ANZ EXCHANGEABLE PREFERRED TRUST II #51332.DOC - 12/10/99 - 7:56 PM
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ANZ Exchangeable Preferred Trust II
Financial Statements for the
Period from November 19, 1998
(Commencement of Operations) to
December 31, 1998 and
Independent Auditors' Report
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ANZ EXCHANGEABLE PREFERRED TRUST II
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE PERIOD FROM
NOVEMBER 19, 1998 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1998:
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
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INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders,
ANZ Exchangeable Preferred Trust II:
We have audited the accompanying statement of net assets, including the
schedule of investments, of ANZ Exchangeable Preferred Trust II as of December
31, 1998, the related statements of operations, changes in net assets, and the
financial highlights for the period November 19, 1998 (commencement of
operations) to December 31, 1998. 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, 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 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 ANZ Exchangeable
Preferred Trust II as of December 31, 1998, the results of its operations, the
changes in its net assets, and the financial highlights for the period
November 19, 1998 (commencement of operations) to December 31, 1998 in
conformity with generally accepted accounting principles.
August 27, 1999
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ANZ EXCHANGEABLE PREFERRED TRUST II
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
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ASSETS:
Investments - at value (amortized cost $362,996,791)
(Notes 2, 4 and 8)
Accrued interest receivable $ 362,996,791
3,495,300
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Total assets 366,492,091
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LIABILITIES:
Accrued liabilities 28,055
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NET ASSETS $366,464,036
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COMPOSITION OF NET ASSETS:
Trust Units Exchangeable for Preference Shares (TrUEPrS) -
no par value; 15,004,000 shares issued and outstanding (Note 9) $362,981,242
Undistributed net investment income 3,482,794
NET ASSETS $366,464,036
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NET ASSET VALUE PER TrUEPrS $ 24.42
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See notes to financial statements.
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<CAPTION>
ANZ EXCHANGE PREFERRED TRUST II
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
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Par Maturity Market Amortized
Securities Description Value Date Value Cost
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DEBT SECURITIES:
Aldobrandini (UK) Company, 8.08%
Mandatorily Redeemable Debt $ 375,100,000 01/15/48 $ 362,996,791 $ 362,996,791
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$ 375,100,000 362,996,791 362,996,791
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ADRs PURCHASE CONTRACT:
Australia and New Zealand Banking
Group Limited Preference Shares
Purchase Contract - -
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TOTAL $ 362,996,791 $ 362,996,791
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See notes to financial statements.
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<CAPTION>
ANZ EXCHANGEABLE PREFERRED TRUST II
STATEMENT OF OPERATIONS
PERIOD FROM NOVEMBER 19, 1998 (COMMENCEMENT OF
OPERATIONS) TO DECEMBER 31, 1998
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INTEREST INCOME $ 3,482,794
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EXPENSES:
Administrative fees and expenses $ 7,679
Legal fees 9,450
Accounting fees 1,890
Printing and mailing expense 1,772
Trustee's fees (Note 5) 1,418
Other expenses 15,895
Organization costs 32,000
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Total fees and expenses 70,104
EXPENSE REIMBURSEMENT (Note 7) (70,104)
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Total expense - net -
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NET INVESTMENT INCOME 3,482,794
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NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,482,794
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See notes to financial statements.
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<CAPTION>
ANZ EXCHANGEABLE PREFERRED TRUST II
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM NOVEMBER 19, 1998 (COMMENCEMENT OF
OPERATIONS) TO DECEMBER 31, 1998
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OPERATIONS:
Net investment income $ 3,482,794
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Net increase in net assets from operations 3,482,794
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INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS (Note 9):
Gross proceeds from the sale of 15,000,000 TrUEPrS 375,000,000
Less:
Selling commissions (11,625,625)
Offering costs
(493,133)
Net increase in net assets from capital share transactions 362,881,242
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TOTAL INCREASE IN NET ASSETS FOR THE PERIOD 366,364,036
NET ASSETS, BEGINNING OF PERIOD 100,000
NET ASSETS, END OF PERIOD $366,464,036
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See notes to financial statements.
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ANZ EXCHANGEABLE PREFERRED TRUST II
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM NOVEMBER 19, 1998 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1998
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1. ORGANIZATION
ANZ Exchangeable Preferred Trust II (the "Trust") was established on
October 13, 1998 and is registered as a non-diversified, closed-end
management investment company under the Investment Company Act of 1940
(the "Act"). In November 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 8.08% Mandatorily
Redeemable Debt Securities due January 15, 2048 issued by Aldobrandini
(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)
representing, for each TrUEPrS, four fully paid 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 January 15, 2048 ("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.
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 ADRs 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.
3. DISTRIBUTIONS
The Trust distributes to holders $2.02 per TrUEPrS per annum from the
interest payments received by the Trust on the Debt Securities.
Distributions of $.505 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 January 15,
1999 of $.3142 per TrUEPrS.
4. PURCHASES AND SALES OF INVESTMENT
Purchase of the U.K. Company Debt Securities for the period ended
December 31, 1998 totaled $362,981,242. There were no sales of
investments during the period.
5. TRUSTEES' FEES
Each of the three Trustees is paid a quarterly fee of $1,000 for its
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.
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 $362,996,791 at December 31, 1998.
7. EXPENSES
The estimated expenses incurred by the Trust in connection with the
offering of the TrUEPrS is $525,133, representing offering expenses
($493,133) and organizational expenses ($32,000). The offering and
organizational expenses were paid to the Administrator by an affiliate
of ANZ. As of December 31, 1998, $239,914 had been paid by the
Administrator for these expenses. The annual administrative and other
operating expenses of the Trust are estimated to be $248,000. 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 $314,586, 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 December 31, 1998, $3,000 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.
8. ADRs PURCHASE CONTRACT
On November 19, 1998, the Trust entered into an ADRs 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 representing,
for each TrUEPrS, four fully paid non-cumulative 1998 Preference Shares
(Series 2), 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
distribution thereon for the then quarterly dividend period. See the
Trust's original prospectus, dated November 13, 1998, for the
circumstances under which each would occur.
ANZ's obligations under the Contract are collateralized by 15,004,000
ADRs, each representing four ANZ preference shares, 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 $0.00.
9. CAPITAL SHARE TRANSACTIONS
On November 6, 1998, 4,000 TrUEPrS were sold to the underwriters of the
TrUEPrS for $100,000. During the offering period, the Trust sold
15,000,000 TrUEPrS to the public and received net proceeds of
$362,881,242 ($375,000,000 less sales commission of $11,625,625 and
offering costs of $493,133). As of December 31, 1998, there were
15,004,000 TrUEPrS issued and outstanding with an aggregate cost, net of
sales commission and offering costs, of $362,981,242.
******
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ANZ EXCHANGEABLE PREFERRED TRUST II
FINANCIAL HIGHLIGHTS
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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 were 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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November 19,
1998
(Commencement
of Operations)
to
December 31,
1998
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PER SHARE OPERATING PERFORMANCE FOR A TrUEPrS
OUTSTANDING THROUGHOUT THE PERIOD:
Investment income $ 0.23
Expenses 0.00
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Investment income - net 0.23
Adjustments to capital (commissions and offering expenses) (0.81)
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Net decrease in net asset value (0.58)
BEGINNING NET ASSET VALUE 25.00
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ENDING NET ASSET VALUE $ 24.42
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ENDING MARKET VALUE $ 26.00
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TOTAL INVESTMENT RETURN BASED ON MARKET VALUE 4.00 %
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets:
Before reimbursement (1) 0.16 %
After reimbursement (1) 0.00 %
Ratio of net investment income to average net assets:
Before reimbursement (1) 7.95 %
After reimbursement (1) 8.11 %
NET ASSETS, END OF PERIOD (In thousands) $ 366,464
(1) Annualized
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