120

 

Unrestricted
   Cash equivalents $243,700,027 $243,700,027 $243,083,609 $243,146,889
   U.S. govt. obligations 196,706,580 192,178,778 400,874,242 402,104,856
   Foreign govt. obligations 105,510,591 102,463,887 95,604,412 95,724,325
   Corporate and other debt 214,234,654 210,148,035 49,734,991 49,739,320
   Equities – U.S. 87,984,347 140,353,558 85,188,067 116,939,511
   Equities – International 57,394,493 71,539,204 52,238,946 64,919,651
                Total $905,530,692 $960,383,490 $926,724,267 $972,574,552

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 $45,044,286 $36,796,989 $11,960,694 $110,464,601
Foreign govt. obligations 11,577,230 26,051,985 55,572,693 9,261,979
Corporate and other debt 6,024,702 118,601,465 56,472,507 33,867,405
                Total $62,646,218 $181,450,439 $124,005,894 $153,593,985

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, 1999, the fair value of these instruments was approximately $3.6 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 bond issues. At June 30, 1999, the Trust held at market value approximately $151.9 million in sell currency forward contracts offset by approximately $150.0 million in buy currency forward contracts. The unrealized gains on these outstanding currency forward contracts of approximately $1.9 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 June 30, 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 $    726,894
                    Acquisition of computer hardware and
software
   1,303,543
                    Leasehold improvements         42,011
                                                          Total $ 2,072,448

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, 1999 was approximately $43,400 and $105,700, respectively.

Depreciation expense related to asset acquisitions using generally accepted accounting principles would have been approximately $47,500 and $46,000 for the three and six months ended June 30, 1999, respectively.

(f) JM Dividends

Beginning in August 1996, the JM Board of Directors has declared regular quarterly dividends, the first time such dividends were declared since 1982.   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 settlements 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 claimants who allege that the Trust violated the terms of the Trust Distribution Process with respect to certain medical audit procedures.  A settlement between the parties was agreed to on April 9, 1999 and approved by the Court on May 20, 1999.  The settlement terminates the previous medical audit procedures, provides for payment of certain claims at their pre-medical audit values and provides for new medical audit procedures for those claims filed through April 9, 1999.  Claims filed after this date are subject to medical audit procedures that still have to be negotiated.  The Court dismissed the claims against the Trustees and Trust employees.

(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 $59.3 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       296,083
                                    2000       609,930
                                    2001       628,228
                                    2002       647,075
                                     2003       666,486
                                      Total $ 2,847,802

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 $73,000 and $105,900 for the three and six months ended June 30, 1999, 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 June 30, 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

CLAIMS FILED

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

                     As of
6/3099
                       As of
6/30/98
Claims filed 409,760 383,905
Voided claims (1) (36,618) (13,090)
Currently disqualified (2) (1,075) (28,230)
Expired offers (3) (31,679) (24,933)
            Active claims 340,388 317,652
Settled claims (213,784) (181,422)
Claims currently eligible for settlement 126,604 136,230

(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.

12/31/98

Exhibit I   Non-JM Investment Income for the Three and Six Months Ended June 30, 1999

Exhibit II  Operating and Dispute Resolution Expenses for the Three and Six Months
Ended June 30, 1999

Exhibit III, Page 1 – Schedule of Liquidated Claims Since Consummation (November 28,
1988) Through June 30, 1999


Exhibit III, Page 2 – Schedule of Liquidated Claims for the Three Months Ended
June 30, 1999

                                                                                                                                   EXHIBIT I

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
NON-JM INVESTMENT INCOME FOR THE
THREE AND SIX  MONTHS ENDED JUNE 30, 1999

Three Months
Ended 6/30/99
                    Three Months
Ended 6/30/99
NON-JM INVESTMENT INCOME
         Interest $15,828,536 $26,972,011
         Dividends 1,064,910 1,827,456
         Net realized (losses) gains (2,153,413) (1,290,238)
                     Total non-JM investment income 14,740,033 27,509,229
          Investment expenses (556,298) (1,112,448)
TOTAL $14,183,735 $26,396,781

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 SIX MONTHS ENDED JUNE 30, 1999

Three Months
Ended 6/30/99
     Three Months
Ended 6/30/99
OPERATING EXPENSES:
        Personnel costs $1,672,355 $3,348,589
      Office general and administrative 388,923 735,693
      Travel and meetings 72,545 143,504
      Board of Trustees 140,895 235,040
      Professional fees 2,940,539 4,069,302
      Net fixed asset purchases 43,419 105,691
      Computer and other EDP costs 17,270 51,272
         Total operating expenses 5,275,946 8,689,091
DISPUTE RESOLUTION EXPENSES:
      Litigation defense 16,716 18,142
      Arbitration 3,100 6,560
          Total dispute resolution expenses 19,816 24,702
PROVISION FOR INCOME TAXES 76,400 116,400
                 TOTAL $5,372,162 $8,830,193

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, 1999


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) ($1,051,480,784) $38,314
     Unpaid Balance 168 $1,911,878
     Post-Class Action Complaint
               After November 19, 1990-
     Offers Made at Full Liquidated Amount 217,775 $9,828,785,430
     Reduction in Claim Value (2) ________ ($8,845,628,922)
     Net Offer Amount 217,775 983,156,508
     Payments (186,172) (877,271,592) $4,712
     Offers Outstanding 31,603 $105,884,916
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 $86,886,140
     Investment Receipts (5) 2,395,293
     Payments (82,122,388)
     Unpaid Balance $7,159,045

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 JUNE 30, 1999


Number

Amount
Average
Payment Amount
Trust Liquidated Claims
     Pre-Class Action Complaint
             November 19, 1990 and Before-
             Payable as of March 31, 1999 168 $2,089,698
             Settled
            Present Value Discount
            Paid (1) (177,820)
            Payable as of June 30, 1999 168 $1,911,878
     Post-Class Action Complaint
             After November 19, 1990- (2)
             Offers Outstanding as of March 31, 1998 11,946 $39,214,813
             Net Offers Made (3) 29,729 102,405,574
             Offers Accepted (10,072) (35,735,471) $3,548
             Offers Outstanding as of June 30, 1999 31,603 $105,884,916
Manville Liquidated Claims
             Payable as of March 31, 1999 16 $306,522
             Settled
             Paid
             Payable as of June 30, 1999 16 $306,522
Co-Defendant Liquidated Claims (4)
             Payable as of March 31, 1999 $7,960,824
             Settled 1,959,601
             Investment Receipts (5) 8,824
             Paid (2,770,204)
             Payable as of June 30, 1999 $7,159,045

(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.