-----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, DcLyyp+GypJ0iMafafTB5zaZbkKPgGWus1h4FWI8UwfLxhjy7kDm/04B0VSMgAYJ KZc5FE7fGhQ7wXWDLn8Vvg== 0000950116-99-000086.txt : 19990125 0000950116-99-000086.hdr.sgml : 19990125 ACCESSION NUMBER: 0000950116-99-000086 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990114 FILED AS OF DATE: 19990122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 1838 BOND DEBENTURE TRADING FUND CENTRAL INDEX KEY: 0000030125 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231745238 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-02201 FILM NUMBER: 99509917 BUSINESS ADDRESS: STREET 1: 100 MATSONFORD RD STE 320 STREET 2: FIVE RADNOR CORP CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 2152934300 MAIL ADDRESS: STREET 1: 1100 NORTH MARKET ST STREET 2: 1100 NORTH MARKET ST CITY: WILMINGTON STATE: DE ZIP: 19801-1246 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-30B-2 1 N-30B-2 January 14, 1999 To The Shareholder: The fund ended the quarter December 31, 1998 with a Net Asset Value of $22.45 per share. This represents a 1.10% decrease from $22.70 per share at the end of the March 31, 1998 fiscal year and a 1.26% increase from $22.17 per share a year earlier. On December 31, 1998, the closing price on the New York Stock Exchange for the Fund's stock was $21.25 per share, representing a 5.3% discount to Net Asset Value. The performance of the Fund is compared below to the average of the 18 other closed-end bond funds with which we have historically compared ourselves: Total Return-Percentage Change in Net Asset Value Per Share with All Distributions Reinvested1 - --------------------------------------------------------------------------------
10 Years 5 Years 2 Years 1 Year Quarter to 12/31/98 to 12/31/98 to 12/31/98 to 12/31/98 to 12/31/98 ------------- ------------- ------------- ------------- ------------ 1838 Bond Fund 2 166.23% 47.06% 23.21% 8.63% 0.61% Average of 18 Other Closed-End Bond Funds 2 148.98% 44.18% 19.07% 7.08% 0.87% Salomon Bros. Bond Index 3 180.18% 52.08% 25.10% 10.75% 0.86%
1 - This is historical information and should not be construed as indicative of likely future performance. 2 - Source: Lipper Inc. 3 - Comprised of long-term AAA and AA corporate bonds; series has been changed to include mortgage-backed securities. On December 10, 1998 the Board of Directors declared a total dividend payment of $0.465 per share payable January 26, 1999 to shareholders of record December 31, 1998. This payment is comprised of the $0.38 per share rate paid in previous quarters combined with an additional $0.085 per share special declaration to distribute capital gains realized on portfolio transactions during the most recent tax year. This additional payment is in accordance with the established policy of distributing these gains on an annual basis, as applicable. Please consult the Form 1099 distributed in conjunction with the dividend payment and your tax adviser for specific tax treatment of the Fund's distributions. The past year has been extremely volatile for the bond markets as we discussed in the previous quarter's letter. The recent quarter saw interest rates rise slightly as concerns over Emerging Market difficulties eased. Yield spreads on Corporate bonds tightened relative to US Treasury bonds and overall market liquidity improved from the very extreme conditions of September and October. Three policy moves lowering interest rates on the part of the Federal Reserve Board proved to be the key to restoring market confidence. The Fund had made strategic moves to reduce its exposure to emerging market, lower rated and very cyclical credits. This enabled the Fund to realize the incremental total return while maintaining the market exposure of predominantly longer duration bonds and the incremental yield of what we believed would be less volatile corporate bonds. 1 The table below updates the portfolio quality of the Fund's assets compared to the end of the most recent fiscal years: - -------------------------------------------------------------------------------- Percent of Total Investment (Standard & Poor's Ratings) - --------------------------------------------------------------------------------
U.S. Treasuries, Agencies & B and Not Period Ended AAA Rated AA A BBB BB Lower Rated - ------------------- ------------------ --------- ---------- ---------- --------- --------- --------- December 31, 1998 16.7% 0.0% 30.5% 48.7% 3.6% 0.3% 0.2% March 31, 1998 19.9% 0.0% 31.9% 44.0% 3.0% 0.9% 0.3% March 31, 1997 22.3% 1.3% 31.9% 34.5% 9.3% 0.4% 0.3% March 31, 1996 31.4% 1.2% 26.2% 27.4% 9.6% 3.9% 0.3%
Recent developments, particularly the financial troubles in Brazil, have rekindled fears about credit risk and resulted in a modest widening in yield spreads at this writing. We believe that the markets will remain vulnerable to sporadic weakness in the riskier sectors. We would not anticipate adding any incremental credit risk until we feel that markets have regained a more fundamental stability. We would like to remind shareholders of the opportunities presented by the Fund's dividend reinvestment plan as detailed in the Fund's prospectus and referred to inside the back cover of this report. First Chicago Trust Co. of New York, the Fund's Transfer Agent and Dividend Paying Agent, may be reached at 201-324-0498. Sincerely, /s/ John H. Donaldson ----------------------------- John H. Donaldson, CFA President 2 SCHEDULE OF NET ASSETS DECEMBER 31, 1998 (Unaudited)
Moody's/ Standard & Poor's Rating for Debt Principal Securities Amount (000's) ------------ ---------------- LONG TERM DEBT SECURITIES (98.35%) ELECTRIC UTILITIES (9.97%) Cleveland Electric Illuminating, 1st Mtge., 9.00%, 07/01/23 ........... Ba1/BB+ $ 1,800 Commonwealth Edison, 1st Mtge., 9.125%, 10/15/21 ...................... Baa2/BBB 2,000 Hydro Quebec Deb, 8.25%, 04/15/2026 ................................... A2/A+ 1,550 Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 ...................... Baa3/BBB 1,000 Utilicorp United Inc., Sr. Note 9.00%, 11/15/21 ....................... Baa3/BBB 1,000 FINANCIAL (16.12%) Chrysler Financial Corp., Debs., 12.75%, 11/01/99 ..................... A2/A+ 1,000 Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 ............. Aa3/A 2,000 EOP Operating LP. Notes, 7.25%, 02/15/18 .............................. Baa1/BBB 1,000 FBS Capital I, Capital Securities, 8.09%, 11/15/26 .................... A1/BBB+ 2,000 HSBC America Capital II, 8.38%, 05/15/27 .............................. A2/BBB+ 3,000 Liberty Property Trust, 7.50%, 01/15/18 ............................... Baa3/BBB- 1,000 Penn Central Corp., Sub. Notes, 10.625%, 04/15/00 ..................... Ba1/BBB 1,000 Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 ..................... Ba1/BBB 1,500 INDUSTRIAL & MISCELLANEOUS (39.08%) Apache Corp., Notes, 7.70%, 03/15/26 .................................. Baa1/BBB+ 500 Chiquita Brands Int'l, Inc., Sr. Notes, 10.25%, 11/01/06 .............. B1/B+ 250 Dell Computer Corp., Sr. Debs., 7.10%, 04/15/28 ....................... Baa1/BBB+ 2,500 Georgia Pacific Corp., Debs., 9.625%, 03/15/22 ........................ Baa2/BBB- 1,000 Harcourt General Inc., Sr. Debs., 8.875%, 06/01/22 .................... Baa2/BBB 2,000 Harcourt General Inc., 7.30%, 08/01/2097 .............................. Baa2/BBB 1,500 K N Energy Inc., Debs., 8.75%, 10/15/24 ............................... Baa2/BBB- 1,150 Mark IV Industries, Inc., Sr. Sub Notes, 7.75%, 04/01/06 .............. Ba2/BB- 500 May Department Stores Co., Debs., 10.75%, 06/15/18 .................... A1/A 150 News America Holdings Inc., Gtd. Sr. Debs., 10.125%, 10/15/12 ......... Baa3/BBB- 2,050 News America Holdings Inc., Notes, 7.90%, 12/01/2095 .................. Baa3/BBB- 1,400 Phillip Morris Co., Inc., Debs., 7.75%, 01/15/27 ...................... A2/A 3,000 Smurfit Capital Funding, Gtd., Debs., 7.50%, 11/20/25 ................. Baa1/A- 2,000 Societe Generale(NY), Sub Notes, 7.40%, 06/01/06 ...................... A1/A+ 400 Texaco Capital Inc., Gtd. Debs., 7.50%, 03/01/2043 .................... A1/A+ 2,000 Time Warner Inc., Debs., 9.15%, 02/01/23 .............................. Baa3/BBB 3,000 Tricon Global Restaurant, Sr. Notes, 7.65%, 05/15/08 .................. Ba1/BB 500 TRW Inc., Medium Term Sr. Notes, 9.25%, 12/30/11 ...................... A2/A 275 TRW Inc., Sr. Notes, 9.375%, 04/15/21 ................................. A2/A 303 Union Camp Corp., Debs., 9.25%, 02/01/11 .............................. A2/A- 1,500 Western Atlas Inc., Debs., 8.55%, 06/15/24 ............................ A2/A 2,539 TELEPHONE & COMMUNICATIONS (7.46%) Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 ................... Baa3/BBB 1,000 MCI Worldcom Inc., Sr. Note., 9.375%, 01/15/04 ........................ Baa2/BBB+ 1,000 MCI Worldcom Inc., Sr. Note., 6.95%, 08/15/28 ......................... Baa2/BBB+ 1,500 TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 .................. Baa3/BBB- 2,000 Identified Cost Value (Note 2) (Note 1) ----------------- -------------- LONG TERM DEBT SECURITIES (98.35%) ELECTRIC UTILITIES (9.97%) Cleveland Electric Illuminating, 1st Mtge., 9.00%, 07/01/23 ........... $ 1,662,876 $ 1,982,432 Commonwealth Edison, 1st Mtge., 9.125%, 10/15/21 ...................... 2,062,500 2,117,796 Hydro Quebec Deb, 8.25%, 04/15/2026 ................................... 1,475,994 1,920,047 Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 ...................... 1,028,220 1,098,220 Utilicorp United Inc., Sr. Note 9.00%, 11/15/21 ....................... 1,090,000 1,100,192 ----------- ----------- 7,319,590 8,218,687 ----------- ----------- FINANCIAL (16.12%) Chrysler Financial Corp., Debs., 12.75%, 11/01/99 ..................... 1,090,125 1,058,533 Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 ............. 2,012,070 2,208,132 EOP Operating LP. Notes, 7.25%, 02/15/18 .............................. 991,900 944,860 FBS Capital I, Capital Securities, 8.09%, 11/15/26 .................... 1,993,370 2,220,278 HSBC America Capital II, 8.38%, 05/15/27 .............................. 3,080,350 3,061,941 Liberty Property Trust, 7.50%, 01/15/18 ............................... 998,430 910,600 Penn Central Corp., Sub. Notes, 10.625%, 04/15/00 ..................... 1,150,640 1,040,220 Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 ..................... 1,634,965 1,847,265 ----------- ----------- 12,951,850 13,291,829 ----------- ----------- INDUSTRIAL & MISCELLANEOUS (39.08%) Apache Corp., Notes, 7.70%, 03/15/26 .................................. 525,280 519,960 Chiquita Brands Int'l, Inc., Sr. Notes, 10.25%, 11/01/06 .............. 255,625 260,625 Dell Computer Corp., Sr. Debs., 7.10%, 04/15/28 ....................... 2,501,140 2,552,500 Georgia Pacific Corp., Debs., 9.625%, 03/15/22 ........................ 1,059,240 1,120,742 Harcourt General Inc., Sr. Debs., 8.875%, 06/01/22 .................... 2,157,020 2,232,844 Harcourt General Inc., 7.30%, 08/01/2097 .............................. 1,488,886 1,359,077 K N Energy Inc., Debs., 8.75%, 10/15/24 ............................... 1,263,798 1,299,788 Mark IV Industries, Inc., Sr. Sub Notes, 7.75%, 04/01/06 .............. 462,650 495,775 May Department Stores Co., Debs., 10.75%, 06/15/18 .................... 154,385 158,344 News America Holdings Inc., Gtd. Sr. Debs., 10.125%, 10/15/12 ......... 2,163,503 2,443,580 News America Holdings Inc., Notes, 7.90%, 12/01/2095 .................. 1,298,624 1,504,510 Phillip Morris Co., Inc., Debs., 7.75%, 01/15/27 ...................... 3,007,020 3,414,957 Smurfit Capital Funding, Gtd., Debs., 7.50%, 11/20/25 ................. 1,990,780 1,965,734 Societe Generale(NY), Sub Notes, 7.40%, 06/01/06 ...................... 413,588 432,926 Texaco Capital Inc., Gtd. Debs., 7.50%, 03/01/2043 .................... 1,977,920 2,224,324 Time Warner Inc., Debs., 9.15%, 02/01/23 .............................. 3,159,700 3,955,629 Tricon Global Restaurant, Sr. Notes, 7.65%, 05/15/08 .................. 498,875 523,722 TRW Inc., Medium Term Sr. Notes, 9.25%, 12/30/11 ...................... 326,312 357,041 TRW Inc., Sr. Notes, 9.375%, 04/15/21 ................................. 320,893 402,982 Union Camp Corp., Debs., 9.25%, 02/01/11 .............................. 1,486,305 1,896,303 Western Atlas Inc., Debs., 8.55%, 06/15/24 ............................ 2,651,998 3,112,535 ----------- ----------- 29,163,542 32,233,898 ----------- ----------- TELEPHONE & COMMUNICATIONS (7.46%) Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 ................... 1,120,000 1,192,163 MCI Worldcom Inc., Sr. Note., 9.375%, 01/15/04 ........................ 1,051,875 1,036,027 MCI Worldcom Inc., Sr. Note., 6.95%, 08/15/28 ......................... 1,485,975 1,618,160 TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 .................. 1,991,940 2,305,000 ----------- ----------- 5,649,790 6,151,353 ----------- -----------
See notes to financial statements. 3 SCHEDULE OF NET ASSETS -- continued DECEMBER 31, 1998 (Unaudited)
Moody's/ Standard & Poor's Rating for Debt Principal Identified Cost Value Securities Amount (000's) (Note 2) (Note 1) ------------ ---------------- ----------------- --------------- TRANSPORTATION (9.17%) AMR Corp., Debs., 10.00%, 04/15/21 ......................... Baa2/BBB- $ 2,000 $ 2,148,940 $ 2,612,684 Auburn Hills Trust, Gtd. Ctf Ex adj rate, 05/01/20 ......... A2/A+ 1,000 1,000,000 1,660,114 Ford Holdings, Inc., Gtd. Debs., 9.30%, 03/01/20 ........... A1/A 1,000 1,117,790 1,314,618 Ford Motor Co., Debs., 8.90%, 02/15/2032 ................... A1/A 1,500 1,480,350 1,977,341 ------------- ----------- 5,747,080 7,564,757 ------------- ----------- MORTGAGE BACKED SECURITIES (4.21%) FNMA Pool #313411, 7.00%, 03/01/04 ......................... NR/NR 1,185 1,087,120 1,085,441 GNMA Pool #780374, 7.50%, 12/15/23 ......................... NR/NR 664 631,793 656,599 GNMA Pool #417239, 7.00%, 02/15/26 ......................... NR/NR 1,718 1,710,433 1,726,073 ------------- ----------- 3,429,346 3,468,112 ------------- ----------- MUNICIPAL BONDS (1.89%) Greater Orlando Aviation Auth 8.20% 10/01/2012 ............. Aaa/AAA 500 551,875 551,830 North Dakota St Str Sys Rev 10.50% 04/01/2014 .............. Aaa/AAA 1,000 1,159,780 1,012,740 ------------- ----------- 1,711,655 1,564,570 ------------- ----------- U.S. GOVERNMENT & AGENCIES (10.45%) U.S. Treasury Bonds, 10.75%, 08/15/05 ...................... NR/NR 1,600 2,120,750 2,133,501 U.S. Treasury Bonds, 8.125%, 08/15/21 ...................... NR/NR 1,000 1,016,407 1,353,750 U.S. Treasury Bonds, 7.875%, 02/15/21 ...................... NR/NR 3,900 4,051,031 5,140,688 ------------- ----------- 7,188,188 8,627,938 ------------- ----------- TOTAL LONG TERM DEBT SECURITIES ............................ 73,161,041 81,121,140 ------------- ----------- COMMERCIAL PAPER (1.21%) General Electric Capital Corp., 5.50%, 01/25/99 ............ 1,000 1,000,000 1,000,000 ------------- ----------- Shares -------- SHORT-TERM INVESTMENTS (0.39%) Republic US Govt M/M Fund-Reg .............................. NR/NR 322,537 322,537 322,537 ------------- ----------- INVESTMENT COMPANIES (0.24%) High Yield Plus Fund ....................................... NR/NR 25,000 167,178 192,188 ------------- ----------- TOTAL INVESTMENTS (100.19%) ................................ $ 74,650,756* $82,635,865 ============= =========== LIABILITIES IN EXCESS OF OTHER ASSETS (0.19%) .............. (159,899) ----------- NET ASSETS (100.00%) ....................................... $82,475,966 ===========
* The cost for federal income tax purposes was $74,850,758. The aggregate gross unrealized appreciation in which there was an excess of market value over tax cost was $8,605,187 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value was $820,078. See notes to financial statements 4 FINANCIAL STATEMENTS (Unaudited) STATEMENT OF ASSETS AND LIABILITIES December 31, 1998
Assets: Investment in securities at value (identified cost $74,650,756) (Note 1) .............. $82,635,865 Cash .................................................................................. 28,658 Interest receivable ................................................................... 1,631,439 Prepaid expenses ...................................................................... 9,727 ----------- TOTAL ASSETS ........................................................................ 84,305,689 ----------- Liabilities: Accrued expenses payable .............................................................. 122,861 Dividends payable ..................................................................... 1,706,862 ----------- TOTAL LIABILITIES ................................................................... 1,829,723 ----------- Net assets: (equivalent to $22.45 per share based on 3,673,258 shares of capital stock $82,475,966 =========== outstanding) NET ASSETS consisted of: Capital paid - in ..................................................................... $74,544,927 Accumulated net realized loss ......................................................... (54,070) Net unrealized appreciation on investments ............................................ 7,985,109 ----------- $82,475,966 ===========
STATEMENT OF OPERATIONS For the nine months ended December 31, 1998 Investment Income: Interest ............................................................ $ 4,604,063 Dividends ........................................................... 40,682 ----------- Total Investment Income ........................................... 4,644,745 ----------- Expenses: Investment advisory fees (Note 4) ................................... $ 351,332 Transfer agent fees ................................................. 35,471 Insurance ........................................................... 11,811 Directors' fees and expenses ........................................ 20,377 Audit fees .......................................................... 19,137 State and local taxes ............................................... 15,466 Legal fees and expenses ............................................. 19,786 Reports to shareholders ............................................. 13,825 Custodian fees ...................................................... 6,431 Miscellaneous ....................................................... 20,324 ---------- Total Expenses .................................................... 513,960 ----------- Net Investment Income .......................................... 4,130,785 ----------- Realized and unrealized gain on investments (Note 1): Net realized gain from security transactions ........................ 231,764 ----------- Unrealized appreciation of investments: Beginning of period ............................................... 7,350,696 End of period ..................................................... 7,985,109 ---------- Change in unrealized appreciation of investments ............... 634,413 ----------- Net realized and unrealized gain on investments .............. 866,177 ----------- Net increase in net assets resulting from operations ......... $ 4,996,962 ===========
See notes to financial statements 5 STATEMENTS OF CHANGES IN NET ASSETS
Nine Months ended December 31, 1998 Year ended (unaudited) March 31, 1998 ------------------- --------------- Increase (decrease) in net assets: Operations: Net investment income ....................................................... $ 4,130,785 $ 5,528,166 Net realized gain from security transactions (Note 2) ....................... 225,441 164,027 Change in unrealized appreciation of investments ............................ 634,413 7,586,669 ------------ ------------ Net increase in net assets resulting from operations ........................ 4,990,639 13,278,862 ------------ ------------ Dividends to shareholders from net investment income ......................... (4,136,385) (5,528,166) Dividends to shareholders in excess of net investment income ................. (1,287,709) (86,494) Distributions to shareholders from net realized gain ......................... (470,282) (5,422) ------------ ------------ (5,894,376) (5,620,082) ------------ ------------ Capital share transactions: Net asset value of shares issued to shareholders in reinvestment of dividends from net investment income (Note 5) ....................................... 0 0 ------------ ------------ Increase (decrease) in net assets ........................................... (903,737) 7,658,780 Net Assets: Beginning of period ......................................................... 83,379,703 75,720,923 ------------ ------------ End of period ............................................................... $ 82,475,966 $ 83,379,703 ============ ============
HOW TO ENROLL IN THE DIVIDEND REINVESTMENT PLAN 1838 Bond-Debenture Trading Fund (the "Fund") has established a plan for the automatic investment of dividends and distributions which all shareholders of record are eligible to join. The method by which shares are obtained is explained on page 11. The Fund has appointed First Chicago Trust Company of New York to act as the Agent of each shareholder electing to participate in the plan. Information and application forms are available from First Chicago Trust Company of New York, P.O. Box 2500, Jersey City, New Jersey 07303-2500. See notes to financial statements. 6 FINANCIAL HIGHLIGHTS The table below sets forth financial data for a share of capital stock outstanding throughout each period presented.
Nine Months Ended Year Ended March 31, 12/31/98 ----------------------------------------------------- (unaudited) 1998 1997 1996 1995 ------------- ----------- ----------- ----------- ----------- Per Share Operating Performance Net asset value, beginning of period .................. $ 22.70 $ 20.61 $ 21.15 $ 20.64 $ 21.45 ------- ------- ------- ------- ------- Net investment income ................................ 1.13 1.51 1.51 1.58 1.58 Net realized and unrealized gain (loss) on investments ........................................ 0.23 2.11 ( 0.49) 0.61 ( 0.67) ------- ------- ------- ------- ------- Total from investment operations ...................... 1.36 3.62 1.02 2.19 0.91 ------- ------- ------- ------- ------- Less distributions Dividends from net investment income ................. ( 1.13) ( 1.51) ( 1.51) ( 1.58) ( 1.58) Dividends in excess of net investment income . ( 0.35) 0.00 ( 0.02) 0.00 ( 0.01) Distributions from net realized gain ................. ( 0.13) ( 0.02) 0.00 ( 0.06) 0.00 Distributions in excess of net realized gain ......... 0.00 0.00 0.00 0.00 0.00 Distributions from tax return of capital ............. 0.00 0.00 ( 0.03) ( 0.04) ( 0.13) -------- ------- ------- ------- ------- Total distributions ................................... ( 1.61) ( 1.53) ( 1.56) ( 1.68) ( 1.72) -------- ------- ------- ------- ------- Net asset value, end of period ........................ $ 22.45 $ 22.70 $ 20.61 $ 21.15 $ 20.64 ======== ======= ======= ======= ======= Per share market price, end of period ................. $ 21.25 $ 20.81 $ 19.75 $ 21.25 $ 20.13 ======== ======= ======= ======= ======= Total Investment Return Based on market value ................................ 9.85 % 13.11% 0.28% 13.91% 3.41% Ratios/Supplemental Data Net assets, end of period (in 000's) .................. $ 82,476 $83,380 $75,721 $77,581 $75,384 Ratio of expenses to average net assets .............. 0.82%* 0.85% 0.87% 0.86% 0.86% Ratio of net investment income to average net assets ............................................. 6.58%* 6.89% 7.27% 7.37% 7.83% Portfolio Turnover Rate .............................. 8.88 % 25.03% 32.83% 43.25% 35.38% Number of shares outstanding at the end of period (in 000's) ........................................... 3,673 3,673 3,673 3,668 3,653
- ------------ * Annualized See notes to financial statements. 7 NOTES TO FINANCIAL STATEMENTS (unaudited) Note 1 -- Significant Accounting Policies -- The 1838 Bond-Debenture Trading Fund ("the Fund") 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. A. Security Valuation -- Securities which are primarily traded in the over-the-counter market are valued at the mean of the bid prices on the last business day of the period generally obtained from at least two dealers regularly making a market in the security. Securities which are primarily traded on a national securities exchange are valued at the last reported sales price. The Fund believes that, because of the size of its position in securities, the primary market for the listed debt securities in its portfolio is the over-the-counter market. Short-term money market instruments which have a maturity of more than 60 days are valued at the mean bid prices for securities of a similar type, yield and maturity obtained from at least two dealers. Short-term money market instruments which have a maturity of 60 days or less are valued at amortized cost which approximates market value. At December 31, 1998, the Fund had invested 98.35% of its portfolio in long-term debt obligations of issuers engaged in financial, industrial, electric utilities, transportation, telephone & communication, foreign and other miscellaneous activities. The issuers' ability to meet these obligations may be affected by economic developments in their respective industries. B. Determination of Gains or Losses on Sale of Securities -- Gains or losses on the sale of securities are calculated for accounting and tax purposes on the identified cost basis. 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. D. Other -- Security transactions are accounted for on the date the securities are purchased or sold. The Fund records interest income on the accrual basis. In computing net investment income, the Fund does not amortize premiums or accrue discounts on fixed income securities in the portfolio. Dividend income and distributions to shareholders are recorded on the ex-dividend date. E. Distributions to Shareholders -- Distributions of net investment income will be made quarterly. Distributions of net capital gains realized will be made annually. Income distributions and capital gain distributions are determined in accordance with U.S. Federal Income Tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments in market discount and mortgage backed securities. F. Use of Estimates in the Preparation of Financial Statements -- 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2 -- Portfolio Transactions -- The following is a summary of the security transactions for the nine months ended December 31, 1998:
Proceeds Cost of from Sales Purchases or Maturities ------------- -------------- U.S. Government Securities .......... $ 368,611 $1,252,216 Other Investment Securities ......... $8,398,088 $5,956,153
Note 3 -- Capital Stock -- At December 31, 1998, there were 10,000,000 shares of capital stock ($1.00 par value) authorized, with 3,673,258 shares issued and outstanding. 8 NOTES TO FINANCIAL STATEMENTS (unaudited)--continued Note 4 -- Investment Advisory Contract and Payments to Affiliated Persons -- Under the terms of the current contract with 1838 Investment Advisors, Inc., advisory fees are paid monthly to the Investment Advisor at an annual rate of 5/8 of 1% on the first $40 million of the Fund's month end net assets and 1/2 of 1% on the excess. Certain directors and officers of the Fund are also directors, officers and/or employees of the Investment Advisor. None of the directors so affiliated receives compensation for services as a director of the Fund. Similarly, 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, 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 nine months ended December 31, 1998, the Fund issued zero shares under this Plan. 9 DIVIDEND REINVESTMENT PLAN 1838 Bond-Debenture Trading Fund (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. First Chicago Trust Company of New York 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 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 First Chicago Trust Company of New York, P.O. Box 2500, Jersey City, New Jersey, 07303-2500. HOW TO GET ASSISTANCE WITH SHARE TRANSFER OR DIVIDENDS Contact Your Transfer Agent, First Chicago Trust Company of New York, P.O. Box 2500, Jersey City, New Jersey 07303-2500, or call 201-324-0498 10 -----END PRIVACY-ENHANCED MESSAGE-----