SNYDER STRYPES TRUST
FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 1998 AND THE
PERIOD SEPTEMBER 24, 1997 (COMMENCEMENT OF
OPERATIONS) TO DECEMBER 31, 1997, AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT..................................................1
FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1998 AND THE PERIOD SEPTEMBER 24, 1997
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997:
Statement of Net Assets..............................................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
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Snyder STRYPES Trust:
We have audited the accompanying statement of net assets, including the
schedule of investments, of Snyder STRYPES Trust as of December 31, 1998, the
related statement of operations for the year then ended and statements of
changes in net assets and the financial highlights for the year ended December
31, 1998 and the period September 24, 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, 1998 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 Snyder STRYPES
Trust as of December 31, 1998, 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.
Deloitte & Touche LLP
Princeton, New Jersey
July 6, 1999
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3
SNYDER STRYPES TRUST
STATEMENT OF NET ASSETS
December 31, 1998
ASSETS
Investments, at value (amortized cost $121,167,847)
(Notes 2, 4, and 8) $160,417,842
Cash 5,214
------------
TOTAL ASSETS $160,423,056
============
NET ASSETS $160,423,056
============
COMPOSITION OF NET ASSETS
Structured Yield Product Exchangeable for Stock
("STRYPES"), no par value; $120,023,148
5,175,000 shares issued and outstanding (Note 9)
Net unrealized appreciation of investments 39,249,995
Undistributed net investment income 1,149,913
----------
NET ASSETS $160,423,056
=============
NET ASSET VALUE PER STRYPES $ 31.00
==============
See Notes to Financial Statements.
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SNYDER STRYPES TRUST
SCHEDULE OF INVESTMENTS
December 31, 1998
<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 $2,170,000 02/15/99 $2,158,391 $2,154,718
United States Treasury Strips 2,170,000 05/15/99 2,134,173 2,124,844
United States Treasury Strips 2,170,000 08/15/99 2,110,477 2,094,604
United States Treasury Strips 2,170,000 11/15/99 2,086,932 2,063,538
United States Treasury Strips 2,170,000 02/15/00 2,063,019 2,033,835
United States Treasury Strips 2,170,000 05/15/00 2,039,258 2,004,734
United States Treasury Strips 2,170,000 08/15/00 2,016,407 1,974,940
United States Treasury Strips 2,170,000 11/15/00 1,993,991 1,945,688
--------- --------- ---------
$17,360,000 $16,602,648 $16,396,901
=========== =========== ===========
FORWARD PURCHASE CONTRACT:
Snyder Communications, Inc. Common
Stock Forward Purchase Agreement 11/15/00 143,815,194 104,770,946
----------- -----------
TOTAL $160,417,842 $121,167,847
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
SNYDER STRYPES TRUST
STATEMENT OF OPERATIONS
December 31, 1998
ACCRETION OF ORIGINAL ISSUE DISCOUNT $1,147,710
EXPENSES:
Administrative fees and expenses $36,531
Legal fees 27,002
Accounting fees 28,273
Mailing expense 14,295
Trustees fees (Note 5) 11,436
Other expenses 12,470
-------
TOTAL FEES AND EXPENSES 130,007
EXPENSE REIMBURSEMENT (Note 7) (130,007)
TOTAL EXPENSES - NET -
------------
NET INVESTMENT INCOME 1,147,710
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS (7,985,820)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $(6,838,110)
============
See Notes to Financial Statements.
<PAGE>
SNYDER STRYPES TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR SEPTEMBER 24, 1997
ENDED DECEMBER 31, (COMMENCEMENT OF
1998 OPERATIONS) TO
DECEMBER 31, 1997
OPERATIONS
<S> <C> <C>
Net investment income $1,147,710 $ 368,976
Net change in unrealized appreciation of investments (7,985,820) 47,235,815
----------- ----------
NET INCREASE IN NET ASSETS FROM OPERATIONS (6,838,110) 47,604,791
----------- ----------
DIVIDENDS AND DISTRIBUTIONS:
Net investment income (357,542) (9,231)
Return of capital (8,325,073) (1,220,866)
- --------------------------------------------------------------------------------------- ---------------------- --------------------
NET DECREASE IN NET ASSETS FROM DIVIDENDS AND DISTRIBUTIONS (8,682,615) (1,230,097)
- --------------------------------------------------------------------------------------- ---------------------- --------------------
INCREASE IN NET ASSETS FROM CAPITAL SHARES TRANSACTIONS (NOTE 9):
Gross proceeds from the sale of 5,174,997 STRYPES -- 133,579,610
Less:
Selling commissions -- (4,010,623)
- --------------------------------------------------------------------------------------- ---------------------- --------------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARES TRANSACTIONS -- 129,568,987
- --------------------------------------------------------------------------------------- ---------------------- --------------------
TOTAL (DECREASE) INCREASE IN NET ASSETS FOR THE PERIOD (15,520,725) 175,943,681
NET ASSETS, BEGINNING OF PERIOD 175,943,781 100
======================================================================================= ====================== =====================
NET ASSETS, END OF PERIOD $160,423,056 $175,943,781
======================================================================================= ====================== =====================
See Notes to Financial Statements.
</TABLE>
<PAGE>
SNYDER STRYPES TRUST
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998 AND THE PERIOD SEPTEMBER 24, 1997
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997
NOTE 1. ORGANIZATION
Snyder STRYPES Trust ("Trust") was established on August 5, 1997 and
is registered as a non-diversified, closed-end management investment
company under the Investment Company Act of 1940 (the "Act"). In
September 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
shares of common stock of Snyder Communications, Inc. ("Snyder") with
certain existing shareholders of Snyder ("Contracting Stockholders").
The shares are 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
(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
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
NOTE 3. DISTRIBUTIONS AND DIVIDENDS
STRYPES holders are entitled to receive distributions from the
maturity of U.S. Treasury Strips of $1.6778 per annum or $0.41945 per
quarter (except for the first distribution on November 15, 1997 which
was $0.2377).
Distributions are payable quarterly and commenced November 15, 1997.
NOTE 4. PURCHASES AND SALES OF INVESTMENTS
Maturities of U.S. Treasury Strips totaled $8,680,000 and $1,229,000
for the year ended December 31,1998 and the period ended December 31,
1997, respectively. There were no sales of such investments during
either period. Purchase of U.S. Treasury Strips and the forward
purchase contract during the year ended December 31, 1998 and the
period ended December 31, 1997, totaled $24,789,215 and $104,770,946,
respectively.
NOTE 5. TRUSTEES FEES
Each of the three Trustees was 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 on a straight-line basis over
the life of the Trust. For the year ended December 31, 1998, the
Trust had expensed $14,538 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, 1998, gross unrealized appreciation and
depreciation of investments, based on amortized cost for Federal
income tax purposes, aggregated $39,249,995 and $0, respectively. The
amortized cost of investment securities for Federal income tax
purposes was $121,167,847 at December 31, 1998.
NOTE 7. EXPENSES
The estimated expenses to be incurred by the Trust in connection with
the offering of the STRYPES and its ongoing operations are $818,061.
Of this amount, $395,000 represents offering expenses ($385,000) 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, 1998, the Administrator
had paid $186,725 relating to such expenses. The remaining amount of
$423,061 represents a prepayment of estimated administrative and
other operating expenses. 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 $423,061 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, 1998, $232,670 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.
NOTE 8. FORWARD PURCHASE CONTRACT
On September 18, 1997, the Trust entered into a forward purchase
contract with certain existing shareholders of Snyder (the
"Contracting Stockholders") and paid to the Contracting Stockholders
$104,770,946 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 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
0.8333 shares and 1.00 shares of common stock. See the Trust's
original prospectus dated September 18, 1997 for the formula upon
which such exchange will be determined.
The forward purchase contract held by the Trust at December 31, 1998
is as follows:
<TABLE>
<CAPTION>
Exchange Cost of Contract Unrealized
Date Contract Value Appreciation
- --------------------------------------------- ----------------- ------------------ ------------------ ------------------
Snyder Communications, Inc. Common
<S> <C> <C> <C> <C>
Stock Forward Purchase Agreement 11/15/00 $104,770,946 $143,815,194 39,044,248
============================================= ================= ================== ================== ==================
</TABLE>
The Sellers' obligations under the forward purchase contract are
collateralized by shares of Snyder common stock which are being held
in the custody of the Trust's Custodian, The Bank of New York. At
December 31, 1998, the Custodian held 5,175,000 shares with an
aggregate value of $174,656,250.
NOTE 9. CAPITAL SHARE TRANSACTIONS
On September 12, 1997 one STRYPES was sold to one of the underwriters
of the STRYPES 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 5,174,997 STRYPES to the public and received net proceeds
of $129,568,987 ($133,579,610 less sales commission of $4,010,623).
As of December 31, 1998 and 1997, there were 5,175,000 STRYPES issued
and outstanding with an aggregate cost, net of sales commission and
return of capital, of $120,023,148 and $124,126,784, respectively.
<PAGE>
SNYDER 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>
For the Period
September 24, 1997
Year (Commencement of
Ended Operations) to
December 31, 1998 December 31, 1997
PER SHARE OPERATING PERFORMANCE FOR A STRYPES
OUTSTANDING THROUGHOUT THE PERIOD
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Investment income - net $0.22 $ 0.07
Dividends and distributions from income (0.07) 0.00
Return of capital (1.61) (0.24)
Unrealized (loss) gain on investments (1.54) 9.13
-------------------------- --------------------------
Net (decrease) increase in net asset value (3.00) 8.96
Beginning net asset value 34.00 25.04
--------------------------
--------------------------
Ending net asset value $31.00 $ 34.00
==========================
==========================
Ending market value $31.00 $ 34.00
========================== ==========================
TOTAL INVESTMENT RETURN BASED ON MARKET VALUE (4.46)% 32.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets
Before reimbursement 0.07% 0.09% (1)
After reimbursement 0.00% 0.00% (1)
Ratio of net investments income to average net assets
Before reimbursement 0.57% 0.80% (1)
After reimbursement 0.64% 0.89% (1)
Net assets, end of period (in thousands) $160,423 $ 175,944
(1) Annualized
</TABLE>
