-----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, EkSo9uvIg6/sYQNAIAVoEWSYqBEiPFTPMaMC/NHHXlnaY9P/m9E8zg/EJ6tZGajF hD0a/U511wJE3TRNdATptQ== 0000950116-99-001442.txt : 19990809 0000950116-99-001442.hdr.sgml : 19990809 ACCESSION NUMBER: 0000950116-99-001442 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990719 FILED AS OF DATE: 19990802 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-30D SEC ACT: SEC FILE NUMBER: 811-02201 FILM NUMBER: 99676079 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-30D 1 N-30D July 19, 1999 TO THE SHAREHOLDER: The Fund ended the quarter June 30, 1999 with a Net Asset Value of $21.15 per share. This represents a 4.7% decrease from $22.20 per share at the end of the March 31, 1999 Fiscal Year and a 5.8% decrease from $22.45 per share at December 31, 1998. On June 30, 1999, the closing price on the New York Stock Exchange for the Fund's stock was $19.875 per share, representing a 6.0% 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 6/30/99 to 6/30/99 to 6/30/99 to 6/30/99 to 6/30/99 ------------ ------------ ------------ ------------ ----------- 1838 Bond Fund (2) 132.12% 43.18% 13.78% -1.50% -3.09% Average of 18 Other Closed-End Bond Funds (2) 126.75% 43.25% 12.94% 1.07% -1.22% Salomon Bros. Bond Index (3) 135.17% 53.20% 14.12% -1.25% -3.56%
1 - This is historical information and should not be construed as indicative of any 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 June 25, 1999 the Board of Directors declared a dividend payment of $0.3625 per share payable August 3, 1999 to shareholders of record on July 6, 1999. The pending maturity and redemption of high coupon holdings, specifically Chrysler Financial 12.75% due 11/1/99, Penn Central 10.625% due 4/1/00, and North Dakota Municipal Bond Bank taxable bonds 10.5% called on 4/1/99 (whose income levels could not be replaced in the current market) are the primary reasons for the dividend reduction. The Board determined that it was in the best interests of the Fund and the shareholders to impose one reduction at this time instead of numerous small reductions over time. This decision results in the Fund fully reflecting the impact, and permits the portfolio managers to have the flexibility to hold the issues until maturity, or alternatively, to sell them prior to maturity to capture optimal reinvestment. Long-term U.S. bond yields rose for most of the first half of 1999. The benchmark U.S. Treasury 30-year bond began the year at 5.09% and rose to a peak of 6.16% before declining to 5.96% at June 30th. The price of the Fund's largest Treasury holding, 7.875% bonds due 2/15/21 fell 9.8% for the 6-month period and 4.36% for the 3 months. 1 Bond yields rose in anticipation of an increase in short term rates by the Federal Reserve Bank in response to accelerating economic growth. The anticipated increase came at the Federal Reserve's meeting at the end of June. Part of the decrease in rates that resulted after the meeting can be attributed to the market's positive response to a Federal Reserve that was willing to act to curb inflation in a preemptory manner. The table below updates the portfolio quality of the Fund's assets compared to the end of recent prior 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 - ---------------- ------------ --------- ---------- ---------- --------- --------- --------- June 30, 1999 17.1% 3.3% 28.4% 45.3% 5.3% 0.3% 0.3% March 31, 1999 16.9% 3.4% 29.2% 44.6% 5.3% 0.3% 0.3% March 31, 1998 19.9% 0.0% 31.9% 44.0% 3.0% 0.9% 0.3%
Numerous large corporate bond financings had contributed to a sizeable new issue calendar that kept pressure on yield spreads and continued to afford attractive opportunities in that sector. We would not expect any dramatic changes in the credit quality mix and would expect to select between A and BBB rated issuers for reinvestment opportunities. The Fund's Annual Meeting of shareholders was held on June 25, 1999. We would like to extend our appreciation to all shareholders who voted their proxies at the meeting for their continued support. 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. To participate in the plan, please contact First Chicago Trust Co. of New York, the Fund's Transfer Agent and Dividend Paying Agent, at 201-324-0498. Sincerely, /s/ John H. Donaldson ---------------------------------- John H. Donaldson, CFA President 2 SCHEDULE OF NET ASSETS June 30, 1999 (Unaudited)
Moody's/ Standard & Poor's Principal Rating Amount (000's) ----------- ---------------- LONG TERM DEBT SECURITIES (96.00%) ELECTRIC UTILITIES (9.41%) Calpine Energy Corp., 7.75%, 04/15/09 ............................. Ba2/BB $ 250 Cleveland Electric Illuminating, 1st Mtge., 9.00%, 07/01/23 ....... Ba1/BB+ 1,800 CMS Energy, 7.50%, 01/15/09 ....................................... Ba3/BB 1,000 Hydro-Quebec Debs., 8.25%, 04/15/26 ............................... A2/A+ 1,550 Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 .................. Baa2/BBB+ 1,000 Midamerican Funding LLC, 6.927%, 03/01/29, 144A ................... Baa1/BBB+ 500 Utilicorp United Inc., Sr. Notes, 8.27%, 11/15/21 ................. Baa3/BBB 1,000 FINANCIAL (17.42%) Chrysler Financial Corp., Debs., 12.75%, 11/01/99 ................. A1/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, 144A .................... A2/BBB+ 2,500 Liberty Property Trust, 7.50%, 01/15/18 ........................... Baa3/BBB- 1,000 Penn Central Corp., Sub. Notes, 10.625%, 04/15/00 ................. Baa3/BBB 1,000 Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 ................. Baa3/BBB 1,500 Spieker Properties, 7.875%, 12/01/16 .............................. Baa2/BBB 1,000 West Deutsche LB, NY, 6.05%, 01/15/09 ............................. Aa1/AA+ 400 INDUSTRIAL & MISCELLANEOUS (36.31%) 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+ 1,500 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., Debs., 7.30%, 08/01/97 ..................... 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 News America Holdings Inc., Gtd. Sr. Debs., 10.125%, 10/15/12 ..... Baa3/BBB- 2,050 News America Holdings Inc., Notes, 7.90%, 12/01/95 ................ 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 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., Sr. Notes, 9.375%, 04/15/21 ............................. Baa1/BBB 303 Union Camp Corp., Debs., 9.25%, 02/01/11 .......................... A2/BBB+ 1,500 Union Pacific Resources Co., 7.00%, 10/15/06 ...................... Baa3/BBB- 750 Western Atlas Inc., Debs., 8.55%, 06/15/24 ........................ A2/A 2,539 TELEPHONE & COMMUNICATIONS (9.06%) Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 ............... Baa3/BBB 1,000 New York Telephone, 9.375%, 07/15/31 .............................. A2/A+ 1,250 Sprint Capital Corp., 6.875%, 11/15/28 ............................ Baa1/BBB+ 1,000 TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 .............. A2/AA- 2,000 Worldcom Inc., Sr. Notes, 6.95%, 08/15/28 ......................... A3/A- 1,500
Identified Cost Value (Note 2) (Note 1) ----------------- -------------- LONG TERM DEBT SECURITIES (96.00%) ELECTRIC UTILITIES (9.41%) Calpine Energy Corp., 7.75%, 04/15/09 ............................. $ 249,845 $ 235,625 Cleveland Electric Illuminating, 1st Mtge., 9.00%, 07/01/23 ....... 1,662,876 1,897,987 CMS Energy, 7.50%, 01/15/09 ....................................... 1,000,000 932,428 Hydro-Quebec Debs., 8.25%, 04/15/26 ............................... 1,475,994 1,687,888 Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 .................. 1,028,220 1,032,575 Midamerican Funding LLC, 6.927%, 03/01/29, 144A ................... 500,000 471,660 Utilicorp United Inc., Sr. Notes, 8.27%, 11/15/21 ................. 1,090,000 1,052,500 ------------ ------------ 7,006,935 7,310,663 ------------ ------------ FINANCIAL (17.42%) Chrysler Financial Corp., Debs., 12.75%, 11/01/99 ................. 1,090,125 1,021,527 Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 ......... 2,012,070 1,999,726 EOP Operating LP, Notes, 7.25%, 02/15/18 .......................... 991,900 915,340 FBS Capital I, Capital Securities, 8.09%, 11/15/26 ................ 1,993,370 2,000,774 HSBC America Capital II, 8.38%, 05/15/27, 144A .................... 2,570,605 2,490,215 Liberty Property Trust, 7.50%, 01/15/18 ........................... 998,430 886,400 Penn Central Corp., Sub. Notes, 10.625%, 04/15/00 ................. 1,150,640 1,033,500 Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 ................. 1,634,965 1,851,615 Spieker Properties, 7.875%, 12/01/16 .............................. 1,001,830 974,540 West Deutsche LB, NY, 6.05%, 01/15/09 ............................. 398,988 370,828 ------------ ------------ 13,842,923 13,544,465 ------------ ------------ INDUSTRIAL & MISCELLANEOUS (36.31%) Apache Corp., Notes, 7.70%, 03/15/26 .............................. 525,280 497,721 Chiquita Brands Int'l, Inc., Sr. Notes, 10.25%, 11/01/06 .......... 255,625 253,750 Dell Computer Corp., Sr. Debs., 7.10%, 04/15/28 ................... 1,503,520 1,408,725 Georgia Pacific Corp., Debs., 9.625%, 03/15/22 .................... 1,059,240 1,076,812 Harcourt General Inc., Sr. Debs., 8.875%, 06/01/22 ................ 2,157,020 2,079,174 Harcourt General Inc., Debs., 7.30%, 08/01/97 ..................... 1,488,886 1,246,631 K N Energy Inc., Debs., 8.75%, 10/15/24 ........................... 1,263,798 1,159,085 Mark IV Industries, Inc., Sr. Sub Notes, 7.75%, 04/01/06 .......... 462,650 473,120 News America Holdings Inc., Gtd. Sr. Debs., 10.125%, 10/15/12 ..... 2,163,503 2,265,570 News America Holdings Inc., Notes, 7.90%, 12/01/95 ................ 1,298,624 1,337,214 Phillip Morris Co., Inc., Debs., 7.75%, 01/15/27 .................. 3,007,020 3,041,763 Smurfit Capital Funding, Gtd., Debs., 7.50%, 11/20/25 ............. 1,990,780 1,923,332 Texaco Capital Inc., Gtd. Debs., 7.50%, 03/01/43 .................. 1,977,920 1,964,440 Time Warner Inc., Debs., 9.15%, 02/01/23 .......................... 3,159,700 3,466,884 Tricon Global Restaurant, Sr. Notes, 7.65%, 05/15/08 .............. 498,875 496,072 TRW Inc., Sr. Notes, 9.375%, 04/15/21 ............................. 320,893 345,337 Union Camp Corp., Debs., 9.25%, 02/01/11 .......................... 1,486,305 1,718,381 Union Pacific Resources Co., 7.00%, 10/15/06 ...................... 728,985 718,142 Western Atlas Inc., Debs., 8.55%, 06/15/24 ........................ 2,651,998 2,740,851 ------------ ------------ 28,000,622 28,213,004 ------------ ------------ TELEPHONE & COMMUNICATIONS (9.06%) Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 ............... 1,120,000 1,155,661 New York Telephone, 9.375%, 07/15/31 .............................. 1,426,113 1,377,136 Sprint Capital Corp., 6.875%, 11/15/28 ............................ 992,220 913,234 TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 .............. 1,991,940 2,171,100 Worldcom Inc., Sr. Notes, 6.95%, 08/15/28 ......................... 1,485,975 1,418,204 ------------ ------------ 7,016,248 7,035,335 ------------ ------------
3 SCHEDULE OF NET ASSETS--continued June 30, 1999 (Unaudited)
Moody's/ Standard & Poor's Principal Identified Cost Value Rating Amount (000's) (Note 2) (Note 1) ----------- ---------------- ----------------- --------------- TRANSPORTATION (8.76%) AMR Corp., Debs., 10.00%, 04/15/21 ...................... Baa2/BBB- $ 2,000 $ 2,148,940 $ 2,346,220 Auburn Hills Trust, Gtd. Ctfs., 12.00%, 05/01/20 ........ A1/A+ 1,000 1,000,000 1,516,150 Ford Holdings, Inc., Gtd. Debs., 9.30%, 03/01/30 ........ A1/A 1,000 1,117,790 1,206,752 Ford Motor Co., Debs., 8.90%, 01/15/32 .................. A1/A 1,500 1,480,350 1,737,932 ------------- ------------ 5,747,080 6,807,054 ------------- ------------ MORTGAGE BACKED SECURITIES (3.64%) FNMA Pool #313411, 7.00%, 03/01/04 ...................... NR/NR 811 820,527 818,043 GNMA Pool #780374, 7.50%, 12/15/23 ...................... NR/NR 526 521,736 532,921 GNMA Pool #417239, 7.00%, 02/15/26 ...................... NR/NR 1,492 1,512,981 1,474,595 ------------- ------------ 2,855,244 2,825,559 ------------- ------------ TAXABLE MUNICIPAL BONDS (0.68%) Greater Orlando Aviation Authority, 8.20%, 10/01/12 ..... Aaa/AAA 500 551,875 525,825 ------------- ------------ U.S. GOVERNMENT & AGENCIES (10.72%) U.S. Treasury Bonds, 10.75%, 08/15/05 ................... NR/NR 1,600 2,120,750 1,990,000 U.S. Treasury Bonds, 8.125%, 05/15/21 ................... NR/NR 1,000 1,016,406 1,216,875 U.S. Treasury Bonds, 6.25%, 08/15/23 .................... NR/NR 500 548,125 500,625 U.S. Treasury Bonds, 7.875%, 02/15/21 ................... NR/NR 3,900 4,051,031 4,620,283 ------------- ------------ 7,736,312 8,327,783 ------------- ------------ TOTAL LONG TERM DEBT SECURITIES 72,757,239 74,589,688 ------------- ------------ COMMERCIAL PAPER (1.30%) General Electric Corp., 5.05%, 08/02/99 ................. P-1/A-1+ 1,000 1,000,000 1,000,000 ------------- ------------ Shares -------- INVESTMENT COMPANIES (0.69%) High Yield Plus Fund .................................... 33,333 223,875 256,247 Republic US Govt M/M Fund-Reg ........................... 272,067 272,067 272,067 ------------- ------------ 495,942 528,314 ------------- ------------ TOTAL INVESTMENTS (97.99%) $ 74,253,181* $ 76,118,002 ============= ============ OTHER ASSETS AND LIABILITIES (2.01%) .................... 1,576,957 ------------ NET ASSETS (100.00%) .................................... $ 77,694,959 ============
* The cost for federal income tax purposes was $74,305,368. The aggregate gross unrealized appreciation in which there was an excess of market value over tax cost was $3,619,484 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value was $1,806,850. 144A -- Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. At the end of the period, these securities amounted to 3.8% of net assets. Legend Ctfs -- Certificates Debs -- Debentures Gtd -- Guaranteed Sr -- Senior Sub -- Subordinated The accompanying notes are an integral part of these financial statements. 4 FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (Unaudited) June 30, 1999 Assets: Investment in securities at value (identified cost $74,253,181) (Note 1) $ 76,118,002 Interest receivable ..................................................... 1,659,503 ------------ TOTAL ASSETS .......................................................... 77,777,505 ------------ Liabilities: Due to Advisor .......................................................... 24,524 Accrued expenses payable ................................................ 58,022 ------------ TOTAL LIABILITIES ..................................................... 82,546 ------------ Net assets: (equivalent to $21.15 per share based on 3,673,258 shares of capital stock outstanding) ............................................. $ 77,694,959 ============ NET ASSETS consisted of: Par value ............................................................... $ 3,673,258 Capital paid-in ......................................................... 72,405,142 Dividends paid in excess of net investment income ....................... (27,603) Accumulated net realized loss on investments ............................ (220,659) Net unrealized appreciation on investments .............................. 1,864,821 ------------ $ 77,694,959 ============
STATEMENT OF OPERATIONS (Unaudited) For the three months ended June 30, 1999 Investment Income: Interest ............................................................ $ 1,517,279 Dividends ........................................................... 7,440 ------------- Total Investment Income ........................................... 1,524,719 ------------- Expenses: Investment advisory fees (Note 4) ................................... $ 111,386 Transfer agent fees ................................................. 11,716 Insurance ........................................................... 1,200 NYSE ................................................................ 3,908 Directors' fees and expenses ........................................ 6,731 Audit fees .......................................................... 6,333 State and local taxes ............................................... 6,118 Legal fees and expenses ............................................. 3,347 Reports to shareholders ............................................. 5,487 Custodian fees ...................................................... 2,119 Miscellaneous ....................................................... 6,235 ---------- Total Expenses .................................................... 164,580 ------------- Net Investment Income .......................................... 1,360,139 ------------- Realized and unrealized gain (loss) on investments (Note 1): Net realized loss from security transactions ........................ (168,472) ------------- Unrealized appreciation of investments: Beginning of period ............................................... 5,525,189 End of period ..................................................... 1,864,821 ---------- Change in unrealized appreciation of investments ............... (3,660,368) ------------- Net realized and unrealized loss on investments .............. (3,828,840) ------------- Net decrease in net assets resulting from operations ......... $ (2,468,701) =============
The accompanying notes are an integral part of these financial statements. 5 STATEMENTS OF CHANGES IN NET ASSETS
Three Months ended June 30, 1999 Year ended (Unaudited) March 31, 1999 --------------- --------------- Increase (Decrease) in net assets: Operations: Net investment income ................................................................ $ 1,360,139 $ 5,560,689 Net realized gain (loss) from security transactions (Note 2) ......................... (168,472) 340,192 Change in unrealized appreciation of investments ..................................... (3,660,368) (1,825,507) ------------ ------------ Net increase (decrease) in net assets resulting from operations ...................... (2,468,701) 4,075,374 ------------ ------------ Dividends to shareholders from net investment income .................................. (1,360,139) (5,472,586) Dividends to shareholders in excess of net investment income .......................... (35,699) -- Distributions to shareholders from net realized gain .................................. -- (422,993) ------------ ------------ (1,395,838) (5,895,579) ------------ ------------ Capital share transactions: Net asset value of shares issued to shareholders in reinvestment of dividends from net investment income (Note 5) ..................................................... -- -- ------------ ------------ Decrease in net assets ............................................................... (3,864,539) (1,820,205) Net Assets: Beginning of period .................................................................. 81,559,498 83,379,703 ------------ ------------ End of period ........................................................................ $ 77,694,959 $ 81,559,498 ============ ============
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 10. 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. The accompanying notes are an integral part of these financial statements. 6 FINANCIAL HIGHLIGHTS The table below sets forth financial data for a share of capital stock outstanding throughout each period presented.
Three months ended June 30, 1999 (Unaudited) --------------- Per Share Operating Performance Net asset value, beginning of period ............. $ 22.20 -------- Net investment income ........................... 0.37 Net realized and unrealized gain (loss) on investments ................................... ( 1.04) -------- Total from investment operations ................. ( 0.67) -------- Less distributions Dividends from net investment income ............ ( 0.37) Dividends in excess of net investment income ( 0.01) Distributions from net realized gain ............ 0.00 Distributions from tax return of capital ........ 0.00 -------- Total distributions .............................. ( 0.38) -------- Net asset value, end of period ................... $ 21.15 ======== Per share market price, end of period ............ $ 19.88 ======== Total Investment Return Based on market value ........................... ( 2.08)% Ratios/Supplemental Data Net assets, end of period (in 000's) ............. $ 77,695 Ratio of expenses to average net assets ......... 0.83%* Ratio of net investment income to average net assets ........................................ 6.88%* Portfolio Turnover Rate ......................... 4.18% Number of shares outstanding at the end of period (in 000's) ............................... 3,673
Year Ended March 31, --------------------------------------------------------------- 1999 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 ........................... 1.52 1.51 1.51 1.58 1.58 Net realized and unrealized gain (loss) on investments ................................... ( 0.41) 2.11 ( 0.49) 0.61 ( 0.67) ------- ------- ------- ------- ------- Total from investment operations ................. 1.11 3.62 1.02 2.19 0.91 ------- ------- ------- ------- ------- Less distributions Dividends from net investment income ............ ( 1.48) ( 1.51) ( 1.51) ( 1.58) ( 1.58) Dividends in excess of net investment income 0.00 ( 0.02) ( 0.02) 0.00 ( 0.01) Distributions from net realized gain ............ ( 0.13) 0.00 0.00 ( 0.06) 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 ................... $ 22.20 $ 22.70 $ 20.61 $ 21.15 $ 20.64 ======= ======= ======= ======= ======= Per share market price, end of period ............ $ 20.69 $ 20.81 $ 19.75 $ 21.25 $ 20.13 ======= ======= ======= ======= ======= Total Investment Return Based on market value ........................... 7.28% 13.11% 0.28% 13.91% 3.41% Ratios/Supplemental Data Net assets, end of period (in 000's) ............. $81,559 $83,380 $75,721 $77,581 $75,384 Ratio of expenses to average net assets ......... 0.77% 0.85% 0.87% 0.86% 0.86% Ratio of net investment income to average net assets ........................................ 6.70% 6.89% 7.27% 7.37% 7.83% Portfolio Turnover Rate ......................... 17.89% 18.88% 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 The accompanying notes are an integral part of these 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 June 30, 1999, the Fund had invested 36.31% of its portfolio in long-term debt obligations of issuers engaged in industrial 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. 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. Note 2 -- Portfolio Transactions -- The following is a summary of the security transactions for the period ended June 30, 1999:
Proceeds Cost of from Sales Purchases or Maturities ------------- -------------- U.S. Government Securities .......... $ 0 $1,166,329 Other Investment Securities ......... $3,231,970 $3,820,001
Note 3 -- Capital Stock -- At June 30, 1999, 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, Inc. (the "Advisor"), 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 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. 8 NOTES TO FINANCIAL STATEMENTS (Unaudited)--continued 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 period ended June 30, 1999, 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-----