(Amounts in thousands, except per unit data)
Gains on dispositions of assets, net Interest, dividend and other income	$166 124
Total income Administrative expenses	290 463
Net loss	$(173)
Net loss per unit	$(0.00)
Outstanding units	38,979

($ in thousands)
Assets -- Restricted deposit for charitable remainder expense reserve	$224
Liabilities -- Charitable remainder expense reserve	$224
Total trust equity	$0
See accompanying notes to financial statements

($ in thousands)
Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash   provided by/(used for) operating activities: Restricted deposit for charitable remainder expense reserve Gain on sale of real estate Net amortization of premium of investment securities Other, net	$(173)     (224) (183) (15) 3
Net cash used for operating activities	(592)
Cash flows from investing activities: Maturities/sales of investment securities Purchases of investment securities Proceeds from sale of real estate	5,824 (1,603) 685
Net cash provided by investing activities	4,906
Cash flows from financing activities: Cash distribution to Unit Holders	(4,521)
Net cash used for financing activities	(4,521)
Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year	(207) 207
Cash and cash equivalents (unrestricted) at end of period	$0

($ in thousands)
Balance at beginning of period Net loss Restricted deposit for charitable remainder expense reserve Cash distribution to Unit Holders	$4,918 (173) (224) (4,521)
Balance at March 31, 2006	$0
See accompanying notes to financial statements

Note 1 - Organization

The City Investing Company Liquidating Trust (the "Trust") was created on September 25, 1985, pursuant to an Agreement and Declaration of Trust ("Trust Agreement") by and between City Investing Company ("City") and the three individuals then serving as trustees of the Trust ("Trustees"). The Trust Agreement is governed by the laws of the State of Delaware.

On September 25, 1985, pursuant to a Plan of Complete Liquidation and Dissolution approved by stockholders of City on December 12, 1984, City transferred all its remaining assets and liabilities ("Trust Estate") to the Trust to assure compliance with Section 337 of the Internal Revenue Code. The sole purpose of the Trust is to liquidate the Trust Estate in a manner calculated to conserve and protect the Trust Estate, and to collect and distribute to the beneficiaries the income and proceeds therefrom in as prompt and orderly a fashion as possible after the payment of, or provision for, expenses and liabilities.

The Common Stock transfer books of City were permanently closed on September 25, 1985, and the holders of record of Common Stock of City as of the close of business on that date became holders of Units of Beneficial Interest in the Trust on the basis of one Unit of Beneficial Interest for each share of Common Stock of City held on September 25, 1985. After September 25, 1985, the outstanding certificates that formerly represented shares of Common Stock of City are deemed to evidence the same number of Units of Beneficial Interest in the Trust.

The Trust Agreement, signed on September 25, 1985, set forth a time limit of three years for the disposition of the Trust's assets and distribution to the Unit Holders unless a later termination was required by the Trustees. As a result of the protracted nature of certain litigation and other claims asserted against the Trust, the Trustees extended the time limit of the Trust's existence a number of times, most recently to September 25, 2006.

On April 18, 2006, the Trust will pay a $0.116 final cash distribution to Unit Holders of record on March 31, 2006. The aggregate cash distribution to a Unit Holder involving less than a full cent will be rounded up to the nearest whole cent. After March 31, 2006, the outstanding certificates that represented Units of Beneficial Interest in the Trust and formerly represented shares of Common Stock of City will have no value and will cease trading. The Trust will cease doing business and be dissolved on April 18, 2006, the date on which the final distribution, audited financial statements for the Trust's final accounting period and a 2006 Tax Information letter will be mailed.

Note 2 - Basis of Accounting

Basis of presentation : The accompanying financial statements have been prepared in accordance with Federal Income Tax Reporting Principles ("FITR"). Accordingly, certain revenue and the related assets are recognized when received rather than when earned; certain expenses are recognized when paid rather than when the obligation is incurred; and assets are refiected at their tax basis. For information concerning the financial statements prepared on accounting principles generally accepted in the United States of America, refiecting an entity in liquidation, and a reconciliation of the Trust's FITR to accounting principles generally accepted in the United States of America, refiecting an entity in liquidation, see Note 7.

Valuation of assets and liabilities : The Trust Equity balance on September 25, 1985 was established at an amount equivalent to the number of Units of Beneficial Interest outstanding (38,979,372) multiplied by the average of the high and low trading prices of such units on the first day of trading ($3.1875), or an aggregate of $124.2 million. For FITR purposes, the fair market value of each asset other than cash and cash equivalents was determined by that asset's proportionate share of the Trust Equity increased by accounts payable and decreased by cash and cash equivalents at September 25, 1985. The proportionate share of each of these assets was determined by the estimated value of such Trust asset in relation to the estimated value of all of the Trust assets other than cash and cash equivalents. In determining the estimated value of Trust assets, the Trustees evaluated, where appropriate, such factors as City's historical carrying values, expected amounts and dates of realization, prevailing interest rates, available

market prices and restrictions with respect to disposition. Assets acquired after September 25, 1985, are generally carried at cost.

Income taxes : For Federal income tax purposes, the September 25, 1985 transfer of assets and liabilities to the Trust and distribution to stockholders of Units in the Trust was treated as a distribution of assets and liabilities by City to its stockholders and a contribution by the stockholders of such net assets to the Trust in return for Units. The Trust is treated as a grantor trust and not as a corporation. Accordingly, any income or loss of the Trust will not be taxable to the Trust but will be taxable to the Unit Holders as if the Unit Holders had themselves realized the income or loss from their undivided interests in Trust assets.

Losses on dispositions of assets : Losses on dispositions of assets, net of gains, includes expenses attributable to litigation exposures that relate to periods before the liquidation of City.

Net income per unit : Net income per unit is calculated by dividing net income of the Trust by the number of outstanding Units of Beneficial Interest.

Cash and cash equivalents : The Trust considers all investments in money market funds as cash equivalents. The restricted deposit of $224,000 was transferred from unrestricted cash and cash equivalents during the three-month period ended March 31, 2006. See Note 6.

Note 3 - Mortgage Receivable

In 2000, the Trust sold certain real estate acreage located in Texas City, Texas for $2,888,000 in cash and a non-recourse promissory note of $3,683,000, payable in five equal annual installments plus interest at 8 percent. The final installment of principal and interest on the mortgage note due in June 2006 was prepaid in January 2006 in the amount of approximately $720,000, which resulted in a recognized longterm gain, net of expenses, of $183,000 and net interest income of $35,000.

Note 4 - Litigation and Other Contingent Liabilities

In accordance with the Trust Agreement, the Trust has assumed the obligation, where required, to discharge certain litigation and other contingent liabilities of City Investing Company. At the present time, there is no litigation or other contingent liabilities against the Trust in any jurisdiction. The Trust settled all claims asserted against it in the State of California v. Lake Oroville Area Public Utility District (described in the Trust's 2005 Form 10-K, Item 8--Note 7, "Litigation and Other Contingent Liabilities") by payment of $15,000 in February 2006.

Note 5 - Future Distributions of Trust Assets

On March 15, 2006, the Trustees declared a $0.116 final cash distribution per Trust Unit of Beneficial Interest to be paid on April 18, 2006, to Unit Holders of record on March 31, 2006. The aggregate cash distribution to a Unit Holder involving less than a full cent will be rounded up to the nearest whole cent. After March 31, 2006, the outstanding certificates that represented Units of Beneficial Interest in the Trust and formerly represented shares of Common Stock of City will have no value and will cease trading. The Trust will cease doing business and be dissolved on April 18, 2006, the date on which the final distribution, audited financial statements for the Trust's final accounting period and a 2006 Tax Information letter will be mailed.

Note 6 - Restricted Deposit for Charitable Remainder Expense Reserve

To declare the final distribution and dissolve the Trust, a restricted deposit has been provided to pay for possible future expenses and receive any incidental return of funds. The Trustees resolved to transfer any portion of the deposit that is not expended for possible future expenses to the University of Southern California. Thus, the balance in the restricted deposit has no value to the holders of Units of Beneficial Interest. The restricted deposit is excluded from the determination of net loss in the tax basis statement of operations, but is reflected in the determination of net loss for accounting principles generally accepted in the United States of America, reflecting an entity in liquidation ("GAAPLIQ").

Note 7 - Differences between Federal Income Tax Reporting Principles and Accounting Principles Generally Accepted in the United States of America, Reflecting an Entity in Liquidation

These financial statements have been prepared in accordance with Federal Income Tax Reporting Principles ("FITR") which differ in certain respects from those principles and practices that the Trust would have followed had its financial statements been prepared in accordance with accounting principles generally accepted in the United States of America, reflecting an entity in liquidation ("GAAPLIQ").
The material differences between FITR and GAAPLIQ, which are relevant to the Trust's Statement of Operations, Balance Sheet, Statement of Cash Flows and Statement of Changes in Trust Equity are summarized as follows:
		a.   Accounting for Investment Securities
	For GAAPLIQ, all of the Trust's securities were reflected at net realizable value; thus, the reversal of the excess of fair market value over amortized cost of investment securities is recognized through income.
		b.   Accounting for Prepaid Expenses
	For FITR, no expenses have been recorded as prepaid. For GAAPLIQ, a prepaid asset is recognized at each period end for a ratable portion of expenses that relate to subsequent periods. For FITR, all known liabilities have been paid including the transfer of the final cash distribution to the transfer agent, payable to Unit Holders on April 18, 2006. For GAAPLIQ, the transfer of the final cash distribution to the transfer agent is shown as a deposit with transfer agent for cash distribution. For GAAPLIQ, the restricted deposit for a charitable remainder expense reserve is to provide for possible future expenses after the final distribution was declared with the remainder to be transferred to the University of Southern California. See Note 6.
		c.   Accounting for Mortgage Receivable and Mortgage Interest Receivable
	Upon the sale of the Texas City Property in the year 2000, a Mortgage Receivable was recorded. For FITR, the income, net of collection expenses, attributable to the five annual installment amounts is recorded when the principal and interest are collected. For GAAPLIQ, the full gain on the sale attributable to the Texas City Property would have been recognized in the year 2000. The Texas City Mortgage was fully paid when the fifth annual installment was received.
		d.   Accounting for Accrued Liabilities
	For GAAPLIQ, accrued liabilities are recognized as a liability in the period the assets are purchased or the services are incurred. For FITR, all known liabilities have been paid including the transfer of the final cash distribution to the transfer agent for payment to Unit Holders. For GAAPLIQ, the transfer of the final cash distribution to the transfer agent on March 20, 2006 is shown as an accrued liability as the payment date is April 18, 2006. See Note 6.

e.   The effect of the different treatments described above on the Trust's financial statements would be as follows:

(Amounts in thousands, except per unit data)
Net loss per Federal Income Tax Reporting Principles (FITR)	$(173)
To adjust from FITR to accounting principles generally accepted in the United States of America, reflecting an entity in liquidation (GAAPLIQ):
Losses on dispositions of assets, net	(166)
Interest, dividend and other income	(85)
Administrative expenses	(293)
Adjustments from FITR to GAAPLIQ	(544)
Net loss for the period per GAAPLIQ	$(717)
Net loss per unit per GAAPLIQ	$(.02)

($ in thousands)
Total assets per Federal Income Tax Reporting Principles (FITR)	$224
To adjust from FITR to accounting principles generally accepted in the United States of America, reflecting an entity in liquidation (GAAPLIQ):
Deposit with transfer agent for cash distribution	4,521
Total assets per GAAPLIQ	$4,745
Total liabilities per Federal Income Tax Reporting Principles (FITR)	$224
To adjust from FITR to GAAPLIQ:
Distribution payable	$4,521
Total liabilities per GAAPLIQ	$4,745
Trust equity per Federal Income Tax Reporting Principles (FITR)	$0
To adjust from FITR to GAAPLIQ:
Adjustments from FITR to GAAPLIQ	(544)
Restricted deposit for charitable remainder expense reserve	224
Adjustments for prior periods for GAAPLIQ	320
Trust equity per GAAPLIQ	$0

($ in thousands)
Cash flows from operating activities:
Net loss per Federal Income Tax Reporting Principles (FITR)	$(173)
Cash flows from operating activities per accounting principles   generally accepted in the United States of America, reflecting   an entity in liquidation (GAAPLIQ):	(544)
Adjustments to reconcile net loss to net cash   provided by/(used for) operating activities to GAAPLIQ:
2005 accrued interest income collected on investment securities	50
2006 amortization of premium of investment securities	(15)
Other	(2)
Changes in other assets and liabilities
2005 prepaid expenses deducted in 2006	72
2005 mortgage interest receivable collected in 2006	34
2005 accrued liabilities paid in 2006	(17)
Other	3
Net cash used for operating activities in GAAPLIQ	(592)
Cash flows from investing activities:
Maturities/sales of investment securities	5,824
Purchases of investment securities	(1,603)
Proceeds from sale of real estate	685
Net cash provided by investing activities	4,906
Cash flows from financing activities:
Cash distribution to Unit Holders	(4,521)
Net cash used for financing activities	(4,521)
Net decrease in cash and cash equivalents	(207)
Cash and cash equivalents at beginning of year	207
Cash and cash equivalents (unrestricted) at end of period	$0

($ in thousands)
Balance at beginning of year per Federal Income Tax Reporting Principles (FITR):	$4,918
Net loss per GAAPLIQ	(717)
Cash distribution to Unit Holders	(4,521)
Adjustments for prior periods for GAAPLIQ	320
Balance at March 31, 2006	$0