-----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, ENqLeqqASW3ROQuvJY8jgn3CqRzioA14iZ0d4gtHIeAVN4oHUPNeX8dlDthqkslc /31wozXPaSM2g3zErgL/nQ== 0000950116-98-001040.txt : 19980511 0000950116-98-001040.hdr.sgml : 19980511 ACCESSION NUMBER: 0000950116-98-001040 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980330 FILED AS OF DATE: 19980508 SROS: NONE 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: 98613426 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 April 14, 1998 TO THE SHAREHOLDER: The Fund ended its fiscal year March 31, 1998, with a Net Asset Value of $22.70 per share. This represents a 10.1% increase from $20.61 per share a year earlier at March 31, 1997. The Fund's stock closed this fiscal year on the NYSE at $20.81 per share, representing a 9.1% 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 3/31/98 To 3/31/98 To 3/31/98 To 3/31/98 To 3/31/98 - ------------------------------------------------------------------------------------------------------ 1838 Bond Fund (2) 165.71% 50.98% 24.32% 18.27% 2.39% Average of 18 Other Closed-End Bond Funds (2) 149.64% 47.11% 20.38% 13.63% 1.63% Salomon Bros. Bond Index (3) 172.21% 49.99% 22.41% 17.46% 1.68%
(1) - This is historical information and should not be construed as indicative of likely future performance. (2) - Source: Lipper Analytical Services Corporation. (3) - Comprised of long-term AAA and AA corporate bonds; series has been changed to include mortgage- backed securities. We are very pleased to report to shareholders that your fund has been ranked first in the category of Investment Grade Bond Funds by Lipper Analytical Services Inc. for the 20 year period ending December 31, 1997. The past year has been very favorable for bond prices as inflation has remained benign, the economy has not been accelerating toward unacceptable growth rates, and the Federal Budget is in the best shape it has been in many years. While we see no near-term severe disruptions to this scenario, the fixed income markets can be subject to volatility as various economic data releases either confirm or disappoint market expectations. 1 The table below updates the portfolio quality of the Fund's assets at 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 - ------------------------------------------------------------------------------------------------------------ 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%
On March 19, 1998, the Board of Directors declared a dividend of $0.38 per share to shareholders of record on April 9, 1998, payable April 28, 1998. Should you wish to take advantage of the Fund's dividend reinvestment plan, you may contact First Chicago Trust Co. of New York, the Fund's Transfer Agent, at 201-324-0498 for additional information. The Board of Directors and management of the Fund appreciate the continued support of shareholders and welcome any inquiries you may have. Sincerely, [GRAPHIC OMITTED] John H. Donaldson President 2 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of 1838 Bond-Debenture Trading Fund We have audited the accompanying statement of assets and liabilities, including the schedule of net assets, of 1838 Bond- Debenture Trading Fund as of March 31, 1998, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial high- lights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 1998, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of 1838 Bond-Debenture Trading Fund as of March 31, 1998, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. 2400 Eleven Penn Center Philadelphia, Pennsylvania April 22, 1998 3
SCHEDULE OF NET ASSETS MARCH 31, 1998 Moody's/ Standard & Poor's Rating for Debt Principal Securities Amount (000's) ------------ ---------------- LONG TERM DEBT SECURITIES (94.62%) ELECTRIC UTILITIES (9.70%) 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, Gtd. Debs., 8.25%, 04/15/26 ........................... A2/A+ 1,550 Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 .................... Ba2/BBB- 1,000 Utilicorp United Inc., Sr. Note 9.00%, 11/15/21 ..................... Baa3/BBB 1,000 FINANCIAL (16.39%) Chrysler Financial Corp., Notes, 12.75%, 11/01/99 ................... A3/A 1,000 Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 ........... Aa3/A- 2,000 EOP Operating LP, 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 Corp., 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 FOREIGN (.51%) Korea Electric Power Inc., Debs., 7.00%, 02/01/27 ................... Ba1/B+ 500 INDUSTRIAL & MISCELLANEOUS (37.36%) Chiquita Brands, Sr. Notes, 10.25%, 11/01/06 ........................ B1/B+ 250 Georgia Pacific Corp., Debs., 9.625%, 03/15/22 ...................... Baa2/BBB- 1,000 Harcourt General Inc., Sr. Debs., 8.875%, 06/01/22 .................. Baa1/BBB+ 2,000 Harcourt General Inc., Sr. Debs., 7.30%, 08/01/2097 ................. Baa1/BBB+ 1,500 K N Energy Inc., Debs., 8.75%, 10/15/24 ............................. A3/BBB+ 1,150 Mark IV Industries, Inc., Debs., 7.75%, 04/01/06 .................... Ba2/BB+ 500 May Department Stores Co., Debs., 10.75%, 06/15/18 .................. A2/A 150 News America Holdings Inc., Sr. Debs., 10.125%, 10/15/12 ............ Baa3/BBB- 2,050 News America Holdings Inc., Gtd. Debs., 7.90%, 12/01/2095 ........... Baa3/BBB- 1,400 North Dakota State Muni. Bond Bank, Water Sys. Rev., 10.50%, 04/01/14 Aaa/AAA 1,000 Phillip Morris, Debs., 7.75%, 01/15/27 .............................. A2/A 3,000 Rohm & Haas Co., Debs., 9.50%, 04/01/21 ............................. A1/A 1,500 Smurfit Capital Funding, Gtd., Debs., 7.50%, 11/20/25 ............... Baa1/A- 2,000 Societe Generale(NY), 7.40%, 06/01/06 ............................... A1/A+ 400 Texaco Capital Inc., Debs., 7.50%, 03/01/43 ......................... A1/A+ 2,000 Time Warner Inc., Debs., 9.15%, 02/01/23 ............................ Ba1/BBB- 3,000 TRW Inc., Notes, 9.25%, 12/30/11 .................................... A2/A 275 TRW Inc., Notes, 9.375%, 04/15/21 ................................... A2/A 303 Union Camp Corp., Debs., 9.25%, 02/01/11 ............................ A1/A- 1,500 Westren Atlas Inc., Debs., 8.55%, 06/15/24 .......................... A3/A- 2,539 TELEPHONE & COMMUNICATIONS (4.15%) Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 ................. Baa3/BBB+ 1,000 TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 ................ Ba1/BBB- 2,000
Identified Cost Value (Note 2) (Note 1) ----------------- ------------- LONG TERM DEBT SECURITIES (94.62%) ELECTRIC UTILITIES (9.70%) Cleveland Electric Illuminating, 1st Mtge., 9.00%, 07/01/23 ......... $ 1,662,876 $ 1,967,584 Commonwealth Edison, 1st Mtge., 9.125%, 10/15/21 .................... 2,062,500 2,126,466 Hydro Quebec, Gtd. Debs., 8.25%, 04/15/26 ........................... 1,475,994 1,823,139 Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 .................... 1,028,220 1,082,620 Utilicorp United Inc., Sr. Note 9.00%, 11/15/21 ..................... 1,090,000 1,091,632 ----------- ----------- 7,319,590 8,091,441 ----------- ----------- FINANCIAL (16.39%) Chrysler Financial Corp., Notes, 12.75%, 11/01/99 ................... 1,090,125 1,099,961 Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 ........... 2,012,070 2,101,084 EOP Operating LP, 7.25%, 02/15/18 ................................... 991,900 989,959 FBS Capital I, Capital Securities, 8.09%, 11/15/26 .................. 1,993,370 2,173,034 HSBC America Capital Corp., 8.38%, 05/15/27 ......................... 3,080,350 3,194,991 Liberty Property Trust, 7.50%, 01/15/18 ............................. 998,430 1,000,000 Penn Central Corp., Sub. Notes, 10.625%, 04/15/00 ................... 1,150,640 1,084,420 Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 ................... 1,634,965 2,021,340 ----------- ----------- 12,951,850 13,664,789 ----------- ----------- FOREIGN (.51%) Korea Electric Power Inc., Debs., 7.00%, 02/01/27 ................... 421,466 429,794 ----------- ----------- INDUSTRIAL & MISCELLANEOUS (37.36%) Chiquita Brands, Sr. Notes, 10.25%, 11/01/06 ........................ 255,625 275,000 Georgia Pacific Corp., Debs., 9.625%, 03/15/22 ...................... 1,059,240 1,135,184 Harcourt General Inc., Sr. Debs., 8.875%, 06/01/22 .................. 2,157,020 2,396,770 Harcourt General Inc., Sr. Debs., 7.30%, 08/01/2097 ................. 1,488,886 1,515,137 K N Energy Inc., Debs., 8.75%, 10/15/24 ............................. 1,263,799 1,308,125 Mark IV Industries, Inc., Debs., 7.75%, 04/01/06 .................... 462,650 513,935 May Department Stores Co., Debs., 10.75%, 06/15/18 .................. 154,385 159,336 News America Holdings Inc., Sr. Debs., 10.125%, 10/15/12 ............ 2,163,502 2,428,432 News America Holdings Inc., Gtd. Debs., 7.90%, 12/01/2095 ........... 1,298,624 1,487,268 North Dakota State Muni. Bond Bank, Water Sys. Rev., 10.50%, 04/01/14 1,159,780 1,044,040 Phillip Morris, Debs., 7.75%, 01/15/27 .............................. 3,007,020 3,205,647 Rohm & Haas Co., Debs., 9.50%, 04/01/21 ............................. 1,494,375 1,702,706 Smurfit Capital Funding, Gtd., Debs., 7.50%, 11/20/25 ............... 1,990,780 2,098,534 Societe Generale(NY), 7.40%, 06/01/06 ............................... 413,588 415,259 Texaco Capital Inc., Debs., 7.50%, 03/01/43 ......................... 1,977,920 2,096,890 Time Warner Inc., Debs., 9.15%, 02/01/23 ............................ 3,159,700 3,686,478 TRW Inc., Notes, 9.25%, 12/30/11 .................................... 326,312 347,821 TRW Inc., Notes, 9.375%, 04/15/21 ................................... 320,893 399,634 Union Camp Corp., Debs., 9.25%, 02/01/11 ............................ 1,486,305 1,858,686 Westren Atlas Inc., Debs., 8.55%, 06/15/24 .......................... 2,651,998 3,059,493 ----------- ----------- 28,292,402 31,134,375 ----------- ----------- TELEPHONE & COMMUNICATIONS (4.15%) Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 ................. 1,120,000 1,197,802 TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 ................ 1,991,940 2,264,960 ----------- ----------- 3,111,940 3,462,762 ----------- -----------
See notes to financial statements. 4
SCHEDULE OF NET ASSETS--continued MARCH 31, 1998 Moody's/ Standard & Poor's Rating for Debt Principal Securities Amount (000's) ------------ --------------- TRANSPORTATION (10.80%) AMR Corp., Debs., 10.00%, 04/15/21 ................................... Baa3/BBB- $ 2,000 Auburn Hills Trust, Gtd. Exchangeable Ctfs. 12.00%, 05/01/20 ......... A3/A 1,000 Ford Holdings, Gtd. Debs., 9.375%, 03/01/20 .......................... A1/A 1,000 Ford Motor Co., Debs., 8.875%, 01/15/22 .............................. A1/A 1,500 Greater Orlando Aviation Auth., 8.20%, 10/01/12 ...................... Aaa/AAA 500 Union Pacific Co., Debs., 8.625%, 05/15/22 ........................... Baa2/BBB 1,000 MORTGAGE BACKED SECURITIES (5.36%) FNMA Pool #313411, 7.00%, 03/01/04 ................................... NR/NR 1,707 GNMA Pool #780374, 7.50%, 12/15/23 ................................... NR/NR 800 GNMA Pool #417239, 7.00%, 02/15/26 ................................... NR/NR 1,892 U.S. GOVERNMENT & AGENCIES (10.35%) U.S. Treasury Bonds, 10.75%, 08/15/05 ................................ NR/NR 1,600 U.S. Treasury Bonds, 8.125%, 08/15/21 ................................ NR/NR 1,000 U.S. Treasury Bonds, 7.875%, 02/15/21 ................................ NR/NR 3,900 U.S. Treasury Bonds, 6.25%, 08/15/23 ................................. NR/NR 500 TOTAL LONG TERM DEBT SECURITIES ...................................... COMMERCIAL PAPER (3.12%) American Express Credit Corp., 5.75%, 04/03/98 ....................... A-1/P-1 1,600 General Electric Capital Corp., 5.57%, 04/28/98 ...................... A-1+/P-1 1,000 TOTAL COMMERCIAL PAPER ............................................... Shares ------ INVESTMENT COMPANIES (.27%) High Yield Plus Fund ................................................. NR/NR 25,000 TOTAL INVESTMENTS (98.01%) ........................................... OTHER ASSETS AND LIABILITIES (1.99%) ................................. NET ASSETS (100.00%) .................................................
Identified Cost Value (Note 2) (Note 1) ----------------- ------------- TRANSPORTATION (10.80%) AMR Corp., Debs., 10.00%, 04/15/21 ................................... $ 2,148,940 $ 2,640,000 Auburn Hills Trust, Gtd. Exchangeable Ctfs. 12.00%, 05/01/20 ......... 1,000,000 1,600,000 Ford Holdings, Gtd. Debs., 9.375%, 03/01/20 .......................... 1,117,790 1,276,313 Ford Motor Co., Debs., 8.875%, 01/15/22 .............................. 1,480,350 1,836,612 Greater Orlando Aviation Auth., 8.20%, 10/01/12 ...................... 551,875 556,250 Union Pacific Co., Debs., 8.625%, 05/15/22 ........................... 1,062,430 1,098,480 ------------- ----------- 7,361,385 9,007,655 ------------- ----------- MORTGAGE BACKED SECURITIES (5.36%) FNMA Pool #313411, 7.00%, 03/01/04 ................................... 1,727,062 1,733,016 GNMA Pool #780374, 7.50%, 12/15/23 ................................... 794,104 822,064 GNMA Pool #417239, 7.00%, 02/15/26 ................................... 1,919,100 1,911,750 ------------- ----------- 4,440,266 4,466,830 ------------- ----------- U.S. GOVERNMENT & AGENCIES (10.35%) U.S. Treasury Bonds, 10.75%, 08/15/05 ................................ 2,120,750 2,073,000 U.S. Treasury Bonds, 8.125%, 08/15/21 ................................ 1,016,407 1,260,625 U.S. Treasury Bonds, 7.875%, 02/15/21 ................................ 4,051,031 4,786,033 U.S. Treasury Bonds, 6.25%, 08/15/23 ................................. 515,625 515,157 ------------- ----------- 7,703,813 8,634,815 ------------- ----------- TOTAL LONG TERM DEBT SECURITIES ...................................... 71,602,712 78,892,461 ------------- ----------- COMMERCIAL PAPER (3.12%) American Express Credit Corp., 5.75%, 04/03/98 ....................... 1,600,000 1,600,000 General Electric Capital Corp., 5.57%, 04/28/98 ...................... 1,000,000 1,000,000 ------------- ----------- TOTAL COMMERCIAL PAPER ............................................... 2,600,000 2,600,000 ------------- ----------- INVESTMENT COMPANIES (.27%) High Yield Plus Fund ................................................. 167,178 228,125 ------------- ----------- TOTAL INVESTMENTS (98.01%) ........................................... $ 74,369,890* $81,720,586 ============= =========== OTHER ASSETS AND LIABILITIES (1.99%) ................................. 1,659,117 ----------- NET ASSETS (100.00%) ................................................. $83,379,703 ===========
* The Moody's/Standard & Poor's rating for debt securities is not covered by the Report of Independant Accountants. * The cost for federal income tax purposes was $74,369,890. The aggregate gross unrealized appreciation in which there was an excess of market value over tax cost was $7,590,166, and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value was $239,470. See notes to financial statements 5 FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES March 31, 1998 Assets: Investment in securities at value(identified cost $74,369,890) (Note 1) ............... $ 81,720,586 Cash .................................................................................. 83,110 Interest receivable ................................................................... 1,703,068 Prepaid expenses ...................................................................... 13,636 ------------ TOTAL ASSETS ........................................................................ 83,520,400 ------------ Liabilities: Accrued expenses payable .............................................................. 140,697 ------------ TOTAL LIABILITIES ................................................................... 140,697 ------------ Net assets: (equivalent to $22.70 per share based on 3,673,258 shares of capital stock outstanding).................................................... $ 83,379,703 ============ NET ASSETS consisted of: Capital paid - in ..................................................................... $ 76,017,088 Accumulated undistributed net realized gain on investments ............................ 11,919 Net unrealized appreciation on investments ............................................ 7,350,696 ------------ $ 83,379,703 ============
STATEMENT OF OPERATIONS For the year ended March 31, 1998 Investment Income: Interest ............................................................ $ 6,108,125 Dividends ........................................................... 99,730 ----------- Total Investment Income ........................................... 6,207,855 ----------- Expenses: Investment advisory fees (Note 4) ................................... $ 446,510 Transfer agent fees ................................................. 51,025 Insurance ........................................................... 16,811 Directors' fees and expenses ........................................ 30,000 Audit fees .......................................................... 24,876 State and local taxes ............................................... 21,707 Legal fees and expenses ............................................. 27,268 Reports to shareholders ............................................. 25,766 Custodian fees ...................................................... 7,077 Miscellaneous ....................................................... 28,649 ---------- Total Expenses .................................................... 679,689 ----------- Net Investment Income .......................................... 5,528,166 ----------- Realized and unrealized gain (loss) on investments (Note 1): Net realized gain from security transactions ........................ 164,027 ----------- Unrealized appreciation of investments: Beginning of year ................................................. (235,973) End of year ....................................................... 7,350,696 ---------- Change in unrealized appreciation of investments ............... 7,586,669 ----------- Net realized and unrealized gain on investments .............. 7,750,696 ----------- Net increase in net assets resulting from operations ......... $13,278,862 ===========
See notes to financial statements 6 STATEMENTS OF CHANGES IN NET ASSETS
Year ended Year ended March 31, 1998 March 31, 1997 ---------------- --------------- Increase (decrease) in net assets: Operations: Net investment income ....................................................... $ 5,528,166 $ 5,547,419 Net realized gain (loss) from security transactions (Note 2) ................ 164,027 (60,192) Change in unrealized appreciation (depreciation) of investments ............. 7,586,669 (1,719,346) ------------ ------------ Net increase in net assets resulting from operations ........................ 13,278,862 3,767,881 ------------ ------------ Dividends to shareholders from net investment income ........................... (5,528,166) (5,547,419) Dividends to shareholders in excess of net investment income ................... (86,494) (61,312) Distributions to shareholders from net realized gain ........................... (5,422) 0 Distributions to shareholders from tax return of capital ....................... 0 (119,660) ------------ ------------ (5,620,082) (5,728,391) ------------ ------------ Capital share transactions: Net asset value of shares issued to shareholders in reinvestment of dividends from net investment income (Note 5) ........................................ 0 100,233 ------------ ------------ Increase (decrease) in net assets ........................................... 7,658,780 (1,860,277) Net Assets: Beginning of year ........................................................... 75,720,923 77,581,200 ------------ ------------ End of year ................................................................. $ 83,379,703 $ 75,720,923 ============ ============
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 7 FINANCIAL HIGHLIGHTS The table below sets forth financial data for a share of capital stock outstanding throughout each period presented.
Year Ended March 31, --------------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ------------- Per Share Operating Performance Net asset value, beginning of year .................... $20.61 $ 21.15 $ 20.64 $ 21.45 $ 22.27 ------- ------- ------- ------- -------- Net investment income ................................ 1.51 1.51 1.58 1.58 1.61 Net realized and unrealized gain (loss) on investments ........................................ 2.11 (0.49) 0.61 (0.67) (0.68) ------- ------- ------- ------- -------- Total from investment operations ...................... 3.62 1.02 2.19 0.91 0.93 ------- ------- ------- ------- -------- Less distributions Dividends from net investment income ................. (1.51) (1.51) (1.58) (1.58) (1.73) Dividends in excess of net investment income . (0.02) (0.02) 0.00 (0.01) 0.00 Distributions from net realized gain ................. (0.00) 0.00 (0.06) 0.00 0.00 Distributions in excess of net realized gain ......... 0.00 0.00 0.00 0.00 (0.02) Distributions from tax return of capital ............. 0.00 (0.03) (0.04) (0.13) 0.00 ------- ------- ------- ------- -------- Total Distributions ................................... (1.53) (1.56) (1.68) (1.72) (1.75) ------- ------- ------- ------- -------- Net asset value, end of year .......................... $ 22.70 $ 20.61 $ 21.15 $ 20.64 $ 21.45 ======= ======= ======= ======= ======== Per share market price, end of year ................... $ 20.81 $ 19.75 $ 21.25 $ 20.13 $ 21.13 ======= ======= ======= ======= ======== Total Investment Return Based on market value ................................ 13.11% 0.28% 13.91% 3.41% (7.72%) Ratios/Supplemental Data Net assets, end of year (in 000's) .................... $83,380 $75,721 $77,581 $75,384 $ 78,120 Ratio of expenses to average net assets .............. 0.85% 0.87% 0.86% 0.86% 0.92% Ratio of net investment income to average net assets ............................................. 6.89% 7.27% 7.37% 7.83% 7.11% Portfolio Turnover Rate .............................. 18.88% 32.83% 43.25% 35.38% 18.91% Number of shares outstanding at the end of year (in 000's) ........................................... 3,673 3,673 3,668 3,653 3,642
See notes to financial statements 8 NOTES TO FINANCIAL STATEMENTS 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 March 31, 1998, the Fund had invested 94.62% 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 year ended March 31, 1998:
Proceeds Cost of from Sales Purchases or Maturities ------------- -------------- U.S. Government Securities .......... $ 2,914,436 $ 5,300,402 Other Investment Securities ......... $17,038,069 $14,732,974
9 NOTES TO FINANCIAL STATEMENTS--continued Note 3 -- Capital Stock -- At March 31, 1998, there were 10,000,000 shares of capital stock ($1.00 par value) authorized, with 3,673,258 shares issued and outstanding. Note 4 -- Investment Advisory Contract and Payments to Affiliated Persons -- Under the terms of the current contract with 1838 Investment Advisors, L.P., 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 or its corporate general partner, 1838 Investment Advisors, Inc. 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 Reinvestments -- 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 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 year ended March 31, 1998, the Fund issued zero shares under this Plan. 10 DIVIDEND REINVESTMENT PLAN 1838 Bond-Denture 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 the 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 11 DIRECTORS --------------------------------------- W. THACHER BROWN JOHN GILRAY CHRISTY JOHN H. DONALDSON MORRIS LLOYD, JR. JOHN J. McELROY, III J. LAWRENCE SHANE OFFICERS --------------------------------------- JOHN H. DONALDSON President ANNA M. BENCROWSKY Vice President and Secretary MARCIA ZERCOE Vice President RHONDA L. McNAVISH Assistant Vice President INVESTMENT ADVISOR --------------------------------------- 1838 INVESTMENT ADVISORS, L.P. FIVE RADNOR CORPORATE CENTER, SUITE 320 100 MATSONFORD ROAD RADNOR, PA 19087 CUSTODIAN --------------------------------------- REPUBLIC NATIONAL BANK OF NEW YORK 452 FIFTH AVENUE NEW YORK, NY 10018 TRANSFER AGENT --------------------------------------- FIRST CHICAGO TRUST COMPANY OF NEW YORK P.O. BOX 2500 JERSEY CITY, NJ 07303-2500 COUNSEL --------------------------------------- PEPPER HAMILTON LLP 3000 TWO LOGAN SQUARE EIGHTEENTH & ARCH STREETS PHILADELPHIA, PA 19103 AUDITORS --------------------------------------- COOPERS & LYBRAND L.L.P. 2400 ELEVEN PENN CENTER PHILADELPHIA, PA 19103 1838 BOND-DEBENTURE TRADING FUND --------------------------------------- FIVE RADNOR CORPORATE CENTER, SUITE 320 100 MATSONFORD ROAD RADNOR, PA 19087 [GRAPHIC OMITTED] Annual Report March 31, 1998 -----END PRIVACY-ENHANCED MESSAGE-----