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Nextel STRYPES Trust
Financial Statements for the
Year Ended December 31, 1999 and
Independent Auditors' Report
NEXTEL STRYPES TRUST
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1999:
Statement of Net Assets 2
Schedule of Investments 3
Statement of Operations 4
Statements of Changes in Net Assets 5
Notes to Financial Statements 6-8
Financial Highlights 9
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Nextel STRYPES Trust:
We have audited the accompanying statement of net assets, including the
schedule of investments, of Nextel STRYPES Trust as of December 31, 1999, the
related statement of operations for the year then ended and statements of
changes in net assets for each of the years in the two year period then ended
and the financial highlights for each of the years in the two year period
ended December 31, 1999 and the period March 10, 1997 (commencement of
operations) to December 31, 1997. These financial statements and the financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
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 the
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 securities
owned at December 31, 1999 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Nextel STRYPES
Trust as of December 31, 1999, the results of its operations, the changes in
its net assets, and the financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
March 24, 2000
NEXTEL STRYPES TRUST
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
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ASSETS:
Investments, at value (amortized cost $80,083,928)
(Notes 2, 4 and 8) $ 645,821,769
Cash 1,743
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TOTAL ASSETS $645,823,512
LIABILITIES:
Accounts Payable 60
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NET ASSETS $645,823,452
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COMPOSITION OF NET ASSETS:
Structured Yield Product Exchangeable for Stock(SM) ("STRYPES"),
no par value; 7,175,731 shares issued and outstanding
(Note 9) $ 79,519,997
Net unrealized appreciation of investments 565,737,841
Undistributed net investment income 565,614
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NET ASSETS $645,823,452
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NET ASSET VALUE PER STRYPES $ 90.00
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NEXTEL STRYPES TRUST
SCHEDULE OF INVESTMENTS
YEAR ENDED DECEMBER 31, 1999
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<TABLE>
<CAPTION>
Par Maturity Market Amortized
Securities Description Value Date Value Cost
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT
SECURITIES:
United States Treasury Strips $ 1,820,000 02/15/00 $ 1,808,680 $ 1,806,027
United States Treasury Strips 1,820,000 05/15/00 1,785,165 1,779,094
----------- --------- ---------
$ 3,640,000 3,593,845 3,585,121
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FORWARD PURCHASE CONTRACT:
Nextel Communications, Inc. Common
Stock Forward Purchase Agreement 05/15/00 642,227,924 76,498,807
----------- ----------
TOTAL $645,821,769 $80,083,928
============ ===========
</TABLE>
See notes to financial statements.
NEXTEL STRYPES TRUST
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
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<TABLE>
<CAPTION>
<S> <C> <C>
ACCRETION OF ORIGINAL ISSUE DISCOUNT $ 427,072
EXPENSES:
Administrative fees and expenses $ 43,185
Legal fees 5,335
Accounting fees 20,400
Trustees' fees (Note 5) 11,298
Other expenses 21,969
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Total fees and expenses 102,187
EXPENSE REIMBURSEMENT (Note 7) (102,187)
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Total expenses - net -
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NET INVESTMENT INCOME 427,072
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENTS 505,568,278
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NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 505,995,350
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</TABLE>
See notes to financial statements.
NEXTEL STRYPES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1999 and 1998
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<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1999 1998
<S> <C> <C>
OPERATIONS:
Net investment income $ 427,072 $ 818,246
Net change in unrealized appreciation (depreciation) of investments 505,568,278 (16,849,768)
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Net increase (decrease) in
net assets from operations 505,995,350 (16,031,522)
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DIVIDENDS AND DISTRIBUTIONS:
Net investment income (943,670) (528,528)
Return of capital (6,339,697) (6,754,839)
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Net decrease in net assets from dividends and distributions (7,283,367) (7,283,367)
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TOTAL INCREASE (DECREASE) IN NET ASSETS
FOR THE YEAR 498,711,983 (23,314,889)
NET ASSETS, BEGINNING OF YEAR 147,111,469 170,426,358
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NET ASSETS, END OF YEAR $645,823,452 $147,111,469
============ =============
</TABLE>
See notes to financial statements.
NEXTEL STRYPES TRUST
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
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1. ORGANIZATION
Nextel Strypes Trust (the "Trust") was established on October 25, 1995
and is registered as a nondiversified closed-end management investment
company under the Investment Company Act of 1940 (the "Act"). In March
1997, the Trust sold Structured Yield Product Exchangeable for StockSM
("STRYPES") to the public pursuant to a Registration Statement on Form
N-2 under the Securities Act of 1933 and the Act. The Trust used the
proceeds to purchase a portfolio comprised of stripped U.S. Treasury
securities and a forward purchase contract for shares of common stock of
Nextel Communications, Inc. ("Nextel"), a Delaware corporation, with
certain existing shareholders of Nextel ("Contracting Stockholders").
The shares are deliverable pursuant to the contract on May 15, 2000 and
the Trust will thereafter terminate.
Pursuant to the Administration Agreement between the Trust and The Bank
of New York (the "Administrator"), the Trustees have delegated to the
Administrator the administrative duties with respect to the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies
followed by the Trust, which are in conformity with generally accepted
accounting principles.
Valuation of Investments - The U.S. Treasury Strips are valued at the
mean of the bid and ask price at the close of the period. Amortized cost
is calculated using the effective interest method. The forward purchase
contract is valued at the mean of the bid prices received by the Trust
at the end of each period from two independent broker-dealer firms
unaffiliated with the Trust who are in the business of making bids on
financial instruments similar to the contract and with terms comparable
thereto.
Investment Transactions - Securities transactions are accounted for as
of the date the securities are purchased and sold (trade date). Interest
income (including amortization of discount) is recognized on the accrual
basis. Realized gains and losses are accounted for on the specific
identification method.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income
and expenses during the reporting period. Actual results could differ
from those estimates.
3. DIVIDENDS AND DISTRIBUTIONS
STRYPES holders are entitled to receive distributions from the maturity
of U.S. Treasury Strips of $1.015 per annum or $0.25375 per quarter
(except for the first distribution on November 15, 1997 which was
$0.1833). Distributions are payable quarterly and commenced November 15,
1997.
4. PURCHASES AND SALES OF INVESTMENTS
Maturities of U.S. Treasury Strips for the years ended December 31, 1999
and 1998 totaled $7,280,000 and $7,280,000, respectively. There were no
sales of such investments during either period. Purchases of U.S.
Treasury Strips and the forward purchase contract during the period ended
December 31, 1997, totaled $20,940,192 and $76,498,807, respectively.
5. TRUSTEES FEES
Each of the three Trustees was paid a one-time, upfront fee of $10,800
for the services during the life of the Trust. In addition, the Managing
Trustee was paid an additional one-time, upfront fee of $3,600 for
serving in such capacity. The total fees paid to the Trustees of $36,000
are being expensed on a straight-line basis over the life of the Trust.
As of December 31, 1999, the Trust had expensed $31,790 of such fees.
6. INCOME TAXES
The Trust is not an association taxable as a corporation for Federal
income tax purposes; accordingly, no provision is required for such
taxes.
As of December 31, 1999, gross unrealized appreciation and depreciation
of investments, based on amortized cost for Federal income tax purposes,
aggregated $565,737,841 and $0, respectively. The amortized cost of
investment securities for Federal income tax purposes was $80,083,928 at
December 31, 1999.
7. EXPENSES
The estimated expenses to be incurred by the Trust in connection with
the offering of the STRYPES and its ongoing operations is $687,117. Of
this amount, $361,517 represents offering expenses ($351,517) and
organizational expenses ($10,000) incurred by the Trust. All of these
expenses are being paid from cash received by the Administrator from the
Contracting Stockholders. At December 31, 1999, the Administrator had
paid $291,358 relating to such expenses. The remaining amount of
$325,600 represents a prepayment of estimated administrative and other
operating expenses of the Trust. Such amount was paid to the
Administrator by the Contracting Stockholders. Expenses incurred in
excess of this amount will be paid by the Contracting Stockholders.
Cash received by the Administrator from the Contracting Stockholders of
$325,600 for the payment of administrative and related operating
expenses of the Trust has not been included in the Trust's financial
statements since the amount does not represent Trust property. At
December 31, 1999, $247,140 had been paid by the Administrator for
current and prepaid administrative and related operating expenses. All
administrative and related operating expenses incurred by the Trust are
reflected in the Trust's financial statements net of amounts reimbursed.
8. FORWARD PURCHASE CONTRACT
On March 10, 1997, the Trust entered into a forward purchase contract
with certain existing stockholders of Nextel (the "Contracting
Stockholders") and paid to the Contracting Stockholders $76,498,807 in
connection therewith. Pursuant to such contract, the Contracting
Stockholders are obligated to deliver to the Trust a specified number of
shares of common stock on May 15, 2000 (the "Exchange Date") so as to
permit the holders of the STRYPES to exchange on the Exchange Date each
of their STRYPES for between 0.8403 shares and 1.00 share of common
stock. See the Trust's original prospectus dated March 4, 1997 for the
formula upon which such exchange will be determined.
The forward purchase contract held by the Trust at December 31, 1999 is
as follows:
<TABLE>
<CAPTION>
Exchange Cost of Contract Unrealized
Date Contract Value Appreciation
<S> <C> <C> <C> <C>
Nextel Communications, Inc.
Common Stock Forward
Purchase Agreement 05/15/00 $76,498,807 $642,227,924 $ 565,729,117
=========== ============ =============
</TABLE>
The Sellers' obligations under the forward purchase contract are
collateralized by shares of Nextel common stock which are being held in
custody of the Trust's custodian, The Bank of New York. At December 31,
1999, the custodian held 7,175,731 shares with an aggregate value of
$739,997,259.
9. CAPITAL SHARE TRANSACTIONS
On February 26, 1997 two STRYPES were sold to two of the underwriters of
the STRYPES for $100,000 ($50,000 per STRYPES). As a result of a stock
split effected immediately prior to the public offering of the STRYPES,
these two STRYPES were converted into 7,144 STRYPES. During the offering
period, the Trust sold 7,168,587 STRYPES to the public and received net
proceeds of $97,349,411 ($100,360,218 net of sales commission of
$3,010,807). As of December 31, 1999, there were 7,175,731 STRYPES
issued and outstanding with an aggregate cost, net of sales commissions,
and return of capital, of $79,519,997.
******
NEXTEL STRYPES TRUST
FINANCIAL HIGHLIGHTS
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The Trust's financial highlights are presented below. The per share operating
performance data is designed to allow investors to trace the operating
performance, on a per share basis, from the Trust's beginning net asset value
to the ending net asset value so that they can understand what effect the
individual items have on their investment assuming it was held throughout the
period. Generally, the per share amounts are derived by converting the actual
dollar amounts incurred for each item as disclosed in the financial statements
to their equivalent per share amounts.
The total return based on market value measures the Trust's performance
assuming investors purchased shares at market value as of the beginning of the
period, reinvested dividends and other distributions at market value, and then
sold their shares at the market value per share on the last day of the period.
The total return computations do not reflect any sales charges investors may
incur in purchasing or selling shares of the Trust. The total return for a
period of less than one year is not annualized.
<TABLE>
<CAPTION>
For the Period
March 10, 1997
(Commencement
Year Ended Year Ended of Operations) to
December 31, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C>
Per share operating performance for a STRYPES
outstanding throughout the period:
Investment income - net $ 0.06 $ 0.11 $ 0.13
Dividends and distributions from income (0.13) (0.07) (0.02)
Return of capital (0.88) (0.94) (0.67)
Unrealized gain (loss) on investments 70.45 (2.35) 10.73
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Net increase (decrease) in net asset value 69.50 (3.25) 10.17
Beginning net asset value 20.50 23.75 13.58
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Ending net asset value $90.00 $ 20.50 $ 23.75
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Ending market value $ 90.00 $ 20.50 $ 23.75
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Total investment return based on market value 339.02 % (9.71)% 75.57 %
Ratios/Supplemental data:
Ratio of expenses to average net assets:
Before reimbursement 0.03 % 0.06 % 0.08 %(1)
After reimbursement 0.00 0.00 0.00 (1)
Ratio of net investment income to average net assets:
Before reimbursement 0.09 0.45 0.75 (1)
After reimbursement 0.12 0.52 0.83 (1)
Net assets, end of period (in thousands) $645,823 $147,111 $ 170,426
(1)Annualized
</TABLE>
