Financial Statements [2000/Q4]

ARTHUR ANDERSEN

Report of Independent Public Accountants

To the Trustees of
Manville Personal Injury Settlement Trust:

We have audited the accompanying special-purpose consolidated statements of net claimants’ equity of Manville Personal Injury Settlement Trust (the “Trust”, organized in the state of New York) as of December 31, 2000 and 1999, and the related statements of changes in net claimants’ equity and cash flows for the years then ended. These special-purpose consolidated financial statements and the exhibits referred to below are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these special-purpose consolidated financial statements and exhibits based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 2, these special-purpose consolidated financial statements were prepared on a special-purpose basis of accounting and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States. The special-purpose basis of accounting has been used in order to better communicate the amount of equity presently available to current and future claimants.

In our opinion, the accompanying special-purpose consolidated financial statements of Manville Personal Injury Settlement Trust as of and for the years ended December 31, 2000 and 1999, are fairly presented, in all material respects, on the basis of accounting described in Note 2.

Our audits were made for the purpose of forming an opinion on the special-purpose consolidated financial statements taken as a whole. The supplementary schedules at Exhibits I, II, and III are presented for purposes of additional analysis and are not a required part of the special-purpose consolidated financial statements. This information has been subjected to the auditing procedures applied in our audits of the special-purpose consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the special-purpose consolidated financial statements taken as a whole.

This report is intended solely for the information and use of the management of the Trust, the Trustees, the beneficiaries of the Trust, Johns Manville Corporation, and the United States Bankruptcy Court for the Southern District of New York and is not intended to be and should not be used by anyone other than these specified parties. This restriction is not intended to limit the distribution of this report which, upon filing with the United States Bankruptcy Court for the Southern District of New York, is a matter of public record.
/s/ ARTHUR ANDERSEN, LLP

Vienna, Virginia
February 1, 2001

 MANVILLE PERSONAL INJURY SETTLEMENT TRUST
CONSOLIDATED STATEMENTS OF NET CLAIMANTS’ EQUITY
AS OF DECEMBER 31, 2000 and 1999

                           2000 1999
ASSETS:
                Cash equivalents and investments (Notes 1 & 2)
                         Available-for-sale non-JM
                                     Restricted (Note 8) $43,213,378 $49,630,623
                                     Unrestricted non-JM 861,884,353 945,200,542
                                                   Total 905,097,731 994,831,165
                         Other available-for-sale
                                     JM common stock 1,322,611,221 1,571,185,790
                                                  Total cash equivalents and investments 2,227,708,952 2,566,016,956
                Accrued interest and dividend receivables 14,496,071 15,426,902
                Deposits and other assets 275,486 181,637
                         Total assets 2,242,480,509 2,581,625,494
LIABILITIES:
                Accrued expenses 6,048,893 4,975,469
                Unpaid claims (Notes 4, 6 & Exh. III)
                         Settled Pre-Class Action complaint 1,346,673 1,522,673
                         Outstanding Offers – Post Class Action complaint 78,472,418 93,283,702
                Contribution and indemnity claims payable
                         (Notes 4, 8 and Exh. III) 213,378 6,630,836
                Lease commitments payable (Note 5) 1,896,467 2,551,719
                         Total liabilities 87,977,829 108,964,399
NET CLAIMANTS’ EQUITY (Note 6) $2,154,502,680 $2,472,661,095

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN NET CLAIMANTS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


2000

1999
NET CLAIMANTS’ EQUITY,
          BEGINNING OF PERIOD $2,472,661,095 $3,046,568,589
ADDITIONS TO NET CLAIMANTS’ EQUITY:
          JM dividend 27,055,396 28,518,949
          Reimbursement by JM of prior years foreign income taxes 108,666 355,523
          Non-JM investment income (Exh. I) 78,276,208 46,287,440
          Realized gain on sale of JM stock 47,250,000 63,115,810
         Net reduction in outstanding claim offers 14,811,284
         Trust Second Bond accretion 6,363,350
         Net unrealized gains on non-JM available for-sale
          securities 26,039,718
         Decrease in lease commitments payable 655,252 592,165
                 Total additions 168,156,806 171,272,955
DEDUCTIONS FROM NET CLAIMANTS’ EQUITY:
          Operating  expenses (Exh. II) 24,957,806 17,423,345
          Management expenses for investments in JM 676,412 2,243,540
          Net increase in outstanding claim offers 40,376,602
          Claims settled 254,755,552 302,767,388
          Contribution and indemnity  claims settled 4,628,304 3,734,466
           Net unrealized losses on non-JM available-for-sale
              securities 41,972,578
          Unrealized loss on JM stock 159,324,569 378,635,108
                    Total deductions 486,315,221 745,180,449
NET CLAIMANTS’ EQUITY,
          END OF PERIOD 2,154,502,680 2,472,661,095

The accompanying notes are an integral part of these statements.    

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


2000

1999
CASH INFLOWS
          JM dividends $27,055,396 $29,250,730
           Reimbursement by JM of prior years foreign income taxes 108,666 355,523
          Sale of JM stock 136,500,000 166,784,284
          Proceeds from Trust Second  Bond prepayment 33,215,716
           Investment receipts 78,780,579 47,586,803
           Investment receipt on escrow accounts (Note 8) 95,483 204,388
                    Total cash inflows 242,540,124 277,397,444
CASH OUTFLOWS
          Claim payments made 5.931,552 303,706,575
          Contribution and indemnity claim payments 11,141,245 5,705,508
                    Total cash claim payments 266,072,797 309,412,083
          Disbursements for Trust operating, dispute resolution,
              and asset management expenses 24,102,336 18,974,099
                    Total cash outflows 290,175,133 328,386,182
NET CASH OUTFLOWS (47,635,009) (50,988,738)
          Net unrealized gains (losses) on non-JM
                    available-for-sale securities (41,972,579) 26,039,718
          Change in deposits and other assets (125,846) 103,062
NET INCREASE  (DECREASE) IN CASH EQUIVALENTS AND
          NON-JM INVESTMENTS AVAILABLE-FOR-SALE (89,733,434) (24,845,958)
CASH EQUIVALENTS AND NON-JM INVESTMENTS
          AVAILABLE-FOR-SALE, BEGINNING OF PERIOD 994,831,165 1,019,677,123
CASH EQUIVALENTS AND NON-JM INVESTMENTS
          AVAILABLE-FOR-SALE, END OF PERIOD $905,097,731 $994,831,165

The accompanying notes are an integral part of these statements.

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2000 AND 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 with claim processing and settlement services. Prior to January 1, 1999, the Trust provided its own claim processing and settlement services. CRMC began operations on January 1, 1999 in Fairfax, Virginia. The accounts of the Trust and CRMC have been consolidated for financial reporting purposes. All significant balances and transactions between the Trust and CRMC have been eliminated in consolidation.

Funding of the Trust

The Trust was initially funded from the following sources:

  • Manville provided $150 million in cash plus $5.4 million in accrued interest. At consummation, the Trust was required to transfer approximately $27.5 million to the Manville Property Damage Settlement Trust.
  • Insurance settlement proceeds totaling $695 million, which included $72 million in interest thereon.
  • 24,000,000 shares of Manville Common Stock (50% of Manville Common Stock outstanding at consummation).
  • 7,200,000 shares of a new Series A Convertible Preferred Stock of Manville. In December 1992, these shares were converted into 72,000,000 shares of Manville Common Stock.
  • A $50 million interest-bearing note receivable (the Trust Note) payable in equal installments in 1990 and 1991. In December 1989, Manville prepaid the Trust Note. The payment included the $50 million in principal and $8.1 million in accrued interest.
  • Up to $1.65 billion pursuant to the terms of a bond (the Trust Bond). The Trust Bond initially provided for semi-annual installments of $37.5 million commencing in 1991 and ending in 2012. In 1994, the Trust Bond was prepaid.
  • Up to $150 million pursuant to the terms of a second bond (the Trust Second Bond). The Trust Second Bond required Manville to pay the Trust $37.5 million semi-annually in the years 2013 and 2014. On June 30, 1999, the Trust Second Bond was prepaid.
  • Up to 20% of Manville’s profits as defined in the Plan, payable beginning in 1992 with respect to the prior year’s profits (the Profit Sharing Rights). In April 1996, the Profit Sharing Rights were exchanged for an additional 32,527,110 shares of Manville Common Stock.

Manville Stock Interests

On December 19, 2000, JM entered into a definitive merger agreement pursuant to which Berkshire Hathaway, Inc. (Berkshire) will acquire all of the outstanding shares of JM for $13 per share in cash. In addition, the Trust in a separate agreement with Berkshire has agreed to tender its shares of JM. JM has also agreed to repurchase 10.5 million shares of its common stock from the Trust at a price of $13 per share, reflecting the purchase price in the transaction with Berkshire. On December 28, 2000, the Trust received $136.5 million for these shares as part of the repurchase transaction. Under the proposed tender offer, the Trust would receive an additional $1.3 billion for its remaining 102,230,819 shares of JM common stock. In addition, contingent upon the closing of the transaction, JM has agreed to pay the Trust $90 million in settlement of JM’s obligation for future income taxes of the Trust. The transaction is expected to close early in 2001, has been approved by the bankruptcy court and is subject to regulatory approvals and customary conditions. Transaction costs for legal and investment banking of approximately $13 million will be netted against the proceeds received assuming the transaction is consummated.

On June 22, 2000, JM entered into a definitive merger agreement with an investor group led by affiliates of Hicks, Muse, Tate & Furst Inc. and Bears Stearns Merchant Fund Corp. On December 8, 2000, JM announced that the definitive merger agreement had been terminated by mutual agreement between the parties.

On July 7, 1999, JM purchased 12,196,291 shares of its common stock from the Trust for approximately $166.8 million or $13.675 per share. After giving effect to the transaction, the Trust owned 112,730,819 shares of JM common stock or approximately 76% of outstanding shares as of December 31, 1999.

(2)     SIGNIFICANT ACCOUNTING POLICIES

(a)     Basis of Presentation

The Trust’s financial statements are prepared using special-purpose accounting methods that differ from accounting principles generally accepted in the United States. The special-purpose accounting methods were adopted in order to better communicate to the beneficiaries of the Trust the amount of equity available for payment of current and future claims. These special-purpose accounting methods are enumerated as follows:

  1. The financial statements are prepared using the accrual basis of accounting.
  2. The funding received from JM and its liability insurers has been recorded directly to net
    claimants’ equity. These funds do not represent income of the Trust. Settlement offers for
    asbestos health claims are reported as deductions in net claimants’ equity and do not
    represent expenses of the Trust.
  3. Costs of non-income producing assets, which will be exhausted during the life of the Trust
    and are not available for satisfying claims, are expensed as they are incurred. These costs
    include acquisition costs of computer hardware, software, software development, office
    furniture and leasehold improvements.
  4. Future fixed liabilities and contractual obligations entered into by the Trust are recorded
    directly against net claimants’ equity. Accordingly, the future minimum rental commitments
    outstanding at period end for non-cancelable operating leases, net of any sublease
    agreements, have been recorded as deductions to net claimants’ equity.
  5. The liability for unpaid claims reflected in the statements of net claimants’ equity represents
    settled but unpaid claims and outstanding settlement offers. Post-Class Action complaint
    claim’s 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. All interest and dividend income, as
    well as net realized gains/losses, on non-JM available-for-sale securities are included in
    non-JM investment income on the statements of changes in net claimants’ equity. Realized
    gains on JM common stock and unrealized gains and losses on non-JM available-for-sale
    securities are recorded as separate components on the statements of changes in net
    claimants’equity.

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

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 gains or losses 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 December 31, 2000 and 1999, that price was $12.9375 and $13.9375 per share, respectively.

(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 an agreement between the Trust and JM.

(d)    Cash Equivalents and Non-JM Investments

At December 31, 2000 and 1999, the Trust has recorded all its non-JM investment securities at market value, as follows:

                                                                       2000                                             1999         
     Cost     Market      Cost     Market
Restricted
   Cash equivalents $486,511 $486,511 $8,163,247 $8,163,247
   U.S. Govt. oblig. 10,984,393 11,128,022 10,297,941 10,118,666
   Corporate and other debt 8,064,860 8,152,102 6,616,342 6,554,126
   Equities – U.S. 15,309,138 23,446,743 14,201,382 24,794,584
Total $34,844,902 $43,213,378 $39,278,912 $49,630,623
Unrestricted
   Cash equivalents $236,975,974 $236,975,974 $187,773,048 $187,773,048
   U.S. govt. obligations 200,942,969 206,059,774 193,971,035 187,739,337
   Foreign govt. obligations 51,372,068 50,619,721 104,116,650 105,041,002
   Corporate and other debt 220,327,299 219,922,954 220,890,947 214,265,671
   Equities – U.S. 62,287,608 88,852,473 100,365,479 161,724,357
   Equities – International 52,582,491 59,453,457 60,697,725 88,657,127
                Total $824,488,409 $861,884,353 $867,814,884 $945,200,542

The maturities of the Trust’s non-JM available-for-sale securities at market value (excluding cash equivalents and equities) 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 $1,260,833 $53,798,409 $48,323,197 $113,805,357
Foreign govt. obligations 9,203,921 870,935 34,809,366 5,735,499
Corporate and other debt 12,132,859 137,782,010 45,456,231 32,703,956
                Total $22,597,613 $192,451,354 $128,588,794 $152,244,812

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 December 31, 2000, the fair value of these instruments was approximately $1.7 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 December 31, 2000, the Trust held at market value approximately $184.1 million in sell currency forward contracts offset by approximately $184.8 million in buy currency forward contracts. The unrealized loss on these outstanding currency forward contracts of approximately $0.7 million is principally offset by corresponding unrealized gains due to currency exchange on the underlying securities being hedged. These amounts are recorded in the statement of net claimants’ equity at December 31, 2000.

(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                          $ 758,446
Acquisition of computer hardware and software           1,551,196
Leasehold improvements                                                     42,965
Total               $2,352,607

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 years ended December 31, 2000 and 1999 was approximately $134,900 and $228,900, respectively.

Depreciation expense related to asset acquisitions using accounting principles generally accepted in the United States would have been approximately $221,200 and $247,400 for the years ended December 31, 2000 and 1999, respectively.

(f)     JM Dividends

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

(3)     LITIGATION

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

On December 4, 2000, the jury trial of Falise II began in the Court. On January 25, 2001, the Court declared a mistrial because the jury was unable to reach a verdict after six days of deliberation. The Trust has not determined at this time whether it will seek a retrial.

(4)     UNPAID CLAIMS

The Trust distinguishes between claims that were resolved prior to the filing of the class action complaint on November 19, 1990, and claims resolved after the filing of that complaint. Claims resolved prior to the complaint (Pre-Class Action Claims) were resolved under various payment plans, all of which called for 100% payment of the full liquidated amount without interest over some period of time. However, between July 1990 and February 1995, payments on all claims except qualified exigent health and hardship claims were stayed by the courts. By court order on July 22, 1993 (which became final on January 11, 1994), a plan submitted by the Trust was approved to immediately pay, subject to claimant approval, a discounted amount on Pre-Class Action Claims, in full satisfaction of these claims. The discount amount taken, based on the claimants who accepted the Trust’s discounted offer, was approximately $135 million.

The unpaid liability for the Post-Class Action claims represents outstanding offers made in First-in, First-out (FIFO) order to claimants eligible for settlement after November 19, 1990. Under the TDP (Note 6), claimants receive an initial pro rata payment equal to 10% of the liquidated value of their claim. The Trust remains liable for the unpaid portion of the liquidated amount only to the extent that assets will be available after paying all claimants the established pro rata share of their claims. The Trust makes these offers in the form of a check made payable to the claimant and/or claimant’s counsel. If the offer is accepted, a Trust release is completed, the check is deposited and the claim is recorded as settled. An unpaid claim liability is recorded once an offer is made. The unpaid claim liability remains on the Trust’s books until accepted or expiration of the offer after 180 days. A claimant may request that an offer be extended for an additional 180 days.

Pursuant to the Stipulation of Settlement, the Trust is obligated to pay approximately $63 million plus investment earnings on funds set aside for contribution and indemnity claims occurring before July 25, 1994. As of December 31, 2000, approximately $0.2 million remains to be paid.

(5)     COMMITMENTS AND CONTINGENCIES

Operating Leases

In September 1993, the Trust executed a 5-year lease through December 1998 for its offices in Fairfax, Virginia. The lease was extended for an additional 5 years beginning at the expiration of the initial lease. Effective January 1, 1999, the Trust assigned its rights under the lease to CRMC conditioned upon the Trust’s guarantee of future lease payments.

Future minimum rental commitments under this operating lease, as of December 31, 2000, are as follows:t

Calendar Year                                 Amount
2001                                              613,122
2002                                              631,969
2003                                              651,376
Total                     $1,896,467

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 $286,300 and $254,600 for the years ended December 31, 2000 and 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 December 31, 2000 is approximately $0.2 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 (DSF). Income and expenses associated with the DSF are taxed in accordance with Section 468B of the Internal Revenue Code, which obligates JM to pay for any federal income tax liability imposed upon the DSF. In addition, pursuant to an agreement between JM and the Trust, JM is obligated to pay for any income tax liability. Accordingly, no liability or income tax provision has been recorded for the Trust. However, as discussed in Note 1, at the consummation of the tender offer transaction, JM will pay the Trust $90 million to settle their obligation. In return, the Trust will terminate JM’s contractual liability for income taxes of the DSF and agree to indemnify JM in respect for all future income taxes of the Trust.

However, 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. The Trust accounts for CRMC’s income taxes in accordance with the Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes.” SFAS No. 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the book and tax basis of assets and liabilities. As of December 31, 2000, the Trust has recorded a net deferred tax asset of $29,000, representing temporary timing differences primarily for CRMC’s accrued vacation and deferred compensation. The deferred asset is included in deposits and other assets in the accompanying consolidated statement of net claimants’ equity.

The income and expenses attributable to Trust assets not in the DSF are taxed as if these assets were in a “Grantor Trust.” 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 DSF.

(10)     PROOF OF CLAIMS FILED

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

                     As of
12/31/00
                       As of
12/31/99
Claims filed 487,651 428,409
Voided claims (1) (38,071) (36,538)
Currently disqualified (2) (1,194) (1,390)
Expired offers (3) -(42,586) (32,018)
            Active claims 405,800 358,463
Settled claims (340,461) (276,682)
Claims currently eligible for settlement 65,339 81,781

(1) Claim filings that are permanently ineligible due to duplication of filing, withdrawal or missing
critical information.

(2) Claim filings on hold until representation or content problems are resolved.

(3) Claims that received a Trust offer, but failed to respond within the offer acceptance period.
A claim may be reactivated upon written request and is eligible for a new offer at the end of
the FIFO queue.

The following exhibits are provided in accordance with Article 3.02 (d) (iii) of
the Manville Personal Injury Settlement Trust Agreement.

    Exhibit I   Consolidated Non-JM Investment Income for the Years Ended
December 31, 2000 and 1999

Exhibit II  Consolidated Operating Expenses for the Years Ended
December 31, 2000 and 1999

Exhibit III, Page 1 – Schedule of Liquidated Claims Since Consummation
(November 28, 1988) Through December 31, 2000

Exhibit III, Page 2 – Schedule of Liquidated Claims for the Year Ended
December 31, 2000

                                                                                                                                            EXHIBIT I

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
CONSOLIDATED NON-JM INVESTMENT INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

2000 1999
NON-JM INVESTMENT INCOME
         Interest $39,281,978 $50,006,268
         Dividends 3,143,893 3,356,045
         Net realized gains (losses) 37,311,597 (4,920,633)
                     Total non-JM investment income 79,737,468 48,441,680
          Investment expenses (1,461,260) (2,154,240)
TOTAL $78,276,208 $46,287,440

The accompanying notes are an integral part of this exhibit.

                                                                                                                       EXHIBIT II

MANVILLE PERSONAL INJURY SETTLEMENT TRUST
CONSOLIDATED OPERATING  EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


2000

1999
OPERATING EXPENSES:
      Personnel costs $6,337,746 $7,204,652
      Office general and administrative 1,304,887 1,350,797
      Travel and meetings 410,105 272,203
      Board of Trustees 778,788 552,430
      Professional fees 15,920,652 7,437,015
      Net fixed asset purchases 133,983 228,887
      Computer and other EDP costs 94,695 99,645
      Dispute resolution 21,750 36,616
      CRMC income tax (benefit) provision (44,800) 241,100
                            TOTAL $24,957,806 $17,423,345

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 DECEMBER 31, 2000


Number

Amount
Average
Payment Amount
Trust Liquidated Claims
     Pre-Class Action Complaint
             November 19, 1990 and Before-
     Liquidated Claim Value 27,610 $1,188,264,972
     Present Value Discount (1) ______ (135,306,535)
     Net Settlements 27,610 1,052,958,437
     Payments (27,551) (1,051,611,764) $38,170
     Unpaid Balance 59 $1,346,673
     Post-Class Action Complaint
               After November 19, 1990-
     Offers Made at Full Liquidated Amount 333,094 $14,405,854,250
     Reduction in Claim Value (2) ______ (12,964,990,860)
     Net Offer Amount 333,094 1,440,863,390
     Payments (312,851) (1,362,390,972) $4,355
     Offers Outstanding 20,243 $78,472,418
Manville Liquidated Claims (3)
     Liquidated Claim Value 158 $24,946,620
     Payments (158) (24,946,620)
     Unpaid Balance 0 $0
Co-Defendant Liquidated Claims (4)
     Liquidated Claim Value $92,432,321
     Investment Receipts (5) 2,608,454
     Payments (94,827,397)
     Unpaid Balance $213,378)

(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 YEAR ENDED DECEMBER 31, 2000


Number

Amount
Average
Payment Amount
Trust Liquidated Claims
     Pre-Class Action Complaint
            November 19, 1990 and Before-
            Payable as of December 31, 1999 62 $1,522,673
            Rejected settlement (1) ($15,000)
            Paid (1) (2) (161,000)
         Payable as of December 31, 2000 59 $1,346,673
     Post-Class Action Complaint
             After November 19, 1990- (2)
         Offers Outstanding as of December 31, 1999 29,690 $93,283,702
             Net Offers Made (3) 54,332 239,959,268
             Offers Accepted/Paid (63,779) (254,770,552) $3,995
         Offers Outstanding as of December 31, 2000 20,243 $78,472,418
Co-Defendant Liquidated Claims
         Payable as of December 31, 1999 $6,630,836
            Settled 4,628,304
             Investment Receipts (4) 95,483
             Paid (11,141,245)
             Payable as of December 31, 2000 $213,378

(1)    During the period the dollar amount of paid claims includes fully and partially paid  claims.  The number of paid
claims represents only fully paid claims.

(2)    Under the TDP, Post Class Action Complaint claims have been reported at 10% of their liquidated value.

(3)    Represents payment offers made during the period net of rejected and expired offers.

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