MANVILLE PERSONAL INJURY SETTLEMENT TRUST
Special-Purpose Unaudited Consolidated Financial Statements
For the Quarter Ended September 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 consoldiated net claimants’ equity as of September 30, 1999 and 1998 and the consolidated changes in net claimants’ equity and cash flows for the three and nine months ended September 30, 1999 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
STATEMENTS OF NET CLAIMANTS’ EQUITY
AS OF SEPTEMBER 30, 1999 AND 1998
| 1999 | 1998 | |
| ASSETS: | ||
| Cash equivalents and investments (Notes 1 & 2) | ||
| Available-for-sale non-JM | ||
| Restricted (Note 8) | $49,572,826 | $49,679,103 |
| Unrestricted non-JM | 1,034,160,222 | 945,264,081 |
| Total | 1,083,733,048 | 994,943,184 |
| Other available-for-sale | ||
| JM common stock | 1,479,591,999 | 1,421,045,876 |
| Held-to-maturity securities | ||
| Trust Second Bond | 26,106,960 | |
| Total cash equivalents and investments | 2,563,325,047 | 2,442,096,020 |
| Accrued interest and dividend receivables | 15,217,423 | 16,264,973 |
| Deposits and other assets | 151,618 | 185,584 |
| Total assets | 2,578,694,088 | 2,458,546,577 |
| LIABILITIES: | ||
| Accrued expenses | 5,314,188 | 3,090,431 |
| Unpaid claims (Notes 4, 6 & Exh. III) | ||
| Settled Pre-Class Action complaint | 1,839,995 | 2,440,792 |
| Outstanding Offers – Post Class Action complaint | 178,474,685 | 32,042,422 |
| Contribution and indemnity claims payable | ||
| (Notes 4, 8 and Exh. III) | 6,573,039 | 8,944,650 |
| Lease commitments payable (Note 5) | 2,699,76 | 3,254,853 |
| Total liabilities | 194,901,668 | 49,773,148 |
| NET CLAIMANTS’ EQUITY (Note 6) | $2,383,792,420 | $2,408,773,429 |
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, 1999
| Three Months Ended 9/30/99 |
Nine Months Ended 9/30/99 |
|
| NET CLAIMANTS’ EQUITY, | ||
| BEGINNING OF PERIOD | $2,635,872,177 | $3,046,568,587 |
| ADDITIONS TO NET CLAIMANTS’ EQUITY: | ||
| JM dividend | 6,763,849 | 21,755,102 |
| Reimbursement by JM of prior years foreign income taxes | 355,523 | |
| Trust Second Bond accretion | 6,363,350 | |
| Non-JM investment income (Exh. I) | 10,297,129 | 36,693,910 |
| Gain on sale of JM stock | 63,115,810 | 63,115,810 |
| Net Reduction in outstanding claim offers | ||
| Decrease in lease commitments payable | 148,041 | 444,123 |
| Total additions | 80,324,829 | 128,727,818 |
| DEDUCTIONS FROM NET CLAIMANTS’ EQUITY: | ||
| Operating and dispute resolution expenses (Exh. II) | 3,590,105 | 12,420,298 |
| Management expenses for investments in JM | 554,244 | 2,229,720 |
| Net increase in outstanding claim offers | 72,306,427 | 125,284,243 |
| Claims settled | 96,023,955 | 169,135,262 |
| Contribution and indemnity claims settled | 419,864 | 3,236,451 |
| Net unrealized losses on non-JM available-for-sale securities |
9,406,813 | 8,969,113 |
| Unrealized loss on JM stock | 150,103,178 | 470,228,898 |
| Total deductions | 332,404,586 | 791,503,985 |
| NET CLAIMANTS’ EQUITY, | ||
| END OF PERIOD | $2,383,792,420 | $2,383,792,420 |
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 NINE MONTHS ENDED SEPTEMBER 30, 1999
| Three Months Ended 9/30/99 |
Nine Months Ended 9/30/99 |
|
| CASH INFLOWS: | ||
| JM dividends | $7,495,628 | $22,486,881 |
| Reimbursement by JM of prior years foreign income taxes | 355,523 | |
| Sale of JM stock | 166,784,284 | 166,784,284 |
| Proceeds from Trust Second Bond prepayment | 33,215,716 | |
| Investment receipts | 9,768,530 | 38,281,672 |
| Investment receipts on escrow accounts (Note 8) | 59,882 | 146,591 |
| Total cash inflows | 184,108,324 | 261,270,667 |
| CASH OUTFLOWS: | ||
| Claim payments made | 96,151,838 | 169,473,785 |
| Contribution and indemnity claim payments | 1,065,752 | 5,207,494 |
| Total cash claim payments | 97,217,590 | 174,681,279 |
| Disbursements for Trust operating, dispute resolution, | ||
| and asset management | 3,647,222 | 13,698,342 |
| Total cash outflows | 100,864,812 | 188,379,621 |
| NET CASH OUTFLOWS | 83,243,512 | 72,891,046 |
| Net unrealized gains (losses) on non-JM | ||
| available-for-sale securities | (9,406,814) | (8,969,113) |
| Change in deposits and other assets | (84) | 133,081 |
| NET INCREASE (DECREASE) IN CASH EQUIVALENTS AND | ||
| NON-JM INVESTMENTS AVAILABLE-FOR-SALE | 73,836,614 | 64,055,014 |
| CASH EQUIVALENTS AND NON-JM INVESTMENTS | ||
| AVAILABLE-FOR-SALE, BEGINNING OF PERIOD | 1,009,896,434 | 1,019,678,034 |
| CASH EQUIVALENTS AND NON-JM INVESTMENTS | ||
| AVAILABLE-FOR-SALE, END OF PERIOD | $1,083,733,048 | $1,083,733,048 |
The accompanying notes are an integral part of these statements.
MANVILLE PERSONAL INJURY SETTLEMENT TRUST
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 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 $13.675, JM’s common stock for the 20 business days beginning June 8, 1999 and ending July 6, 1999. After giving effect to the transaction, the Trust owns 112,730,819 shares of JM common stock or approximately 77% of outstanding shares. The Trust continues to explore strategic alternatives for further diversifying the Trust estate.
(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 September 30, 1999 and 1998, that price was $13.125 and $11.375 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
On June 30, 1999 JM prepaid the Trust Second Bond resulting in the payment to the Trust of $33,215,716, 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
At September 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 | $3,249,633 | $3,249,633 | $10,035,511 | $10,035,511 |
| U.S. Govt. oblig. | 12,611,611 | 12,488,721 | 13,219,294 | 13,400,324 |
| Corporate and other debts | 4,387,451 | 4,347,221 | 3,026,663 | 3,066,455 |
| Equities – U.S. | 23,591,671 | 29,487,251 | 25,287,491 | 23,176,812 |
| Total | $43,840,366 | $49,572,826 | $51,568,959 | $49,679,103 |
| Unrestricted | ||||
| Cash equivalents | $324,670,649 | $324,670,649 | $198,655,775 | $198,655,775 |
| U.S. govt. obligations | 195,933,959 | 191,482,268 | 413,072,988 | 420,530,827 |
| Foreign govt. obligations | 104,933,111 | 103,524,003 | 102,370,581 | 100,820,191 |
| Corporate and other debt | 212,913,720 | 207,704,097 | 64,561,382 | 65,845,950 |
| Equities – U.S. | 89,639,524 | 131,244,365 | 85,407,861 | 103,883,892 |
| Equities – International | 59,073,183 | 75,534,840 | 56,423,268 | 55,527,446 |
| Total | $987,164,146 | $1,034,160,222 | $920,491,855 | $945,264,081 |
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 | $30,361,713 | $41,677,789 | $17,238,011 | $114,693,476 |
| Foreign govt. obligations | 7,507,753 | 33,994,264 | 47,276,097 | 14,745,889 |
| Corporate and other debt | 10,867,647 | 126,227,326 | 43,097,955 | 31,858,390 |
| Total | $48,737,113 | $201,899,379 | $107,612,063 | $161,297,755 |
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, 1999, the fair value of these instruments was approximately $4.4 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, 1999, the Trust held at market value approximately $180.7 million in sell currency forward contracts offset by approximately $182.8 million in buy currency forward contracts. The unrealized losses on these outstanding currency forward contracts of approximately $2.1 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 changes in net claimants’ equity at September 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 nine months ended September 30, 1999 was approximately $61,500 and $167,200, respectively.
Depreciation expense related to asset acquisitions using generally accepted accounting principles would have been approximately $63,000 and $157,000 for the three and nine months ended September 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 discovery and it is too early to estimate the amount, if any, of any recovery. A February 2, 2000 trial date has been scheduled.
In September 1998, the Trust, Trustees and certain officers and employees of the Trust were sued by certain claimants who alleged breach of fiduciary duty and breach of the terms of the Trust Distribution Process with respect to certain medical audit procedures. The Trustees and said officers and employees were dismissed from those suits that named them as defendants. A settlement between the remaining 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 and, subject to new medical audit procedures, provides for the payment of certain claims filed through April 9, 1999.
(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 $60 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 September 30, 1999 are as follows:
Calendar Year Amount
1999 148,041
2000 609,930
2001 628,228
2002 647,075
2003 666,487
Total $2,699,761
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 $72,700 and $178,600 for the three and nine months ended September 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 September 30, 1999 is $6.6 million. This balance and the $43 million of self-insurance funds described above, have been reported as restricted investments.
(9) INCOME TAXES
For Federal income tax purposes, JM has elected for the qualified assets of the Trust to be taxed as a “Designated Settlement Fund.” Income and expenses associated with these qualified assets of the Trust are taxed in accordance with Section 468B of the Internal Revenue Code. JM is obligated to indemnify the Trust for any income tax liability imposed upon the Trust, and accordingly, no liability or income tax provision has been recorded for the Trust. JM is not obligated to pay the federal and state income taxes of CRMC and the provision for income taxes on Exhibit II is the responsibility of CRMC.
To the extent that JM has a residual interest in any assets of the Trust or such assets represent stock or indebtedness of JM, the income and expenses attributable to such assets are taxed as if these assets were in a “Grantor Trust.” In addition, for tax purposes the Trust has segregated at times certain non-JM available-for-sale securities that are held in a Grantor Trust Account. Consequently, income and expenses associated with these assets are included in the income tax return of JM (the Grantor) and are not part of the Designated Settlement Fund.
(10) PROOF OF CLAIMS FILED
Proof of claim forms have been filed with the Trust as follows:
| As of 9/30/99 |
As of 9/30/98 |
|
| Claims filed | 419,509 | 390,273 |
| Voided claims (1) | (36,351) | (13,285) |
| Currently disqualified (2) | (1,080) | (27,948) |
| Expired offers (3) | (30,556) | (25,990) |
| Active claims | 351,522 | 323,050 |
| Settled claims | (240,923) | (188,238) |
| Claims currently eligible for settlement | 110,599 | 134,812 |
(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 Non-JM Investment Income for the Three and Nine Months Ended
September 30, 1999
Exhibit III, Page 1 – Schedule of Liquidated Claims Since Consummation (November 28,
1988) Through September 30, 1999
Exhibit III, Page 2 – Schedule of Liquidated Claims for the Three Months Ended
September 30, 1999
EXHIBIT I
MANVILLE PERSONAL INJURY SETTLEMENT TRUST
NON-JM INVESTMENT INCOME FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
| Three Months Ended 9/30/99 |
Nine Months Ended 9/30/99 |
|
| NON-JM INVESTMENT INCOME | ||
| Interest | $11,653,561 | $38,625,572 |
| Dividends | 830,553 | 2,658,009 |
| Net realized (losses) gains | (1,611,819) | (2,902,057) |
| Total non-JM investment income | 10,872,295 | 38,381,524 |
| Investment expenses | (575,166) | (1,687,614) |
| TOTAL | $10,297,129 | $36,693,910 |
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, 1999
| Three Months Ended 9/30/99 |
Nine Months Ended 9/30/99 |
|
| OPERATING EXPENSES: | ||
| Personnel costs | $1,582,615 | $4,931,204 |
| Office general and administrative | 299,468 | 1,035,161 |
| Travel and meetings | 47,968 | 191,472 |
| Board of Trustees | 93,551 | 328,591 |
| Professional fees | 1,415,548 | 5,484,850 |
| Net fixed asset purchases | 61,549 | 167,240 |
| Computer and other EDP costs | 21,665 | 72,937 |
| CRMC income taxes | 66,000 | 182,400 |
| Total operating expenses | 3,588,364 | 12,393,855 |
| DISPUTE RESOLUTION EXPENSES: | ||
| Litigation defense | 1,141 | 19,283 |
| Arbitration | 600 | 7,160 |
| Total dispute resolution expenses | 1,741 | 26,443 |
| TOTAL | $3,590,105 | $12,420,298 |
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, 1999
Number |
Amount |
Average Payment Amount |
||||
| Trust Liquidated Claims | ||||||
| Pre-Class Action Complaint | ||||||
| November 19, 1990 and Before- | ||||||
| Liquidated Claim Value | 27,610 | $1,188,279,972 | ||||
| Present Value Discount (1) | ($135,306,535) | |||||
| Net Settlements | (27,610) | 1,052,973,437 | ||||
| Payments | (27,548) | (1,051,439,964) | $38,168 | |||
| Unpaid Balance | 62 | $1,533,473 | ||||
| Post-Class Action Complaint | ||||||
| After November 19, 1990- | ||||||
| Offers Made at Full Liquidated Amount | 270,609 | $11,515,951,500 | ||||
| Reduction in Claim Value (2) | ________ | (10,364,078,385) | ||||
| Net Offer Amount | 270,609 | 1,151,873,115 | ||||
| Payments | (213,314) | (973,398,430) | $4,563 | |||
| Offers Outstanding | 57,295 | $178,474,685 | ||||
| Manville Liquidated Claims (3) | ||||||
| Liquidated Claim Value | 174 | $26,253,142 | ||||
| Payments | (158) | (24,946,620) | ||||
| Unpaid Balance | 16 | $306,522 | ||||
| Co-Defendant Liquidated Claims (4) | ||||||
| Liquidated Claim Value | $87,306,004 | |||||
| Investment Receipts (5) | 2,455,175 | |||||
| Payments | (83,188,140) | |||||
| Unpaid Balance | $6,573,039 | |||||
(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, 1999
Number |
Amount |
Average Payment Amount |
|||
| Trust Liquidated Claims | |||||
| Pre-Class Action Complaint | |||||
| November 19, 1990 and Before- | |||||
| Payable as of June 30, 1999 | 168 | $1,911,878 | |||
| Adjustment (1) | (105) | ($353,405) | |||
| Present Value Discount | |||||
| Paid (2) | (1) | (25,000) | |||
| Payable as of September 30, 1999 | 62 | $1,533,473 | $0 | ||
| Post-Class Action Complaint | |||||
| After November 19, 1990- (3) | |||||
| Offers Outstanding as of June 30, 1999 | 31,603 | $105,884,916 | |||
| Net Offers Made (4) | 52,834 | 168,716,607 | |||
| Offers Accepted | (27,142) | (96,126,838) | $3,542 | ||
| Offers Outstanding as of September 30, 1999 | 57,295 | $178,474,685 | |||
| Manville Liquidated Claims | |||||
| Payable as of June 30, 1999 | 16 | $306,522 | |||
| Settled | |||||
| Paid | |||||
| Payable as of September 30, 1999 | 16 | $306,522 | |||
| Co-Defendant Liquidated Claims (5) | |||||
| Payable as of June 30, 1999 | $7,159,045 | ||||
| Settled | 419,864 | ||||
| Investment Receipts (6) | 59,882 | ||||
| Paid | (1,065,752) | ||||
| Payable as of September 30, 1999 | $6,573,039 | ||||
(1) Principally claims to be settled under the TDP process.
(2) 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.
(3) Under the TDP, Post Class Action Complaint claims have been reported at 10% of their liquidated value.
(4) Represents payment offers made during the period net of rejected and epxired offers.
(5) Number of personal injury claimants not identifiable.
(6) Investment receipts of separate investment escrow account established for the sub-class beneficiaries per the
stipulation of settlement, net of income taxes.