McGLADREY & PULLEN, LLP RSM
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[LOGO](R) Certified Public Accountants and Consultants international
ACCOUNTANT'S REPORT
The accompanying statement of net assets, including the schedule of
investments, of ANZ Exchange Preferred Trust as of June 30, 1999, and the
related statement of operations for the six months then ended, the statements
of changes in net assets for the six months ended June 30, 1999 and period
ended December 31, 1998 and the financial highlights for the periods indicated
in the financial statements were not audited by us and, accordingly, we do not
express an opinion on them.
/s/ McGladrey & Pullen, LLP
New York, New York
January 7, 2000
<PAGE>
ANZ EXCHANGEABLE PREFERRED TRUST
FINANCIAL REPORT
JUNE 30, 1999
(Unaudited)
<PAGE>
CONTENTS
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FINANCIAL STATEMENTS
Statement of net assets 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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<PAGE>
ANZ EXCHANGEABLE PREFERRED TRUST
STATEMENT OF NET ASSETS
JUNE 30, 1999
(UNAUDITED)
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ASSETS
Investments, at value (amortized cost $386,939,498)
(Notes 2, 4, and 8) $ 386,939,498
Accrued interest receivable 6,682,989
Cash 150
Accounts receivable 355
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Total Assets 393,622,992
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Net Assets $ 393,622,992
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COMPOSITION OF NET ASSETS
Trust Units Exchangeable for Preference Shares
("TrUEPrS"), no par value; 16,004,000 shares
issued and outstanding (Note 9) $ 386,950,470
Undistributed net investment income 6,672,522
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Net Assets $ 393,622,992
=============
Net Asset Value per TrUEPrS $ 24.60
=============
See Notes to Financial Statements.
<PAGE>
ANZ EXCHANGEABLE PREFERRED TRUST
SCHEDULE OF INVESTMENTS
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Par Maturity Market Amortized
Securities Description Value Date Value Cost
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEBT SECURITIES:
Carlotta (UK) Company, 8%,
Mandatorily Redeemable Debt $ 400,100,000 10/15/47 $ 386,939,498 $ 386,939,498
------------- -------------------------------
$ 400,100,000 $ 386,939,498 $ 386,939,498
=============
ADS PURCHASE CONTRACT:
Australia and New Zealand Banking
Group Limited Preference Shares
Purchase Contract 0 0
-------------------------------
Total $ 386,939,498 $ 386,939,498
===============================
</TABLE>
See Notes to Financial Statements.
<PAGE>
ANZ EXCHANGEABLE PREFERRED TRUST
STATEMENT OF OPERATIONS
For the Six Months ended June 30, 1999
(Unaudited)
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INTEREST INCOME $ 15,999,957
EXPENSES:
Administrative fees and expenses $ 58,750
Legal fees 60,000
Accounting fees 15,000
Printing and mailing expense 7,500
Trustees' fees (Note 5) 6,000
Other expenses (18,796)
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Total fees and expenses 128,454
EXPENSE REIMBURSEMENT (Note 7) (128,454)
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Total expenses - net 0
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Net Investment Income 15,999,957
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Net increase in net assets resulting
from operations $ 15,999,957
=============
See Notes to Financial Statements.
<PAGE>
ANZ EXCHANGEABLE PREFERRED TRUST
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months ended June 30, 1999 and the Period from September 23, 1998
(commencement of operations) to December 31,1998
(Unaudited)
Six Months Period Ended
Ended December 31,
June 30, 1999 1998
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OPERATIONS
Net investment income $ 15,999,957 $ 8,632,254
-----------------------------------
Net increase in net assets
from operations 15,999,957 8,632,254
-----------------------------------
DISTRIBUTIONS
Net investment income (16,004,000) (1,955,689)
-----------------------------------
Net decrease in net assets
from distributions (16,004,000) (1,955,689)
-----------------------------------
INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS (Note 9)
Gross proceeds from the sale of
16,000,000 TrUEPrS 400,000,000
Less:
Selling commissions (12,600,000)
Offering costs (549,530)
-----------------------------------
Net increase in net assets from
capital share transactions 0 386,850,470
-----------------------------------
Total (decrease) increase in
net assets for the period (4,043) 393,527,035
Net assets, beginning of period 393,627,035 100,000
-----------------------------------
Net assets, end of period $ 393,622,992 $ 393,627,035
===================================
See Notes to Financial Statements.
<PAGE>
ANZ EXCHANGEABLE PREFERRED TRUST
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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Note 1. Organization
ANZ Exchangeable Preferred Trust ("Trust") was established on July 8, 1998 and
is registered as a non-diversified, closed-end management investment company
under the Investment Company Act of 1940 (the "Act"). In September 1998, the
Trust sold Trust Units Exchangeable for Preference Shares (each, a "TrUEPrS")
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 8%
Mandatorily Redeemable Debt Securities due October 15, 2047 issued by Carlotta
(UK) Company (the "U.K. Company") and entered into a purchase contract with an
affiliate of Australia and New Zealand Banking Group Limited ("ANZ" or the
"Company") for American Depositary Receipts (ADRs) evidencing, for each
TrUEPrS, one American Depositary Share ("ADS") representing four fully-paid
non-cumulative preference shares issued by ANZ, an Australian corporation.
The U.K. Company is also an affiliate of ANZ. The TrUEPrS will be exchanged
for the ADRs pursuant to the contract on October 15, 2047 ("Exchange Date") or
sooner at the occurrence of an Exchange Event 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 value of the Debt Securities and the ADSs Purchase Contract held by
the Trust will be determined in good faith by the Board of Trustees
pursuant to procedures adopted by them.
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.
<PAGE>
ANZ EXCHANGEABLE PREFERRED TRUST
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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Note 3. Distributions
The Trust distributes to holders $2.00 per TrUEPrS per annum from the interest
payments received by the Trust on the Debt Securities. Distributions of $.50
per TrUEPrS are payable quarterly in arrears on each Dividend Payment Date to
holders of record on the immediately preceding Record Date, except for the
first distribution on October 15, 1998 which was $.1222 per TrUEPrS.
Note 4. Purchases and Sales of Investment
Purchase of the U.K. Company Debt Securities for the period ended December 31,
1998 totaled $386,950,470. There was no sales of investments during either
period.
Note 5. Trustees Fees
Each of the three Trustees are paid a quarterly fee of $1,000 for their
services during the life of the Trust. Such fees and anticipated out-of-pocket
expenses of each Trustee will be paid by the Jersey Holding Company pursuant
to an expense agreement between it and The Bank of New York.
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.
The amortized cost of investment securities for Federal income tax purposes
was $386,939,498 at June 30, 1999.
Note 7. Expenses
The estimated expenses incurred by the Trust in connection with the offering
of the TrUEPrS is $581,530, representing offering expenses ($549,530) and
organizational expenses ($32,000). The offering and organizational expenses
were paid to the Administrator by an affiliate of ANZ. As of June 30, 1999,
$535,077 had been paid by the Administrator for these expenses. The annual
administrative and other operating expenses of the Trust are estimated to be
$310,000. Such amounts are estimated quarterly and paid to the Administrator
by an affiliate of ANZ. Expenses incurred in excess of this amount will be
paid by an affiliate of ANZ.
Cash of $39,280, received by the Administrator from an affiliate of ANZ for
the payment of offering expenses and 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, $213,214 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.
<PAGE>
ANZ EXCHANGEABLE PREFERRED TRUST
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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Note 8. ADS Purchase Contract
On September 23, 1998, the Trust entered into an ADS Purchase Contract (the
"Contract") with an affiliate of ANZ. Pursuant to such contract, each of the
TrUEPrS will be exchanged on the Exchange Date, or sooner at the occurrence of
an Exchange Event, for either (1) ADRs evidencing, for each TrUEPrS, one ADS
representing four fully-paid non-cumulative preference shares, liquidation
preference US$6.25 per share issued by ANZ or (2) cash in an amount of US$25
per TrUEPrS, plus the accrued dividend distributions thereon for the current
quarterly dividend period. See the Trust's original prospectus dated September
15, 1998 for the circumstances under which each would occur.
ANZ's obligations under the ADS Purchase Contract are collateralized by ADRs
evidencing 16,004,000 ADS, each representing four fully-paid non-cumulative
preference shares issued by ANZ, which are being held in the custody of the
Trust's custodian, The Bank of New York.
As of December 31,1998, no active market exists for the Contract. The Contract
is valued by determining the market price of one TrUEPrS as of the close of
the New York Stock Exchange (the "NYSE") on December 31, 1998, less the
present value of the remaining quarterly payments to be made on each TrUEPrS
as of December 31, 1998. The resulting present value of the expected future
quarterly payments to each TrUEPrS exceeds the market price of each TrUEPrS at
December 31, 1998; accordingly, the Contract value is negative. For purposes
of determining the NAV of each TrUEPrS, the value of the Contract is
determined to be $0.
Note 9. Capital Share Transactions
On September 1, 1998 4,000 TrUEPrS were sold to the underwriters of the
TrUEPrS for $100,000. During the offering period, the Trust sold 16,000,000
TrUEPrS to the public and received net proceeds of $386,850,470 ($400,000,000
less sales commission of $12,600,000 and offering costs of $549,530). As of
June 30, 1999, there were 16,004,000 TrUEPrS issued and outstanding with an
aggregate cost, net of sales commission and offering costs, of $386,950,470.
<PAGE>
ANZ EXCHANGEABLE PREFERRED 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>
September 23,
1998
(Commencement
Six Months of Operations) to
Ended December 31,
June 30, 1999 1998
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Per share operating performance for a TrUEPrS
outstanding throughout the period
<S> <C> <C>
Investment income $ 1.00 $ 0.54
Expenses (0.00) (0.00)
-----------------------------------------
Investment income - net 1.00 0.54
Distributions from income (1.00) (0.12)
Adjustments to capital (commissions and offering expenses) (0.00) (0.82)
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Net decrease in net asset value (0.00) (0.40)
Beginning net asset value 24.60 25.00
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Ending net asset value $ 24.60 $ 24.60
=========================================
Ending market value $ 24.71 $ 25.50
=========================================
Total investment return based on market value 0.72% 2.50%
Ratios/Supplemental data
Ratio of expenses to average net assets:
Before reimbursement (1) 0.07% 0.12%
After reimbursement (1) 0.00% 0.00%
Ratio of net investment income to average net assets:
Before reimbursement (1) 8.13% 7.95%
After reimbursement (1) 8.20% 8.07%
Net assets, end of period (in thousands) $ 393,623 $ 393,627
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(1) Annualized
</TABLE>
