ITEM 1. BUSINESS
THE TRUST
On September 25, 1985, pursuant to the Plan of Complete Liquidation and Dissolution of City Investing Company ('City') approved by stockholders of City on December 12, 1984, City transferred all its remaining assets and liabilities ('Trust Estate') to the City Investing Company Liquidating Trust (the 'Trust') to assure compliance with Section 337 of the Internal Revenue Code. The common stock transfer books of City were permanently closed on September 25, 1985, and the holders of record of common stock of City as of the close of business on that date became holders of units of beneficial interest in the Trust on the basis of one unit of beneficial interest for each share of common stock of City held on September 25, 1985. After September 25, 1985, the outstanding certificates that formerly represented shares of common stock of City are deemed to evidence the same number of units of beneficial interest in the Trust.
The City Investing Company Liquidating Trust Agreement ('Trust Agreement') provides that the Trust is organized for the sole purpose of liquidating the Trust Estate in a manner calculated to conserve and protect the Trust Estate, and to collect and distribute to the beneficiaries proceeds therefrom in as prompt and orderly a fashion as possible after the payment of, or provision for, expenses and liabilities. The Trustees are required to distribute to the beneficiaries cash or other property comprising a portion of the Trust Estate as the Trustees may, in their sole discretion, determine may be distributed without detriment to the ability of the Trust to pay or discharge claims, expenses, charges, liabilities and obligations. The existence of the contingent liabilities referred to in Note 7 to the Trust's Financial Statements will affect the timing of future distributions of Trust assets, see Item 8 -- Note 7, 'Litigation and Other Contingent Liabilities'.
On June 18, 2003, the Trustees extended the time limit of the Trust's existence to September 25, 2004 from September 25, 2003 in order to continue the orderly resolution of legal exposures of the Trust and reducing to cash the remaining non-liquid assets.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In accordance with the Trust Agreement, the Trust has assumed the obligation to make payments, where required, to discharge certain litigation and other contingent liabilities of City which existed at September 25, 1985 or which have subsequently arisen. For a description of litigation terminated during the fourth quarter of 2003 and claims currently pending or threatened that affect the Trust, see Item 8 -- Note 7, 'Litigation and Other Contingent Liabilities'.
PART II
ITEM 5.
ITEM 5. MARKET PRICE OF UNITS
The Trust's Units of Beneficial Interest ('Units') trade on The Nasdaq stock exchange and appear daily in the list entitled Small Capitalization Issues, under the symbol CITYINVLQ or CNVLZ. Selected contemporaneous trading information is available on the Internet and can be accessed as follows -- http://www.nasdaq.com. The high and low prices for the Units during 2003 and 2002 were as follows:
As of December 31, 2003, there were approximately 12,800 registered holders of the Trust's Units of Beneficial Interest. No cash distributions were made in either 2003 or 2002.
The Trust may have a contingent liability to the United States Environmental Protection Agency and other third parties.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Trust recorded net income of $924,000 ($0.02 per unit) in 2003 compared with $1,504,000 ($0.04 per unit) in 2002 and $5,337,000 ($0.14 per unit) in 2001. It is difficult to compare amounts in comparable periods, as the financial statements of the Trust are prepared on the basis of accounting used for Federal income tax purposes; that is, amounts are reflected in the financial statements when amounts are received or paid.
In February 2000, the Trust sold 39 percent of certain real estate acreage for $2,410,000 in cash, which resulted in a recognized long-term capital gain, net of expenses, of $610,000. In May 2000, the Trust sold its remaining real estate acreage for $478,000 in cash and a non-recourse promissory note of $3,683,000, payable in five equal annual installments plus interest at 8 percent. The May 2000 sale resulted in a recognized long-term capital gain, net of expenses, of $171,000 and deferred gain of $1,173,000. The deferred gain of $1,173,000 was recorded as a reduction to the $3,683,000 mortgage receivable. In June 2001, 2002 and 2003, cash payment installments of $960,000, $907,000 and $850,000, respectively, were received which resulted in a recognized long-term gain, net of expenses, of $183,000 in each of the years and net interest income of $274,000, $222,000 and $177,000, respectively. The deferred gains of $469,000 at December 31, 2003 and $704,000 at December 31, 2002 are netted against the gross mortgage receivable of $1,473,000 at December 31, 2003 and $2,210,000 at December 31, 2002. A one-year extension of the non-recourse promissory note to pay only interest in 2004 and principal and interest in 2005 and 2006 was requested by the mortgagee and is expected to be approved by the holders of the mortgage. It is projected that if the remaining payments are made, the remaining deferred gain of $469,000 will be subject to expenses estimated to be $102,000.
In 1985, City Investing Company purchased a group annuity contract from The Prudential Insurance Company of America (Prudential). Upon the 2002 demutualization of Prudential, the Trust received 885 shares of Prudential Financial Inc. As the Trust had a $0 basis in this asset, all of the $29,000 proceeds received upon the sale of these shares is reported as long-term capital gain.
Legal fees attributable to issues that relate to periods before the liquidation of City of $324,000 in 2003, compared to $1,009,000 in 2002 and $451,000 in 2001 are reflected as losses on dispositions of assets.
Interest, dividend and other income of $1,457,000 in 2003, $2,707,000 in 2002 and $5,953,000 in 2001, was principally derived from interest earned on U.S. Treasury securities. In 2001, the Trust purchased Treasury Notes due to the cessation of the issuance of one-year Treasury Bills by the U.S. Government. As the Trust reports on a cash basis, both interest received on Treasury Bills and semi-annual interest received on Treasury Notes were reported as income in 2001. In addition, declining interest rates adversely affected interest income received in 2003 and 2002.
Administrative expenses were $392,000 in 2003, $406,000 in 2002, and $348,000 in 2001. The Trust is a party to a five-year lease of office space (which can be cancelled as of July 2004 without penalty in the event of the Trust's liquidation) which requires total remaining lease payments of $94,000, $26,000 of which is due in less than one year, $54,000 within one-three years and $14,000 within three-five years.
At December 31, 2003, the Trust had cash and cash equivalents and investment securities of $83,069,000. The Trustees believe that such cash resources and investment securities are sufficient to meet all anticipated liquidity requirements.
No cash distributions have been made since May 12, 1990. For information regarding considerations affecting the future distribution of Trust assets, see Item 8
Item 8 -- Note 8, 'Future Distributions of Trust Assets'.
ITEM 8. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
THE TRUSTEES AND HOLDERS OF UNITS OF BENEFICIAL INTEREST CITY INVESTING COMPANY LIQUIDATING TRUST:
We have audited the accompanying balance sheets of the City Investing Company Liquidating Trust (the 'Trust') as of December 31, 2003 and 2002, and the related statements of operations, cash flows and changes in trust equity for each of the years in the three-year period ended December 31, 2003. These financial statements are the responsibility of the Trust's Trustees. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Trustees, 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 to the financial statements, the Trust's policy is to prepare its financial statements on the basis of accounting used for Federal income tax reporting purposes. Accordingly, the accompanying financial statements are not intended to present financial position, income and expenses, cash flows and changes in trust equity in conformity with accounting principles generally accepted in the United States of America.
See Note 7 to the financial statements for a description of litigation and other contingent liabilities.
In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, and trust equity of City Investing Company Liquidating Trust as of December 31, 2003 and 2002, and its income and expenses, cash flows and changes in trust equity for each of the years in the three-year period ended December 31, 2003, on the basis of accounting described in Note 2.
KPMG LLP New York, New York January 27, 2004
CITY INVESTING COMPANY LIQUIDATING TRUST
STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31
BALANCE SHEETS DECEMBER 31
See accompanying notes to financial statements.
CITY INVESTING COMPANY LIQUIDATING TRUST
STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31
STATEMENTS OF CHANGES IN TRUST EQUITY YEAR ENDED DECEMBER 31
See accompanying notes to financial statements.
CITY INVESTING COMPANY LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
The City Investing Company Liquidating Trust (the 'Trust') was created on September 25, 1985, pursuant to an Agreement and Declaration of Trust ('Trust Agreement') by and between City Investing Company ('City') and the three individuals then serving as trustees of the Trust ('Trustees'). The Trust Agreement is governed by the laws of the State of Delaware.
On September 25, 1985, pursuant to a Plan of Complete Liquidation and Dissolution approved by stockholders of City on December 12, 1984, City transferred all its remaining assets and liabilities ('Trust Estate') to the Trust to assure compliance with Section 337 of the Internal Revenue Code. The sole purpose of the Trust is to liquidate the Trust Estate in a manner calculated to conserve and protect the Trust Estate, and to collect and distribute to the beneficiaries the income and proceeds therefrom in as prompt and orderly a fashion as possible after the payment of, or provision for, expenses and liabilities.
The common stock transfer books of City were permanently closed on September 25, 1985, and the holders of record of common stock of City as of the close of business on that date became holders of units of beneficial interest in the Trust on the basis of one unit of beneficial interest for each share of common stock of City held on September 25, 1985. After September 25, 1985, the outstanding certificates that formerly represented shares of common stock of City are deemed to evidence the same number of units of beneficial interest in the Trust.
The Trust Agreement, signed on September 25, 1985, set forth a time limit of three years for the disposition of the Trust's assets and distribution to the unit holders unless a later termination was required by the Trustees. As a result of the protracted nature of certain litigation and other claims asserted against the Trust, the Trustees extended the time limit of the Trust's existence a number of times, most recently to September 25, 2004.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying financial statements have been prepared on the basis of accounting used for Federal income tax purposes. Accordingly, certain revenue and the related assets are recognized when received rather than when earned; certain expenses are recognized when paid rather than when the obligation is incurred; and assets are reflected at their tax basis.
Valuation of assets and liabilities: The Trust Equity balance on September 25, 1985 was established at an amount equivalent to the number of units of beneficial interest outstanding (38,979,372) multiplied by the average of the high and low trading prices of such units on the first day of trading ($3.1875), or an aggregate of $124.2 million. The fair market value for Federal income tax purposes of each asset other than cash and cash equivalents was determined by that asset's proportionate share of the Trust Equity increased by accounts payable and decreased by cash and cash equivalents at September 25, 1985. The proportionate share of each of these assets was determined by the estimated value of such Trust asset in relation to the estimated value of all of the Trust assets other than cash and cash equivalents. In determining the estimated value of Trust assets, the Trustees evaluated, where appropriate, such factors as City's historical carrying values, expected amounts and dates of realization, prevailing interest rates, available market prices and restrictions with respect to disposition.
Income taxes: For Federal income tax purposes, the September 25, 1985 transfer of assets and liabilities to the Trust and distribution to stockholders of units in the Trust was treated as a distribution of assets and liabilities by City to its stockholders and a contribution by the stockholders of such net assets to the Trust in return for units.
The Trust is treated as a grantor trust and not as a corporation. Accordingly, any income or loss of the Trust will not be taxable to the Trust but will be taxable to the unit holders as if the unit holders had themselves realized the income or loss from their undivided interests in Trust assets.
Losses on dispositions of assets: Losses on dispositions of assets, net of gains, includes legal fees attributable to issues that relate to periods before the liquidation of City.
Net income per unit: Net income per unit is calculated by dividing net income of the Trust by the number of outstanding Units of Beneficial Interest.
CITY INVESTING COMPANY LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Cash and cash equivalents: The Trust considers all investments in money market funds as cash equivalents.
NOTE 3 - INVESTMENT SECURITIES
Investment securities, all of which mature within one year, consist of U.S. Treasuries and are carried at original cost, net of premium amortization recorded at interest collection dates. The fair value of U.S. Treasuries is based on quoted market prices.
Investment securities at December 31, consist of the following:
NOTE 4 - RESTRICTED FUNDS
Restricted funds at December 31, 2003 and 2002 represent a rent deposit of $4,000.
NOTE 5 - INVESTMENTS
Investments at December 31 are as follows:
The Trust holds 310,810 shares of Oklahoma Energy Corp. common stock, which are carried at their tax basis. At December 31, 2003 and 2002, the fair value of the Oklahoma Energy stock, based on quoted market prices, was $31 and $9,324, respectively.
NOTE 6 - REAL ESTATE
In February 2000, the Trust sold 39 percent of certain real estate acreage for $2,410,000 in cash, which resulted in a recognized long-term capital gain, net of expenses, of $610,000. In May 2000, the Trust sold its remaining real estate acreage for $478,000 in cash and a non-recourse promissory note of $3,683,000, payable in five equal annual installments plus interest at 8 percent. The May 2000 sale resulted in a recognized long-term capital gain, net of expenses, of $171,000 and deferred gain of $1,173,000. The deferred gain of $1,173,000 was recorded as a reduction to the $3,683,000 mortgage receivable. In June 2001, 2002 and 2003, cash payment installments of $960,000, $907,000 and $850,000, respectively, were received which resulted in a recognized long-term gain, net of expenses, of $183,000 in each of the years and net interest income of $274,000, $222,000 and $177,000, respectively. The deferred gains of $469,000 at December 31, 2003 and $704,000 at December 31, 2002 are netted against the gross mortgage receivable of $1,473,000 at December 31, 2003 and $2,210,000 at December 31, 2002. A one-year extension of the non-recourse promissory note to pay only interest in 2004 and principal and interest in 2005 and 2006 was requested by the mortgagee and is expected to be approved by the holders of the mortgage. It is projected that if the remaining payments are made, the remaining deferred gain of $469,000 will be subject to expenses estimated to be $102,000.
CITY INVESTING COMPANY LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - LITIGATION AND OTHER CONTINGENT LIABILITIES
In accordance with the Trust Agreement, the Trust has assumed the obligation to make payments, where required, to discharge certain litigation and other contingent liabilities of City which existed at September 25, 1985 or which have subsequently arisen. The Trust may have a contingent liability with respect to certain issues described below:
AmBase Corporation v. City Investing Company Liquidating Trust, et al. (01 Civ. 0771): On January 30, 2001, AmBase Corporation ('AmBase') filed a Complaint in the United States District Court for the Southern District of New York claiming that the Trust was primarily liable for certain potential tax liabilities of City and seeking to recover expenses incurred by AmBase in defending against those liabilities in the Tax Court of the United States. Although a subsequent decision by the Tax Court concluding that City was not liable for the taxes in question has mooted any claim for reimbursement of the tax liability, AmBase's claim seeking recovery of its expenses remained at issue. A virtually identical suit by AmBase against the Trust in the Delaware Chancery Court was dismissed on statute-of-limitations grounds on January 3, 2001. On January 11, 2002, Judge Stanton granted the Trust's motion to dismiss the New York action on the statute of limitations grounds. On February 14, 2002, Judge Stanton denied AmBase's motion for reconsideration. AmBase thereafter appealed Judge Stanton's decision to the United States Court of Appeals for the Second Circuit which Court affirmed the District Court's dismissal of this action. AmBase filed a petition for rehearing with the Court of Appeals which was denied on June 12, 2003. AmBase then filed a petition for certiorari with the United States Supreme Court seeking review of the Court of Appeals decision. That petition was denied by the Supreme Court on November 17, 2003, bringing an end to this matter.
Marina Pacifica: Environmental Protection Agency Claim. The U.S. Environmental Protection Agency ('EPA') has identified Marina Pacifica as a Potentially Responsible Party ('PRP') under the Comprehensive Environmental Response, Compensation and Liability Act ('CERCLA') with respect to the Operating Industries, Inc. Site in Monterey, California ('Site'). The Site, a landfill for municipal and industrial waste, was included on the National Priorities List in May 1986.
Marina Pacifica was a California limited partnership, the general partner of which was a subsidiary of City Investing Company. Marina Pacifica was in the business of developing and selling condominiums. Development of one construction site required the relocation of six oil wells. Drilling muds generated during the relocation activities were allegedly disposed of at the Site.
In September 1990, EPA sent a special notice letter to all PRPs, including Marina Pacifica, demanding payment of the total costs incurred by the government since June 1, 1988, which EPA estimated were at least $15.3 million. EPA also requested a good faith offer to perform or pay for the remedy selected for the third remedial stage. Marina Pacifica did not make a counter offer. Counsel for Marina Pacifica notified EPA that Marina Pacifica had been dissolved and would be unable to participate in any settlements. On September 30, 1997, the EPA sent a further special notice letter to all PRPs, including Marina Pacifica, that requested a good-faith offer to perform or pay for, among other things, the final remedial measures covered by the September 1996 Record of Decision. The EPA included an updated list of 280 PRPs on which Marina Pacifica appeared 84th in volumetric terms. Marina Pacifica did not make a counter offer, and has not received anything further from EPA.
The EPA has conducted site control and monitoring activities at the Site since May 1986. In addition, EPA has conducted a number of removal actions and studies at the Site to stabilize site conditions and to evaluate the extent of contamination. Other PRPs have entered into several consent decrees requiring clean-up work or payments to EPA, including a December 2001 decree that requires work estimated to cost $340 million. Based on its volumetric share and other material factors, counsel would expect actual payments, if any, required of Marina Pacifica to be a small fraction of the total costs for which it could still be held liable. Given that City Investing Company had nothing to do with day-to-day operations of Marina Pacifica or its general partner, the Trust should not be liable for any clean-up responsibilities of Marina Pacifica.
CITY INVESTING COMPANY LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Admiral Home Appliances Site. Maytag Corporation ('Maytag') has sued Rheem Manufacturing Company ('Rheem') in the United States District Court for the District of South Carolina, Aiken Division, (Maytag Corporation v. Rheem Manufacturing Company v. City Investing Company, et al. Civ. Action 1-01-0137-22), seeking to recover environmental remediation expenses for which Maytag is liable under the Comprehensive Environmental Response, Compensation and Liability Act because of ownership by a subsidiary of Maytag of the Admiral Home Appliances Super Fund Site in Williston, South Carolina (the 'Admiral Site'). In its Complaint against Rheem, Maytag claimed that Rheem was liable for a share of the remediation expenses because of Rheem's prior ownership of the Admiral Site. On October 23, 2001, Rheem filed a Third Party Complaint against City Investing Company ('City'), alleging that City, as owner of the stock of first and second-tier subsidiaries which conducted manufacturing operations at the Admiral Site from 1968 to 1981, was liable to reimburse Rheem for some or all of Rheem's liability. The Trust was added as a Third Party Defendant in an amended pleading. On October 23, 2002, the District Court dismissed Rheem's action against the Trust for lack of personal jurisdiction. Rheem did not attempt to appeal the District Court's decision within the required time and is barred from suing City or the Trust in South Carolina, but Rheem is not barred from attempting to sue City and/or the Trust in other jurisdictions. While the Trust has been advised by its counsel that the Trust is not liable for environmental remediation expenses related to the Admiral Site, no assurance can be given as to the ultimate outcome of the Trust's exposure to this environmental matter.
Other Matters. The Trust also remains subject to possible claims by other third parties.
Lease Commitment. The Trust has leased office space at 853 Broadway, Suite 1607, New York, NY 10003-4703, beginning July 1, 2002. The five-year lease can be cancelled after two years without penalty in the event of the liquidation of the Trust. Base annual lease expense beginning July 1, 2002, will be approximately $24,000 during the first year of the lease, escalating to an estimated $27,000 during the last year of the lease. Annual lease expense was $25,000 in 2003, $31,000 in 2002, and $32,000 in 2001.
NOTE 8 - FUTURE DISTRIBUTIONS OF TRUST ASSETS
The existence of the contingent liabilities referred to in Note 7 will affect the timing of future distributions of Trust assets.
NOTE 9 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The quarterly financial data for 2003 and 2002 are as follows:
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Trust carried out an evaluation, under the supervision and with the participation of the Trust's management, including the Trustee who is the functional equivalent of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Trust's internal disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. That Rule requires that such controls and procedures assure that information required to be included in the Trust's periodic SEC filings is recorded, processed, summarized and reported within the time periods specified by the rules and forms. Based upon that evaluation, the Trustees concluded that the Trust's internal disclosure controls and procedures are effective in assuring that information required to be disclosed by the Trust in its periodic SEC filings is accurate and communicated to the Trust's management in order to allow timely decisions regarding required disclosure. There have not been any significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of such evaluation.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
THE TRUSTEES
The Trustees of the Trust are Eben W. Pyne, John J. Quirk and Lester J. Mantell. Each Trustee will serve for the term of the Trust subject to his earlier resignation or removal. There are no family relationships between the Trustees.
Eben W. Pyne (86) retired in 1982 as a Senior Vice President of Citibank, N.A. He was a director of City, AmBase and W.R. Grace and Co.
John J. Quirk (60) is a managing director at Morgan Joseph & Co. Inc. He was a principal at Churchill Capital, Inc., a private equity firm, from 1998 to 2001. He was the Chairman and Co-founder of Quirk Carson Peppet Inc. from 1985 to 1998. He served as Senior Vice President and Treasurer of City prior to March 1985.
Lester J. Mantell (66) was an officer of City and AmBase prior to 1997.
The Audit Committee of the Trust consists of Messrs. Pyne and Quirk, neither of whom has been determined to be an 'audit committee financial expert' within the meaning of Item 401 (h) (i) of Regulation S-K since neither possesses all the attributes required for such designation by that regulation.
The Trust has adopted a Code of Ethics that is applicable to the Trustees, one of whom is the functional equivalent of its principal executive officer and its principal financial officer, and the Trust's Administrator. See Exhibit 14 -- 'Code of Ethics'.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to Section 9.1 of the Trust Agreement, the Trustees, in lieu of commissions or other compensation fixed by law for Trustees, receive as compensation for services there under the aggregate sum of $36,000 per year to be allocated equally among the Trustees. Each Trustee is also reimbursed from the Trust Estate for all expenses reasonably incurred by him in the performance of his duties pursuant to the Trust Agreement.
There are no plans, pursuant to which cash or non-cash compensation was paid or distributed during the last fiscal year, or is proposed to be paid or distributed in the future, to the Trustees, except for amounts that one Trustee may receive as a holder of 1,000 Units of Beneficial Interest.
ITEM 12.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following are the only persons known to the Trust to own beneficially (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) more than five percent of the Trust's Units of Beneficial Interest. The information provided below was obtained from Form 4 of Goldman, Sachs & Co., as filed with the Securities and Exchange Commission ('SEC') as of August 10, 2001, from Form 4 of Farallon Capital Management, L.L.C. filed with the SEC as of January 14, 2004, and from Amendment No. 3 to Schedule 13G as filed with the SEC by Franklin Mutual Advisers, LLC as of January 22, 2002.
The following table shows the Units of Beneficial Interest of the Trust beneficially owned by each Trustee and the Trustees as a group as of January 7, 2004.
* Represents less than one quarter of 1% of the class.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit fees: The aggregate fees paid in each of the last two fiscal years for professional services rendered by KPMG LLP for the audit of the Trust's annual financial statements and review of the financial statements included in the Trust's Forms 10-Q were as follows:
The Audit Committee of the Trust met in the first quarter of each of the fiscal years shown above and unanimously approved a proposal by KPMG LLP to provide the services described above. There were no audit-related, tax, non-audit, review or attest services provided by KPMG LLP to the Trust during the periods shown.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
SIGNATURES:
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of January 2004.
CITY INVESTING COMPANY LIQUIDATING TRUST
LESTER J. MANTELL Trustee
Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the Registrant on the 27th day of January 2004.
The Trustees:
EBEN W. PYNE Trustee
JOHN J. QUIRK Trustee
LESTER J. MANTELL Trustee
2003 U.S. FEDERAL INCOME TAX INFORMATION
This letter provides information relating to the amount and character of the income, gain, loss, deductions and basis adjustment ('Tax Items') of the City Investing Company Liquidating Trust ('Trust') for 2003. You should use this information in preparing your 2003 U.S. Federal income tax return.
If you (i) acquired Trust Units ('Units') upon liquidation of City Investing Company, (ii) reported long-term capital gain or loss upon the liquidation, and (iii) did not dispose of any Units in 2003, you can calculate on the Schedule your share of the Trust Tax Items by multiplying the Amount per Unit [Column IA] of each Tax Item by the Number of Units you held [Column IB] and entering the product under the Taxable Amount [Column IC].
If you (i) disposed of Units in 2003, or (ii) acquired your Units other than upon the liquidation of City Investing Company, or (iii) did not report long-term capital gain or loss upon the liquidation, you will probably have different income tax consequences that cannot readily be calculated by the Trust. For administrative convenience, you may calculate your share of the Trust Tax Items by (i) multiplying the Amount per Unit [Column A] of each Tax Item by the Number of Units you held [Column B] on the first day of each month applicable to your holding period, (ii) entering the product under the Taxable Amount [Column C] and (iii) entering the sum of the amounts in Columns IIC through XIIIC, if any, in Column XIV.
Individual taxpayers may report on Form 1040 the amounts of Tax Items computed for Federal income tax purposes as follows:
THIS LETTER IS NOT INTENDED TO PROVIDE INCOME TAX ADVICE RELATING TO THE ACQUISITION, HOLDING AND DISPOSITION OF UNITS. YOU ARE STRONGLY ENCOURAGED TO DISCUSS THE INCOME TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF UNITS WITH YOUR TAX ADVISOR.
For all information about UNIT HOLDINGS:
UNITS HELD IN STREET NAME, PLEASE COMMUNICATE WITH YOUR BANK OR BROKER.
REGISTERED UNIT HOLDERS, PLEASE COMMUNICATE WITH MELLON INVESTOR SERVICES, transfer agent for City Investing Company Liquidating Trust, at:
For current FINANCIAL AND TAX INFORMATION (10-K, 8-K AND 10-Q), please go to the Trust's web site:
http://www.cnvlz.com
For all INFORMATION OTHER THAN UNIT HOLDINGS, please communicate with us at:
CITY INVESTING COMPANY LIQUIDATING TRUST UNITS TRADE ON THE NASDAQ STOCK MARKET AND APPEAR DAILY IN THE LIST ENTITLED SMALL CAPITALIZATION ISSUES UNDER THE SYMBOL CITYINVLQ OR CNVLZ.
-A-
CITY INVESTING COMPANY LIQUIDATING TRUST
* The Trust Tax Items for 2003 have been calculated in accordance with the letter on the front side of this page, and our letter of November 26, 1985 (reproduced on Page D) providing certain tax information, which are integral parts hereof and which you should review with your tax advisor before reporting your share of the Trust Tax Items on your 2003 U.S. Federal income tax return.
# Taxable Amount [Column IC] is equal to the Amount per Unit [Column IA] multiplied by No. of Units you held [Column IB] continuously from January 1 through December 31, 2003.
[d] Taxable Amount [Column C] is equal to the Amount per Unit [Column A] multiplied by No. of Units you held [Column B] on the first day of each month.
! Taxable Amount [Column XIV] is equal to the sum of the Taxable Amounts in Columns IIC through XIIIC for each month that you held Trust Units on the first day.
-B-
SCHEDULE OF 2003 U.S. FEDERAL TAX ITEMS
- ------------------------------- XIV TOTAL IF HELD ON SOME, BUT NOT ALL, FIRST DAYS OF EACH MONTH - ------------------------------- IIC + IIIC + IVC + VC + VIC + VIIC + VIIIC + IXC +
XC + XIC + XIIC + XIIIC TAXABLE AMOUNT! - -------------------------------
-C-
CITY INVESTING COMPANY LIQUIDATING TRUST
RE: TAX INFORMATION
This letter is to advise you of the tax return information to be provided to you annually as a holder of units ('Units') in the City Investing Company Liquidating Trust ('Trust'). The Trust, being a 'grantor' trust, will be disregarded for Federal income tax purposes and you will be treated as having a direct interest in an allocable portion of each asset and liability of the Trust. Consequently, an allocable portion of all items of Trust income, deductions and credits ('Tax Items') must be reported by you on your income tax return. Your taxable year and accounting method will determine the income tax treatment of your allocable portion of Tax Items. As soon as practicable after the end of each year, but no later than April 15 of the following year, you will be provided with a schedule listing your allocable share of Tax Items for the year, which will be determined by the number of Units you own in relation to the total number of outstanding Units. This will enable you to file your federal, state and local income tax returns. The types of Tax Items which will be required to be reported by you on your income tax return may include, but are not limited to interest income, original issue discount income, short-term and long-term capital gains and losses, dividend income, market discount income, depreciation, state, local and foreign taxes and deductible expenses incurred by the Trust.
For purposes of determining gain or loss from the sale or other disposition of your undivided interest in assets held by the Trust, your holding period and adjusted basis for your undivided interest in each of the assets held by the Trust will be determined by your date of acquisition and the price you paid for your Units. If you received your Units upon the liquidation of City Investing Company, you will be treated as acquiring your undivided interest in the net assets of the Trust at a price of $3.1875 per Unit and your holding period for your undivided interest in the assets held by the Trust will have begun on September 26, 1985. If you sell your Units, you will be deemed to sell an undivided interest in each asset of the Trust for an allocable portion of the sales price for the Units. For example, if you sell your Units, you may be required to recognize ordinary income with respect to your interest in market discount obligations held by the Trust. For administrative convenience, gains and losses from the sale or other disposition by the Trust of assets held by the Trust, including the collection of installment notes receivable, will be reported to you by the Trust as if all Unit holders obtained their Units, and, consequently, their undivided interests in the assets held by the Trust, upon the liquidation of City Investing Company. Subsequent Unit holders may have different income tax consequences, but these tax consequences cannot readily be calculated. For example, with respect to the collection of installment notes receivable, the Trust will report to you the portion of amounts received which are reportable as market discount, which will be taxed as ordinary income, on the basis of an acquisition date of September 25, 1985 and a price per Unit of $3.1875. For this purpose, it will be assumed that the installment notes receivable will not be eligible for installment sales reporting tax treatment.
For administrative convenience, certain special rules will apply to the determination of the effective date of transfers of Units. A transfer will not be considered effective until the first day of the month following the month in which the transfer occurs (or, if earlier, the first day following the date on which the Trust disposes of any asset the basis of which exceeds 5% of the bases of all the assets held by the Trust on September 25, 1985). Record holders of Units on the first day of a month or the day after which such a disposition of assets takes place will be entitled to receive all distributions made on or after such date and before any subsequent effective date of transfer and will be treated for tax purposes as the owner of the underlying assets of the Trust for such period. In accordance with these rules, the Trust will determine for periods ending at the end of each month (and for periods ending on the day the Trust disposes of any asset the basis of which exceeds 5% of the bases of all assets held by the Trust on September 25, 1985) the Tax Items to be included on the schedule to be provided to you annually. For administrative convenience, Tax Items will be determined using the cash method of tax accounting.
This letter is not intended to provide income tax advice relating to the holding of Units. As such, you are strongly encouraged to discuss the income tax consequences of an investment in Units with your tax advisor.
November 26, 1985
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STATEMENT OF DIFFERENCES ------------------------
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