<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
to
FORM N-1A
File No. 811-5520
AMENDMENT TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
CHICAGO MILWAUKEE CORPORATION
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
547 W. Jackson Boulevard, Chicago, Illinois 60661
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 822-0400
--------------
Edwin Jacobson
President and Chief Executive Officer
Chicago Milwaukee Corporation
547 W. Jackson Boulevard, Chicago, Illinois 60661
with copies to:
Simeon Gold, Esq. Janet D. Olsen, Esq.
Weil, Gotshal & Manges, LLP Bell, Boyd & Lloyd
767 Fifth Avenue Three First National Plaza, Suite 3300
New York, New York 10153 Chicago, Illinois 60602
(Name and Address of Agents for Service)
<PAGE>
PART A
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INFORMATION REQUIRED IN PROSPECTUS OR REGISTRATION STATEMENT
1. Cover Page.
Not Applicable.
2. Synopsis.
Not Applicable.
3. Condensed Financial Information.
Not Applicable.
4. General Description of Registrant.
(a)(i) GENERAL. Chicago Milwaukee Corporation (the "Company") was
organized as a corporation under the laws of the State of Delaware
on June 24, 1971 and originally registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a closed-end,
non-diversified management investment company on March 23, 1988.
On May 12, 1993, at a special stockholders meeting (the "Special
Meeting"), the stockholders of the Company approved (i) the
conversion (the "Conversion") of the Company from a closed-end,
non-diversified management investment company to an open-end, non-
diversified management investment company and (ii) the change of
the state of the incorporation of the Company from Delaware to
Maryland by means of a merger of the Company with and into a
wholly-owned subsidiary of the Company. The Company operated as a
closed-end, non-diversified management investment company from
March 23, 1988 through July 1, 1993, the date upon which the
Conversion became effective. The Company changed its state of
incorporation to Maryland effective December 31, 1993.
On May 22, 1995, pursuant to Article SIXTH of the Company's
charter, the Company redeemed all of its outstanding shares of
common stock at the net asset value on that date of $133.92 per
share. The Company then ceased all operations other than the
winding up of its affairs. On October 30, 1995, the Company was
dissolved by action of the Maryland Department of Assessments and
Taxation. On March 22, 1996 the Company filed with the Securities
and Exchange Commission an application on Form N-8F for an order
declaring that the Company has ceased to be an investment company.
That application is pending at the date of filing this amendment.
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(ii) INVESTMENT OBJECTIVE AND POLICIES.
On May 8, 1995, in connection with the decision to redeem all of
the Company's outstanding common stock, the Company's board of
directors approved a change in the Company's investment objective
to achievement of a reasonable level of current income consistent
with the preservation of capital and maintenance of liquidity.
The Company's assets were managed in accordance with that objective
from that date through May 22, 1995, when all of the Company's
outstanding common stock was redeemed. Since the redemption of all
of the Company's outstanding common stock, the Company's remaining
assets (all of which are reserved for the payment of the Company's
remaining liabilities) have been held in cash and U.S. treasury
instruments.
Except for the investment restrictions described as fundamental
policies below, the Company's investment objective and policies
described herein are not fundamental policies and may be changed by
the Company's Board of Directors without stockholder approval.
As matters of fundamental policy, unless such policies are changed
by a vote of a majority (as defined in the 1940 Act) of the
Company's outstanding voting securities, the Company will not:
1. Issue senior securities (as defined in the 1940 Act) except
insofar as any transaction permitted in Restriction (3) below
might be considered to be the issuance of senior securities.
Section 18 of the 1940 Act prohibits a registered open-end
investment company from issuing or selling any senior security,
including preferred stock, unless the requirements set forth
therein are complied with.
2. Engage in short sales, purchase securities on margin or write
put and call options.
3. Borrow money, except that the Company may borrow money from
banks and other lending institutions in an amount not exceeding
10% of the value of its total assets in negotiated
transactions; provided that (i) the proceeds of each such
borrowing will be used for future equity or debt investments of
the nature described in Item 4(a)(i) above, share repurchases,
the payment s, working capital or for temporary or emergency
purposes, and (ii) after giving effect to such borrowing, the
Company's senior securities representing indebtedness (as
defined in the 1940 Act) will have an asset coverage of at
least 300% and all other applicable requirements of the 1940
Act, including Section 18 thereof, are met. Subject to such
limitations as may be specified in applicable margin
regulations of the Board of Governors of the Federal Reserve
System,
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amounts so borrowed by the Company may be secured by a pledge
or mortgage of the Company's assets.
4. Engage in the underwriting of securities except to the extent
that, in connection with the disposition of portfolio
securities, the Company may be deemed to be an underwriter for
purposes of applicable securities laws; provided, however, that
the Company may invest in securities which are not publicly
traded or which cannot be readily resold because of legal or
contractual restrictions if, regarding all such securities, not
more than 15% of the Company's net assets would be invested in
such securities.
5. Invest 25% or more of the value of its total assets in
securities of issuers the primary business of which is in one
particular industry, except that this restriction does not
apply to investments in obligations of the U.S. government or
its agencies, authorities or instrumentalities.
6. Purchase or sell real estate or interests in real estate except
to the extent such investments are deemed to be, or such sales
are deemed to involve, obligations of the U.S. government or
its agencies, authorities or instrumentalities.
7. Invest in commodities or commodity contracts, including futures
contracts in a contract market or other futures market.
8. Lend money to other persons, except through the purchase of
debt securities and loans of portfolio securities in a manner
consistent with the Company's investment objectives and
policies.
9. Change its subclassification from an open-end company to a
closed-end company; provided, however, that without such
stockholder approval, the Company may change its
subclassification from a non-diversified company to a
diversified company if deemed appropriate by the Board of
Directors to realize the Company's investment objectives.
Whenever any fundamental investment policy states a maximum
percentage of the Company's assets which may be invested, other
than the asset coverage requirement of 300% set forth in
Restriction (3) above, it is intended that if the percentage
limitation was adhered to at the time the investment was made, a
later change in percentage resulting from changing values will not
be considered a violation of such policy.
(b) OTHER PERMITTED INVESTMENTS.
The Company may invest in mortgage-backed securities and in other
equity and debt securities issued by one or more private or
governmental issuers of any type located anywhere in the world. The
Company did not invest in securities other
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than as described in (a), above, during the last fiscal year and
has no present intention of doing so. See Part B, Item 13 of this
Amendment to the Registration Statement.
(c) RISK FACTORS.
Obligations of the U.S. government are considered among the most
creditworthy of fixed income investments. The yields available from
these securities are generally lower than the yields available from
corporate debt securities. The values of U.S. government securities
(like those of fixed income securities generally) will change as
interest rates fluctuate and generally vary inversely with
prevailing interest rates.
5. Management of the Fund.
(a) The Company is managed by its Board of Directors and all powers
conferred by the State of Maryland and other applicable law are
exercised by or under authority of the Board.
(b) OFFITBANK, a New York banking organization organized under the New
York Banking Law, served as investment adviser to the Company until
May 22, 1995. The principal business address of OFFITBANK is 520
Madison Avenue, New York, New York 10022. The Company's investment
advisory agreement with OFFITBANK was terminated May 22, 1995, in
connection with the redemption of the Company's outstanding common
stock and the cessation of the Company's ordinary business
operations.
For the services rendered by OFFITBANK through May 22, 1995, the
Company paid an annual advisory fee equal to .10 of 1% per annum of
the value of the Company's investment portfolio, payable quarterly
in arrears based on the average month-end value of the portfolio
during such quarter. Payments by the Company to OFFITBANK with
respect to the period January 1, 1995 through May 22, 1995
aggregated $32,989.
Since May 22, 1995 the Company's remaining assets have been managed
by the Company's officers under the supervision of the Board of
Directors.
(c) Leon F. Fiorentino, Vice President - Finance, Treasurer and
Secretary of the Company; Vice President - Finance, Secretary and
Treasurer of Milwaukee Land Company, a closed-end investment
company.
(d) Norwest Bank Minnesota, N.A. ("Norwest Bank") serves as the
transfer agent, custodian, fund accountant and dividend disbursing
agent for the Company.
(e) The Company's expenses for the fiscal year ended December 31, 1995
were 4.39% of the Company's average net assets.
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(f) The Company did not pay any brokerage commissions during the three
fiscal years ended December 31, 1995.
5A. Management's Discussion of Fund Performance.
(a) Not Applicable.
6. Capital Stock and Other Securities.
(a) The authorized capital stock of the Company consists of 5,000,000
shares of Common Stock.
The holders of the Common Stock are entitled to receive, to the
extent permitted by law, dividends thereon if and when declared
payable by the Board of Directors. The holders of Common Stock are
entitled to one vote for each share held and are entitled to
cumulate votes in the election of directors. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, holders of the Common Stock are
entitled, after payment or provision for payment of the debts and
other liabilities of the Company, to receive all remaining assets
of the Company.
The terms of the Common Stock contain no preemptive rights,
conversion rights or sinking fund provisions.
Holders of Common Stock have the right to redeem their shares as
more fully described in Part A, Item 8 hereof. All shares of
Common Stock of the Company are subject to redemption and are
redeemable at the option of the Company. The Board of Directors by
resolution adopted May 8, 1995 authorized the Company to require
the redemption of all the outstanding shares of Common Stock upon
the sending of written notice thereof to each holder whose shares
are to be redeemed at the net asset value per share. All of the
Company's Common Stock was redeemed pursuant to that notice on May
22, 1995 at the net asset value on that date of $133.92 per share.
The Company has no Common Stock, or any other security,
outstanding.
(b) Not Applicable.
(c) Not Applicable.
(d) Not Applicable.
(e) All stockholder inquiries should be made to Secretary, Chicago
Milwaukee Corporation, 547 West Jackson Blvd., Chicago, Illinois
60661 (312) 294-0440.
(f) Prior to cessation of its operations on May 22, 1995, the Company
distributed to stockholders substantially all of its net investment
income and realized net capital
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gains on at least an annual basis. The Company had no automatic
dividend reinvestment program.
(g) Not Applicable.
7. Purchase of Securities Being Offered.
(a) Not Applicable.
8. Redemption or Repurchase.
(a) Not Applicable. The Company has no securities outstanding.
(b) Not Applicable. The Company has no securities outstanding.
(c) See the discussion of the Company's redemption of shares of Common
Stock contained in Part A, Item 4(a)(i) and Item 6(a) hereof.
(d) Not Applicable.
9. Pending Legal Proceedings.
The Company does not consider any pending legal proceeding to which it is a
party material. The Company has no principal underwriter or investment
adviser.
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PART B
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Item 10. Cover Page.
Not Applicable.
Item 11. Table of Contents.
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information and
History...................... 10
Investment Objective and
Policies..................... 10
Management of the Fund........ 14
Control Persons and
Principal Holders
of Securities................ 16
Investment Advisory and
Other Services............... 17
Page
----
Brokerage Allocation.......... 18
Capital Stock and Other
Securities................... 19
Purchase, Redemption and
Pricing of Shares........... 19
Tax Status.................... 19
Underwriters.................. 22
Performance Data.............. 22
Financial Statements.......... 23
</TABLE>
Item 12. General Information and History.
Not Applicable.
Item 13. Investment Objectives and Policies
(a) The Company's investment objective is to achieve a
reasonable level of current income consistent with the preservation
of capital and maintenance of liquidity. In accordance with this
objective, all of the Company's remaining assets are held in cash
and direct obligations of the U.S. government, such as U.S.
Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds
(generally maturities of greater than ten years). The Company also
may enter into "repurchase agreements" pertaining to U.S.
government securities with member banks of the Federal Reserve
System or "primary dealers" (as designated by the Federal Reserve
Bank of New York) in such securities although, at the present time,
the Company does not intend to enter into any such repurchase
agreements.
Obligations of the U.S. government, its agencies, authorities and
instrumentalities are considered among the most creditworthy of
fixed income investments. The yields available from these
securities are generally lower than the yields available from
corporate debt securities. The values of U.S. government
securities (like those of fixed income securities generally) will
change as interest rates fluctuate and generally vary inversely
with prevailing interest rates.
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Except for the investment restrictions described as fundamental
policies below, the Company's investment objective and policies
described herein are not fundamental policies and may be changed by
the Company's Board of Directors without stockholder approval.
(b) As matters of fundamental policy, unless such policies are changed
by a vote of a majority (as defined in the 1940 Act) of the
Company's outstanding voting securities, the Company will not:
1. Issue senior securities (as defined in the 1940 Act) except
insofar as any transaction permitted in restriction (3)
below might be considered to be the issuance of senior
securities. Section 18 of the 1940 Act prohibits a
registered open-end investment company from issuing or
selling any senior security, including preferred stock,
unless the requirements set forth therein are complied with.
2. Engage in short sales, purchase securities on margin or
write put and call options.
3. Borrow money, except that the Company may borrow money from
banks and other lending institutions in an amount not
exceeding 10% of the value of its total assets in negotiated
transactions; provided that (i) the proceeds of each such
borrowing will be used for future equity or debt investments
of the nature described in Item 4(a)(i) or Item 13 above,
share repurchases, the payment of dividends, working capital
or for temporary or emergency purposes, and (ii) after
giving effect to such borrowing, the Company's senior
securities representing indebtedness (as defined in the 1940
Act) will have an asset coverage of at least 300% and all
other applicable requirements of the 1940 Act, including
Section 18 thereof, are met. Subject to such limitations as
may be specified in applicable margin regulations of the
Board of Governors of the Federal Reserve System, amounts so
borrowed by the Company may be secured by a pledge or
mortgage of the Company's assets.
4. Engage in the underwriting of securities except to the
extent that, in connection with the disposition of portfolio
securities, the Company may be deemed to be an underwriter
for purposes of applicable securities laws; provided,
however, that the Company may invest in securities which are
not publicly traded or which cannot be readily resold
because of legal or contractual restrictions if, regarding
all such securities, not more than 15% of the Company's net
assets would be invested in such securities.
5. Invest 25% or more of the value of its total assets in
securities of issuers the primary business of which is in
one particular industry, except that this restriction does
not apply to investments in obligations of the U.S.
government or its agencies, authorities or
instrumentalities.
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6. Purchase or sell real estate or interests in real estate
except to the extent such investments are deemed to be, or
such sales are deemed to involve, obligations of the U.S.
government or its agencies, authorities or instrumentalities.
7. Invest in commodities or commodity contracts, including
futures contracts in a contract market or other futures
market.
8. Lend money to other persons, except through the purchase of
debt securities and loans of portfolio securities in a manner
consistent with the Company's investment objectives and
policies.
9. Change its subclassification from an open-end company to a
closed-end company; provided, however, that without such
stockholder approval, the Company may change its
subclassification from a non-diversified company to a
diversified company if deemed appropriate by the Board of
Directors to realize the Company's investment objectives.
Whenever any fundamental investment policy states a maximum
percentage of the Company's assets which may be invested, other
than the asset coverage requirement of 300% set forth in
Restriction (3) above, it is intended that if the percentage
limitation was adhered to at the time the investment was made, a
later change in percentage resulting from changing values will not
be considered a violation of such policy.
(c) Not Applicable.
(d) The Company's portfolio turnover rate for the fiscal year ended
December 31, 1994 was 79.47% . As a result of the Company's
liquidation of substantially all its portfolio securities in
connection with the redemption on May 22, 1995 of all of the
Company's outstanding Common Stock, the portfolio turnover rate for
the fiscal year ended December 31, 1995 is not meaningful.
Item 14. Management of the Fund - Directors, Officers and Advisory Board
Members.
(a) & (b) Set forth below are the names, ages at April 1, 1996,
positions held with the Company and principal occupations during
the past five years of the directors and officers of the Company.
There are no family relationships between any of the persons
listed. The Company has no advisory board. The business address of
the Company and its officers and directors is 547 West Jackson
Boulevard, Chicago, Illinois 60661.
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<TABLE>
<CAPTION>
POSITION(S) HELD WITH THE
COMPANY, PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE(i) DURING PAST 5 YEARS(ii)
- ------------------------ -----------------------------
<S> <C>
Lawrence S. Adelson, age 46 Vice President-General Counsel of the Company
(since November 1988); General Counsel of CMC Real
Estate Corporation, formerly the Company's
principal subsidiary (1985-1989).
Robert S. Davis, age 81 Director of the Company (since 1985); Chairman of
the audit committee of the Company; consultant
(for more than the past five years).
Leon F. Fiorentino, age 71 Vice President-Finance (since May 1981), Treasurer
(since May 1982) and Secretary (since May 1984) of
the Company.
Clarence G. Frame, age 77 Chairman of the Board of the Company (since June
(iii) 1985); Director of the Company (since 1980);
member of the executive and investment committees
of the Company; Chairman of the Board (1984-1989)
and Chief Executive Officer (1986-1989), Tosco
Corporation (oil refiner), Stamford, Connecticut.
Mr. Frame also serves as a director of
Independence One Mutual Funds, Voyageur Mutual
Funds and Tosco Corporation.
Edwin Jacobson, age 66 President and Chief Executive Officer and Director
(iii) of the Company (since June 1985); member of the
executive and investment committees of the
Company; Chairman of the executive committee
(since June 1992) and President and Chief
Executive Officer (since February 1994) of Avatar
Holdings Inc. (real estate, water and wastewater
utilities operations).
</TABLE>
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<TABLE>
<CAPTION>
POSITION(S) HELD WITH THE
COMPANY, PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE(i) DURING PAST 5 YEARS(ii)
- ------------------------ -----------------------------
<S> <C>
Ezra K. Zilkha, age 70 Director of the Company (since 1981); member of
the executive committee and chairman of the
investment committee of the Company; President
(since 1957), Zilkha & Sons, Inc. (investments),
New York, New York. Mr. Zilkha is also a director
of Cigna Corporation and Newhall Land and Farming
Company.
- -----------
</TABLE>
(i) The address of each person listed hereunder for purposes of this
Item is c/o Chicago Milwaukee Corporation, 547 W. Jackson Boulevard,
Chicago, Illinois 60661.
(ii) Messrs. Frame, Jacobson and Zilkha are members of the Company's
Investment Committee. The Investment Committee was established in
early 1986 to provide investment policies and guidelines to the
management of the Company. In addition, the Company has an Executive
Committee, comprised of Messrs. Frame, Jacobson and Zilkha, which,
subject to certain exceptions, is empowered to assume the power of
the Board of Directors when it is not in session, including the
functions of compensation review and board nominations.
(iii) Directors who are "interested persons" of the Company, as defined in
the 1940 Act, by virtue of their status as officers of the Company.
(c) Remuneration of Directors and Others.
The table below shows the aggregate compensation paid during 1995 by
the Company to its directors and to each executive officer of the
Company to whom the Company paid more than $60,000 during the year.
The Company is not part of a complex of investment companies. The
Company does not maintain any pension, profit-sharing, bonus or
similar plan for its officers and directors. The compensation shown
in the table includes all salary deferrals and bonus payments, if any,
for 1995.
<TABLE>
<CAPTION>
NAME AND POSITION AGGREGATE COMPENSATION FROM THE COMPANY
<S> <C>
Robert S. Davis $3,938
Director ======
Clarence G. Frame 6,250
Chairman of the Board and Director ======
</TABLE>
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<TABLE>
<CAPTION>
NAME AND POSITION AGGREGATE COMPENSATION FROM THE COMPANY
<S> <C>
Edwin Jacobson $10,000 (a)
President and Chief Executive =======
Officer and Director
Jack Nash 3.750
Director =======
Ezra K. Zilkha 3,375
Director =======
</TABLE>
(a) On June 17, 1985, as part of the employment agreement between the
Company and Mr. Jacobson (the "Agreement"), the Company granted to Mr.
Jacobson "phantom share units" at $143.75 per share in respect of
7,500 shares of the Company's Common Stock. By amendment to the
Agreement on January 19, 1988, the Company granted additional units to
Mr. Jacobson at $134.25 in respect of 7,500 shares. Such units
entitled Mr. Jacobson to payment on or before July 5, 1991 of the
excess, if any, of the value of such common shares on July 1, 1991
adjusted for dividend payments, stock dividends, etc. over the prices
indicated above. On June 26, 1991, in connection with an amendment to
the Agreement extending Mr. Jacobson's employment term to June 30,
1994, the measurement date was changed to July 1, 1994 and the payment
date was revised from on or before July 5, 1991 to on or before July
5, 1994. On June 29, 1994, in connection an amendment to the Agreement
further extending Mr. Jacobson's employment term to June 30, 1996, the
measurement date was changed to September 30, 1994 and the payment
date was changed to on or before October 5, 1994 with respect to the
7,500 phantom units granted on June 17, 1985. The measurement date and
payment date for the 7,500 phantom units granted on January 19, 1988
were changed to the last day of Mr. Jacobson's employment with the
Company pursuant to the Agreement, and on or before the fifth day
following Mr. Jacobson's last day of employment with the Company
pursuant to the Agreement, respectively. Payment of $498,225 with
respect to the phantom units granted on January 17, 1985 was made on
October 3, 1994. The remaining liability with respect to the phantom
units granted on January 19, 1988 of $536,775 was paid to Mr. Jacobson
on February 29, 1996.
The compensation received by Mr. Jacobson was in his capacity as
president and chief executive officer of the Company; directors who
are salaried employees of the Company receive no compensation from the
Company for their services as director.
Item 15. Control Persons and Principal Holders of Securities
(a)-(c) The Company has had no outstanding securities and no
security holders since May 22, 1995 when all of the
Company's outstanding Common Stock was redeemed.
Item 16. Investment Advisory and Other Services.
(a) Offit Associates Inc. served as an investment adviser to the
Company from April 10, 1987 until Offit Associates Inc. was
reorganized as OFFITBANK, a New York banking organization
organized under the New York Banking Law, on
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July 13, 1990. OFFITBANK served as an investment adviser to the
Company from July 13, 1990 through May 22, 1995. The principal
business address of OFFITBANK is 520 Madison Avenue, New York, New
York 10022.
OFFITBANK is engaged in the business of rendering investment advisory
services to individuals, pension and profit sharing plans, trusts,
estates and corporations. Morris W. Offit, the Chairman and President
of OFFITBANK, owns approximately 29.0% of OFFITBANK's outstanding
voting securities and, therefore, solely for the purposes of this Item
16, may be deemed to "control" OFFITBANK (as such term is defined for
purposes of this Item).
For the services rendered by OFFITBANK, the Company paid through
August 10, 1993 an annual advisory fee equal to .05 of 1% per annum of
the value of the Company's investment portfolio. The annual fee was
payable quarterly in advance based upon the value of the portfolio at
the beginning of the quarter. From August 11, 1994 through May 22,
1995, the advisory fee was increased to .10 of 1% per annum of the
value of the Company's investment portfolio, payable quarterly in
arrears based on the average month-end value of the portfolio during
such quarter.
Payments by the Company to OFFITBANK (including payments to
OFFITBANK's predecessor, Offit Associates, Inc.) with respect to the
last three fiscal years ended December 31, 1995 was approximately
$32,989, $46,476 and $108,000 respectively.
(b) Not Applicable.
(c) Not Applicable.
(d) Not Applicable.
(e) Not Applicable.
(f) Not Applicable.
(g) Not Applicable.
(h) The Company's custodian is Norwest Bank Minnesota, N.A. ("Norwest").
Norwest also serves as the Company's transfer agent, stock registrar,
dividend distributing agent and redemption agent. Norwest's principal
business address is 733 Marquette Avenue, Fifth Floor, Minneapolis,
Minnesota 55479-0040.
The Company's independent auditors are Ernst & Young LLP ("Ernst &
Young"), 233 S. Wacker Drive, Chicago, Illinois 60606. Ernst &
Young's responsibilities include auditing and reporting on the
Company's annual financial statements, reviewing certain regulatory
reports and performing other professional accounting and auditing
services.
(i) Not Applicable.
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Item 17. Brokerage Allocation.
(a) The Company did not pay any brokerage commissions during the three
fiscal years ended December 31, 1995.
(b) Not Applicable.
(c) The Company's seeks to execute trades at the most favorable security
prices through responsible brokers and dealers. In selecting brokers
and dealers to execute transactions and evaluating them, consideration
is given to such factors as the price of the security, the size and
difficulty of the order, the reliability, integrity, financial
condition and general execution and operational capabilities of
competitive brokers and dealers, their expertise in particular markets
and research services provided by them.
The Company may pay a broker or dealer a commission in excess of that
which another broker or dealer might have charged for effecting the
same transaction in recognition of the value of brokerage services
provided by the broker or dealer.
(d) Not Applicable.
(e) Not Applicable.
Item 18. Capital Stock and Other Securities.
Not Applicable.
Item 19. Purchase, Redemption and Pricing of Securities Being Offered.
Not Applicable.
Item 20. Tax Status.
The Company intends to maintain its qualification as a regulated
investment company ("RIC") in each year under Section 851, et seq., of
the Internal Revenue Code of 1986, as amended (the "Code").
As a RIC, the Company will not be subject to federal income tax on its
net investment income and net realized capital gains which are
distributed to its stockholders. The Company intends to distribute
substantially all of such income to its stockholders.
Dividends distributed by the Company will constitute ordinary income
to its stockholders to the extent derived from ordinary income and
short-term capital gain. Any long-term capital gain dividends
distributed by the Company will constitute long-term capital gain
income to the Company's stockholders, regardless of how long the
stockholder has held the Company's stock. Generally, a stockholder's
gain or loss on a sale or redemption of Company shares will be long-
term capital gain or loss if the shares have been held for more than
one year
15
<PAGE>
and short-term gain or loss if the shares are held for one year or
less. Dividends and distributions paid by the Company generally do not
qualify for a dividends received deduction for corporate stockholders
for federal income tax purposes, but corporate stockholders may be
eligible for the 70 percent dividend received deduction for the
portion of the Company's distributions attributable to eligible
dividends received by the Company.
In general, the Company may be liable for a 4% excise tax on the
portion of its ordinary income for a calendar year, and its capital
gain net income for the twelve-month period ending October 31, that it
does not actually distribute by December 31 of such year.
Dividends distributed by the Company to non-U.S. holders of its Common
Stock may be subject to U.S. withholding tax at a rate of 30%, subject
to reduction by applicable tax treaties.
The Company will provide its stockholders annually with a written
notice designating the amounts of any ordinary income dividends or
capital gain distributions. If the Company pays a dividend in January
which was declared in the previous October, November or December to
stockholders of record on a specified date in one of such months, then
such dividend will be treated for tax purposes as being paid by the
Company and received by its stockholders on December 31 of the year in
which such dividend was declared.
Dividends and capital gain distributions also may be subject to state
and local taxes. Certain states exempt from state income taxation
dividends which are paid by RICs which are derived from interest on
U.S. government obligations. State law varies as to whether dividend
income attributable to U.S. government obligations is exempt from
state income tax.
If the Company fails to maintain its qualification as a RIC for any
given taxable year, the Company will not be entitled to a federal
income tax deduction for dividends distributed, and amounts
distributed as dividends, therefore, will be subject to federal income
tax at both the corporate level (subject to net operating loss and
investment credit carryforwards) and the stockholder level.
The Tax Reform Act of 1986 included a provision which limits the
deductibility of certain individual itemized deductions to that amount
which exceeds 2% of the taxpayer's adjusted gross income. In enacting
this provision, Congress directed the Internal Revenue Service (the
"IRS") to issue regulations that would prohibit the indirect deduction
through a pass-through entity of amounts which an individual could not
otherwise deduct if incurred directly.
Temporary Regulations were issued in March 1988, addressing Congress'
directive. These regulations apply to non-publicly-offered RICs as
well as other pass-through entities and give guidance on how the
holder of an interest in such a pass-through entity is required to
separately take into account as an item of both income and expense an
amount equal to the holder's allocable share of the
16
<PAGE>
expenses in question. It is incumbent on the entity to advise its
investors of the amounts to be included in income as additional
dividends and as itemized deductions subject to the 2% limitation.
The Temporary Regulations do not apply to publicly-offered RICS. If
the Company is classified as a publicly-offered RIC, the Company and
its stockholders will not be subject to the provisions outlined above
concerning the deductibility of certain expenses. To be considered
publicly-offered, a RIC must be (i) continuously offered pursuant to a
public offering, (ii) regularly traded on an established securities
market or (iii) held by or for no fewer than 500 persons at all times
during the taxable year.
At December 31, 1995, the Company had a capital loss carryover of
approximately $2.9 million for federal income tax purposes which can
be used to offset capital gains in future years. The capital loss
carryover expires in 2002 and 2003. At December 31, 1995, the Company
also had the following tax attributes, none of which will be used by
the Company during any period for which the Company is qualified as a
RIC: estimated net operating loss carryforward of approximately $4.2
million, expiring in 1999; estimated aggregate investment tax credit
carryforward of approximately $2.7 million, expiring from 1996 through
2000; and estimated alternative minimum tax credit carryforwards of
approximately $2.3 million.
On May 22, 1995, the Company redeemed all of its outstanding shares of
common stock and ceased all operations other than winding up of its
affairs. The Company retained certain assets all of which are reserved
for the payment of the Company's remaining liabilities. Any assets
remaining after satisfaction of all of the Company's liabilities will
be distributed to the Company's shareholders as additional redemption
proceeds. Such distribution will be taxable to a shareholder as either
long term or short term capital gain income (assuming that the
shareholder held the Company's common stock as a capital asset)
depending upon the shareholder's holding period.
Under the Code, a stockholder may be subject, under certain
circumstances, to "backup withholding" at a 31% rate on reportable
dividends, capital gains distributions and redemption payments. This
withholding generally applies only if the holder (i) fails to furnish
its social security or other taxpayer identification number ("TIN")
within a reasonable time after the request therefor, (ii) furnishes an
incorrect TIN, (iii) fails to report properly interest or dividends,
or (iv) fails, under certain circumstances, to provide a certified
statement, signed under penalty or perjury, that the TIN provided is
its correct number and that it is not subject to backup withholding.
Any amount withheld from a payment to a holder under backup
withholding rules is allowable as a credit against such holder's
federal income tax liability, provided that the required information
is furnished to the IRS. Corporations and certain other entities
described in the Code and Treasury Regulations are exempt from such
withholding if their exempt status is properly established.
17
<PAGE>
Item 21. Underwriters.
Not Applicable.
Item 22. Performance Data.
Not Applicable.
Item 23. Financial Statements.
The Company's 1995 annual report to shareholders contains the
financial statements listed below, all of which, but no other part of
the annual report, are incorporated herein by reference.
Statement of Assets and Liabilities at December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Schedule of Investments at December 31, 1995
Notes to Financial Statements
Report of Independent Auditors dated February 20, 1996
Note: The following schedules have been omitted for the following reasons:
Schedules I and III - The required information is presented in
the schedule of investments at December 31, 1995.
Schedules II, IV and V - The required information is not
present.
18
<PAGE>
CHICAGO
MILWAUKEE
CORPORATION
- ------------------------------------------------------------------------------
1995 ANNUAL REPORT
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Chicago Milwaukee Corporation
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Chicago Milwaukee Corporation as of
December 31, 1995, the related statement of operations for the year then ended,
and the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the three years in the
period then ended. These financial statements and the financial highlights are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the two years in the period ended
December 31, 1992 were audited by auditors whose report dated February 19, 1993,
expressed an unqualified opinion on the financial statements and the financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the investment owned as of
December 31, 1995 by correspondence with the custodian. 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 discussed in Note 1 to the financial statements the Board of the Company
approved a plan for liquidation and redeemed all outstanding shares of the
Company's common stock.
In our opinion, the financial statements and fianancial highlights referred
to above present fairly, in all material respects, the financial position of
Chicago Milwaukee Corporation at December 31, 1995, the results of its
operations for the year then ended, and the changes in its net assets for each
of the two years in the period then ended and financial highlights for each of
the three years in the period then ended, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Chicago, Illinois
February 20, 1996
<PAGE>
CHICAGO MILWAUKEE CORPORATION
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investment, at value (cost $2,061,098)............................ $2,061,098
Cash.............................................................. 115,439
----------
Total Assets................................................... 2,176,537
LIABILITIES
Estimated costs through date of complete liquidation.............. 2,176,537
----------
Total Liabilities.............................................. 2,176,537
NET ASSETS........................................................ $ ---
==========
COMMON SHARES OUTSTANDING......................................... ---
==========
NET ASSET VALUE PER COMMON SHARE.................................. $ ---
==========
</TABLE>
See accompanying Notes to Financial Statements
2
<PAGE>
CHICAGO MILWAUKEE CORPORATION
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
Investment Income:
Interest.............................................. $ 915,448
Expenses:
Compensation and benefits............................. 180,038
Directors fees and expenses........................... 7,570
Professional fees..................................... 420,200
Advisory fees......................................... 32,989
Custodian fees........................................ (4,363)
Insurance............................................. 56,163
Fund termination expenses............................. 1,752,080
Other general and administrative expenses............. 34,843
---------
Total Expenses...................................... 2,479,520
-----------
Net Investment Loss................................. (1,564,072)
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on sale of investments.............. (95,674)
Net change in unrealized depreciation on investments.. 370,057
---------
Net Realized and Unrealized Gain on Investments..... 274,383
-----------
Net Decrease in Net Assets.......................... $(1,289,689)
===========
</TABLE>
See accompanying Notes to Financial Statements
3
<PAGE>
CHICAGO MILWAUKEE CORPORATION
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Operations:
Net investment (loss) income.......................... $ (1,564,072) $ 4,928,252
Net realized loss on sales of investments............. (95,674) (2,848,349)
Net change in unrealized depreciation on investments.. 370,057 (248,406)
------------ ------------
Net increase (decrease) in Net Assets Resulting from
Operations............................................ (1,289,689) 1,831,497
------------ ------------
Distributions to Stockholders:
From Net Investment Income............................. (734,142) (2,438,749)
From Realized Gains on Investments..................... --- (11,651)
Liquidating Distribution............................... (35,867,614) ---
------------ ------------
Total Distributions to Stockholders................ (36,601,756) (2,450,400)
------------ ------------
Capital Share Transactions:
Redemptions............................................ (11,205,327) (56,166,685)
------------ ------------
Total Decrease in Net Assets.............................. (49,096,772) (56,785,588)
Net Assets at Beginning of Year........................... 49,096,772 105,882,360
------------ ------------
Net Asset at End of Year (including undistributed
net investment income of $0 at December 31, 1995
and $ 826,223 at December 31, 1994)....................... $ --- $ 49,096,772
=========== ============
</TABLE>
See accompanying Notes to Financial Statements
4
<PAGE>
CHICAGO MILWAUKEE CORPORATION
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
FIXED INCOME SECURITIES Amount Value
------ -----
<S> <C> <C>
US Treasury Obligations
- -----------------------
U. S. Treasury Bill, due 2/15/96 (cost $2,061,098).. $2,075,000 $ 2,061,098
OTHER ASSETS AND LIABILITIES, NET................... (2,061,098)
-----------
NET ASSETS.......................................... $ ---
===========
</TABLE>
See accompanying Notes to Financial Statements
5
<PAGE>
CHICAGO MILWAUKEE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1. PLAN OF LIQUIDATION
On May 8, 1995, the Board of Directors of the Company adopted a plan of complete
liquidation of the Company. Pursuant to the plan of liquidation and the
Company's Articles of Incorporation, the Company redeemed all outstanding shares
of its common stock held by stockholders of record at the close of business on
May 22, 1995 (Liquidating Distribution Date), at a redemption price of $133.92
per share, which was the net asset value per share at the close of business on
such date.
The Company will seek to terminate its registration as an investment company.
Any assets of the Company available for distribution pursuant to the plan of
complete liquidation, after satisfaction of the Company's liabilities and
expenses, will subsequently be distributed to the stockholders who received the
initial liquidating distribution payment.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Estimated costs through date of complete liquidation:
- -----------------------------------------------------
As a result of the Company's adoption of its plan of complete liquidation, the
Company has established a liability which is presented at estimated final
settlement amounts, including estimated costs associated with carrying out the
liquidation. Preparation of the financial statements requires significant
assumptions by management, including assumptions regarding the amounts that
creditors would agree to accept in settlement of obligations due them, the
estimate of liquidation costs to be incurred and the resolution of contingent
liabilities resulting from the liquidation. There may be differences between the
assumptions and the actual results because events and circumstances frequently
do not occur as expected. Those differences, if any, could result in a change in
the net assets recorded in the statement of net assets as of December 31, 1995.
Separate reporting:
- ------------------
The financial statements reflect the activities of Chicago Milwaukee Corporation
(the "Company"). Previous Chicago Milwaukee Corporation annual reports through
December 31, 1992 included the activities of Milwaukee Land Company ("MLC") on a
consolidated basis. See Note 4.
Security valuation:
- ------------------
Investments are stated at "value." Fixed-income securities are valued at the
most recent bid quotation. U.S. Treasury bills are valued at amortized cost,
which approximates market value.
Investment transactions and investment income:
- ---------------------------------------------
Security transactions are accounted for on the trade date (the date the order to
buy or sell is executed). Realized gains and losses on investment transactions
are reported on an identified cost basis. Interest income is recorded on the
accrual basis and includes amortization of premium and discount on securities.
6
<PAGE>
CHICAGO MILWAUKEE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Common shares valuation:
- -----------------------
Prior to the Liquidating Distribution Date shares of Chicago Milwaukee
Corporation common shares were redeemed by stockholders on a continuous basis at
the net asset value per share. On each day the New York Stock Exchange
(the"Exchange") was open for trading, the net asset value per share was
determined as of the earlier of 3:00 p.m. Chicago time or the close of the
Exchange by dividing the total value of the Company's investments and other
assets, less liabilities, by the number of common shares outstanding.
In accordance with the plan of liquidation, all issued and outstanding common
stock at the Liquidating Distribution Date were redeemed by stockholders at the
net asset value at that date (Note 1).
Federal income taxes:
- --------------------
Beginning with 1991, the Company elected to be taxed as a "regulated investment
company" for Federal income tax purposes. The Company has complied with the
special provisions of the Internal Revenue Code applicable to investment
companies and, therefore, no federal income tax provision is required.
Dividends and distributions to stockholders:
- -------------------------------------------
Dividends and distributions payable to the Company's stockholders are recorded
by the Company on the ex-dividend date.
NOTE 3. INTERESTS IN PARTNERSHIPS AND RELATED TRANSACTIONS
At the close of business on June 27, 1990, the Company and MLC transferred to
CMC Heartland Partners ("CMC"), at the direction of Heartland Partners, L.P.
("Heartland"), substantially all of their respective real estate properties and
certain miscellaneous assets and liabilities related to these properties.
In connection with the real estate transfer, Heartland and CMC have assumed
primary responsibility and liability for the resolution and satisfaction of most
of the liabilities for (i)claims remaining under the plan of reorganization of
the predecessor of CMC Real Estate Corporation, formerly a wholly owned
subsidiary of the Company, and previously named the Chicago, Milwaukee, St paul
and Pacific Railroad Company (the "Railroad"), (ii)certain other contingent
liabilities with respect to the properties transferred to CMC arising after the
consummation of such plan, and (iii)the costs and expenses incurred in resolving
such plan and other contingent liabilities (collectively, the "Plan
Liabilities"). The Company was required to contribute to Heartland, over time,
cash in the amount of $18.1 million ("Deferred Capital Contribution"), plus
interest, for settlement of the Plan Liabilities. In consideration of such
commitment, Heartland issued to the Company a Class B limited partnership
interest (the "Class B Interest"). On August 28, 1990 and February 15, 1991,
pursuant to an authorization of the Board of Directors of the Company on May 7,
1990, the Company made additional capital contributions to Heartland of
approximately $3. 6 million in the aggregate, representing an increase in the
Company's Class B Interest in Heartland. In general, the Class B Interest
entitles the holder to .5% of Heartland's available cash for distribution and
allocations of taxable income and loss. In addition, items of deduction, loss,
credit and expense attributable to the satisfaction of Plan Liabilities are
specially allocated 99% to the holder of the Class B Interest and 1% to MLC as
the general partner until the aggregate amount of all such items allocated to
the Class B Interest equals the aggregate capital contribution with respect to
the Class B Interest. If the aggregate amount of such items specially allocated
to the holder of the Class B Interest is less than the amounts contributed by
such holder to Heartland, such excess will be reflected in the capital account
of the Class B Interest. The Company paid interest on the undrawn balance of the
Deferred Capital Contribution at the average one year U.S. Treasury bill rate as
in effect from time to time, payable monthly. On June 30, 1993 the Company paid
the $7.9 million remaining outstanding balance of the $18.1 million Deferred
Capital Contribution and related accrued interest.
7
<PAGE>
CHICAGO MILWAUKEE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
The Class B Interest was transferred to MLC on June 30, 1993 in a transaction
related to the Company's conversion to an open-end management investment
company. (See Note 4)
Pursuant to a management agreement, CMC was required to pay to the Company an
annual management fee in the amount of approximately $425,006. In the discretion
of Heartland, the management fee may be accrued and not paid for up to 5 full
years after the real estate transfer. Effective July 1, 1993 the Company
transferred its rights and obligations under the management agreement to MLC.
CMC paid the Company the $1,272,657, representing accrued management fee due and
owing to the Company under the management agreement through the date of payment
and $234,418 in reimbursement of Heartland's organization expenses.
For the year ended December 31, 1995, the Company paid CMC Heartland
approximately $20,000 for staff salary and operating expense allocations.
Included in estimated costs through the date of complete liquidation are amounts
reimbursable to CMC Heartland of $23,689, for fees and expenses.
NOTE 4. CONVERSION TO AN OPEN-END MANAGEMENT INVESTMENT COMPANY
On May 12, 1993, the Company's shareholders approved the conversion (the
"Conversion) of the Company from a closed-end management investment company to
an open-end management investment company under the Investment Company Act of
1940, as amended. The Conversion was effected on June 30, 1993.
As part of the Conversion, the Company redeemed its outstanding preferred stock,
sold its waste water treatment plant to Heartland for its fair market value, and
paid Heartland the balance of the Deferred Capital Contribution. In addition,
the Company transferred to MLC, as a capital contribution, the Company's rights
and obligations pursuant to the 1990 Management Agreement with Heartland, its
Class B Interest in Heartland, and all of its remaining illiquid assets and
certain of its contingent liabilities.
After the close of business on June 30, 1993, the Company distributed to its
shareholders, on a pro-rata basis and without consideration, all of the shares
of common stock of MLC, at the rate of one share of MLC for each share of the
Company's common stock that was held as of June 18, 1993, the record date for
the distribution.
The Company changed its state of incorporation from Delaware to Maryland on
December 31, 1993.
NOTE 5. CAPITAL SHARE TRANSACTIONS
On May 9, 1995, the Company paid dividends of ordinary income of $2.73 per share
to holders of record at the close of business on May 8, 1995.
On May 23, 1995, the Company paid a liquidating distribution of $133.92 per
share to holders of record on May 22, 1995 (Note 1).
8
<PAGE>
CHICAGO MILWAUKEE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
The following table summarizes the redemption activity in common shares and
dollars of the Company:
<TABLE>
<CAPTION>
SHARES AMOUNT
------ ------
<S> <C> <C>
Year Ended December 31, 1995
Redeemed................................ 79,417 $ 11,205,327
----------------------------
Year Ended December 31, 1994
Redeemed................................ 385,475 $ 56,166,685
</TABLE>
NOTE 6. LEGAL PROCEEDINGS AND CONTINGENCIES
In connection with the separation of its real estate properties from its
investment activities in June 1990, the Company transferred to Heartland and CMC
(collectively, the "Real Estate Partnerships"), and the Real Estate Partnerships
jointly and severally agreed to assume and become primarily responsible for,
certain fixed and contingent obligations for which the Company was, or in the
future might become, liable. These obligations were comprised of most of the
liabilities for claims remaining under the plan of reorganization of the
Railroad, and certain liabilities relating to the real estate properties
transferred by the Company and MLC to the Real Estate Partnerships (such
liabilities being hereinafter referred to as the "Heartland Assumed
Liabilities"). At the time of the real estate separation, the Company estimated
the Heartland Assumed Liabilities to be in the amount of approximately $12.1
million.
In consideration of the Real Estate Partrnership assumption of the Heartland
Assumed Liabilities and the issuance to the Company of the Class B Interest, the
Company contributed to Heartland cash in the aggregate amount of $18.1 million,
plus interest. Heartland had available reserves of approximately $2.5 million as
of December 31 ,1995 which are estimates of future costs that may be incurred in
respect of the Heartland Assumed Liabilities. Actual payments in respect of the
Heartland Assumed Liabilities may exceed such amount.
Included in the Heartland Assumed Liablities are knowm environmental liabilities
associated with certain of the real estate properties transferred to the Real
Estate Partnerships arising out of the activities of the Railroad or certain of
its lessees or other third parties. Further environmental obligations as yet
unknown in respect of these properties may become due and owing in the future. A
majority of the known environmental matters stem from the use of petroleum
products, such as motor oil and diesel fuel, in the operation of a railroad. The
Company and/or the Real Estate Partnerships have been notified by governmental
agencies of potential liabilities inconnection with certain of these real estate
properties. Decscriptions of the known material environmental matters are
included in the reports filed by Heartland with the Securities and Exchange
Commission pursuant to the provisions of the Securities Exchange Act of 1934, as
amended.
The Company did not seek any releases from third party obligees in respect of
the Heartland Assumed Liabilities and, accordingly, the Company remains liable
to such obligees for any amounts that may in the future become due and owing in
respect of such liabilities. The Real Estate Partnerships have agreed to
indemnify and hold the Company harmless from any and all damages, costs or
expenses that the Company may incur in connection with the Heartland Assumed
Liabilities. Further, as the general partner of the Real Estate Partnerships,
MLC would be liable to the Company in respect of any such amounts to the extent
that the Real Estate Partnerships do not perform and satisfy their respective
indemnification obligations.
In connection with the Conversion and the transaction related thereto, the
Company transferred to MLC, and MLC agreed to become primarily liable for, any
obligation for which the Company is or may become liable (the "MLC Assumed
Liablilities") arising out of any matters existing on or occurring prior to the
effective time of the Conversion other than (i) the Heartland Assumed
Liabilities, (ii) liabilities directly related to the Company's business of
investing and managing its investment securities, (iii) certain litigation then
pending against the Company and subsequently dismissed, or (iv) any liabilities
relating to federal, state, local or foreign income or other tax matters.
9
<PAGE>
CHICAGO MILWAUKEE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
As is the case with the Heartland Assumed Liabilities, the Company has not and
will not seek any release from third party obligees in respect of the MLC
Assumed Liabilities and, accordingly, the Company remains liable to such
obligees for any amounts that may in the future become due and owing in respect
of such liabilities. Prior to the effective time of the Conversion, the Company
and MLC entered into an agreement pursuant to which MLC agreed to indemnify and
hold the Company harmless from any and all damages, costs or expenses that the
Company may incur in connection with the MLC Assumed Liabilities.
Based on its knowledge of the Heartland Assumed Liabilities and the MLC Assumed
Liabilities, and the current financial condition of Heartland, CMC and MLC, and
in consideration of all other relevant factors, the Company believes that
Heartland, CMC and MLC together will have sufficient assets to fully satisfy any
future claims that may be made in respect of the Heartland Assumed Liabilities
and the MLC Assumed Liabilities and that the Company will not be required to
expend any amounts in connection therewith. Accordingly, the Company did not
establish any reserves in respect of these liabilities.
NOTE 7. DIRECTORS AND OFFICERS COMPENSATION
On June 17, 1985, as part of the employment agreement between the Company and
its chief executive officer (the "Agreement"), the Company granted to its chief
executive officer, "phantom share units" at $143.75 per share in respect of
7,500 shares. By amendment to the Agreement, on January 19, 1988, the Company
granted additional units to its chief executive officer at $134.25 in respect of
7,500 shares. Such units entitled the officer to payment on or before July 5,
1991 of the excess, if any, of the value of such common shares on July 1, 1991
adjusted for dividend payments, stock dividends, etc., over the prices indicated
above. On June 26, 1991, in connection with an amendment to the Agreement
extending the officer's employment term to June 30, 1994, the measurement date
was changed to July 1, 1994 and the payment date was revised from on or before
July 5, 1991 to on or before July 5, 1994. On June 29, 1994, in connection with
an amendment to the Agreement further extending the officer's employment term to
June 30, 1996, the measurement date was changed to September 30, 1994 and the
payment date was changed to on or before October 5, 1994 with respect to the
7,500 phantom units granted on June 17, 1985. The measurement date and payment
date for the 7,500 phantom units granted on January 19, 1988 were changed to the
last day of the officer's employment with the Company, pursuant to the
Agreement, and on or before the fifth day following the officer's last day of
employment with the Company, pursuant to the Agreement, respectively.
The Company included changes in the adjusted net asset value subsequent to the
measurement date as a component of compensation expense in the statement of
operations. During 1995, compensation expense included $12,550 due to an
increase in the adjusted net asset value relating to the phantom share units.
Payment of $498,225 with respect to the phantom units granted on January 17,
1985 was made on October 3, 1994. The remaining liability with respect to the
phantom units granted on January 19, 1988 was $536,775 at December 31, 1995.
Included in the estimated costs through date of complete liquidation is an
accrual for $713,345 relating to a former officer of the Railroad.
NOTE 8. NET ASSETS
As a result of the Company's adoption of its plan of complete liquidation and
its liquidating distribution in May, 1995, there are no net assets at December
31, 1995.
At the Liquidating Distribution Date undistributed net investment losses of
$1,471,991 and undistributed net realized losses of $2,944,023 were reclassified
to Paid-in capital as there is no future benefit of these amounts for tax
purposes.
10
<PAGE>
CHICAGO MILWAUKEE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 9. INVESTMENT SERVICES
The Company paid advisory fees in the amount of $32,989, for investment advisory
services during 1995 under a revised agreement with OFFITBANK, a nonaffiliated
investment advisor. The Company terminated such agreement in connection with its
plan of complete liquidation and the redemption of all outstanding shares of its
common stock.
NOTE 10. INVESTMENT TRANSACTIONS
Investment transactions for the year ended December 31, 1995, excluding any
money market investments, are as follows:
<TABLE>
<S> <C>
Purchases...................... $18,078,040
Proceeds from Sales............ $66,906,988
</TABLE>
The cost of investments at December 31, 1995 for federal income tax purposes
was $2,061,098.
11
<PAGE>
CHICAGO MILWAUKEE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 11. FINANCIAL HIGHLIGHTS
The table below reflects per share financial highlights and ratios for a
share of common stock outstanding during the years presented.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE: (d)
Net Asset Value, Beginning
of period.......................... $141.39 $ 144.51 $ 149.35 $ 151.49 $ 145.91
Net Investment Income (a)........... (6.27)(e) 14.19 8.11 8.43 13.24
Net Gains or Losses on Securities
both realized and unrealized (b)... 1.53 (10.71) .51 1.39 5.22
------- ------------ ------------ ------------ ------------
Total From Investment
Operations......................... (4.74) 3.48 8.62 9.82 18.46
Less Distributions:
To Preferred Shareholders......... --- --- .10(c) .54 .78
To Common Shareholders............ 2.73 (c) 6.58(c) 2.93(c) 7.26 11.11
Distributions (from capital gains)
To Preferred Shareholders......... --- --- .35(c) .30 .06
To Common Shareholders............ --- .02(c) 10.08(c) 3.86 .93
Liquidating distribution to
Common Shareholders................ 133.92 (c) --- --- --- ---
------- ------------ ------------ ------------ ------------
Total Distributions................. 136.65 6.60 13.46 11.96 12.88
------- ------------ ------------ ------------ ------------
Net Asset Value, End of
Period............................. $ --- $141.39 $ 144.51 $ 149.35 $ 151.49
======== ============ ============ ============ ============
Total Investment Return:............ (3.35)% 2.41% 10.59% 16.07% 17.94%
RATIO/SUPPLEMENTAL DATA
Net Assets, End of Period........... $ --- $ 49,096,772 $105,882,360 $277,468,595 $281,038,250
Ratio of Expenses to Average
Net Assets........................ 4.39%(f) 1.09% 1.30% 1.24% 1.46%
Ratio of Net Investment Income to
Average Net Assets................ 1.13%(f) 5.88% 3.33% 4.90% 6.03%
Portfolio Turnover Rate............. (g) 79.47% 207.01% 76.03% 172.77%
</TABLE>
(a) Unless otherwise noted, per share figures are based on the number of
common shares outstanding at the end of the year.
(b) Includes net effect of repurchases and redemptions of common and
preferred stock at market value.
(c) Per share figures for 1993,1994 and 1995 distributions are based on the
number of common shares outstanding at the date of distribution.
(d) Years prior to 1993 have not been adjusted to reflect the transaction
described in Note 4 to Financial Statements.
(e) Based on 267,827, the number of common shares outstanding prior to May
22, 1995, liquidation.
(f) Excludes fund termination expense of $1,752,080 which represents
estimated remaining expenses to be incurred through final liquidation. In
addition, ratios have been determined on an annualized basis. Inclusion of
fund termination expenses would result in a ratio of expenses to
average net assets of 5.25% and a ratio of net investment loss to average
net assets of (3.31)%.
(g) Not meaningful.
12
<PAGE>
CHICAGO MILWAUKEE CORPORATION
<TABLE>
<S> <C>
BOARD OF DIRECTORS CHICAGO MILWAUKEE CORPORATION
ROBERT S. DAVIS An open-end mutual fund NASDAQ
Consultant symbol CHGMX
CLARENCE G. FRAME 547 W. Jackson Boulevard
Chairman of the Board Chicago, Illinois 60661
Chicago Milwaukee Corporation (312) 822-0400
EDWIN JACOBSON Investment Adviser
President and Chief Executive Officer OFFITBANK
Chicago Milwaukee Corporation 520 Madison Avenue
New York, New York 10022
EZRA K. ZILKHA
President, Zilkha & Sons, Inc. Custodian,
Transfer Agent,
OFFICERS Stock Registrar,
Dividend Disbursing Agent,
CLARENCE G. FRAME and Redemption Agent
Chairman of the Board Norwest Bank Minnesota, N.A.
Mutual Fund Services - Transfer Agent
EDWIN JACOBSON MS 0040
President and Chief Executive Officer 733 Marquette Avenue, Fifth Floor
Minneapolis, Minnesota 55479-0040
LEON F. FIORENTINO (800) 767-0096
Vice President-Fiance,
Secretary and Treasurer Independent Auditors
Ernst & Young, LLP
LAWRENCE S. ADELSON 233 S. Wacker Drive
Vice President and Chicago, Illinois 60606
General Counsel and
Assistant Secretary
DAVID L. KOZISEK
Assistant Treasurer
</TABLE>
13
<PAGE>
PART C
------
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a)(1) Financial statements included in Part A of this Amendment: None.
(2) Financial statements included in Part B of this Amendment: The
following financial statements are incorporated by reference to the
following portions of the Company's 1995 annual report to
shareholders; a copy of the annual report is attached to this
Amendment, but, except for those portions incorporated by reference,
is furnished for the information of the Commission and is not deemed
to be filed as part of this Amendment:
Statement of Assets and Liabilities at December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Schedule of Investments at December 31, 1995
Notes to Financial Statements
Report of Independent Public Auditors dated February 20, 1996
Note: The following schedules have been omitted for the following reasons:
Schedules I and III - The required information is presented in
the schedule of investments at December 31, 1995.
Schedules II, IV and V - The required information is not
present.
(b) Exhibits.
The following documents are filed as Exhibits to this Amendment to the
Registration Statement:
(1) Articles of Incorporation of the Company and Articles of Merger of
Chicago Milwaukee Corporation (a Delaware corporation) into CMC
Maryland Corp. (changing the surviving corporation's name to Chicago
Milwaukee Corporation), incorporated by reference to Exhibit 1 to
Amendment No. 2 to the Company's Registration Statement.
(2) Bylaws of the Company, incorporated by reference to an Exhibit to the
Company's Form N-SAR for the fiscal year ended December 31, 1993.
19
<PAGE>
(3) Not Applicable.
(4) Specimen certificate for Common Stock, incorporated by reference to
Exhibit 4.1 to the Company's Form N-2 Registration Statement, dated
November 13, 1989.
(5) Not Applicable.
(6) Not Applicable.
(7) Not Applicable.
(8) Custodian Contract by and between the Company and Norwest Bank
Minnesota, N.A. dated June 1, 1993, incorporated by reference to
Exhibit 8 of the Company's Form N-1A Registration Statement, dated
October 1, 1993.
(9.1) Conveyance Agreement dated as of June 2, 1990, by and among the
Company and MLC, CMC Heartland Partners ("CMC") and Heartland
Partners, L.P. ("Heartland"), incorporated by reference to Exhibit
10.5 to the Company's Form N-2 Registration Statement, Amendment No. 2
dated December 31, 1990.
(9.2) Management Agreement dated as of June 27, 1990, by and among the
Company, Heartland and CMC, incorporated by reference to Exhibit 10.6
to the Company's Form N-2 Registration Statement, Amendment No. 2,
dated December 31, 1990.
(9.3) Conveyance Agreement dated as of June 29, 1993 by and between the
Company and MLC, incorporated by reference to Exhibit 9.9 to the
Company's Form N-1A Registration Statement, dated October 1, 1993.
(9.4) Federal Income Tax Allocation Agreement by and between the Company
and MLC dated June 29, 1993, incorporated by reference to Exhibit 9.10
to the Company's Form N-1A Registration Statement, dated October 1,
1993.
(9.5) Consent, Assignment and Assumption Agreement by and among the
Company, MLC, Heartland and CMC dated June 29, 1993, incorporated by
reference to Exhibit 9.11 to the Company's Form N-1A Registration
Statement, dated October 1, 1993.
(10) Not Applicable.
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Not Applicable.
20
<PAGE>
(16) Not Applicable.
(17) Financial Data Schedule.
(18) Not Applicable.
Item 25. Persons Controlled by or Under Common Control with the Company.
Not applicable.
Item 26. Number of Holders of Securities.
As of April 1, 1996, the following is the number of record holders of
each class of securities of the Company:
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, par value
$0.01 per share -0-
Item 27. Indemnification.
The Company's Articles of Incorporation and Bylaws contain provisions relating
to indemnification of directors and officers and the elimination of certain
potential monetary liabilities of directors, in each case solely to the extent
permitted by the 1940 Act and for so long as the Company is a registered
investment company. The following summary of certain provisions of the Articles
of Incorporation and Bylaws is qualified in its entirety by reference to the
Articles of Incorporation and Bylaws, a copy of each of which has been filed as
an Exhibit to this Registration Statement.
The Company's Articles of Incorporation provides in Article SEVENTH that the
Company shall indemnify (i) its directors and officers, whether serving the
Company or at its request any other entity, to the full extent required or
permitted by the General Laws of the State of Maryland, including the advance of
expenses under the procedures and to the full extent permitted by law, and (ii)
other employees and agents to such extent as shall be authorized by the Board of
Directors or the Bylaws of the Company and as permitted by law. Nothing
contained in the Articles of Incorporation shall be construed to protect any
director or officer of the Company against any liability to the Company or its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. For so long as the Company is registered
with the Securities and Exchange Commission as an investment company under the
1940 Act, the indemnification provided by the Articles of Incorporation shall
not be available to any person to the extent such indemnification is
inconsistent with the provisions of the 1940 Act, and the rules and regulations
thereunder. Article VIII of the Company's Bylaws provides for the
indemnification by the Company of officers, directors, employees and agents with
respect to third party claims and sets forth procedures for determining
entitlement to such indemnification as well as other mechanics in connection
with such indemnification.
21
<PAGE>
Article SEVENTH also provides that to the fullest extent permitted by Maryland
law and the 1940 Act, no director or officer of the Company shall be personally
liable to the Company or its stockholders for money damages; provided, however,
that nothing in the Articles of Incorporation shall be construed to protect any
director or officer of the Company against any liability to the Company or its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. No amendment of the charter of the
Company or repeal of any of its provisions shall limit or eliminate the
limitation of liability provided to directors and officers under the Articles of
Incorporation with respect to any act or omission occurring prior to such
amendment or repeal. Notwithstanding the foregoing, for so long as the Company
is registered with the Securities and Exchange Commission as an investment
company under the 1940 Act, the provisions of such Article SEVENTH shall not
relieve any director from any liability to the extent that such relief would be
inconsistent with the 1940 Act, and the rule and regulations thereunder.
The Company maintains directors' and officers' liability insurance.
Item 28. Business and Other Connections of Investment Adviser.
Not Applicable.
Item 29. Principal Underwriters.
Not Applicable.
Item 30. Location of Accounts and Records.
Accounts, books and other records required by Section 31(a) of the 1940 Act are
maintained and kept in the offices of the Company.
Records relating to transactions in the Common Stock of the Company are
maintained and kept by the Company's stock transfer agent and registrar, Norwest
Bank Minnesota, N.A., 733 Marquette Ave., Fifth Floor, Minneapolis, Minnesota
55475-0040.
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
Not Applicable.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment No. 3 to the Registration
Statement to be signed on behalf by the undersigned, thereunto duly authorized
in the City of Chicago and State of Illinois on the 25th day of April,
1996.
CHICAGO MILWAUKEE CORPORATION
By: /s/ Edwin Jacobson
-------------------------
Edwin Jacobson
Director
23
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number
- -------
<S> <C>
(17) Financial Data Schedule.
</TABLE>
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Form N-SAR
for 12/31/95 and the 1995 Audited Financial Statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
<INVESTMENTS-AT-COST> 2061
<INVESTMENTS-AT-VALUE> 2061
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 115
<TOTAL-ASSETS> 2176
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2176
<TOTAL-LIABILITIES> 2176
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 916
<OTHER-INCOME> 0
<EXPENSES-NET> 2480
<NET-INVESTMENT-INCOME> (1564)
<REALIZED-GAINS-CURRENT> (96)
<APPREC-INCREASE-CURRENT> 370
<NET-CHANGE-FROM-OPS> (1290)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 734
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 141.51
<PER-SHARE-NII> 5.84
<PER-SHARE-GAIN-APPREC> (10.70)
<PER-SHARE-DIVIDEND> 2.73
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 133.92
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 15.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
