-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ByGzI/wXHBs3rq0LStzVj9izrUF2m2wFzGtaRFblk68qlwf+7hWdLoPl7op6hiFU NE6Q+yrBul0YN+3jDT9U2A== 0000935069-07-002893.txt : 20071130 0000935069-07-002893.hdr.sgml : 20071130 20071130113842 ACCESSION NUMBER: 0000935069-07-002893 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071130 DATE AS OF CHANGE: 20071130 EFFECTIVENESS DATE: 20071130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVUS BOND FUND CENTRAL INDEX KEY: 0000030125 IRS NUMBER: 231745238 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02201 FILM NUMBER: 071276853 BUSINESS ADDRESS: STREET 1: 113 KING STREET CITY: ARMONK STATE: NY ZIP: 10508 BUSINESS PHONE: 9142734545 MAIL ADDRESS: STREET 1: 113 KING STREET CITY: ARMONK STATE: NY ZIP: 10508 FORMER COMPANY: FORMER CONFORMED NAME: 1838 BOND DEBENTURE TRADING FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DREXEL BOND DEBENTURE TRADING FUND DATE OF NAME CHANGE: 19890511 FORMER COMPANY: FORMER CONFORMED NAME: DREXEL INCOME SECURITIES INC DATE OF NAME CHANGE: 19711102 N-CSRS 1 ncsr.txt RIVUS BOND FUND NCSRS 0907 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-02201 RIVUS BOND FUND ---------------------------------------------------------------------- (Exact name of registrant as specified in charter) 113 King Street ARMONK, NY 10504 ---------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Clifford D. Corso 113 King Street ARMONK, NY 10504 ---------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 914-273-4545 Date of fiscal year end: MARCH 31 Date of reporting period: SEPTEMBER 30, 2007 ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. RIVUS BOND FUND SHAREHOLDER LETTER - 09/30/07 OCTOBER 11, 2007 TO THE SHAREHOLDER: In late September, the Federal Open Market Committee ("FOMC") cut the Federal Funds rate by a full 50 basis points to 4.75% instead of the expected 25 basis points. The decision appears to have had the desired effect in helping to ease the liquidity crunch that had nearly paralyzed Wall Street in August and into September. The market now anticipates, the Fed will cut rates by at-least another 25 basis points by the end of the year to further facilitate inter-bank lending and to shore up liquidity. The results of the Fed's action are best illustrated by the relief provided to the stressed rates observed in one-month Libor. After spiking in August from the 5.32% level at the end of July, the rate peaked at 5.82% on September 7, 2007. By the end of September the rate had receded down to 5.12% and is currently hovering around 5.06%. While the liquidity crisis has seemingly abated, it has left damage in its wake. A number of major Wall Street institutions have revealed significant losses from subprime-related investments and hung leveraged loans related to large LBOs. The contagion from the sub-prime debacle led to a re-pricing of risk in other fixed income assets, with spreads in the High Yield, Emerging Market and even Investment Grade Corporate bonds (particularly brokers and finance companies) gapping out. As is typical in such periods, investors moved to safety as evidenced by a rally in the 10 year treasury yield from 5.03% at the start of the quarter to 4.59% at the end of the quarter. Intra quarter volatility in the equity markets was also extreme. The Standard & Poors ("S&P") 500 index, for instance, dropped from a high of 1,553.08 on July 19, 2007 to a low of 1,406.7 on August 15, 2007 and then closed the quarter at 1,526.75. Clearly this period was characterized by elevated levels of volatility across a spectrum of asset classes. The larger-than-expected rate cut and recent inflation data indicate that the Fed is now more concerned about slow economic growth than it is about inflation. In their press release after the September 18 meeting, the Fed noted that "readings on core inflation have improved" and they are "monitoring inflation developments carefully." Economic consensus supports the Fed's notion, predicting that core personal consumption expenditures ("PCE") inflation will be only 1.8 percent over the next five quarters, even assuming oil price increases. One key factor on the other side of a moderating inflation figure is the continued weakening of the dollar. In September, the dollar hit a historic low against the Euro, falling to $1.40 per Euro. The dollar also reached parity with the Canadian dollar, an event that had not happened since 1976. As the dollar weakens, imported goods and raw materials cost more, adding to overall inflationary pressures. Oil prices have also continued their upward trend, ending the quarter at $81.66 per barrel and are currently at record levels and likely contributing to a slowdown in the US economy. Domestic employment growth slowed in the quarter with 292,000 new non-farm jobs added. The unemployment rate at quarter end was 4.7%, up 0.2% from June 2007, and down significantly from the current cyclical high of 6.3% as of June 2003. Clearly, the Fed may be in the unenviable position of continuing to cut rates despite a weak dollar and potential for inflation. For the quarter ended September 28, 2007, the Fund had a Net Asset Value ("NAV") of $19.67 per share. This represents a 0.15% increase from $19.64 per share at June 29, 2007. On September 28, 2007, the Fund's closing price on the New York Stock Exchange was $17.66 per share, representing a 10.22% discount to NAV per share, compared with 8.76% discount as of June 29, 2007. One of the primary objectives of the Fund is to maintain its high level of income. On September 12, 2007 the Board of Directors declared a dividend payment of $0.2875 per share payable November 1, 2007 to shareholders of record on October 5, 2007. The dividend was unchanged from the prior quarter and has been for the last 11 quarters. On an annualized basis, including the pending dividend, the Fund has paid a total of $1.15 per share in dividends, representing a 6.62% Dividend Yield based on the market price on October 11, 2007 of $17.37 per share. 1 Another primary objective of the Fund is to deliver a competitive total return. The table below compares the performance of the Fund to the Lehman Investment Grade Credit Index benchmark: TOTAL RETURN-PERCENTAGE CHANGE (ANNUALIZED FOR PERIODS LONGER THAN 1 YEAR) IN NAV PER SHARE WITH ALL DISTRIBUTIONS REINVESTED 1
QUARTER 1 YEAR 2 YEARS 5 YEARS 10 YEARS TO TO TO TO TO 09/30/07 09/30/07 09/30/07 09/30/07 09/30/07 -------- -------- -------- -------- -------- Rivus Bond Fund 2 .................................... 1.65% 4.79% 3.94% 4.84% 5.49% Lehman Investment Grade Credit Index 3 ............... 2.08% 4.23% 3.70% 5.07% 6.13%
- ---------- 1 This is historical information and should not be construed as indicative of any likely future performance 2 Source: Lipper Inc. 3 Comprised primarily of U.S., investment grade corporate bonds (FUNDS BENCHMARK) The Fund's performance for the 5 and 10 year historical periods was reduced by the impact of the 4.5% dilution of net asset value resulting from the rights offering during the December 2003 quarter. The returns for the quarter ended September 30, 2007 relative to the benchmark were negatively impacted by the disproportionate spread widening of High Yield bonds, in which the Fund has a 20.5% allocation, relative to the Investment Grade Credit Index. Although the High Yield allocation took away from the Fund's performance in the quarter, it has had a significant positive impact on the Fund's performance relative to its benchmark over the last 12 months period and continues to generate a steady stream of income which has enabled the sustainability of the dividend. The Fund's performance will continue to be subject to the impact of trends in longer term interest rates as was the case in the last few quarters. The Fund's performance also remains sensitive to trends in relative yield spreads on corporate bonds due to the concentration in corporate bonds. While event risk was a major concern in the market throughout 2006 and the first half of 2007, slowing GDP growth is a major concern in the second half of 2007 and for 2008. Indeed, with continued trouble in the housing market, limited credit availability, high oil prices and weaker consumer spending, we believe the near to intermediate term risks to the economy and the financial markets remain elevated. This translates into an expectation for rising and potentially doubling of corporate defaults in 2008 from the current low levels which will add to the pressure on spreads. Consistent with our cautious near to intermediate term outlook, we continue to add diversity to the portfolio to reduce the impact from name specific event risk as well as look for opportunities to trim risk. The pie chart below summarizes the portfolio quality of the Fund's long-term invested assets as of September 28, 2007: PERCENT OF TOTAL INVESTMENT (LOWER OF S&P AND MOODY'S RATINGS) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] AAA 14.3% AA 9.4% A 21.7% BBB 34.1% BB 12.9% B & Lower 7.6% 2 Please refer to the Schedule of Investments in the financial statements for details concerning portfolio holdings. We would like to remind shareholders of the opportunities presented by the Fund's dividend reinvestment plan ("the Plan") as detailed in the Fund's prospectus and referred to in the Shareholder Information section of this report. The Plan affords shareholders a price advantage by allowing the purchase of shares at the lower of NAV or market price. This means that the reinvestment is at market price when the Fund is trading at a discount to NAV or at NAV per share when market trading is at a premium to that value. To participate in the Plan, please contact PFPC Inc., the Fund's Transfer Agent and Dividend Paying Agent, at 1-800-331-1710. The Fund's investment adviser, MBIA Capital Management Corp., may be reached at 914-765-3272. Sincerely, /s/ Clifford D. Corso Clifford D. Corso President 3
SCHEDULE OF INVESTMENTS (UNAUDITED) SEPTEMBER 30, 2007 MOODY'S/ STANDARD & POOR'S PRINCIPAL VALUE RATING (a) AMOUNT (000'S) (NOTE 1) ---------- -------------- -------------- LONG-TERM DEBT SECURITIES (97.13%) AUTOMOTIVE (4.81%) Ford Holdings, LLC, Gtd., 9.30%, 03/01/30 ................................. Caa1/CCC+ $ 1,000 $ 880,000 Ford Motor Co., Debs., 8.90%, 01/15/32 .................................... Caa1/CCC+ 1,060 874,500 Ford Motor Credit Co., Debs., 7.00%, 10/01/13 ............................. B1/B 1,000 903,700 Ford Motor Credit Co., Sr. Unsec. Notes, 8.00%, 12/15/16 .................. B1/B 1,000 935,505 General Motors Acceptance Corp., Notes, 7.25%, 03/02/11 ................... Ba1/BB+ 1,000 969,415 Meritor Automotive, Inc., Notes, 6.80%, 02/15/09 .......................... B1/B+ 87 85,477 -------------- 4,648,597 -------------- CHEMICALS (0.78%) Lyondell Chemical Co., Sr. Unsec. Notes, 8.25%, 09/15/16 .................. B1/B+ 250 281,875 Nova Chemicals Co., Sr. Notes, 6.50%, 01/15/12 ............................ Ba3/B+ 500 472,500 -------------- 754,375 -------------- COMMERCIAL SERVICES (0.25%) Avis Budget Car Rental LLC, Sr. Unsec. Notes, 8.058%, 05/15/14 (b) ........ Ba3/BB- 250 243,750 -------------- DIVERSIFIED FINANCIAL SERVICES (18.13%) Bank of America Corp., Sub. Notes, 5.42%, 03/15/17 ........................ Aa2/AA- 1,000 972,285 BlackRock, Inc., Sr. Unsub., 6.25%, 09/15/17 .............................. A1/A+ 500 500,817 Capital One Financial Corp., Notes, 7.125%, 08/01/08 ...................... A3/BBB+ 1,000 1,012,977 Credit Suisse FB USA, Inc., Notes, 4.875%, 08/15/10 ....................... Aa1/AA- 500 499,308 General Electric Capital Corp., Notes, 6.125%, 02/22/11 ................... Aaa/AAA 1,000 1,030,553 General Electric Capital Corp., Unsec. Notes, 6.00%, 06/15/12 ............. Aaa/AAA 1,725 1,778,725 HSBC America Capital Trust II, Co. Gty., 8.38%, 05/15/27, 144A ............ NA/A 2,500 2,610,200 HSBC Finance Corp., Notes, 6.75%, 05/15/11 ................................ Aa3/AA- 1,500 1,564,450 ICICI Bank Ltd., Notes, 5.75%, 01/12/12, 144A ............................. Baa2/BBB- 1,000 986,269 JP Morgan Chase Bank NA, Sub. Notes, 6.00%, 10/01/17 ...................... Aa1/AA- 1,000 1,009,694 Landesbank Baden-Wurtt NY, Sub. Notes, 6.35%, 04/01/12 .................... Aaa/AA+ 500 531,400 Residential Capital Corp., Gtd., 7.375%, 06/30/10 ......................... Ba1/BBB- 1,000 830,000 Residential Capital LLC, Co. Gty., 7.125%, 11/21/08 ....................... Ba1/BBB- 500 447,500 Sanwa Bank Ltd., Sub. Notes, 7.40%, 06/15/11 .............................. Aa3/A 500 537,398 Takefuji Corp., Sr. Notes, 9.20%, 04/15/11, 144A .......................... Baa1/BBB 1,000 1,121,167 UBS PFD Funding Trust I, Co. Gty., 8.622%, 12/31/49 (b) ................... Aa2/AA- 1,000 1,086,063 Wachovia Capital Trust III, Gtd., 5.80%, 08/29/49 (b) ..................... A2/A 1,000 993,291 -------------- 17,512,097 -------------- ENERGY (7.56%) Anadarko Petroleum Corp., Sr. Notes, 5.95%, 09/15/16 ...................... Baa3/BBB- 700 693,287 Apache Corp., Notes, 7.70%, 03/15/26 ...................................... A3/A- 500 579,912 Chesapeake Energy Corp., Sr. Notes, 7.50%, 09/15/13 ....................... Ba2/BB 500 513,750 Pemex Project Funding Master Trust, Co. Gty., 6.125%, 08/15/08 ............ Baa1/BBB 1,000 1,005,000 Petrobras International Finance Co., Sr. Unsub. Notes, 6.125%, 10/06/16 ... Baa1/BBB- 750 755,769 Transocean, Inc., Notes, 7.50%, 04/15/31 .................................. Baa1/BBB+ 500 554,013 Western Atlas, Inc., Debs., 8.55%, 06/15/24 ............................... A2/A 2,539 3,203,134 -------------- 7,304,865 -------------- GAMING, LODGING & LEISURE (4.23%) Caesars Entertainment, Inc., Sr. Notes, 7.50%, 09/01/09 ................... Baa3/BB 1,000 1,025,000 MGM Mirage, Inc., Co. Gty., 6.00%, 10/01/09 ............................... Ba2/BB 1,000 992,500 Royal Caribbean Cruises Ltd., Sr. Notes, 6.75%, 03/15/08 .................. Ba1/BBB- 1,000 1,002,541 Starwood Hotels & Resorts Worldwide, Inc., Gtd., 7.875%, 05/01/12 ......... Baa3/BBB- 1,000 1,067,150 -------------- 4,087,191 --------------
The accompanying notes are an integral part of these financial statements. 4 SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED
MOODY'S/ STANDARD & POOR'S PRINCIPAL VALUE RATING (a) AMOUNT (000'S) (NOTE 1) ---------- -------------- -------------- HOME BUILDERS (0.95%) Centex Corp., Notes, 5.45%, 08/15/12 ...................................... Baa2/BBB $ 1,000 $ 913,023 -------------- INDUSTRIAL (0.76%) Belden CDT, Inc., Sr. Sub. Notes, 7.00%, 03/15/17, 144A ................... Ba2/BB- 250 247,500 L-3 Communications Corp., Co. Gty., 6.125%, 07/15/13 ...................... Ba3/BB+ 500 491,250 -------------- 738,750 -------------- INSURANCE (5.32%) AIG Sunamerica Global Finance VI, Sr. Notes, 6.30%, 05/10/11, 144A ........ Aa2/AA+ 1,000 1,031,280 Berkshire Hathaway Finance Corp., Notes, 5.10%, 07/15/14 .................. Aaa/AAA 1,000 978,766 Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 (c) ..................... WR/NR 1,500 1,713,750 Sunamerica, Inc., Debs., 8.125%, 04/28/23 ................................. Aa2/AA 750 891,622 XL Capital Europe PLC, Gtd., 6.50%, 01/15/12 .............................. A3/A- 500 518,547 -------------- 5,133,965 -------------- MEDIA (12.90%) Clear Channel Communication, Inc., Co. Gty., 8.00%, 11/01/08 .............. Baa3/B+ 1,000 1,016,224 Comcast Corp., Gtd., 7.05%, 03/15/33 ...................................... Baa2/BBB+ 2,000 2,108,100 Dex Media West LLC, Sr. Notes, 8.50%, 08/15/10 ............................ Ba3/B 500 513,750 Harcourt General, Inc., Sr. Debs., 8.875%, 06/01/22 ....................... WR/A- 2,000 2,498,966 News America Holdings, Inc., Gtd., 7.90%, 12/01/95 ........................ Baa2/BBB 1,400 1,531,388 Quebecor World Capital Corp., Gtd., 6.125%, 11/15/13 ...................... B3/B 1,000 860,000 Time Warner, Inc., Debs., 9.15%, 02/01/23 ................................. Baa2/BBB+ 3,000 3,658,392 Viacom, Inc., Sr. Debs., 7.875%, 07/30/30 ................................. Baa3/BBB 250 270,507 -------------- 12,457,327 -------------- MINING (1.61%) Freeport-McMoran C&G, Sr. Unsec. Notes, 8.375%, 04/01/17 .................. Ba3/BB 500 546,250 Vale Overseas Ltd., Co. Gty., 6.25%, 01/23/17 ............................. Baa3/BBB 1,000 1,011,199 -------------- 1,557,449 -------------- PAPER (2.35%) Abitibi-Consolidated, Inc., Debs., 8.85%, 08/01/30 ........................ B3/B 500 345,000 Smurfit Capital Funding PLC, Debs., 7.50%, 11/20/25 ....................... Ba2/BB 2,000 1,920,000 -------------- 2,265,000 -------------- PHARMACEUTICALS (0.56%) Monsanto Co. (Pharmacia Corp.), Debs., 6.50%, 12/01/18 .................... Aa1/AAA 500 538,649 -------------- REAL ESTATE INVESTMENT TRUST (REIT) (5.46%) Chelsea Property Group, Inc., Notes, 7.25%, 10/21/07 ...................... A3/A- 1,000 1,000,809 Federal Realty Investment Trust, Sr. Unsec. Notes, 5.40%, 12/01/13 ........ Baa1/BBB+ 750 731,063 Host Marriott LP, Sr. Notes, 7.00%, 08/15/12 .............................. Ba1/BB 500 503,750 iStar Financial, Inc., Sr. Notes, 6.00%, 12/15/10 ......................... Baa2/BBB 1,000 972,161 Liberty Property LP, Sr. Notes, 7.50%, 01/15/18 ........................... Baa2/BBB 1,000 1,063,833 Nationwide Health Properties, Inc., Notes, 6.00%, 05/20/15 ................ Baa3/BBB- 500 504,292 Prologis, Sr. Notes, 5.50%, 04/01/12 ...................................... Baa1/BBB+ 500 494,303 -------------- 5,270,211 -------------- RETAIL & RESTAURANT (2.14%) Autonation, Inc., Co. Gty., 7.00%, 04/15/14 ............................... Ba2/BB+ 500 477,500 Darden Restaurants, Inc., Debs., 7.125%, 02/01/16 ......................... Baa3/BBB+ 500 522,076 JC Penney Co., Inc., Sr. Unsec. Notes, 8.00%, 03/01/10 .................... Baa3/BBB- 1,000 1,064,119 -------------- 2,063,695 --------------
The accompanying notes are an integral part of these financial statements. 5 SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED
MOODY'S/ STANDARD & POOR'S PRINCIPAL VALUE RATING (a) AMOUNT (000'S) (NOTE 1) ---------- -------------- -------------- TECHNOLOGY (0.52%) Avnet, Inc., Sr. Notes, 6.625%, 09/15/16 .................................. Ba1/BBB- $ 500 $ 504,842 -------------- TELECOMMUNICATIONS (10.35%) Citizens Communications Co., Sr. Notes, 6.25%, 01/15/13 ................... Ba2/BB+ 500 487,500 Deutsche Telekom International Finance BV, Gtd., 8.25%, 06/15/30 .......... A3/A- 2,000 2,448,326 France Telecom SA, Notes, 7.75%, 03/01/11 (d) ............................. A3/A- 750 806,191 GTE Corp., Debs., 6.94%, 04/15/28 ......................................... Baa1/A 2,000 2,078,554 SBC Communications, Inc., Notes, 5.875%, 08/15/12 ......................... A2/A 500 511,789 Sprint Capital Corp., Co. Gty., 6.90%, 05/01/19 ........................... Baa3/BBB 1,750 1,756,922 Verizon Global Funding Corp., Notes, 7.75%, 12/01/30 ...................... A3/A 1,646 1,903,907 -------------- 9,993,189 -------------- TRANSPORTATION (3.91%) BNSF Funding Trust I, Co. Gty., 6.613%, 12/15/55 (b) ...................... Baa3/BBB- 250 225,528 Burlington North Santa Fe., Unsec. Notes, 5.65%, 05/01/17 ................. Baa1/BBB 1,000 979,694 Federal Express Corp., Notes, 9.65%, 06/15/12 ............................. Baa2/BBB 1,750 2,069,187 Ryder Systems, Inc., Notes, 5.85%, 03/01/14 ............................... Baa1/BBB+ 500 504,013 -------------- 3,778,422 -------------- UTILITIES (5.34%) DPL, Inc., Sr. Notes, 8.00%, 03/31/09 (e) ................................. NR/NR 1,000 1,039,789 Hydro-Quebec, Gtd., Debs., 8.25%, 04/15/26 ................................ Aa2/A+ 1,550 2,020,315 Midamerican Funding LLC, Sec. Sr. Bonds, 6.927%, 03/01/29 ................. A3/BBB+ 500 543,353 NSTAR, Notes, 8.00%, 02/15/10 ............................................. A2/A 500 530,888 Ohio Power Co., Sr. Notes, 6.00%, 06/01/16 ................................ A3/BBB 500 502,330 Old Dominion Electric Coop., Sec. Bonds, 6.25%, 06/01/11 .................. Aaa/AAA 500 522,404 -------------- 5,159,079 -------------- MORTGAGE BACKED SECURITIES (7.70%) FHLMC Pool # B11892, 4.50%, 01/01/19 ...................................... Aaa/AAA 1,402 1,353,021 FHLMC Pool # A15675, 6.00%, 11/01/33 ...................................... Aaa/AAA 989 993,563 FNMA Pool # 763852, 5.50%, 02/01/34 ....................................... Aaa/AAA 2,212 2,170,736 FNMA Pool # 754791, 6.50%, 12/01/33 ....................................... Aaa/AAA 1,261 1,290,381 GNSF Pool # 417239, 7.00%, 02/15/26 ....................................... Aaa/AAA 60 63,037 GNSF Pool # 780374, 7.50%, 12/15/23 ....................................... Aaa/AAA 26 27,917 Meristar Commercial Mortgage Trust, Series 1999-C1, Class C, 8.29%, 03/03/16, 144A ......................................................... Aaa/AAA 500 533,341 Wachovia Bank Commercial Mortgage Trust, Series 2006-C28, Class A3, 5.679%, 10/15/48 ....................................................... Aaa/AAA 500 503,813 Wells Fargo Mortgage Backed Securities Trust, Series 2007-10, Class 1A19, 6.00%, 07/25/37 ........................................................ Aaa/NA 500 504,880 -------------- 7,440,689 -------------- ASSET BACKED SECURITIES (1.50%) CPS Auto Trust, Series 2007-C, Class A3, 5.45%, 05/15/12 (c) .............. Aaa/AAA 590 590,708 Option One Mortgage Loan Trust, Series 2007-FXD2, Class 2A1, 5.90%, 03/25/38 (d) .................................................... Aaa/AAA 866 861,209 -------------- 1,451,917 -------------- TOTAL LONG-TERM DEBT SECURITIES (Cost of $92,069,929) ..................... 93,817,082 -------------- COMMERCIAL PAPER (0.78%) Atomium Funding Corp., 5.45% due 10/01/07 ................................. 750 750,000 -------------- TOTAL COMMERCIAL PAPER (Cost of $750,000) ................................. 750,000 --------------
The accompanying notes are an integral part of these financial statements. 6 SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED
VALUE SHARES (000'S) (NOTE 1) -------------- -------------- INVESTMENT COMPANIES (0.40%) PNC Bank Money Market ..................................................... 389 $ 389,291 -------------- TOTAL INVESTMENT COMPANIES (Cost of $389,291) ............................. 389,291 -------------- TOTAL INVESTMENTS (98.31%) (Cost $93,209,220) ..................................................... $ 94,956,373 -------------- OTHER ASSETS AND LIABILITIES (1.69%) ...................................... 1,628,958 -------------- NET ASSETS (100.0%) ....................................................... $ 96,585,331 ==============
- ---------- (a) Ratings for debt securities are unaudited. All ratings are as of September 30, 2007 and may have changed subsequently. (b) Variable rate security. Rate disclosed is as of September 30, 2007. (c) Security was valued using fair value procedures as of September 30, 2007. (d) Multi-Step Coupon. Rate disclosed is as of September 30, 2007. (e) Security rated BBB+ by Fitch. 144A Securities were purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. At September 30, 2007, these securities amounted to 6.76% of net assets. LEGEND Co. Gty. - Company Guaranty Debs. - Debentures FHLMC - Federal Home Loan Mortgage Corp. FNMA - Federal National Mortgage Association GNSF - Government National Mortgage Association (Single Family) Gtd. - Guaranteed NA - Not Available NR - Not Rated Sec. - Secured Sr. - Senior Sub. - Subordinated Unsec. - Unsecured Unsub. - Unsubordinated WR - Withdrawn Rating The accompanying notes are an integral part of these financial statements. 7 STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) SEPTEMBER 30, 2007 Assets: Investment in securities, at value (amortized cost $93,209,220) (Note 1) ................................................. $ 94,956,373 Interest receivable ..................................................... 1,660,050 Prepaid expenses ........................................................ 30,721 ------------- TOTAL ASSETS ........................................................ 96,647,144 ------------- Liabilities: Payable to Investment Adviser ........................................... 38,721 Accrued expenses payable ................................................ 23,092 ------------- TOTAL LIABILITIES ................................................... 61,813 ------------- Net assets: (equivalent to $19.68 per share based on 4,907,678 shares of capital stock outstanding) ..................... $ 96,585,331 ============= NET ASSETS consisted of: Par value ............................................................... $ 4,907,678 Capital paid-in ......................................................... 91,975,447 Accumulated net investment loss ......................................... (448,811) Accumulated net realized loss on investments ............................ (1,596,136) Net unrealized appreciation on investments .............................. 1,747,153 ------------- $ 96,585,331 =============
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007 Investment Income: Interest ................................................................ $ 3,081,203 Other income ............................................................ 92,498 ------------- Total Investment Income ............................................. 3,173,701 ------------- Expenses: Investment advisory fees (Note 4) ......................... $ 240,720 Transfer agent fees ....................................... 19,886 Trustees' fees ............................................ 30,354 Audit fees ................................................ 9,911 Legal fees and expenses ................................... 59,943 Reports to shareholders ................................... 13,785 Custodian fees ............................................ 6,562 Insurance ................................................. 15,600 NYSE fees ................................................. 12,500 Miscellaneous ............................................. 26,299 ----------- Total Expenses ...................................................... 435,560 ----------- Net Investment Income ............................................. 2,738,141 ----------- Realized and unrealized gain on investments (Note 1): Net realized gain from security transactions ............................ 933,546 ----------- Unrealized appreciation of investments: Beginning of the year ................................... 4,208,776 End of the year ......................................... 1,747,153 ----------- Change in unrealized depreciation of investments .................... (2,461,623) ----------- Net realized and unrealized gain on investments ................... (1,528,077) ----------- Net increase in net assets resulting from operations ....................... $ 1,210,064 ===========
The accompanying notes are an integral part of these financial statements. 8 STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED SEPTEMBER 30, 2007 YEAR ENDED (UNAUDITED) MARCH 31, 2007 ------------------ -------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income .............................................. $ 2,738,141 $ 5,365,142 Net realized gain from security transactions (Note 2) .............. 933,546 29,957 Change in unrealized appreciation (depreciation) of investments .... (2,461,623) 1,686,481 ------------------ -------------- Net increase in net assets resulting from operations ............. 1,210,064 7,081,580 ------------------ -------------- Distributions: Distributions to shareholders from net investment income ........... (2,821,916) (5,643,838) ------------------ -------------- Increase (decrease) in net assets .................................. (1,611,852) 1,437,742 Net Assets: Beginning of period ................................................ 98,197,183 96,759,441 ------------------ -------------- End of period ...................................................... $ 96,585,331 $ 98,197,183 ================== ============== Accumulated net investment loss .................................... (448,811) (365,036) ================== ==============
The accompanying notes are an integral part of these financial statements. 9 FINANCIAL HIGHLIGHTS The table below sets forth financial data for a share of capital stock outstanding throughout each year presented.
SIX MONTHS ENDED YEAR ENDED MARCH 31, SEPTEMBER 30, 2007 ------------------------------------------------- (UNAUDITED) 2007 2006 2005 2004 2003 ------------------ ------- ------- -------- -------- ------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .................. $ 20.01 $ 19.72 $ 20.62 $ 21.32 $ 21.50 $ 20.13 ------- ------- ------- -------- -------- ------- Net investment income(1) ............................ 0.56 1.09 1.10 1.14 1.29 1.31 Net realized and unrealized gain (loss) on investments(1) .................................... (0.31) 0.35 (0.85) (0.59) 0.83 1.45 ------- ------- ------- -------- -------- ------- Total from investment operations ....................... 0.25 1.44 0.25 0.55 2.12 2.76 ------- ------- ------- -------- -------- ------- Capital share transaction: Dilution of the net asset value from rights offering (Note 6) ................................. -- -- -- -- (0.97) -- ------- ------- ------- -------- -------- ------- Less distributions: Dividends from net investment income ................ (0.58) (1.15) (1.15) (1.14) (1.27) (1.34) Distributions from tax return of capital ............ -- -- -- (0.11) (0.06) (0.05) ------- ------- ------- -------- -------- ------- Total distributions .................................... (0.58) (1.15) (1.15) (1.25) (1.33) (1.39) ------- ------- ------- -------- -------- ------- Net asset value, end of period ......................... $ 19.68 $ 20.01 $ 19.72 $ 20.62 $ 21.32 $ 21.50 ======= ======= ======= ======== ======== ======= Per share market price, end of period .................. $ 17.66 $ 18.30 $ 17.75 $ 18.26 $ 19.51 $ 20.65 ======= ======= ======= ======== ======== ======= TOTAL INVESTMENT RETURN (1) Based on market value ............................... (0.34)% 9.93% 3.52% 0.22% 1.13% 14.55% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................... $96,585 $98,197 $96,759 $101,181 $104,628 $78,973 Ratio of expenses to average net assets ................ 0.91%* 1.00% 0.90% 0.89% 0.86% 0.91% Ratio of net investment income to average net assets ... 5.70%* 5.57% 5.42% 5.43% 5.57% 6.39% Portfolio turnover rate ................................ 8.50%** 25.90% 24.33% 6.78% 11.99% 12.27% Number of shares outstanding at the end of the period (in 000's) ................................... 4,908 4,908 4,908 4,908 4,908 3,673
- ---------- (1) Total investment return is calculated assuming a purchase of common shares at the market price on the first day and a sale at the market price on the last day of the period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. The total investment return, if for less than a full year, is not annualized. Past performance is not a guarantee of future results. * Annualized ** Not annualized The accompanying notes are an integral part of these financial statements. 10 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Note 1 - SIGNIFICANT ACCOUNTING POLICIES - The Rivus Bond Fund (the "Fund"), a Delaware statutory trust, is registered under the Investment Company Act of 1940, as amended, as a diversified closed-end, management investment company. The following is a summary of significant accounting policies consistently followed by the Fund in preparation of its financial statements. The policies are in conformity with generally accepted accounting principles within the United States of America ("GAAP"). A. SECURITY VALUATION - In valuing the Fund's net assets, all securities for which representative market quotations are available will be valued at the last quoted sales price on the security's principal exchange on the day of valuation. If there are no sales of the relevant security on such day, the security will be valued at the bid price at the time of computation. Prices for securities traded in the over-the-counter market, including listed debt and preferred securities, whose primary market is believed to be over-the-counter, normally are supplied by independent pricing services. Securities for which market quotations are not readily available will be valued at their respective fair values as determined in good faith by, or under procedures established by the Board of Trustees. At September 30, 2007, Penn Central Corp. and CPS Auto Trust were valued using fair value procedures and represented 1.77% and 0.61% of net assets, respectively. B. DETERMINATION OF GAINS OR LOSSES ON SALE OF SECURITIES - Gains or losses on the sale of securities are calculated for financial reporting purposes and for federal tax purposes using the identified cost basis. The identified cost basis for financial reporting purposes differs from that used for federal tax purposes in that the amortized cost of the securities sold is used for financial reporting purposes and the original cost of the securities sold is used for federal tax purposes, except for those instances where tax regulations require the use of amortized cost. C. FEDERAL INCOME TAXES - It is the Fund's policy to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Therefore, no federal income tax provision is required. On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Recent SEC guidance allows for implementation of FIN 48 in fund NAV calculations as late as the fund's last NAV calculation in the first required financial statement reporting period. As of September 30, 2007, management has evaluated the application of FIN 48 to the Fund, and has determined that there is no material impact on the Fund's financial statements. D. OTHER - Security transactions are accounted for on the trade date. Interest income is accrued daily. Premiums and discounts are amortized using the interest method. Paydown gains and losses on mortgage-backed and asset-backed securities are presented as an adjustment to interest income. Dividend income and distributions to shareholders are recorded on the ex-dividend date. 11 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED E. DISTRIBUTIONS TO SHAREHOLDERS AND BOOK/TAX DIFFERENCES - Distributions of net investment income will be made quarterly. Distributions of any net realized capital gains will be made annually. Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for amortization of market premium and accretion of market discount. Distributions during the fiscal years ended March 31, 2007 and 2006 were characterized as follows for tax purposes:
ORDINARY INCOME RETURN OF CAPITAL CAPITAL CAPITAL TOTAL DISTRIBUTION --------------- ----------------- --------------- ------------------ FY 2007 $ 5,643,838 $ -- $ -- $ 5,643,838 FY 2006 $ 5,643,830 $ -- $ -- $ 5,643,830
At March 31, 2007, the components of distributable earnings on a tax basis were as follows:
ACCUMULATED CAPITAL LOSS POST-OCTOBER NET REALIZED TOTAL* ORDINARY INCOME CARRYFORWARD LOSS APPRECIATION - ----------- --------------- ----------------- --------------- ------------------ $ 1,314,058 $ 54,650 ($ 2,529,682) $ -- $ 3,789,090 =========== =============== ================= =============== ==================
* Temporary differences include book amortization and deferral of post-October losses, if any, which will be recognized for the tax year ending March 31, 2008. As of March 31, 2007, the capital loss carryovers available to offset possible future capital gains were as follows: AMOUNT EXPIRATION DATE ----------- --------------- $ 956,105 2010 1,393,195 2011 47,236 2013 133,146 2015 At March 31, 2007, the following table shows for federal tax purposes the aggregate cost of investments, the net unrealized appreciation of those investments, the aggregate gross unrealized appreciation of all securities with an excess of market value over tax cost and the aggregate gross unrealized depreciation of all securities with an excess of tax cost over market value: AGGREGATE NET UNREALIZED GROSS UNREALIZED GROSS UNREALIZED TAX COST APPRECIATION APPRECIATION (DEPRECIATION) ------------ -------------- ---------------- ---------------- $ 92,817,449 $ 3,789,090 $ 4,689,519 ($900,429) The difference between book basis and tax-basis unrealized appreciation is attributable primarily to the differing treatments for amortization of market premium and accretion of market discount. F. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 - PORTFOLIO TRANSACTIONS - The following is a summary of the security transactions, other than short-term investments, for the six months ended September 30, 2007: COST OF PROCEEDS FROM SALES PURCHASES OR MATURITIES ----------- ------------------- U.S. Government Securities $ -- $ 609,074 Other Investment Securities $ 8,000,251 $ 7,627,462 12 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED NOTE 3 - CAPITAL STOCK - At September 30, 2007, there were 10,000,000 shares of capital stock ($1.00 par value) authorized, with 4,907,678 shares issued and outstanding. NOTE 4 - INVESTMENT ADVISORY CONTRACT AND PAYMENTS TO AFFILIATED PERSONS - MBIA Capital Management Corp. ("MBIA-CMC") serves as Investment Adviser to the Fund. MBIA-CMC is entitled to a fee at the annual rate of 0.50% on the first $100 million of the Fund's month end net assets and 0.40% on the Fund's month-end net assets in excess of $100 million. PFPC Inc., a member of PNC Financial Services Group, provides accounting and administrative services to the Fund and is compensated for these services by the Investment Adviser. Certain officers of the Fund are also directors, officers and/or employees of the Investment Adviser. None of the Fund's officers receive compensation from the Fund. NOTE 5 - DIVIDEND AND DISTRIBUTION REINVESTMENT - In accordance with the terms of the Automatic Dividend Investment Plan (the "Plan"), for shareholders who so elect, dividends and distributions are made in the form of previously unissued Fund shares at the net asset value if on the Friday preceding the payment date (the "Valuation Date") the closing New York Stock Exchange price per share, plus the brokerage commissions applicable to one such share equals or exceeds the net asset value per share. However, if the net asset value is less than 95% of the market price on the Valuation Date, the shares issued will be valued at 95% of the market price. If the net asset value per share exceeds market price plus commissions, the dividend or distribution proceeds are used to purchase Fund shares on the open market for participants in the Plan. During the six months ended September 30, 2007, the Fund issued no shares under the Plan. NOTE 6 - RIGHTS OFFERING - On December 3, 2003 the Fund completed its transferable rights offering. In accordance with the terms of the rights offering described in the Fund's prospectus an additional 1,234,420 shares were issued at a subscription price of $18.77 per share, making the gross proceeds raised by the offering $23,170,063, before offering-related expenses. Dealer/managers fees of $868,877 and offering costs of approximately $417,993 were deducted from the gross proceeds making the net proceeds available for investment by the Fund $21,883,193. The dilution impact of the offering was $0.97 per share or 4.49% of the $21.58 net asset value per share on December 3, 2003, the expiration and pricing date of the offering. NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS - In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("SFAS 157") was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures. 13 SHAREHOLDER INFORMATION (UNAUDITED) RESULTS OF SHAREHOLDER VOTES The Annual Meeting of Shareholders of the Fund was held on June 11, 2007. At the meeting, shareholders voted on the election of all trustees, the results of which were as follows: # of Shares # of Shares in Favor Withheld ----------- ----------- W. Thacher Brown .................................. 4,427,997 36,261 John Gilray Christy ............................... 4,423,976 40,282 Morris Lloyd, Jr. ................................. 4,426,801 37,457 J. Lawrence Shane ................................. 4,422,803 41,455 HOW TO GET INFORMATION REGARDING PROXIES The Fund has adopted the Investment Adviser's proxy voting policies and procedures to govern the voting of proxies relating to the voting securities of the Fund. You may obtain a copy of these proxy voting procedures, without charge, by calling (800) 765-6242 or on the U.S. Securities and Exchange Commission's ("SEC") website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available, without charge, by calling (800) 765-6242 or on the SEC's website at www.sec.gov. QUARTERLY STATEMENT OF INVESTMENTS The Fund files a complete statement of investments with the SEC for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the SEC's website at www.sec.gov. The filed form may also be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330. DIVIDEND REINVESTMENT PLAN The Fund has established a plan for the automatic investment of dividends and distributions ("the Plan") pursuant to which dividends and capital gain distributions to shareholders will be paid in or reinvested in additional shares of the Fund. All shareholders of record are eligible to join the Plan. PFPC Inc. acts as the agent (the "Agent") for participants under the Plan. Shareholders whose shares are registered in their own names may elect to participate in the Plan by completing an authorization form and returning it to the Agent. Shareholders whose shares are held in the name of a broker or nominee should contact such broker or nominee to determine whether or how they may participate in the Plan. Dividends and distributions are reinvested under the Plan as follows: if the market price per share on the Friday before the payment date for the dividend or distribution (the "Valuation Date"), plus the brokerage commissions applicable to one such share, equals or exceeds the net asset value per share on that date, the Fund will issue new shares to participants valued at the net asset value or, if the net asset value is less than 95% of the market price on the Valuation Date, then valued at 95% of the market price. If net asset value per share on the Valuation Date exceeds the market price per share on that date, plus the brokerage commissions applicable to one such share, the Agent will buy shares on the open market, on the New York Stock Exchange, for the participants' accounts. If before the Agent has 14 SHAREHOLDER INFORMATION (UNAUDITED) -- CONTINUED completed its purchases, the market price exceeds the net asset value of shares, the average per share purchase price paid by the Agent may exceed the net asset value of shares, resulting in the acquisition of fewer shares than if the dividend or distribution has been paid in shares issued by the Fund at net asset value. There is no charge to participants for reinvesting dividends or distributions payable in either shares or cash. The Agent's fees for handling of reinvestment of such dividends and distributions will be paid by the Fund. There will be no brokerage charges with respect to shares issued directly by the Fund as a result of dividends or distributions payable either in shares or cash. However, each participant will be charged by the Agent a pro rata share of brokerage commissions incurred with respect to Agent's open market purchases in connection with the reinvestment of dividends or distributions payable only in cash. For purposes of determining the number of shares to be distributed under the Plan, the net asset value is computed on the Valuation Date and compared to the market value of such shares on such date. The Plan may be terminated by a participant by delivery of written notice of termination to the Agent at the address shown below. Upon termination, the Agent will cause a certificate or certificates for the full shares held for a participant under the Plan and a check for any fractional shares to be delivered to the former participant. Distributions of investment company taxable income that are invested in additional shares generally are taxable to shareholders as ordinary income. A capital gain distribution that is reinvested in shares is taxable to shareholders as long-term capital gain, regardless of the length of time a shareholder has held the shares or whether such gain was realized by the Fund before the shareholder acquired such shares and was reflected in the price paid for the shares. Plan information and authorization forms are available from PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027. PRIVACY POLICY The privacy of your personal financial information is extremely important to us. When you open an account with us, we collect a significant amount of information from you in order to properly invest and administer your account. We take very seriously the obligation to keep that information private and confidential, and we want you to know how we protect that important information. We collect nonpublic personal information about you from applications or other forms you complete and from your transactions with us or our affiliates. We do not disclose information about you, or our former clients, to our affiliates or to service providers or other third parties, except as permitted by law. We share only the minimum information required to properly administer your accounts, which enables us to send transaction confirmations, monthly or quarterly statements, financials and tax forms. Even within MBIA-CMC and its affiliated entities, only a limited number of people who actually service accounts will ever have access to your personal financial information. Further, we do not share information about our current or former clients with any outside marketing groups or sales entities. To ensure the highest degree of security and confidentiality, MBIA-CMC and its affiliates maintain various physical, electronic and procedural safeguards to protect your personal information. We also apply special measures for authentication of information you request or submit to us on our website- www.MBIA.com. MBIA CAPITAL MANAGEMENT CORP. 15 SHAREHOLDER INFORMATION (UNAUDITED) -- CONTINUED NOTICE The Fund's Audit Committee adopted an audit committee charter on September 10, 2003. A copy of the audit committee charter was included as Appendix A to the Fund's proxy statement filed with the SEC in May, 2004, which is available on the SEC's website at www.sec.gov. A copy of the Fund's audit committee charter is also available to shareholders, free of charge, upon request by calling the Fund at 800-331-1710. - -------------------------------------------------------------------------------- HOW TO GET ASSISTANCE WITH SHARE TRANSFER OR DIVIDENDS Contact Your Transfer Agent, PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027, or call 1-800-331-1710 - -------------------------------------------------------------------------------- 16 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] - -------------------------------------------------------------------------------- TRUSTEES ---------- W. THACHER BROWN JOHN GILRAY CHRISTY MORRIS LLOYD, JR. J. LAWRENCE SHANE OFFICERS ---------- CLIFFORD D. CORSO PRESIDENT MARC D. MORRIS TREASURER LEONARD CHUBINSKY SECRETARY RICHARD WALZ CHIEF COMPLIANCE OFFICER ROBERT T. CLAIBORNE VICE PRESIDENT GAUTAM KHANNA VICE PRESIDENT INVESTMENT ADVISER -------------------- MBIA CAPITAL MANAGEMENT CORP. 113 KING STREET ARMONK, NY 10504 CUSTODIAN ----------- PFPC TRUST COMPANY 8800 TINICUM BOULEVARD PHILADELPHIA, PA 19153 TRANSFER AGENT ---------------- PFPC INC. P.O. BOX 43027 PROVIDENCE, RI 02940-3027 1-800-331-1710 COUNSEL --------- PEPPER HAMILTON LLP 3000 TWO LOGAN SQUARE EIGHTEENTH & ARCH STREETS PHILADELPHIA, PA 19103 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------ TAIT, WELLER & BAKER LLP 1818 MARKET STREET SUITE 2400 PHILADELPHIA, PA 19103 RIVUS [LOGO] Managed by MBIA SEMI-ANNUAL REPORT SEPTEMBER 30, 2007 - -------------------------------------------------------------------------------- ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. There has been no change, as of the date of this filing, in any of the portfolio managers identified in response to paragraph (a)(1) of this Item in the registrant's most recently filed annual report on Form N-CSR. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) RIVUS BOND FUND By (Signature and Title)* /S/ CLIFFORD D. CORSO ------------------------------------------------------- Clifford D. Corso, President (principal executive officer) Date NOVEMBER 29, 2007 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /S/ CLIFFORD D. CORSO ------------------------------------------------------- Clifford D. Corso, President (principal executive officer) Date NOVEMBER 29, 2007 ---------------------------------------------------------------------------- By (Signature and Title)* /S/ MARC D. MORRIS ------------------------------------------------------- Marc D. Morris, Treasurer (principal financial officer) Date NOVEMBER 29, 2007 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 cert302.txt 302 CERTT CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, Clifford D. Corso, certify that: 1. I have reviewed this report on Form N-CSR of Rivus Bond Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: NOVEMBER 29, 2007 /S/ CLIFFORD D. CORSO -------------------- --------------------------------------------------- Clifford D. Corso, President (principal executive officer) CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, Marc D. Morris, certify that: 1. I have reviewed this report on Form N-CSR of Rivus Bond Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: NOVEMBER 29, 2007 /S/ MARC D. MORRIS ------------------- ------------------------------------------------- Marc D. Morris, Treasurer (principal financial officer) EX-99.906CERT 3 cert906.txt 906 CERT CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT I, Clifford D. Corso, President of Rivus Bond Fund (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: NOVEMBER 29, 2007 /S/ CLIFFORD D. CORSO ------------------------- ----------------------------------------------- Clifford D. Corso, President (principal executive officer) I, Marc D. Morris, Treasurer of Rivus Bond Fund (the "Registrant"),certify that: 1. The Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: NOVEMBER 29, 2007 /S/ MARC D. MORRIS ------------------------- ---------------------------------------------- Marc D. Morris, Treasurer (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----