<PAGE>
MILWAUKEE
LAND
COMPANY
________________________________________________________________________________
1995 ANNUAL REPORT
<PAGE>
To Our Shareholders:
For the year ended December 31, 1995, the net decrease in net assets
resulting from operations was $4,020,981. Net investment income for the
same period totalled $122,543, compared to $83,363 in 1994, or an
increase of $39,180.
The net realized loss from sales of investments for 1995 amounted to
$52,728, compared to a loss of $17,943 in 1994. Together, net
investment income and realized losses on sales of investments net of
taxes for 1995 totalled $69,815, or $.04 per common share, compared to
net investment income plus realized losses on sales of investments of
$65,420, or $.04 per common share in 1994. Income per share of common
stock is based on the weighted average number of common shares
outstanding.
The unrealized appreciation on investments for 1995 decreased
$4,090,796, net of taxes. The decrease is primarily attributable to the
decreased valuation of the Heartland Partners L.P. Class B Interest that
was transferred to Milwaukee Land Company by Chicago Milwaukee
Corporation as part of its conversion to an open-end investment company.
The Class B Interest is not publicly traded and is stated in the
financial statements at a fair value as determined by the Company's
Board of Directors. On December 7, 1995, the Board of Directors of
Milwaukee Land Company changed the methodology for valuing this
interest due to their determination that operating losses of Heartland
Partners, L.P. could cause anomalous results in the application of the
former methodology. The new methodology imputes a value to the Class B
Interest based on the market value of the publicly traded Class A
limited partnership units at date of valuation. Due to the inherent
uncertainty of valuation, the recorded value of the Class B Interest on
the Company's financial statements may differ from the value that would
have been used had a ready market existed for the Class B Interest, and
the difference could be material.
The Company's principal investments in securities of nonaffiliates at
year-end consisted of portfolio securities invested in direct
obligations of the U.S. Government (all U.S. Treasury Notes) and high
yield corporate obligations. At December 31, 1995, 21% of the Company's
net assets was invested in high yield corporate obligations, 28% in
Treasury Notes and 2% in cash equivalents. The current yield on high
yield corporate bonds at December 31, 1995 was 9.17% with a yield to
maturity of 9.26%. The current yield on Treasury Notes at December 31,
1995 was 5.09% with a yield to maturity of 5.25%. The average maturity
of the portfolio investment in securities of nonaffiliates is 2.8 years
and the current yield is 6.72%.
At December 31, 1995, the net asset value per common share amounted to
$11.35 based on 1,671,238 common shares outstanding.
The Company continues to search for one or more acquisitons of real
estate and/or operating businesses. Any acquisition that would result in
the Company's ceasing to be an "investment company" within the meaning
of the Investment Company Act of 1940 (which the Company believes would
be a desirable result) would require approval by the Company's
shareholders.
Sincerely,
/s/ Edwin Jacobson
Edwin Jacobson
President and Chief Executive Officer
February 29, 1996
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors of
Milwaukee Land Company
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Milwaukee Land Company 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 the 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 other auditors whose report dated
February 19, 1993, expressed an unqualified opinion on the financial
statements and 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 investments 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.
In our opinion, financial statements and financial highlights referred
to above present fairly, in all material respects, the financial
position of Milwaukee Land Company 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>
MILWAUKEE LAND COMPANY
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS
Investments at Value:
Nonaffiliates (cost $9,528,029)............................. $ 9,617,748
Affiliates (cost $12,294,768)............................... 9,158,961
-----------
Total Investments......................................... 18,776,709
Cash.......................................................... 300,134
Receivables
Management fees- affiliate.................... $425,006
Note Receivable- affiliate.................... 648,134
Securities sold............................... 156,665
Accrued interest.............................. 188,829
Other......................................... 50,805
--------
Total Receivables............................................. 1,469,439
Prepaid and deferred expenses and other assets................ 30,124
-----------
Total Assets.............................................. 20,576,406
LIABILITIES
Directors and officers........................................ 8,438
Allowance for claims and liabilities.......................... 1,348,789
Deferred taxes................................................ 72,946
Other......................................................... 177,383
-----------
Total Liabilities......................................... 1,607,556
-----------
NET ASSETS.................................................... $18,968,850
===========
COMMON SHARES OUTSTANDING..................................... 1,671,238
===========
NET ASSET VALUE PER COMMON SHARE.............................. $ 11.35
===========
See accompanying Notes to Financial Statements
2
<PAGE>
MILWAUKEE LAND COMPANY
STATEMENT OF OPERATIONS
Year ended December 31, 1995
Investment Income:
Interest............................................ $ 704,455
Management fee from affiliate....................... 425,006
Other............................................... 1,250
-----------
Total Investment Income........................... $ 1,130,711
Expenses:
Compensation and benefits........................... 287,544
Directors' fees and expenses........................ 38,482
Professional fees................................... 359,031
Advisory fees....................................... 21,386
Custodian fees...................................... 6,102
Taxes............................................... 46,622
Insurance........................................... 59,644
Facility expense allocation......................... 39,732
General and administrative expenses................. 102,214
-----------
Total Expenses.................................... 960,757
-----------
Investment Income Before Taxes........................ 169,954
Provision for Income Taxes............................ 47,411
-----------
Net Investment Income................................. 122,543
Net Realized and Unrealized Gain(Loss) on Investments:
Net realized loss on sales of investments............. (73,129)
Net change in unrealized appreciation/depreciation
on investments:
Nonaffiliates....................................... 571,836
Affiliates.......................................... (6,245,318)
-----------
Net change in unrealized appreciation/depreciation
on investments.................................... (5,673,482)
-----------
Net Realized and Unrealized Gain/(Loss) on
Investments Before Taxes............................. (5,746,611)
Income Tax Benefit.................................... (1,603,087)
-----------
Net Realized and Unrealized (Loss) on Investments..... (4,143,524)
-----------
Net Decrease in Net Assets Resulting From Operations.. $(4,020,981)
===========
See accompanying Notes to Financial Statements
3
<PAGE>
MILWAUKEE LAND COMPANY
STATEMENT OF CHANGES IN NET ASSETS
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Year Ended
---------------------------
12/31/95 12/31/94
----------- -----------
<S> <C> <C>
Operations:
Net investment income...................................... $ 122,543 $ 83,363
Net realized loss on sales of investments, net of taxes.... (52,728) (17,943)
Net change in unrealized depreciation/appreciation on
investments, net of taxes................................. (4,090,796) 546,569
----------- -----------
Net (Decrease) Increase in Net Assets Resulting From
Operations.............................................. (4,020,981) 611,989
Net Assets at Beginning of Year........................... 22,989,831 22,377,842
----------- -----------
Net Assets at End of Year (including undistributed net
investment income of $10,184,650 at December 31, 1995
and $10,062,107 at December 31, 1994)................... $18,968,850 $22,989,831
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements
4
<PAGE>
MILWAUKEE LAND COMPANY
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
NON-AFFILIATES
FIXED INCOME SECURITIES
PRINCIPAL
U.S. TREASURY OBLIGATIONS -- 27.69% AMOUNT VALUE
- ----------------------------------- ----------- -----------
<S> <C> <C>
U.S. Treasury notes, 4.250% due 5/15/96................................... $1,105,000 $ 1,101,033
U.S. Treasury notes, 6.875% due 10/31/96.................................. 650,000 658,326
U.S. Treasury notes, 5.250% due 7/31/98................................... 1,260,000 1,260,391
U.S. Treasury notes, 6.375% due 1/15/99................................... 1,300,000 1,340,417
U.S. Treasury notes, 6.875% due 7/31/99................................... 850,000 892,500
-----------
Total U.S. Treasury Obligations (cost $5,194,569)....................... 5,252,667
CORPORATE OBLIGATIONS -- 21.43%
- -------------------------------
Triton Energy Corp 1997 Sr Sub, 0%, due 11/1/97........................... 250,000 215,625
Navistar Finl Sr Sub Nt, 8.875%, due 11/15/98............................. 250,000 247,500
Revlon Consumer Prods Corp Sr Nt, 9.500%, due 6/01/99..................... 150,000 151,500
Unisys Corp Nt, 10.625%, due 10/1/99...................................... 200,000 177,000
Penn Central Corp Sub Nt. 10.625% due 4/15/00............................. 150,000 160,284
Riverwood Intl Corp Sr Nt II, 10.750%, due 6/15/00........................ 200,000 215,000
SIFTO CDA Inc Gtd Sr Secd Nt, 8.500% due 7/15/00.......................... 200,000 192,000
Texas New Mex Pwr Hldgs Inc Sr Nt, 9.250%, due 9/15/00.................... 200,000 214,234
Armco Inc. Sr Nt, 9.375%, due 11/01/00.................................... 250,000 247,500
Reliance Group Hldgs Inc Sr Nt, 9.000%, due 11/15/00...................... 250,000 257,188
American Annuity Group Sr Nt, 9.500%, due 8/15/01......................... 250,000 260,000
Repap Wis Inc 1st Priority Sr Secd Nt, 9.250, due 2/01/02................. 200,000 190,000
Sequa Corp Sr Nt, 8.750%, due 12/15/01.................................... 250,000 237,500
Penn Traffic Co New Sr Nt, 10.250%, due 2/15/02........................... 150,000 142,875
Century Communications Sr Nt, 9.750%, due 2/15/02......................... 200,000 209,000
Continental Cablevision Sr Sub Nt, 10.625%, due 6/15/02................... 200,000 213,500
Owens II Inc Sr Sub Nt, 10.500%, due 6/15/02.............................. 200,000 212,500
Rogers Cablesystems Ltr Sr Secd 2nd Priority Nt. 9.625% due 8/1/02........ 200,000 209,500
CTC Mansfield Fdg Corp Sec Lease Oblig, 10.250%, due 3/30/03.............. 150,000 152,063
Phoenix RE Corp Sr Nt, 9.750%, due 8/15/03................................ 150,000 160,312
-----------
Total Corporate Obligations (cost $4,033,460)........................... 4,065,081
MONEY MARKET FUND -- 1.58%
- --------------------------
Norwest Cash Investment Fund (cost $300,000).............................. 300,000
-----------
Total Non-Affiliates (cost $9,528,029).................................. 9,617,748
AFFILIATES -- 48.29%
- --------------------
Heartland Partners, L.P. - 1% General Partnership Interest and
.5% Class B Limited Partnership Interest (a)............................ 9,157,461
CMC Heartland Partners - .01% General Partnership Interest (a)........... 1,500
-----------
Total Affiliates (cost $12,294,768).................................... 9,158,961
-----------
Total Investments (cost $21,822,797) - 98.99%.......................... 18,776,709
OTHER ASSETS AND LIABILITIES, NET - 1.01%................................. 192,141
-----------
NET ASSETS - 100%......................................................... $18,968,850
===========
(a) Investments not readily marketable
</TABLE>
5
<PAGE>
MILWAUKEE LAND COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Milwaukee Land Company (the "Company") registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a non-diversified,
closed-end management investment company on March 23, 1988. Prior to
June 30, 1993 the Company was a wholly owned subsidiary of Chicago
Milwaukee Corporation ("CMC").
Security valuation:
Investments are stated at value. Securities traded on securities
exchanges or on the NASDAQ National Market System are valued at the last
sales price on the principal exchange or market on which they are traded
or listed or, if there has been no sale that day, at the mean of closing
bid and asked prices. Fixed-income securities are valued at the most
recent bid quotation. Short-term securities are valued at amortized
cost, which approximates market value. Other securities for which
prices are not readily available are valued at a fair value as
determined by the Board of Directors for reporting purposes under the
1940 Act.
The Company's investment in the Class B limited partnership interest
(the "Class B Interest") of Heartland Partners, L.P. is not publicly
traded, and accordingly there are no available market quotations. On
December 7, 1995, the Board of Directors of the Company changed the
methodology for valuing the Class B Interest.
In making its determination of a fair value for the Class B Interest,
the Board of Directors of the Company considers an imputed value based
on the market value of the publicly traded Class A limited partnership
interest in Heartland Partners, L.P. (the "Units") and the operating
results of Heartland Partners, L.P. The Board of Directors of the
Company determined that operating losses of Heartland Partners, L.P.
could cause anomalous results in the application of the valuation
methodology which had been utilized for the Class B Interest. Therefore,
the Board of Directors adopted an alternate method of imputing value
based on the market value of the publicly traded Units. Under the new
methodology, the percentage change in the market value of the publicly
traded Units from June 30, 1990, is applied to the initial cost of the
Class B Interest (approximately $9.6 million) to the date of valuation.
Due to the inherent uncertainty of valuation, the recorded value of
the Class B Interest and the general partnership interests in Heartland
Partners, L.P. and CMC Heartland Partners on the Company's financial
statements may differ from values that would have been used had a ready
market existed for these interests, and the difference could be
material.
The change in methodology adopted by the Board resulted in a decrease
in the value of the Class B Interest of $6.2 million in 1995, and
reduced unrealized gains $4.5 million, net of tax. The effect on the
net asset value of the Company at December 31, 1995 is a decrease of
$2.69 per share.
Investment transactions and investment income:
Security transactions are accounted for on the trade date. Realized
gains and losses on investment transactions are determined on an
identified cost basis. Interest income is recorded on the accrual basis
and includes amortization of premium and accretion of discount on
securities owned.
6
<PAGE>
MILWAUKEE LAND COMPANY
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1995
NOTE 2. NET ASSETS
Net assets at December 31, 1995 consisted of the following items:
Common stock - $0.30 par value per share, authorized 10,000,000
shares, 1,671,238 shares issued and outstanding............... $ 501,371
Paid in capital................................................ 9,973,419
Undistributed net investment income *.......................... 10,184,650
Undistributed net realized gains on investment transactions *.. 462,974
Net unrealized depreciation on investments *................... (2,153,564)
-----------
Net Assets................................................. $18,968,850
===========
* Net of tax provision
NOTE 3. INVESTMENT SERVICES
The Company pays advisory fees for investment advisory services under a
revised agreement with OFFITBANK, a nonaffiliated investment advisor. For the
services rendered by OFFITBANK under the revised agreement, the Company paid
OFFITBANK an annual investment advisory fee equal to .20 of 1% per annum of the
value of the portfolio under management. The revised agreement provides that the
advisory fee is payable quarterly in arrears based on the average month-end
value of the portfolio during such quarter.
NOTE 4. FEDERAL INCOME TAXES
A reconciliation of the statutory federal income tax rate to the effective
income tax rate for the year ended December 31, 1995 is as follows:
Statutory rate 35.0%
Effect of:
State income taxes 7.0
Difference in tax basis
investment in affiliate (14.1)
-----
Effective Rate 27.9%
=====
As of December 31, 1995, the Company has deferred tax assets consisting of tax
NOL carryforwards of approximately $262,000, AMT credit carryforwards of
approximately $919,000 and tax unrealized investment losses of approximately
$425,000. The NOL carryforwards expire in 2009 and 2010. For financial reporting
purposes, a valuation allowance of approximately $1,606,000 has been provided to
reduce the deferred tax liabilities of approximately $73,000 primarily related
to timing differences between book and tax accounting.
Based on cost of investments for federal income tax purposes of $19,788,174 on
December 31, 1995, net unrealized depreciation was $1,011,465, consisting of
gross unrealized appreciation of $158,745 and gross unrealized depreciation of
$1,170,210.
7
<PAGE>
MILWAUKEE LAND COMPANY
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1995
NOTE 5. INTERESTS IN PARTNERSHIPS AND RELATED TRANSACTIONS
At the close of business on June 27, 1990, CMC and the Company
transferred to CMC Heartland Partners ("CMC Heartland") 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 those properties.
The Company has a 1% general partnership interest in Heartland which
entitles the Company to 1% of Heartland's available cash for
distribution and allocation of taxable income and loss. The Company
also has a .01% general partnership interest in CMC Heartland which
entitles the Company to .01% of CMC Heartland's available cash for
distribution and an allocation of taxable income and loss before
distributions and allocations are made by Heartland. The Company's
interests in Heartland and CMC Heartland, including the Class B Interest
in Heartland described below, were included in investments at a value of
$9,158,961 at December 31, 1995.
The Company distributed Units, received from Heartland in the real
estate transfer, to CMC which then distributed the Units to its common
stockholders on June 30, 1990. The Company, in its capacity as the
general partner of Heartland and the managing general partner of CMC
Heartland, has full, exclusive and complete discretion to manage the
business and affairs of Heartland and CMC Heartland (collectively, the
"Partnerships") and is authorized in general to perform all acts
necessary or appropriate to carry out the purposes and conduct the
business of the Partnerships.
In connection with the real estate transfer, Heartland and CMC
Heartland have assumed primary responsibility and liability for the
resolution and satisfaction of most of the liabilities for claims
remaining under the plan of reorganization of the predecessor of CMC
Real Estate Corporation ("CMCRE"), formerly a wholly owned subsidiary of
CMC, and previously named the Chicago, Milwaukee, St. Paul and Pacific
Railroad Company (the "Railroad"), certain other contingent liabilities
with respect to the properties transferred to CMC Heartland arising
after the consummation of such plan, and the costs and expenses incurred
in resolving such plan and other contingent liabilities (collectively,
the "Plan Liabilities"). CMC was required to contribute to Heartland,
over time, cash in the amount of $18.1 million (the "Deferred Capital
Contribution"), plus interest, for settlement of Plan Liabilities. In
consideration of such commitment, Heartland issued to CMC the Class B
Interest. On August 28, 1990 and February 15, 1991, pursuant to an
authorization of the Board of Directors of CMC on May 7, 1990, CMC made
additional capital contributions to Heartland of approximately $3.6
million in the aggregate, representing an increase in CMC's Class B
Interest in Heartland. As part of CMC's conversion from a closed-end
management investment company to an open-end management investment
company, the Class B Interest was transferred to the Company on July 1,
1993. 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
the Company 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.
Effective July 1, 1993, CMC transferred to the Company its rights and
obligations under the management agreement with CMC Heartland. Pursuant
to the management agreement, CMC Heartland is required to pay to the
Company an annual management fee in the amount of $425,006. On December
29, 1995, the Company advanced CMC Heartland $648,134 for payment of the
management fee accrued through December 31, 1994, (which includes
management fees accruing since July 1993). On February 14, 1996, the
Company advanced CMC Heartland $425,006 for payment of the 1995
management fee. Each advance by the Company to CMC Heartland is in the
form of a demand note accruing simple interest at the prime rate plus
2.25% (10.75% at December 31, 1995).
For the year ended December 31, 1995, the Company paid CMC Heartland
approximately $109,000 for staff salary and operating expense
allocations.
8
<PAGE>
MILWAUKEE LAND COMPANY
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1995
NOTE 6. CONTINGENT LIABILITIES
The Company, by reason of its serving as the general partner of the
Partnerships, is liable and responsible to third parties for the
Partnerships' liabilities to the extent the assets of the Partnerships
are insufficient to satisfy such liabilities. In addition to
liabilities incurred as a result of their ongoing real estate business,
the Partnerships assumed, in connection with Heartland's spin-off in
June, 1990, primary responsibility for certain contingent liabilities
related to (i) the plan of reorganization of the Railroad and (ii) the
real estate properties conveyed to CMC Heartland in the spin-off
(collectively, the "Heartland Assumed Liabilities"). CMC remains liable
to third party obligees for the Heartland Assumed Liabilities, and the
Partnerships have indemnified CMC from and against any and all damages,
costs or expenses that may be incurred in connection therewith. In
consideration of the Partnerships' assumption of the Heartland Assumed
Liabilities, and in further consideration of the issuance of the Class B
Interest to CMC, CMC agreed to contribute to Heartland by December 31,
1993, cash in the aggregate amount of $18.1 million, plus interest.
Included in the Heartland Assumed Liabilities are known environmental
liabilities associated with certain of the properties transferred to the
Partnerships arising out of the activities of the Railroad or certain
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 primary business activity of the Railroad.
The Company and/or the Partnerships have been notified by government
agencies of potential liabilities in connection with certain of these
real estate properties. Descriptions 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.
In connection with CMC's conversion to an open-end management
investment company and the transactions related thereto, CMC assigned to
the Company, and the Company assumed from CMC, any obligation for which
CMC is or may become liable (the "MLC Assumed Liabilities") 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 CMC's business of investing and managing
its investment securities, (iii) certain litigation against CMC relating
to CMC's preferred stock which was pending against CMC at the time of
the conversion but which was subsequently dismissed, or (iv) any
liabilities relating to federal, state, local or foreign income or other
tax matters. In addition, in connection with the assignment of the MLC
Assumed Liabilities and the transfer of the Class B Interest to the
Company, CMC contributed to Heartland the balance of the deferred
capital contribution in respect of the Class B Interest. Following the
consummation of the conversion and the transactions related thereto, CMC
will continue to remain liable to third party obligees in connection
with the MLC Assumed Liabilities. The Company will indemnify CMC from
any and all damages, costs or expenses that CMC may incur in connection
with the MLC Assumed Liabilities, although there can be no assurance
that the Company will be able to fully satisfy such indemnification
obligations.
NOTE 7. INVESTMENT TRANSACTIONS
Investment transactions for the year ended December 31, 1995
(excluding money market investments) are as follows:
Purchases.................................... $8,640,540
Proceeds from sales and maturities........... $9,112,483
9
<PAGE>
MILWAUKEE LAND COMPANY
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1995
NOTE 8. CERTAIN DISCLOSURES PURSUANT TO RULE 8B-16, AS AMENDED
The Company has no dividend reinvestment plan and has no plans to
implement such a plan. The Company's Certificate of Incorporation and
By-laws contain several provisions intended to enhance the likelihood of
continuity and stability in the composition of the Company's Board of
Directors and in the policies formulated by such board. These
provisions provide for, among other things, a classified board of
directors, the prohibition of stockholder action by written consent, the
authorization of "blank ticket" preferred stock, the prohibition of
calling special stockholder meetings unless requested by the Chairman,
President or the holders of not less than 80% of the outstanding common
stock of the Company, and the prohibition of calling special Board
meetings unless requested by the Chairman, President or 75% of the
directors.
The portfolio manager associated with the investment policies of the
fund has not changed. During 1994, the Company's investment guidelines
were revised to extend from three years to six years the permissible
average maturity of non-investment grade U.S. dollar denominated
securities in which the Company may invest. In 1995, the investment
guidelines were further modified to provide for up to a maximum of 35%
of the portfolio to be invested in non-investment grade U.S dollar
denominated securities.
10
<PAGE>
MILWAUKEE LAND COMPANY
NOTES TO FINANCIAL STATEMENTS - (Concluded)
December 31, 1995
NOTE 9. 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
Net Asset Value, Beginning
of period......................... $ 13.76 $ 13.39 $ 6.59 $ 6.42 $ 6.44
Net Investment Income.............. .07 .05 .02 .17 .35
Net (Losses)/Gains on Securities
(realized and unrealized)......... (2.48) .32 .81 --- .20
----------- ----------- ----------- ----------- -----------
Total From Investment
Operations........................ (2.41) .37 .83 .17 .55
Capital Contribution
From CMC.......................... --- --- 5.97 --- ---
Less Distributions:
From Net Investment Income to
Common Shareholders.............. --- --- --- --- .57
----------- ----------- ----------- ----------- -----------
Total Distributions................ --- --- --- --- .57
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of
Period............................ $ 11.35 $ 13.76 $ 13.39 $ 6.59 $ 6.42
=========== =========== =========== =========== ===========
Per Share Market Value,
End of Period..................... $ 7.38 $ 8.00 $ 6.50 N/A N/A
Total Investment Return:
Market............................ (7.81)% 23.08% (10.34%) N/A N/A
Net Asset Value................... (17.51)% 2.76% 103.19% 2.65% 8.54%
RATIO/SUPPLEMENTAL DATA
Net Assets, End of Period.......... $18,968,850 $22,989,831 $22,377,842 $11,013,637 $10,727,836
Ratio of:
Expenses to Average
Net Assets....................... 4.17% 5.82% 6.52% 3.4% 2.1%
Net Investment Income to
Average Net Assets............... .53% .36% .17% 2.6% 5.2%
Portfolio Turnover Rate............ 35.16% 24.25% 99.64% 2.24% 98.2%
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11
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MILWAUKEE LAND COMPANY
BOARD OF DIRECTORS
ROBERT S. DAVIS
Consultant
CLARENCE G. FRAME
Chairman of the Board
Milwaukee Land Company
EDWIN JACOBSON
President and Chief Executive Officer
Milwaukee Land Company
EZRA K. ZILKHA
President, Zilkha & Sons, Inc.
OFFICERS
CLARENCE G. FRAME
Chairman of the Board
EDWIN JACOBSON
President and Chief Executive Officer
LEON F. FIORENTINO
Vice President - Finance,
Secretary and Treasurer
LAWRENCE S. ADELSON
Vice President and General Counsel
THOMAS F. REDLER
Assistant Treasurer and
Assistant Secretary
MILWAUKEE LAND COMPANY
A closed-end management
investment company traded on the
American Stock Exchange, symbol
MWK.
547 W. Jackson Blvd.
Chicago, IL 60661
(312) 294-0497
Investment Advisor
OFFITBANK
520 Madison Avenue
New York, NY 10022
Custodian, Transfer
Agent, Stock Registrar and
Dividend Disbursing Agent
Norwest Bank Minnesota, NA
Stock Transfer Department
Post Office Box 738
S. St. Paul, MN 55075
(612) 450-4101
Independent Auditors
Ernst & Young LLP
233 S. Wacker Drive
Chicago, IL 60606
