DOLLAR GENERAL STRYPES TRUST
FINANCIAL REPORT
JUNE 30, 1999
(UNAUDITED)
<PAGE>
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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DOLLAR GENERAL STRYPES TRUST
STATEMENT OF NET ASSETS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
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<S> <C>
Investments, at value (amortized cost $298,754,352) (Notes 2, 4, and 8) $ 361,937,150
Cash 6,930
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TOTAL ASSETS $ 361,944,080
====================
NET ASSETS $ 361,944,080
====================
COMPOSITION OF NET ASSETS
Structured Yield Product Exchangeable for Stock ("STRYPES") , $.10 par value;
8,417,002 shares issued and outstanding (Note 9) $ 295,661,758
Net unrealized appreciation of investments 63,182,798
Undistributed net investment income 3,099,524
--------------------
NET ASSETS $ 361,944,080
====================
NET ASSET VALUE PER STRYPES $ 43.00
====================
</TABLE>
See Notes to Financial Statements.
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DOLLAR GENERAL STRYPES TRUST
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<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 $ 7,053,000 08/15/99 $ 7,012,375 $ 7,004,262
United States Treasury Strips 7,053,000 11/15/99 6,926,399 6,908,366
United States Treasury Strips 7,053,000 02/15/00 6,838,024 6,812,689
United States Treasury Strips 7,053,000 05/15/00 6,746,406 6,720,662
United States Treasury Strips 7,053,000 08/15/00 6,646,536 6,627,712
United States Treasury Strips 7,053,000 11/15/00 6,553,930 6,537,401
United States Treasury Strips 7,053,000 02/15/01 6,457,021 6,445,944
United States Treasury Strips 7,053,000 05/15/01 6,363,569 6,357,517
----------------- -------------------------------------
$ 56,424,000 $ 53,544,260 $ 53,414,553
=================
FORWARD PURCHASE CONTRACT:
Dollar General Common Stock
Forward Purchase Agreement 05/15/01 308,392,890 245,339,799
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TOTAL $ 361,937,150 $ 298,754,352
=====================================
</TABLE>
See Notes to Financial Statements.
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DOLLAR GENERAL STRYPES TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
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ACCRETION OF ORIGINAL ISSUE DISCOUNT $ 1,628,062
<S> <C> <C>
EXPENSES:
Administrative fees and expenses $ 19,202
Legal fees 14,193
Accounting fees 14,860
Printing and mailing expense 7,514
Trustees' fees (Note 5) 6,011
Other expense 10,544
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TOTAL FEES AND EXPENSES 72,324
EXPENSE REIMBURSEMENT (Note 7) (72,324)
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TOTAL EXPENSES - NET ---
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NET INVESTMENT INCOME 1,628,062
NET INCREASE IN UNREALIZED APPRECIATION
OF INVESTMENTS 74,552,181
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 76,180,243
====================
</TABLE>
See Notes to Financial Statements.
<PAGE>
DOLLAR GENERAL STRYPES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND THE PERIOD FROM MAY 28, 1998
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS Period
ENDED Ended
JUNE 30, 1999 December 31, 1998
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<S> <C> <C>
OPERATIONS
Net investment income $ 1,628,062 $ 2,342,316
Unrealized appreciation (depreciation) of investments 74,552,181 (11,369,383)
----------------------- -------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS 76,180,243 (9,027,067)
----------------------- -------------------------
DISTRIBUTIONS
Net investment income (630,552) (240,302)
Return of capital (13,477,133) (12,848,494)
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NET DECREASE IN NET ASSETS FROM DISTRIBUTIONS (14,107,685) (13,088,796)
----------------------- -------------------------
INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS (Note 9)
Gross proceeds from the sale of 8,417,000 STRYPES 331,945,438
Less:
Selling commissions (9,958,153)
-------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS 321,987,285
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TOTAL INCREASE IN NET ASSETS FOR
THE PERIOD 62,072,558 299,871,422
NET ASSETS, BEGINNING OF PERIOD 299,871,522 100
----------------------- -------------------------
NET ASSETS, END OF PERIOD $ 361,944,080 $ 299,871,522
======================= =========================
</TABLE>
See Notes to Financial Statements.
<PAGE>
DOLLAR GENERAL STRYPES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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NOTE 1. ORGANIZATION
Dollar General STRYPES Trust ("Trust") was established on April 15, 1998 and
is registered as a non-diversified, closed-end management investment company
under the Investment Company Act of 1940 (the "Act"). In May 1998, 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 common stock of Dollar General Corporation ("the Company"), from an
existing shareholder of the Company (the "Contracting Stockholder"). The stock
is deliverable pursuant to the contract on May 15, 2001 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
using the effective interest method. The forward purchase contract is
valued at the mean of bid prices received by the Trust at the end of
each period from two independent broker-dealer firms unaffiliated with
the Trust who is 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.
NOTE 3. DISTRIBUTIONS
STRYPES holders are entitled to receive distributions from the maturity of
U.S. Treasury Strips of 8.50% per annum of the "Investment Amount". The
Investment Amount means, with respect to each STRYPES, $39.4375 initially and
is subject to adjustment from time to time prior to the Exchange Date to
reflect the distribution of assets by the Trust upon exercise by the
Contracting Stockholder of its acceleration right under the Contract.
Distributions are payable quarterly and commence on August 15, 1998.
NOTE 4. PURCHASES AND SALES OF INVESTMENT
Purchases and maturities of U.S. Treasury Strips for the period ended December
31, 1998 totaled $76,637,175 and $13,087,000, respectively. Maturities for the
six months ended June 30, 1999 totaled $14,106,000. There was no sale of such
investments during either period. Purchase of the forward purchase contract
during the period ended December 31, 1998 totaled $245,339,799.
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
$13,251 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 $63,182,798 which
consists of gross unrealized appreciation of $63,182,798 and gross unrealized
depreciation of $0. The amortized cost of investment securities for Federal
income tax purposes was $298,754,352 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 $856,850. Of this
amount, $423,700 represents offering expenses ($410,100) and organizational
expenses ($13,600) incurred by the Trust. The offering and organizational
expenses were paid to the Administrator by the sponsor of the Trust. As of
June 30, 1999, $188,910 had been paid by the Administrator for these expenses.
The remaining amount of $433,150 represents a prepayment of estimated
administrative and other operating expenses. Such amount was paid to the
Administrator by the sponsor of the Trust ($115,000) and the Contracting
Stockholder ($318,150). Expenses incurred in excess of this amount will be
paid by the Contracting Stockholder.
Cash received by the Administrator from the sponsor of the Trust and the
Contracting Stockholder of $433,150 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
June 30, 1999, $142,501 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 May 28, 1998, the Trust entered into a forward purchase contract with a
stockholder of the Company (the "Contracting Stockholder") and paid to the
Contracting Stockholder $245,339,799 in connection therewith. Pursuant to such
contract, the Contracting Stockholder is obligated to deliver to the Trust a
specified number of shares of common stock on May 15, 2001 (the "Exchange
Date") so as to permit the holders of the STRYPES to exchange on the Exchange
Date each of their STRYPES for a number of Dollar General Common Stock. See
the Trust's original prospectus dated May 21, 1998 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:
<TABLE>
<CAPTION>
Exchange Cost of Contract Unrealized
Date Contract Value Appreciation
-------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Dollar General
Common Stock Forward 05/15/01 245,339,799 308,392,890 63,053,091
Purchase Agreement $ $ $
=================== ================== ===================
</TABLE>
The Contracting Stockholder's obligations under the forward purchase contract
is collateralized by 596,400 shares of Dollar General Series A Convertible
Junior Preferred Stock which are being held in the custody of the Trust's
custodian, The Bank of New York.
NOTE 9. CAPITAL SHARE TRANSACTIONS
On May 18, 1998 one STRYPES was sold to 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 2 STRYPES. During the
offering period, the Trust sold 8,417,000 STRYPES to the public and received
net proceeds of 321,987,285 ($331,945,438 less sales commission of
$9,958,153). As of June 30, 1999, there were 8,417,002 STRYPES issued and
outstanding with an aggregate cost, net of sales commission and return of
capital, of $295,661,758.
<PAGE>
DOLLAR GENERAL 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.
<TABLE>
<CAPTION>
May 28
1998
(Commencement
SIX MONTHS of Operations) to
ENDED December 31,
JUNE 30, 1999 1998
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<S> <C> <C>
PER SHARE OPERATING PERFORMANCE FOR A STRYPES
OUTSTANDING THROUGHOUT THE PERIOD
Investment income $ 0.19 $ 0.28
Expenses (0.00) (0.00)
----------------------------------------------
Investment income - net 0.19 0.28
Distributions from income (0.07) (0.03)
Return of capital (1.60) (1.52)
Unrealized income (loss) on investments 8.85 (1.35)
----------------------------------------------
Net increase (decrease) in net asset value 7.37 (2.62)
Beginning net asset value 35.63 38.25
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Ending net asset value $ 43.00 $ 35.63
==============================================
Ending market value $ 42.88 $ 35.63
==============================================
TOTAL INVESTMENT RETURN BASED ON MARKET VALUE 25.46% (5.73) %
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets:
Before reimbursement (1) 0.04 % 0.05 %
After reimbursement (1) 0.00 % 0.00 %
Ratio of net investment income to average net assets:
Before reimbursement (1) 0.95 % 1.19 %
After reimbursement (1) 0.99 % 1.24 %
Net assets, end of period (in thousands) $ 361,944 $ 299,872
(1) Annualized
</TABLE>
