4. Pension Plan

The present value of the unfunded portion of past service
benefits is approximately $1,241,000 at December 31,
1977. The amount is being funded and charged to opera-
tions by annual payments of $139,000, including interest.

5. Commitments

The Company is committed to an equipment leasing pro-
gram for mining equipment. At the year end the out-
Standing contracts for leased equipment amounted to
$6,697,000 of which $1,813,000 will be payable in 1978.

6. Anti-Inflation Program
Under the Federal Government's anti-inflation program,
the Company is subject to mandatory compliance with
legislation which controls prices, profit margins, employee
compensation and shareholder dividends. The program will
be phased out at various dates to December 31, 1978.
Because the majority of the Company's sales are for
the export market the controls on prices and profit margins
have relatively little effect on operations. Managementis of
the opinion that the Company is in compliance with the
requirements of the anti-inflation legislation.

Auditors’ Report

7. Legal Actions

The Company, as well as others, has been named as a
defendant in product liability suits in the United States in
which substantial damages are claimed for alleged injuries
to the health of asbestos workers or members of their
families by reason of the inhalation and ingestion of asbestos
fibres or dust. The Company is contesting or defending
each of these actions. Neither the existence of liability nor
the extent of any possible damages arising from any of
these cases can be determined at this time. Accordingly,
no provision for such liability, if any, has been made in the
accompanying financial statement.

—

To the Shareholders of
Cassiar Asbestos Corporation Limited:

Vancouver, Canada
February 23, 1978

| We have examined the consolidated balance sheet of Cassiar Asbestos Corporation Limited as at December 31,
1977 and the consolidated statements of operations, retained earnings and changes in financial position for the
year then ended. Our examination was made in accordance with generally accepted auditing standards, and
accordingly included such tests and other procedures as we considered necessary in the circumstances.

In our opinion, subject to the outcome of the legal actions referred to in note 7, these consolidated financial
statements present fairly the financial position of the Company as at December 31, 1977 and the results of its
operations and the changes in its financial position for the year then ended in accordance with generally accepted
accounting principles applied on a basis consistent with that of the preceding year.

CLARKSON, GORDON & CO.
Chartered Accountants