WBK STRYPES TRUST
FINANCIAL REPORT
JUNE 30, 1999
(Unaudited)
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CONTENTS
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FINANCIAL STATEMENTS
Statement of assets and liabilities 1
Schedule of investments 2
Statement of operations 3
Statements of changes in net assets 4
Notes to financial statements 5-7
Financial highlights 8
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WBK STRYPES TRUST
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
(Unaudited)
<CAPTION>
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<S> <C>
ASSETS
Investments, at value (amortized cost $854,377,302) (Notes 2, 4, and 8) $ 1,063,202,879
Cash 519,050
Deferred organizational costs, net of
accumulated amortization of $7,794 (Note 2) 6,206
----------------------
Total Assets $ 1,063,728,135
LIABILITIES
Accounts payable and accrued expenses 318,190
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Net Assets $ 1,063,409,945
======================
COMPOSITION OF NET ASSETS
Structured Yield Product Exchangeable for StockSM ("STRYPES"),
no par value; 32,840,000 shares issued and outstanding (Note 9) $ 840,771,781
Net unrealized appreciation of investments 208,825,577
Undistributed net investment income 13,812,587
----------------------
Net Assets $ 1,063,409,945
======================
Net Asset Value per STRYPES $ 32.38
======================
See Notes to Financial Statements.
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WBK STRYPES TRUST
SCHEDULE OF INVESTMENTS
June 30, 1999
(Unaudited)
<CAPTION>
Par Maturity Market Amortized
Securities Description Value Date Value Cost
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<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT
SECURITIES:
United States Treasury Strips $ 25,737,000 08/15/99 $ 25,588,755 $ 25,551,687
United States Treasury Strips 25,737,000 11/15/99 25,279,653 25,183,067
United States Treasury Strips 25,737,000 02/15/00 24,953,986 24,817,871
United States Treasury Strips 25,737,000 05/15/00 24,622,321 24,469,576
United States Treasury Strips 25,737,000 08/15/00 24,256,194 24,107,532
United States Treasury Strips 25,737,000 11/15/00 23,915,850 23,751,282
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$ 154,422,000 148,616,759 147,881,015
================
FORWARD PURCHASE CONTRACT:
Westpac Banking Corporation Ordinary
Shares Forward Purchase Agreement 11/15/00 914,586,120 706,496,287
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Total $ 1,063,202,879 $ 854,377,302
========================================
See Notes to Financial Statements.
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WBK STRYPES TRUST
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(Unaudited)
<CAPTION>
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<S> <C> <C>
ACCRETION OF ORIGINAL ISSUE DISCOUNT $ 4,892,870
EXPENSES:
Administrative fees and expenses $ 18,307
Legal fees 13,531
Accounting fees 14,168
Mailing expense 7,164
Trustees fees (Note 5) 5,731
Other expenses 10,324
Amortization of deferred organizational costs 2,229
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Total fees and expenses 71,454
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Net Investment Income 4,821,416
Net increase in unrealized appreciation
of investments 73,222,742
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Net increase in net assets resulting from operations $ 78,044,158
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See Notes to Financial Statements.
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WBK STRYPES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1999 and the Year Ended December 31, 1998
(Unaudited)
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1999 1998
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<S> <C> <C>
OPERATIONS
Net investment income $ 4,821,416 $ 13,514,431
Unrealized appreciation of investments 73,222,742 25,845,378
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Net increase in net assets from operations 78,044,158 39,359,809
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DISTRIBUTIONS
Net investment income (4,161,872) (4,086,310)
Return of capital (47,314,828) (98,867,090)
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Net decrease in net assets from distributions (51,476,700) (102,953,400)
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Total increase (decrease) in net assets for the
period 26,567,458 (63,593,591)
Net assets, beginning of period 1,036,842,487 1,100,436,078
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Net assets, end of period $ 1,063,409,945 $ 1,036,842,487
========================================
See Notes to Financial Statements.
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WBK STRYPES TRUST
STATEMENT OF OPERATIONS
(UNAUDITED)
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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 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 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 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 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 on a straight-line
basis over the life of the Trust beginning at the commencement of
operations of the Trust, in accordance with Statement of Position 98-5.
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
Maturities of U.S. Treasury Strips for the six months ended June 30, 1999 and
the year ended December 31, 1998 totaled $51,474,000 and $102,948,000,
respectively. There were no sales of investments during either period.
Purchases of the forward purchase contract and the U.S. Treasury strips during
the period ended December 31, 1997 totaled $706,496,287 and $291,080,565,
respectively.
Note 5. Trustees Fees
Each of the three Trustees were paid a one-time, up front fee of $10,800 for
the services during the life of the Trust. In addition, the Managing Trustee
was paid an additional one-time, up front fee of $3,600 for serving in such
capacity. The total fees paid to the Trustees of $36,000 is being expensed
over the life of the Trust. As of June 30, 1999, the Trust had expensed
$20,042 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 June 30, 1999, net unrealized appreciation of investments, based on
amortized cost for Federal income tax purposes, aggregated $208,825,577,
consisting of gross unrealized appreciation of $208,825,577 and gross
unrealized depreciation of $0. The amortized cost of investment securities for
Federal income tax purposes was $854,377,302 at June 30, 1999.
Note 7. Expenses
The estimated expenses to be incurred by the Trust in connection with the
offering of the STRYPES and its ongoing operations is $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 by the Contracting
Stockholder. As of June 30, 1999, the Trust had paid $344,702 relating to
offering and organizational expenses. In addition, $182,417 had been paid by
the Trust for current and prepaid administrative and other operating expenses.
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WBK STRYPES TRUST
STATEMENT OF OPERATIONS
(UNAUDITED)
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Note 8. Forward Purchase Contract
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 June 30, 1999 is as
follows:
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<CAPTION>
Exchange Cost of Contract Unrealized
Date Contract Value Appreciation
-------------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Westpac Banking Corporation
Ordinary Shares Forward
Purchase Agreement 11/15/00 $ 706,496,287 $ 914,586,120 $ 208,089,833
=================== =================== ====================
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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 June 30,
1999 there were 32,840,000 STRYPES issued and outstanding with an aggregate
cost, net of sales commissions, offering costs and return of capital, of
$840,771,781.
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WBK STRYPES TRUST
FINANCIAL HIGHLIGHTS
(UNAUDITED)
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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
period of less than one year is not annualized.
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<CAPTION>
October 6, 1997
(Commencement
Six Months Year Ended of Operations) to
Ended December 31, December 31,
June 30, 1999 1998 1997
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<S> <C> <C> <C>
Per share operating performance for a
STRYPE outstanding
throughout the period
Investment income $ 0.15 $ 0.41 $ 0.12
Expenses (0.00) (0.00) (0.00)
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Investment income - net 0.15 0.41 0.12
Adjustments to capital (offering expenses) 0.00 0.00 (0.02)
Distributions from income (0.13) (0.13) (0.00)
Return of capital (1.44) (3.01) (0.34)
Unrealized gain on investments 2.23 0.79 3.34
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Net increase (decrease) in net asset value 0.81 (1.94) 3.10
Beginning net asset value 31.57 33.51 30.41
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Ending net asset value 32.38 31.57 $ 33.51
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Ending market value 32.38 31.56 $ 33.50
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Total investment return based on market value 7.61% 4.07% 7.96%
Ratios/Supplemental data:
Ratio of expenses to average net assets (1) .01% .01% .01%
Ratio of net investment income to average net assets(1) .91% 1.28% 1.50%
Net assets, end of period (in thousands) $ 1,063,410 $ 1,036,842 $ 1,100,436
(1) Annualized for periods less than one year
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