WBK STRYPES TRUST
FINANCIAL REPORT
DECEMBER 31, 1997
CONTENTS
ACCOUNTANTS' REPORT..........................................................1
FINANCIAL STATEMENTS:
Statement of assets and liabilities.................................2
Schedule of investments.............................................3
Statement of operations.............................................4
Statement of changes in net assets..................................5
Notes to financial statements.....................................6-8
Financial highlights................................................9
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
WBK STRYPES Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of WBK STRYPES Trust as of December 31, 1997, the
related statements of operations and changes in net assets, and the financial
highlights for the period October 6, 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 audit.
We conducted our audit 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, 1997 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 audit provides 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 WBK STRYPES Trust
as of December 31, 1997, the results of its operations, the changes in its net
assets, and the financial highlights for the period October 6, 1997 to December
31, 1997 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche llp
Princeton, New Jersey
June 23, 1998
WBK STRYPES TRUST
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments, at value (amortized cost $990,247,909) (Notes 2, 4, and 8) $1,100,005,367
Cash 810,623
Prepaid expenses 58,312
Deferred organizational costs, net of accumulated amortization of $1,071 (Note 2) 12,929
Total Assets 1,100,887,231
LIABILITIES
Accounts payable and accrued expenses 451,153
Net Assets $1,100,436,078
COMPOSITION OF NET ASSETS
Structured Yield Product Exchangeable for Stock ("STRYPES"), no par value; $986,953,699
32,840,000 shares issued and outstanding (Note 9)
Unrealized appreciation of investments 109,757,458
Undistributed net investment income 3,724,921
Net Assets $1,100,436,078
Net Asset Value per STRYPES $ 33.51
See Notes to Financial Statements.
</TABLE>
WBK STRYPES TRUST
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
Par Maturity Market Amortized
Securities Description Value Date Value Cost
UNITED STATES GOVERNMENT
SECURITIES:
<S> <C> <C> <C> <C>
United States Treasury Strips $25,737,000 2/15/98 $25,563,275 $25,563,426
United States Treasury Strips 25,737,000 5/15/98 25,230,753 25,223,093
United States Treasury Strips 25,737,000 8/15/98 24,870,435 24,861,021
United States Treasury Strips 25,737,000 11/15/98 24,531,994 24,503,794
United States Treasury Strips 25,737,000 2/15/99 24,181,970 24,150,803
United States Treasury Strips 25,737,000 5/15/99 23,844,301 23,798,971
United States Treasury Strips 25,737,000 8/15/99 23,510,750 23,451,402
United States Treasury Strips 25,737,000 11/15/99 23,183,375 23,105,867
United States Treasury Strips 25,737,000 2/15/00 22,858,473 22,765,246
United States Treasury Strips 25,737,000 5/15/00 22,551,603 2,449,457
United States Treasury Strips 25,737,000 8/15/00 22,214,122 22,105,942
United States Treasury Strips 25,737,000 11/15/00 21,912,482 21,772,600
$308,884,000 $284,453,533 $283,751,622
FORWARD PURCHASE CONTRACT:
Westpac Banking Corporation Ordinary
Shares Forward Purchase Agreement 11/15/00 815,551,834 706,496,287
Total $1,100,005,367 $990,247,909
</TABLE>
See Notes to Financial Statements.
WBK STRYPES TRUST
STATEMENT OF OPERATIONS
For the period from October 6, 1997 (commencement of operations) to December
31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
ACCRETION OF ORIGINAL ISSUE DISCOUNT $3,824,057
EXPENSES:
Administrative fees and expenses 8,799
Legal fees 6,504
Accounting fees 6,810
Mailing expense 3,443
Trustees fees 2,755
Other expenses 4,963
Amortization of deferred organizational costs 1,071
Total fees and expenses 34,345
Net investment income 3,789,712
Net change in unrealized appreciation of investments 109,757,458
Net increase in net assets resulting from operations $113,547,170
</TABLE>
See Notes to Financial Statements.
WBK STRYPES TRUST
STATEMENT OF CHANGES IN NET ASSETS
For the period from October 6, 1997 (commencement of operations) to December
31, 1997
<TABLE>
<CAPTION>
<S> <C>
OPERATIONS $ 3,789,712
Net investment income 109,757,458
Unrealized appreciation of investments
- -------------------------------------------------------------------------------------- -----------------------------
Net increase in net assets from operations 113,547,170
DISTRIBUTIONS
Net investment income (64,791)
Return of capital (11,088,658)
- -------------------------------------------------------------------------------------- -----------------------------
Net decrease in net assets from distributions (11,153,449)
- -------------------------------------------------------------------------------------- -----------------------------
INCREASE IN NET ASSETS FROM CAPITAL SHARES TRANSACTIONS (Note 9): 1,029,533,906
Gross proceeds from the sale of 32,839,997 STRYPES
Less: (30,902,437)
Selling commissions (589,212)
Offering expenses
- -------------------------------------------------------------------------------------- -----------------------------
Net increase in net assets from capital shares transactions 998,042,257
- -------------------------------------------------------------------------------------- -----------------------------
Total increase in net assets for the period 1,100,435,978
Net assets, beginning of period 100
- -------------------------------------------------------------------------------------- -----------------------------
Net assets, end of period $ 1,100,436,078
</TABLE>
See Notes to Financial Statements.
WBK STRYPES TRUST
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization
WBK STRYPES Trust ("Trust") was established on March 14, 1996 and is registered
as a non-diversified, closed-end management investment company under the
Investment Company Act of 1940 (the "Act"). In October 1997, the Trust sold
Structured Yield Product Exchangeable for Stock ("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
Ordinary Shares ("Reference Property") of Westpac Banking Corporation
("Westpac"), an Australian corporation, with an existing shareholder of Westpac
("Contracting Stockholder"). The Reference Property is deliverable pursuant to
the contract on November 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.
Note 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 on a basis which approximates
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 is recorded as
earned and consists of accrual of discount. Unrealized 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Organizational Expenses
Organizational expenses of $14,000 are being amortized a straight-line basis
over the life of the Trust beginning at the commencement of operations of the
Trust.
Note 3. Distributions
STRYPES holders are entitled to receive distributions from the maturity of U.S.
Treasury Strips of $3.135 per annum or $0.78375 per quarter (except for the
first distribution on November 15, 1997 which was $0.33963).
Note 4. Purchases and Sales of Investments
Purchases and maturities of U.S. Treasury Strips for the period ended December
31, 1997 totaled $291,080,565 and $11,153,000, respectively. There were no
sales of such investments during the period. Purchase of the forward purchase
contract during the period totaled $706,496,287.
Note 5. Trustees Fees
Each of the three Trustees were paid a one-time, upfront fee of $10,800 for
their 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
over the life of the Trust. As of December 31, 1997, the Trust had expensed
$2,755 of such fees.
Note 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, 1997, net unrealized appreciation of investments aggregated
$109,757,458, consisting of gross unrealized appreciation of $109,757,609 and
gross unrealized depreciation of $151. The amortized cost of investment
securities for Federal income tax purposes was $990,247,909 at December 31,
1997.
Note 7. Expenses
The estimated expenses to be incurred in connection with the offering of the
STRYPES and its ongoing operations are $1,038,068. All expenses are being paid
from proceeds received from the offering of the STRYPES. Of this amount,
$603,212 represents offering expenses ($589,212) and organizational expenses
($14,000) incurred by the Trust. The remaining amount of $434,856 represents
estimated administrative and other operating expenses. Expenses incurred in
excess of this amount will be paid the Contracting Stockholder. At December 31,
1997, the Trust had paid $152,059 relating to offering and organizational
expenses. In addition, $91,856 had been paid by the Trust for current and
prepaid administrative and other operating expenses.
Note 8. Forward Purchase Contracts
On October 6, 1997, the Trust entered into a forward purchase contract with an
existing shareholder of Westpac (the "Contracting Stockholder") and paid to the
Contracting Stockholder $706,496,287, less $1,000,000 being held in escrow, in
connection therewith. Pursuant to such contract, the Contracting Stockholder is
obligated to deliver to the Trust a specified amount of the Reference Property
(initially defined as five Ordinary Shares) on November 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 89.68% and 100% of the Reference
Property. See the Trust's original prospectus dated September 30, 1997 for the
formula upon which such exchange will be determined.
The forward purchase contract held by the Trust at December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
Exchange Cost of Contract Unrealized
Date Contract Value Appreciation
- --------------------------------------------- ----------------- ------------------ ------------------ ------------------
Westpac Banking Corporation Ordinary Shares
<S> <C> <C> <C> <C>
Forward Purchase Agreement 5/15/00 $76,498,807 $ $
============================================= ================= ================== ================== ==================
</TABLE>
Note 9. Capital Share Transactions
On September 24, 1997 one STRYPES was sold to the underwriter of the Trust for
$100. As a result of a stock split effected immediately prior to the public
offering of the STRYPES, this STRYPES was converted into three STRYPES. During
the offering period, the Trust sold 32,839,997 STRYPES to the public and
received net proceeds of $998,042,257 ($1,029,533,906 less sales commissions of
$30,902,437 and offering costs of $589,212). As of December 31, 1997, there
were 32,840,000 STRYPES issued and outstanding with an aggregate cost, net of
sales commission, and return of capital, of $986,953,699.
WBK STRYPES TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
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 period
of less than one year is not annualized.
<TABLE>
<CAPTION>
October 6, 1997
(Commencement of
Operations) to
December 31, 1997
---------------------
Per Share Operating Performance (for a STRYPE outstanding throughout
the period)
<S> <C>
Investment income $ 0.12
Expenses 0.00
---------------------
Investment income - net 0.12
Adjustments to capital (offering expenses) (0.02)
Distribution from income 0.00
Return of capital (0.34)
Unrealized gain on investments 3.34
---------------------
Net increase in net asset value 3.10
Beginning net asset value 30.41
---------------------
Ending net asset value $ 33.51
=====================
Ending market value $ 33.50
=====================
Total investment return based on market value 7.96%
Ratios/Supplemental data
Ratio of expenses to average net assets (1) 0.01%
Ratio of net investments income to average net assets (1) 1.50%
Net assets, end of period (in thousands) $ 1,100,436
</TABLE>
(1) Annualized
