-----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, BkzlsS/XYb6VPBwJjvC1Q0Rs/DBF7XHv4vBwWE/4MGGuIcnHsC8HDdFMDQigJTPB Z3Snm3v6Vb/tje68IDMSBA== 0000950116-98-002109.txt : 19981030 0000950116-98-002109.hdr.sgml : 19981030 ACCESSION NUMBER: 0000950116-98-002109 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981015 FILED AS OF DATE: 19981029 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: 98732917 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 October 15, 1998 TO THE SHAREHOLDER: The Fund ended the quarter September 30, 1998 with a Net Asset Value of $22.77 per share. This represents a 0.49% increase from $22.66 per share at the end of the June 30, 1998 quarter and a 4.83% increase from $21.22 per share a year earlier. The closing price on the New York Stock Exchange for the Fund's stock was $21.625 per share, representing a 5.0% 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 Reinvested(1) - --------------------------------------------------------------------------------
10 Years 5 Years 2 Years 1 Year Quarter to 9/30/98 to 9/30/98 to 9/30/98 to 9/30/98 to 9/30/98 ------------ ------------ ------------ ------------ ----------- 1838 Bond Fund (2) 168.84% 46.80% 28.09% 12.09% 2.16% Average of 18 Other Closed-End Bond Funds (2) 150.24% 43.37% 22.41% 9.44% 1.84% Salomon Bros. Bond Index (3) 181.66% 49.71% 29.44% 14.88% 4.46%
(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. The continued turmoil in Asia accentuated by renewed troubles in Russia has combined to drive U.S. Treasury yields to historical lows. The 2 year and 5 year notes both traded at yields below 4% and the 30-year bond reached 4.74%. Home mortgage rates simultaneously reached 30 year lows. At a glance, headlines would read that interest rates are lower as U.S. Treasury Bonds have benefited from a flight to quality in response to weak equity markets around the globe. This cursory summary belies the fact that yields on corporate bonds have risen as stock prices have fallen and markets on Emerging Market bonds effectively ceased trading at all. Bid-offer spreads on many securities have been wider in recent weeks than during the Gulf War, the October 1987 stock market, or even 1981 when the Treasury issued 15 1/4% long-term bonds. These broader bond markets have witnessed as much dislocation, lack of liquidity and general chaos in as brief a period of time as we have seen in at least a decade. Performance of the Fund has held in during this period primarily due to individual credit selection and reductions in exposure to lower rated credits. The portfolio has only a very limited exposure of less than 0.5% of assets in Emerging Markets, specifically Korea Electric Power, compared to 1.8% at December 31, 1997. Total exposure to below Investment Grade ratings is 4.4%, down from a peak of 13.5% in March 1996. We are pleased to have limited the exposure to the more severe swings in market prices. Within the A and BBB rating categories, we have also attempted to shift exposure away from credits exposed to the more chaotic markets in order to dampen the price volatility of the portfolio while maintaining yield. 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 - -------------------- ------------------ --------- ---------- ---------- --------- --------- --------- September 30, 1998 17.3% 0.0% 29.3% 48.8% 4.1% 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%
On September 17, 1998 the Board of Directors declared a dividend of $0.38 per share payable November 10, 1998 to shareholders of record September 30, 1998. We would like to extend our appreciation to all shareholders for their continued support. Sincerely, [GRAPHIC OMITTED] John H. Donaldson President 2 SCHEDULE OF NET ASSETS SEPTEMBER 30, 1998 (Unaudited)
Moody's/ Standard & Poor's Rating for Debt Principal Securities Amount (000's) ------------ ---------------- LONG TERM DEBT SECURITIES (98.74%) ELECTRIC UTILITIES (9.87%) 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 .................... Ba1/BBB- 1,000 Utilicorp United Inc., Sr. Note 9.00%, 11/15/21 ..................... Baa3/BBB 1,000 FINANCIAL (16.01%) 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, 7.25%, 02/15/18 ................................... Baa1/BBB 1,000 FBS Capital I, Capital Securities, 8.09%, 11/15/26 .................. Baa/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 FOREIGN (0.39%) Korea Electric Power Inc., Debs., 7.00%, 02/01/27 ................... Ba1/BB+ 500 INDUSTRIAL & MISCELLANEOUS (39.90%) 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 .................. 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 ............................. 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 .................. 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 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%, 03/01/43 .................... 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., 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 Westren Atlas Inc., Debs., 8.55%, 06/15/24 .......................... A2/A 2,539
Identified Cost Value (Note 2) (Note 1) ----------------- -------------- LONG TERM DEBT SECURITIES (98.74%) ELECTRIC UTILITIES (9.87%) Cleveland Electric Illuminating, 1st Mtge., 9.00%, 07/01/23 ......... $ 1,662,876 $ 2,058,615 Commonwealth Edison, 1st Mtge., 9.125%, 10/15/21 .................... 2,062,500 2,118,280 Hydro Quebec, Gtd. Debs., 8.25%, 04/15/26 ........................... 1,475,994 1,883,078 Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 .................... 1,028,220 1,073,310 Utilicorp United Inc., Sr. Note 9.00%, 11/15/21 ..................... 1,090,000 1,116,980 ----------- ----------- 7,319,590 8,250,263 ----------- ----------- FINANCIAL (16.01%) Chrysler Financial Corp., Debs., 12.75%, 11/01/99 ................... 1,090,125 1,074,979 Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 ........... 2,012,070 2,120,020 EOP Operating LP, 7.25%, 02/15/18 ................................... 991,900 951,635 FBS Capital I, Capital Securities, 8.09%, 11/15/26 .................. 1,993,370 2,234,104 HSBC America Capital II, 8.38%, 05/15/27 ............................ 3,080,350 3,065,514 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 1,067,430 Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 ................... 1,634,965 1,881,885 ----------- ----------- 12,951,850 13,395,567 ----------- ----------- FOREIGN (0.39%) Korea Electric Power Inc., Debs., 7.00%, 02/01/27 ................... 421,466 328,557 ----------- ----------- INDUSTRIAL & MISCELLANEOUS (39.90%) Apache Corp., Notes, 7.70%, 03/15/26 ................................ 525,280 550,118 Chiquita Brands Int'l, Inc., Sr. Notes, 10.25%, 11/01/06 ............ 255,625 257,500 Dell Computer Corp., Sr. Debs., 7.10%, 04/15/28 ..................... 2,501,140 2,603,465 Georgia Pacific Corp., Debs., 9.625%, 03/15/22 ...................... 1,059,240 1,154,120 Harcourt General Inc., Sr. Debs., 8.875%, 06/01/22 .................. 2,157,020 2,277,780 Harcourt General Inc., Sr. Debs., 7.30%, 08/01/2097 ................. 1,488,886 1,400,505 K N Energy Inc., Debs., 8.75%, 10/15/24 ............................. 1,263,798 1,311,000 Mark IV Industries, Inc., Sr. Sub Notes, 7.75%, 04/01/06 ............ 462,650 517,778 May Department Stores Co., Debs., 10.75%, 06/15/18 .................. 154,385 158,812 News America Holdings Inc., Sr. Debs., 10.125%, 10/15/12 ............ 2,163,503 2,420,101 News America Holdings Inc., Gtd. Debs., 7.90%, 12/01/2095 ........... 1,298,624 1,469,495 North Dakota State Muni. Bond Bank, Water Sys. Rev., 10.50%, 04/01/14 ........................................................... 1,159,780 1,024,960 Phillip Morris Co., Inc., Debs., 7.75%, 01/15/27 .................... 3,007,020 3,314,832 Smurfit Capital Funding, Gtd., Debs., 7.50%, 11/20/25 ............... 1,990,780 2,046,706 Societe Generale(NY), Sub Notes, 7.40%, 06/01/06 .................... 413,588 429,427 Texaco Capital Inc., Gtd. Debs., 7.50%, 03/01/43 .................... 1,977,920 2,116,164 Time Warner Inc., Debs., 9.15%, 02/01/23 ............................ 3,159,700 3,917,286 Tricon Global Restaurant, Sr. Notes, 7.65%, 05/15/08 ................ 498,875 527,773 TRW Inc., Notes, 9.25%, 12/30/11 .................................... 326,312 368,422 TRW Inc., Sr. Notes, 9.375%, 04/15/21 ............................... 320,893 416,493 Union Camp Corp., Debs., 9.25%, 02/01/11 ............................ 1,486,305 2,001,420 Westren Atlas Inc., Debs., 8.55%, 06/15/24 .......................... 2,651,998 3,084,885 ----------- ----------- 30,323,322 33,369,042 ----------- -----------
See notes to financial statements. 3 SCHEDULE OF NET ASSETS--continued SEPTEMBER 30, 1998 (Unaudited)
Moody's/ Standard & Poor's Rating for Debt Principal Securities Amount (000's) ------------ ---------------- TELEPHONE & COMMUNICATIONS (7.48%) 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 TRANSPORTATION (9.79%) AMR Corp., Debs., 10.00%, 04/15/21 ........................... Baa2/BBB- 2,000 Auburn Hills Trust, Debs., 12.00%, 05/01/20 .................. A2/A 1,000 Ford Holdings, Inc., 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 MORTGAGE BACKED SECURITIES (4.72%) FNMA Pool #313411, 7.00%, 03/01/04 ........................... NR/NR 1,329 GNMA Pool #780374, 7.50%, 12/15/23 ........................... NR/NR 701 GNMA Pool #417239, 7.00%, 02/15/26 ........................... NR/NR 1,801 U.S. GOVERNMENT & AGENCIES (10.58%) 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 TOTAL LONG TERM DEBT SECURITIES .............................. COMMERCIAL PAPER (0.57%) General Electric Capital Corp., 5.35%, 10/05/98 .............. A1+/P1 474 TOTAL COMMERCIAL PAPER ....................................... Shares ------ INVESTMENT COMPANIES (0.24%) High Yield Plus Fund ......................................... NR/NR 25,000 TOTAL INVESTMENTS (99.55%) ................................... OTHER ASSETS AND LIABILITIES (0.45%) ......................... NET ASSETS (100.00%) .........................................
Identified Cost Value (Note 2) (Note 1) ----------------- --------------- TELEPHONE & COMMUNICATIONS (7.48%) Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 .......... $ 1,120,000 $ 1,205,841 MCI Worldcom Inc., Sr. Note., 9.375%, 01/15/04 ............... 1,051,875 1,169,235 MCI Worldcom Inc., Sr. Note., 6.95%, 08/15/28 ................ 1,485,975 1,563,820 TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 ......... 1,991,940 2,320,000 -------------- ------------ 5,649,790 6,258,896 -------------- ------------ TRANSPORTATION (9.79%) AMR Corp., Debs., 10.00%, 04/15/21 ........................... 2,148,940 2,742,500 Auburn Hills Trust, Debs., 12.00%, 05/01/20 .................. 1,000,000 1,691,820 Ford Holdings, Inc., Gtd. Debs., 9.375%, 03/01/20 ............ 1,117,790 1,248,672 Ford Motor Co., Debs., 8.875%, 01/15/22 ...................... 1,480,350 1,952,816 Greater Orlando Aviation Auth., 8.20%, 10/01/12 .............. 551,875 556,250 -------------- ------------ 6,298,955 8,192,058 -------------- ------------ MORTGAGE BACKED SECURITIES (4.72%) FNMA Pool #313411, 7.00%, 03/01/04 ........................... 1,344,158 1,360,831 GNMA Pool #780374, 7.50%, 12/15/23 ........................... 695,393 727,707 GNMA Pool #417239, 7.00%, 02/15/26 ........................... 1,826,745 1,860,142 -------------- ------------ 3,866,296 3,948,680 -------------- ------------ U.S. GOVERNMENT & AGENCIES (10.58%) U.S. Treasury Bonds, 10.75%, 08/15/05 ........................ 2,120,750 2,190,501 U.S. Treasury Bonds, 8.125%, 08/15/21 ........................ 1,016,407 1,388,438 U.S. Treasury Bonds, 7.875%, 02/15/21 ........................ 4,051,031 5,271,096 -------------- ------------ 7,188,188 8,850,035 -------------- ------------ TOTAL LONG TERM DEBT SECURITIES .............................. 74,019,457 82,593,098 -------------- ------------ COMMERCIAL PAPER (0.57%) General Electric Capital Corp., 5.35%, 10/05/98 .............. 474,000 474,000 TOTAL COMMERCIAL PAPER ....................................... 474,000 474,000 -------------- ------------ INVESTMENT COMPANIES (0.24%) High Yield Plus Fund ......................................... 167,178 200,000 -------------- ------------ TOTAL INVESTMENTS (99.55%) ................................... $ 74,660,635* $ 83,267,098 ============== ============ OTHER ASSETS AND LIABILITIES (0.45%) ......................... 379,130 ------------ NET ASSETS (100.00%) ......................................... $ 83,646,228 ============
* The cost for federal income tax purposes was $74,660,635. The aggregate gross unrealized appreciation in which there was an excess of market value over tax cost was $8,136,896, and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value was $469,567. See notes to financial statements . 4 FINANCIAL STATEMENTS (Unaudited) STATEMENT OF ASSETS AND LIABILITIES September 30, 1998 Assets: Investment in securities at value(identified cost $74,660,635) (Note 1) ............... $83,267,098 Cash .................................................................................. 814 Interest receivable ................................................................... 1,874,581 Prepaid expenses ...................................................................... 9,728 ----------- TOTAL ASSETS ........................................................................ 85,152,221 ----------- Liabilities: Accrued expenses payable .............................................................. 110,155 Dividends payable ..................................................................... 1,395,838 ----------- TOTAL LIABILITIES ................................................................... 1,505,993 ----------- Net assets: (equivalent to $22.77 per share based on 3,673,258 shares of capital stock $83,646,228 =========== outstanding) NET ASSETS consisted of: Capital paid - in ..................................................................... $74,759,014 Accumulated net realized gain on investments .......................................... 280,751 Net unrealized appreciation on investments ............................................ 8,606,463 ----------- $83,646,228 ===========
STATEMENT OF OPERATIONS For the six months ended September 30, 1998 Investment Income: Interest ............................................................ $ 3,227,912 Dividends ........................................................... 31,214 ----------- Total Investment Income ........................................... 3,259,126 ----------- Expenses: Investment advisory fees (Note 4) ................................... $ 234,046 Transfer agent fees ................................................. 23,625 Insurance ........................................................... 7,860 Directors' fees and expenses ........................................ 13,571 Audit fees .......................................................... 12,735 State and local taxes ............................................... 10,292 Legal fees and expenses ............................................. 13,167 Reports to shareholders ............................................. 9,289 Custodian fees ...................................................... 4,289 Miscellaneous ....................................................... 12,731 ---------- Total Expenses .................................................... 341,605 ----------- Net Investment Income .......................................... 2,917,521 ----------- Realized and unrealized gain (loss) on investments (Note 1): Net realized gain from security transactions ........................ 280,751 ----------- Unrealized appreciation of investments: Beginning of period ............................................... 7,350,696 End of period ..................................................... 8,606,463 ---------- Change in unrealized appreciation of investments ............... 1,255,767 ----------- Net realized and unrealized gain on investments .............. 1,536,518 ----------- Net increase in net assets resulting from operations ......... $ 4,454,039 ===========
See notes to financial statements 5 STATEMENTS OF CHANGES IN NET ASSETS
Six Months ended September 30, 1998 Year ended (unaudited) March 31, 1998 -------------------- --------------- Increase (decrease) in net assets: Operations: Net investment income ....................................................... $ 2,917,521 $ 5,528,166 Net realized gain from security transactions (Note 2) ....................... 280,751 164,027 Change in unrealized appreciation of investments ............................ 1,255,767 7,586,669 ------------ ------------ Net increase in net assets resulting from operations ........................ 4,454,039 13,278,862 ------------ ------------ Dividends to shareholders from net investment income ......................... (2,917,521) (5,528,166) Dividends to shareholders in excess of net investment income ................. (1,269,993) (86,494) Distributions to shareholders from net realized gain ......................... -- (5,422) ------------ ------------ (4,187,514) (5,620,082) ------------ ------------ Capital share transactions: Net asset value of shares issued to shareholders in reinvestment of dividends from net investment income (Note 5) ....................................... -- -- ------------ ------------ Increase (decrease) in net assets ........................................... 266,525 7,658,780 Net Assets: Beginning of period ......................................................... 83,379,703 75,720,923 ------------ ------------ End of period ............................................................... $ 83,646,228 $ 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.
Six months ended Year Ended March 31, 09/30/98 ----------------------------------------------------- (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 ............................. 0.79 1.51 1.51 1.58 1.58 Net realized and unrealized gain (loss) on investments ...................................... 0.42 2.11 ( 0.49) 0.61 ( 0.67) ------- ------- ------- ------- ------- Total from investment operations ...................... 1.21 3.62 1.02 2.19 0.91 ------- ------- ------- ------- ------- Less distributions Dividends from net investment income ................. ( 0.79) ( 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 ................. 0.00 ( 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 ................................... ( 1.14) ( 1.53) ( 1.56) ( 1.68) ( 1.72) ------- ------- ------- ------- ------- Net asset value, end of period ........................ $ 22.77 $ 22.70 $ 20.61 $ 21.15 $ 20.64 ======= ======= ======= ======= ======= Per share market price, end of period ................. $ 21.63 $ 20.81 $ 19.75 $ 21.25 $ 20.13 ======= ======= ======= ======= ======= Total Investment Return Based on market value ................................ 0.31% 13.11% 0.28% 13.91% 3.41% Ratios/Supplemental Data Net assets, end of period (in 000's) .................. $ 83,646 $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 ............................................. 6.98%* 6.89% 7.27% 7.37% 7.83% Portfolio Turnover Rate .............................. 9.90%* 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 September 30, 1998, the Fund had invested 98.74% 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 six months ended September 30, 1998:
Proceeds Cost of from Sales Purchases or Maturities ------------- -------------- U.S. Government Securities .......... $ 993,677 $ 518,594 Other Investment Securities ......... $7,054,985 $3,831,320
Note 3 -- Capital Stock -- At September 30, 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 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, 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% on 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 10 DIRECTORS ------------------------------ W. THACHER BROWN JOHN GILRAY CHRISTY MORRIS LLOYD, JR. J. LAWRENCE SHANE OFFICERS ------------------------------ JOHN H. DONALDSON President ANNA M. BENCROWSKY Vice President and Secretary CLIFFORD D. CORSO Vice President INVESTMENT ADVISOR ------------------------------ 1838 INVESTMENT ADVISORS, INC. 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 ------------------------------ PricewaterhouseCoopers L.L.P. 2400 ELEVEN PENN CENTER PHILADELPHIA, PA 19103 [GRAPHIC OMITTED] BOND--DEBENTURE TRADING FUND ------------------------------ FIVE RADNOR CORPORATE CENTER, SUITE 320 100 MATSONFORD ROAD RADNOR, PA 19087 [GRAPHIC OMITTED] Quarterly Report September 30, 1998 -----END PRIVACY-ENHANCED MESSAGE-----