<Page>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from __________ to ____________
Commission File Number 0-13881
CITY INVESTING COMPANY LIQUIDATING TRUST
(Exact name of registrant as specified in its charter)
Delaware 13-6859211
(State of organization) (I.R.S. Employer Identification No.)
99 University Place, 7th Floor
New York, New York 10003-4528
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 473-1918
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
At September 28, 2001 there were 38,979,372 Trust Units of Beneficial Interest
outstanding.
<Page>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CITY INVESTING COMPANY LIQUIDATING TRUST
Statements of Income
Third Quarter and Nine Months ended September 30
(Unaudited)
------------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
($ in thousands, except per unit data) 2001 2000 2001 2000
------------------------------------------------------------------------------------------------------------------
Gains (losses) on dispositions of assets, net $(3) $(2) $(173) $189
Interest, dividend and other income 1,137 960 4,025 2,678
------------------------------------------------------------------------------------------------------------------
Total income 1,134 958 3,852 2,867
Administrative expenses 43 71 191 210
------------------------------------------------------------------------------------------------------------------
Net income $1,091 $887 $3,661 $2,657
------------------------------------------------------------------------------------------------------------------
Net income per unit $0.02 $0.02 $0.09 $0.07
------------------------------------------------------------------------------------------------------------------
Outstanding units 38,979 38,979 38,979 38,979
------------------------------------------------------------------------------------------------------------------
Balance Sheets
------------------------------------------------------------------------------------------------------------------
(Unaudited)
September 30, December 31,
($ in thousands) 2001 2000
------------------------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents $6 $14
U.S. Treasuries 77,954 73,784
Restricted funds 5 4
Investments 27 27
Mortgage receivable, net of deferred gain 2,008 2,510
-------------------------------------------------------------------------------------------------------------------
Total assets $80,000 $76,339
------------------------------------------------------------------------------------------------------------------
Liabilities and trust equity
Trust equity $80,000 $76,339
------------------------------------------------------------------------------------------------------------------
Total liabilities and trust equity $80,000 $76,339
------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- 1 -
<Page>
CITY INVESTING COMPANY LIQUIDATING TRUST
Statements of Cash Flows
Nine Months ended September 30
(Unaudited)
------------------------------------------------------------------------------------------------------------------
($ in thousands) 2001 2000
------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $3,661 $2,657
Adjustments to reconcile net income to net cash provided by (used for) operating
activities:
Gain on sale of real estate (183) (781)
Loss on Global Bancorporation liquidation - 562
Interest income earned on investment in U.S. Treasuries (3,448) (2,594)
------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 30 (156)
-------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of real estate 685 2,888
Proceeds from Global Bancorporation liquidation - 20
Maturities of investment securities 59,547 94,363
Purchases of investment securities (60,269) (97,102)
Restricted funds, net (1) -
------------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by investing activities (38) 169
------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (8) 13
Cash and cash equivalents at beginning of year 14 51
------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $6 $64
------------------------------------------------------------------------------------------------------------------
Statement of Changes in Trust Equity
Nine Months ended September 30
(Unaudited)
------------------------------------------------------------------------------------------------------------------
($ in thousands) 2001 2000
------------------------------------------------------------------------------------------------------------------
Balance at December 31 $76,339 $72,952
Net income 3,661 2,657
------------------------------------------------------------------------------------------------------------------
Balance at September 30 $80,000 $75,609
------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- 2 -
<Page>
CITY INVESTING COMPANY LIQUIDATING TRUST
Notes to Financial Statements
($ in thousands)
Note 1 - Organization
The September 30, 2001 financial statements for the City Investing Company
Liquidating Trust (the "Trust") are unaudited. In the opinion of the Trustees,
the interim financial statements reflect all adjustments necessary for a fair
presentation of the financial position and income and expenses of the Trust as
prepared on a Federal income tax basis. Results for interim periods are not
necessarily indicative of results for the full year.
Note 2 - Basis of Accounting
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; and
certain expenses are recognized when paid rather than when the obligation is
incurred; and assets are reflected at their tax basis.
Note 3 - Gains (Losses) on Dispositions of Assets
Gains (losses) on dispositions of assets, net, include legal fees attributable
to issues that relate to periods before the liquidation of City Investing
Company ("City").
Note 4 - Trust Agreement
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 on September 25, 1985, or which
have subsequently arisen.
Note 5 - Investment Securities
Investment securities consist of U.S. Treasuries and are carried at cost. The
fair value of U.S. Treasuries is based on quoted market prices. Investment
securities consist of the following:
-------------------------------------------------------------------------------------------------------------------
September 30, 2001 December 31, 2000
----------------------------------------- ----------------------------------------
Carrying Fair Carrying Fair
($ in thousands) Value Cost Value Value Cost Value
-------------------------------------------------------------------------------------------------------------------
U.S. Treasuries $77,954 $77,954 $79,506 $73,784 $73,784 $76,224
-------------------------------------------------------------------------------------------------------------------
The gross unrealized gains on investment securities, at September 30, 2001 and
December 31, 2000, are $1,552 and $2,440, respectively.
Note 6 - Restricted Funds
Restricted funds at September 30, 2001 and December 31, 2000 represent a rent
deposit of $5 and $4, respectively.
- 3 -
<Page>
CITY INVESTING COMPANY LIQUIDATING TRUST
Notes to Financial Statements (continued)
($ in thousands)
Note 7 - Investments
Investments are as follows:
-------------------------------------------------------------------------------------------------------------------
September 30, December 31,
($ in thousands) 2001 2000
-------------------------------------------------------------------------------------------------------------------
Oklahoma Energy Corp. $27 $27
------------------------------------------------------------------------------------------------------------------
The Trust held 10,000 shares of Global Bancorporation which were carried at
their tax basis. In February 2000, the Trust collected a final liquidating
distribution of $20 from Global Bancorporation which resulted in a long-term
capital loss of $562. As a result of a 10 for 1 reverse split, the Trust holds
310,810 shares of Oklahoma Energy Corp. common stock, which are carried at their
tax basis. At September 30, 2001 and December 31, 2000, the fair market value of
the Oklahoma Energy stock, based on quoted market prices, was $7 and $15,
respectively.
Note 8 - Real Estate
In February 2000, the Trust sold 39 percent of certain real estate acreage for
$2,410 cash, which resulted in a recognized long-term capital gain of $610. In
May 2000, the Trust sold its remaining real estate acreage for $478 cash and a
non-recourse promissory note of approximately $3,683, payable in five equal
annual installments including interest, bearing interest at 8 percent. The May
2000 sale resulted in a recognized long-term capital gain of $171. On June 1,
2001, the first of the five annual installments, $960 in cash, was received,
which resulted in a recognized long-term gain, net of expenses of sale, of $183.
The deferred gain of $1,173 and $938 at December 31, 2000 and September 30,
2001, respectively, is reflected as a reduction to the mortgage receivable of
$3,683 and $2,946 at December 31, 2000 and September 30, 2001, respectively.
Note 9 - 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 Internal Revenue Service ("IRS") has determined not to appeal the decision
of the United States Tax Court on May 23, 2001, that City (and therefore AmBase
Corporation ("AmBase") which had assumed the tax liability under an Assignment
and Assumption Agreement dated August 30, 1985) was not obligated to pay tax on
interest payments made to a Netherlands Antilles affiliate of City. Accordingly,
the risk of the Trust's contingent liability for some $140 million of potential
tax liability (including accrued interest) had AmBase been unable to respond to
an adverse determination has been eliminated.
The Trust continues to be a defendant in a proceeding commenced by AmBase on
January 30, 2001, in the United States District Court for the Southern District
of New York. This action is virtually identical to one commenced by AmBase in
the Delaware Chancery Court which was dismissed by that Court on January 3,
2001. Although the decision by the IRS not to appeal the Tax Court decision
referred to in the preceding paragraph moots the principal claim by AmBase in
this action, liability for legal expenses incurred by AmBase in defense of the
IRS claim remains at issue. Having successfully defended against AmBase's claims
in Delaware, the Trust will vigorously defend against AmBase's claims in New
York.
- 4 -
<Page>
CITY INVESTING COMPANY LIQUIDATING TRUST
Lease Commitment. The Trust has entered a one-year lease of office space that
expires June 30, 2002, with a monthly rental payment of $3.
Note 10 - Future Distributions of Trust Assets
Pending final resolution of possible claims by the United States Environmental
Protection Agency, see Note 7 to Financial Statements - Litigation and Other
Contingent Liabilities appearing in the Trust's Annual Report on Form 10-K for
the year ended December 31, 2000, and other third parties, see Note 9 to
Financial Statements - Litigation and Other Contingent Liabilities, the Trust is
unable to make any dividend payments or liquidation distributions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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.
The Trust recorded net income of $1,091 ($0.02 per unit) in the third quarter of
2001 and net income of $3,661 ($0.09 per unit) in the nine-month period ended
September 30, 2001, compared with $887 ($0.02 per unit) and a net income of
$2,657 ($0.07 per unit) in the corresponding 2000 periods. The reported gains
(losses) on the dispositions of assets, net, reflect losses of $3 and $173 in
the third quarter and nine-month periods of 2001 as compared to losses of $2 and
gains of $189 in the respective 2000 periods. In February 2000, the Trust sold
39 percent of its real estate acreage for $2,410 cash, which resulted in a
recognized long-term capital gain of $610. In May 2000, the Trust sold its
remaining real estate acreage for $478 cash and a non-recourse promissory note
of $3,683, payable in five equal annual installments, bearing interest at 8
percent. The May 2000 sale resulted in a recognized long-term capital gain of
$171. On June 1, 2001, the first of the five annual installments, $960 in cash,
was received, which resulted in a recognized long-term gain, net of expenses of
sale, of $183. The deferred gain of $1,173 and $938 at December 31, 2000 and
September 30, 2001, respectively, is reflected as a reduction to the mortgage
receivable of $3,683 and $2,946 at December 31, 2000 and September 30, 2001,
respectively.
In February 2000, the Trust received $20 as the final liquidating distribution
from Global Bancorporation which resulted in a long-term capital loss of $562.
Other expenses affecting gains (losses) on disposition of assets, net, consist
principally of legal fees attributable to issues that relate to periods before
the liquidation of City.
Interest, dividend and other income, principally consisting of interest earned
on the investment of cash equivalents and investment securities, was $1,137 and
$4,025 in the third quarter and nine months ended September 30, 2001, and $960
and $2,678 in the corresponding 2000 periods. The increase in the third quarter
and nine-month period of 2001 was primarily due to an increase in the yield on
investment securities compared to the 2000 periods. Administrative expenses were
$43 and $191 for the third quarter and nine months of 2001, compared with $71
and $210 for the comparable 2000 periods. This decrease was primarily due to an
decrease in legal expenses.
At September 30, 2001, the Trust had cash and cash equivalents and U. S.
Treasuries of $77,960. The Trustees believe that such cash resources and
investment securities are sufficient to meet all anticipated liquidity
requirements.
PART II. OTHER INFORMATION
- 5 -
<Page>
ITEM 1. LEGAL PROCEEDINGS
The information contained under Legal Proceedings in the Trust's Annual Report
on Form 10-K for the year ended December 31, 2000 and Forms 10-Q for the
quarters ended March 31 and June 30, 2001 is incorporated by reference herein.
Except as set forth below, there have been no material developments in such
legal proceedings subsequent to the date of that information.
AmBase Corporation v. City Investing Company Liquidating Trust, et al. On May
23, 2001, the United States Tax Court ruled against the Internal Revenue Service
("I.R.S."), holding that City and therefore AmBase did not have an obligation to
pay tax on interest payments made to a Netherlands Antilles affiliate. The I.R.S
has determined not to appeal this decision. Accordingly, the AmBase claim that
the Trust is primarily liable for some $140 million of potential tax liability
(including accrued interest) is moot. Liability for legal expenses incurred by
AmBase in defense of the I.R.S. claim remains at issue. Having successfully
defended against a virtually identical claim by AmBase in the Delaware Chancery
Court, the Trust will vigorously defend against AmBase's claims in New York.
Pending resolution of possible claims by the United States Environmental
Protection Agency, see Note 7 to Financial Statements - Litigation and Other
Contingent Liabilities appearing in the Trust's Annual Report on Form 10-K for
the year ended December 31, 2000, and other third parties, see Note 9 to
Financial Statements - Litigation and Other Contingent Liabilities, the Trust is
unable to make any dividend payments or liquidation distributions.
ITEM 2. CHANGES IN SECURITIES
Trust Units of Beneficial Interest. On July 23, 2001, the Trustees amended the
Trust agreement to extend the existence of the Trust (and thereby the existence
of the Trust Units) until the earlier of (a) the complete distribution of the
Trust Estate or (b) September 25, 2002, unless an earlier termination is
required by the applicable laws of the State of Delaware or by the action of the
Beneficiaries as provided in Section 4.2 of the Trust Agreement or a later
termination is required by the Trustees pursuant to Section 6.2 (q) of the Trust
Agreement.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
The Registrant was not required to file a Current Report on Form 8-K during
the quarter ended September 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITY INVESTING COMPANY LIQUIDATING TRUST
By: /s/ Lester J. Mantell
------------------------------------
Lester J. Mantell, Trustee
Date: October 23, 2001
- 6 -