-----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, ADSzneH3zMEw/45NyKb8DcI3zzjEReiWWQLMgvtuWifI56Dx/izWQd+nuRpwhyTT 6SHfAbbgyVsAFNyIjmwqGA== 0000950116-99-001978.txt : 19991104 0000950116-99-001978.hdr.sgml : 19991104 ACCESSION NUMBER: 0000950116-99-001978 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991103 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: 99740087 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 October 21, 1999 TO THE SHAREHOLDER: The Fund ended the quarter September 30, 1999 with a Net Asset Value of $20.51 per share. This represents a 7.6% decrease from $22.20 per share at the end of the March 31, 1999 Fiscal Year and an 8.6% decrease from $22.45 per share at December 31, 1998. On September 30, 1999, the Fund's closing stock price on the New York Stock Exchange was $17.50 per share, representing a 14.7% 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 9/30/99 to 9/30/99 to 9/30/99 to 9/30/99 to 9/30/99 - ------------------------------------------------------------------------------------------------------- 1838 Bond Fund(2) 127.10% 42.14% 6.63% -4.87% -1.33% Average of 18 Other Closed-End Bond Funds(2) 126.12% 43.29% 8.81% -0.64% 0.18% Salomon Bros. Bond Index(3) 132.83% 52.41% 8.09% -5.91% -0.47%
(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. Long-term U.S. bond yields have risen for most of the first nine months of 1999. The benchmark U.S. Treasury 30-year bond began the year at 5.09% and rose to a peak of 6.28% in August before declining to 6.05% at September 30th. In recent days, that yield has risen to a new peak of 6.36%. The price of the Funds largest Treasury holding, 7.875% bonds due 2/15/21, fell 11.7% for the nine-month period and 6.1% since the end of the March 31, 1999 Fiscal Year. Bond yields rose as the Federal Reserve Bank has twice increased short-term interest rates in response to accelerating economic growth. The strength of the U.S. economy has been further buoyed by an economic rebound around the world, most notably in Asia, which had seen a very difficult 1998 following the expansion of the currency crises in 1997. During its October meeting, the Fed's policy-making Board chose to leave rates unchanged, but adopted a bias toward further increases. Continued strength in the domestic employment market and a modest pickup in inflation indicators are cited as the primary reasons for the vigilant stance. The corporate bond market has seen additional pressure from an exceedingly large calendar of new issues as corporate treasurers have sought to lock-in financing costs ahead of both the Federal Reserve's increases in rates and any potential market disruptions due to Y2K concerns. This has resulted in wider yield spreads and underperformance from the corporate bond holdings in the Fund. 1 Looking past the Fourth Quarter, we expect the Federal Reserve to keep its attention focused on the potential for any inflation and to act to raise rates in anticipation if it believes that would be necessary. We also believe that the wide yield spreads on corporate bonds that have resulted from supply will tighten up in the new year. This will benefit the fund's holdings as yield spreads tighten. The table below updates the portfolio quality of the Fund's assets compared to the end of recent quarter end and two 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 - -------------------- ------------ --------- ---------- ---------- --------- --------- --------- September 30, 1999 15.4% 3.4% 28.8% 46.9% 4.8% 0.3% 0.3% June 30, 1999 17.4% 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%
On September 16, 1999 the Board of Directors declared a dividend payment of $0.3625 per share payable November 9, 1999 to shareholders of record on September 30, 1999. Also, approved at this meeting were new pricing procedures for the Fund which may be found on Page 8 of this financial report under Note 1, A. The Fund's shares have traded on the New York Stock Exchange at a wider discount to Net Asset Value per share than has been typical compared to the last few years. The Fund's assets have declined less in value (8.6%) than the prices on long-term Treasury bonds (11.7%), yet the stock price of the Fund has declined more (15.4%) than either bond prices or the value of the underlying assets since December 31, 1998. 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. The dividend reinvestment plan affords shareholders a price advantage by purchasing shares at the lower of NAV or market price. This means that the reinvestment is at New Asset Value when the Fund is trading at a discount to Net Asset Value or at Net Asset Value per share when market trading is at a premium to that value. To participate in the plan, please contact Equiserve, First Chicago Trust Division, 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 September 30, 1999 (Unaudited)
Moody's/ Standard & Poor's Principal Identified Cost Value Rating Amount (000's) (Note 2) (Note 1) ----------- ---------------- ---------------- -------------- C> LONG TERM DEBT SECURITIES (97.43%) ELECTRIC UTILITIES (9.57%) $ 249,845 $ 235,625 Calpine Corp., 7.75%, 4/15/09 .................................... Ba2/BB $ 250 1,662,876 1,868,855 Cleveland Electric Illum., 1st Mtge, 9.00%, 7/1/23 ............... Ba1/BB+ 1,800 1,000,000 927,425 CMS Energy Corp., 7.5%, 1/15/09 .................................. Ba3/BB 1,000 1,475,994 1,662,499 Hydro-Quebec Debs, 8.25%, 4/15/26 ................................ A2/A+ 1,550 500,000 441,869 Midamerican Funding LLC, 6.927%, 3/1/29, 144A .................... Baa1/BBB+ 500 1,028,220 1,041,827 Niagra Mowhawk Power Co., 1st Mtge, 8.75%, 4/1/22 ................ Baa2/BBB+ 1,000 1,090,000 1,032,005 Utilicorp United Inc., Sr. Notes, 8.27%, 11/15/21 ................ Baa3/BBB 1,000 ------------ ------------ 7,006,935 7,210,105 ------------ ------------ FINANCIAL (17.63%) Chrysler Financial Corp., Debs, 12.75%, 11/1/99 .................. A1/A+ 1,000 1,090,125 1,005,154 Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 ........ Aa3/A 2,000 2,012,070 1,931,734 EOP Operating LP, Notes, 7.25%, 02/15/18 ......................... Baa1/BBB+ 1,000 991,900 882,814 FBS Capital I, Capital Securities, 8.09%, 11/15/26 ............... A1/BBB+ 2,000 1,993,370 1,979,788 HSBC America Capital II, 8.38%, 5/15/27, 144A .................... A2/BBB+ 2,500 2,570,605 2,420,975 Liberty Property Trust, 7.5%, 01/15/18 ........................... Baa3/BBB- 1,000 998,430 887,111 Penn Central Corp., Sub Notes, 10.625%, 04/15/00 ................. Baa3/BBB 1,000 1,150,640 1,018,715 Penn Central Corp., Sub Notes, 10.875%, 05/1/11 .................. Baa3/BBB 1,500 1,634,965 1,842,828 Spieker Properties, 7.875%, 12/01/16 ............................. Baa2/BBB 1,000 1,001,830 948,015 West Deutsche LB, NY, 6.05%, 01/15/09 ............................ Aa1/AA+ 400 398,988 365,967 ------------ ------------ 13,842,923 13,283,101 ------------ ------------ INDUSTRIAL & MISCELLANEOUS (36.97%) Apache Corp., 7.7%, 3/15/26 ...................................... Baa1/BBB+ 500 525,280 493,050 Chiquita Brands Int'l, Inc., Sr. Notes, 10.25%, 11/01/06 ......... B1/B+ 250 255,625 215,000 Dell Computer Corp., Sr. Debs, 7.10%, 04/15/28 ................... Baa1/BBB+ 1,500 1,503,520 1,389,743 Georgia-Pacific Corp., Debs., 9.625%, 03/15/22 ................... Baa2/BBB- 1,000 1,059,240 1,059,857 Harcourt General Inc., Sr. Debs, 8.875%, 06/01/22 ................ Baa2/BBB 2,000 2,157,020 2,115,366 Harcourt General Inc., Debs, 7.300%, 08/01/97 .................... Baa2/BBB 1,500 1,488,886 1,244,903 K N Energy Inc., Debs., 8.75%, 10/15/24 .......................... Baa2/BBB- 1,150 1,263,799 1,138,500 News America Holdings Inc., Gtd. Sr. Debs, 10.125%, 10/15/12 ..... Baa3/BBB- 2,050 2,163,503 2,257,716 News America Holdings Inc., Notes, 7.90%, 12/01/95 ............... Baa3/BBB- 1,400 1,298,624 1,282,102 Owens Corning, 7.7%, 05/1/08 ..................................... Baa3/BBB- 500 482,889 486,381 Phillip Morris Co., Inc, Debs., 7.75% 01/15/27 ................... A2/A 3,000 3,007,020 2,921,577 Smurfit Capital Funding, Gtd. Debs., 7.50%, 11/20/25 ............. Baa1/A- 2,000 1,990,780 1,857,568 Texaco Capital Inc., Gtd. Debs., 7.5% 03/01/43 ................... A1/A+ 2,000 1,977,920 1,936,920 Time Warner Inc., Debs., 9.15%, 02/01/23 ......................... Baa3/BBB 3,000 3,159,700 3,448,257 Tricon Global Restaurant, Sr. Notes, 7.65%, 05/15/08 ............. Ba1/BB 500 498,875 492,752 TRW Inc., Sr. Notes, 9.375%, 04/15/21 ............................ Baa1/BBB 303 320,893 347,178 Union Camp Corp., 9.25%, 02/01/11 ................................ A3/BBB+ 1,500 1,486,305 1,691,462 Union Pacific Resources Co., 7.00%, 10/15/06 ..................... Baa3/BBB- 750 728,985 721,052 Western Atlas Inc., Debs., 8.55%, 06/15/24 ....................... A2/A 2,539 2,651,998 2,752,789 ------------ ------------ 28,020,862 27,852,173 ------------ ------------ TELEPHONE & COMMUNICATIONS (9.23%) Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 .............. Baa3/BBB 1,000 1,120,000 1,108,864 New York Telephone, 9.375%, 07/15/31 ............................. A2/A+ 1,250 1,426,113 1,367,486 Sprint Capital Corp., 6.875%, 11/15/28 ........................... Baa1/BBB+ 1,000 992,220 911,765 TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 ............. A2/AA- 2,000 1,991,940 2,166,690 Worldcom, Inc., 6.95%, 08/15/28 .................................. A3/A- 1,500 1,485,975 1,395,648 ------------ ------------ 7,016,248 6,950,453 ------------ ------------
3 SCHEDULE OF NET ASSETS--continued September 30, 1999 (Unaudited)
Moody's/ Standard & Poor's Principal Identified Cost Value Rating Amount (000's) (Note 2) (Note 1) ----------- ---------------- ----------------- ------------- TRANSPORTATION (8.96%) AMR Corp., Debs., 10.00%, 04/15/21 ...................... Baa2/BBB- 2,000 $ 2,148,940 $ 2,335,154 Auburn Hills Trust, Gtd. Ctfs., 12.00%, 05/01/20 ........ A1/A+ 1,000 1,000,000 1,496,284 Ford Holdings, Inc., Gtd. Debs., 9.375%, 03/01/20 ....... A1/A 1,000 1,117,790 1,193,842 Ford Motor Co., Debs., 8.90%, 01/15/32 .................. A1/A 1,500 1,480,350 1,725,053 ------------- ----------- 5,747,080 6,750,333 ------------- ----------- MORTGAGE BACKED SECURITIES (3.52%) FNMA Pool #313411, 7.60%, 03/01/04 ...................... NR/NR 737 745,206 740,077 GNMA Pool #780374, 7.5%, 12/15/23 ....................... NR/NR 499 495,269 502,917 GNMA Pool #417239, 7.00%, 02/15/26 ...................... NR/NR 1,431 1,452,035 1,406,207 ------------- ----------- 2,692,510 2,649,201 ------------- ----------- TAXABLE MUNICIPAL BONDS (0.69%) Greater Orlando Aviation Authority, 8.20%, 10/01/12 ..... Aaa/AAA 500 551,875 524,418 ------------- ----------- U.S. GOVERNMENT & AGENCIES (10.86%) U.S. Treasury Bonds, 10.75%, 08/15/05 ................... NR/NR 1,600 2,120,750 1,962,501 U.S. Treasury Bonds, 7.875%, 02/15/21 ................... NR/NR 3,900 4,051,031 4,537,408 U.S. Treasury Bonds, 8.125%, 08/15/21 ................... NR/NR 1,000 1,016,406 1,194,063 U.S. Treasury Bonds, 6.25%, 08/15/23 .................... NR/NR 500 548,125 491,875 ------------- ----------- 7,736,312 8,185,847 ------------- ----------- TOTAL LONG TERM DEBT SECURITIES ......................... 72,614,745 73,405,631 ------------- ----------- Shares -------- INVESTMENT COMPANIES (2.24%) High Yield Plus Fund .................................... 33,333 223,876 241,664 Republic U.S. Govt. M/M Fund ............................ 1,442,139 1,442,139 1,442,139 ------------- ----------- 1,666,015 1,683,803 ------------- ----------- TOTAL INVESTMENTS (99.67%) .............................. $ 74,280,760* $75,089,434 ============= =========== OTHER ASSETS AND LIABILITIES (0.33%) .................... 250,123 ----------- NET ASSETS (100%) ....................................... $75,339,557 ===========
* The cost for Federal income tax purposes was $74,332,947. The aggregate gross unrealized appreciation in which there was an excess of market value over tax cost was $3,200,540 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value was $2,444,053. 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) September 30, 1999 Assets: Investment in securities at value (identified cost $74,280,760) (Note 1) $ 75,089,434 Cash .................................................................... 449 Interest receivable ..................................................... 1,614,253 Dividends receivable .................................................... 2,417 Other assets ............................................................ 4,377 ------------ TOTAL ASSETS .......................................................... 76,710,930 ------------ Liabilities: Dividends payable ....................................................... 1,331,556 Due to Advisor .......................................................... 35,069 Accrued expenses payable ................................................ 4,748 ------------ TOTAL LIABILITIES ..................................................... 1,371,373 ------------ Net assets: (equivalent to $20.51 per share based on 3,673,258 shares of capital stock outstanding) ............................................. $ 75,339,557 ============ NET ASSETS consisted of: Par value ............................................................... $ 3,673,258 Capital paid-in ......................................................... 72,405,142 Dividends paid in excess of net investment income ....................... (1,346,306) Accumulated net realized loss on investments ............................ (201,211) Net unrealized appreciation on investments .............................. 808,674 ------------ $ 75,339,557 ============
STATEMENT OF OPERATIONS (unaudited) For the six months ended September 30, 1999 Investment Income: Interest ............................................................ $ 3,027,538 Dividends ........................................................... 7,250 ------------ Total Investment Income ........................................... 3,034,788 ------------ Expenses: Investment advisory fees (Note 4) ................................... $ 221,292 Transfer agent fees ................................................. 23,937 Insurance ........................................................... 180 NYSE ................................................................ 8,350 Directors' fees and expenses ........................................ 13,603 Audit fees .......................................................... 12,169 State and local taxes ............................................... 11,200 Legal fees and expenses ............................................. 12,172 Reports to shareholders ............................................. 10,032 Custodian fees ...................................................... 4,131 Miscellaneous ....................................................... 13,174 ---------- Total Expenses .................................................... 330,240 ------------ Net Investment Income .......................................... 2,704,548 ------------ Realized and unrealized gain (loss) on investments (Note 1): Net realized loss from security transactions ........................ (149,024) ------------ Unrealized appreciation of investments: Beginning of period ............................................... 5,525,189 End of period ..................................................... 808,674 ---------- Change in unrealized appreciation of investments ............... (4,716,515) ------------ Net realized and unrealized loss on investments .............. (4,865,539) ------------ Net decrease in net assets resulting from operations ......... $ (2,160,991) ============
The accompanying notes are an integral part of these financial statements. 5 STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended September 30, 1999 Year Ended (unaudited) March 31, 1999 -------------------- --------------- Increase (Decrease) in net assets: Operations: Net investment income ................................................................ $ 2,704,548 $ 5,560,689 Net realized gain (loss) from security transactions (Note 2) ......................... (149,024) 340,192 Change in unrealized appreciation of investments ..................................... (4,716,515) (1,825,507) ------------ ------------ Net increase (decrease) in net assets resulting from operations ...................... (2,160,991) 4,075,374 ------------ ------------ Dividends to shareholders from net investment income .................................. (2,704,548) (5,472,586) Dividends to shareholders in excess of net investment income .......................... (1,354,402) -- Distributions to shareholders from net realized gain .................................. -- (422,993) ------------ ------------ (4,058,950) (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 net assets .................................................................. (6,219,941) (1,820,205) Net Assets: Beginning of period .................................................................. 81,559,498 83,379,703 ------------ ------------ End of period ........................................................................ $ 75,339,557 $ 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 Equiserve, First Chicago Trust Division, to act as the Agent of each shareholder electing to participate in the plan. Information and application forms are available from Equiserve, First Chicago Trust Division, 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.
Six Months Ended Year Ended March 31, September 30, 1999 ------------------------------------------------------- (unaudited) 1999 1998 1997 1996 1995 -------------------- ---- ---- ---- ---- ---- C> Per Share Operating Performance Net asset value, beginning of period ............. $ 22.20 $ 22.70 $ 20.61 $ 21.15 $ 20.64 $ 21.45 --------- -------- -------- -------- -------- -------- Net investment income ........................... 0.74 1.52 1.51 1.51 1.58 1.58 Net realized and unrealized gain (loss) on investments ................................... (1.32) (0.41) 2.11 (0.49) 0.61 (0.67) --------- -------- -------- -------- -------- -------- Total from investment operations ................. (0.58) 1.11 3.62 1.02 2.19 0.91 --------- -------- -------- -------- -------- -------- Less distributions Dividends from net investment income ............ (0.74) (1.48) (1.51) (1.51) (1.58) (1.58) Dividends in excess of net investment income..... (0.37) 0.00 (0.02) (0.02) 0.00 (0.01) Distributions from net realized gain ............ 0.00 (0.13) 0.00 0.00 (0.06) 0.00 Distributions from tax return of capital ........ 0.00 0.00 0.00 (0.03) (0.04) (0.13) --------- -------- -------- -------- -------- -------- Total distributions .............................. (1.11) (1.61) (1.53) (1.56) (1.68) (1.72) --------- -------- -------- -------- -------- -------- Net asset value, end of period ................... $ 20.51 $ 22.20 $ 22.70 $ 20.61 $ 21.15 $ 20.64 ========== ======== ======== ======== ======== ======== Per share market price, end of period ............ $ 17.50 $ 20.69 $ 20.81 $ 19.75 $ 21.25 $ 20.13 ========== ======== ======== ======== ======== ======== Total Investment Return Based on market value ........................... (10.41)% 7.28% 13.11% 0.28% 13.91% 3.41% Ratios/Supplemental Data Net assets, end of period (in 000's) ............. $ 75,340 $ 81,559 $ 83,380 $ 75,721 $ 77,581 $ 75,384 Ratio of expenses to average net assets ......... 0.85%* 0.77% 0.85% 0.87% 0.86% 0.86% Ratio of net investment income to average net assets ........................................ 6.92%* 6.70% 6.89% 7.27% 7.37% 7.83% Portfolio turnover rate ......................... 4.91% 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 3,673 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 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. 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 -- Effective September 16, 1999, the Fund's Board of Directors authorized the following new pricing procedures for the Fund: In valuing the Fund's net assets, all securities for which representative market quotations are available will be valued at the last quoted sales price on the security's principal exchange on the day of valuation. If there are no sales of the relevant security on such day, the security will be valued at the bid price at the time of computation. Prices for securities traded in the over-the-counter market, including listed debt and preferred securities, whose primary market is believed to be over-the-counter, normally are supplied by independent pricing services. Securities for which market quotations are not readily available will be valued at their respective fair values as determined in good faith by, or under procedures established by the Board of Directors. At September 30, 1999 there were no securities valued by, or under procedures established by the Board of Directors. At September 30, 1999, the Fund had invested 36.97% 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 (excluding short-term securities) for the six month period ended September 30, 1999:
Proceeds Cost of from Sales Purchases or Maturities ------------- -------------- U.S. Government Securities .......... $ 0 $ 403,756 Other Investment Securities ......... $3,714,860 $4,197,483
Note 3 -- Capital Stock -- At September 30, 1999, 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. (the "Advisor"), advisory fees are paid monthly to the Investment Advisor at an annual rate 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. 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 September 30, 1999, the Fund issued no 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. Equiserve, First Chicago Trust Division, 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 Equiserve, First Chicago Trust Division, P.O. Box 2500, Jersey City, New Jersey, 07303-2500. ================================================================================ HOW TO GET ASSISTANCE WITH SHARE TRANSFER OR DIVIDENDS Contact Your Transfer Agent, Equiserve, First Chicago Trust Division, P.O. Box 2500, Jersey City, New Jersey 07303-2500, or call 201-324-0498 ================================================================================ 10 [THIS PAGE INTENTIONALLY LEFT BLANK] 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 1838 Investment advisor - ----------------------------------------- BOND--DEBENTURE TRADING FUND 1838 investment advisors, inc. ------------------------------ five radnor corporate Center, suite 320 100 matsonford road FIVE RADNOR CORPORATE CENTER, radnor, pa 19087 SUITE 320 CUSTODIAN 100 MATSONFORD ROAD - ----------------------------------------- RADNOR, PA 19087 Republic National Bank of new york 452 Fifth Avenue New York, NY 10018 Transfer Agent Semi-Annual Report - ----------------------------------------- September 30, 1999 Equiserve, First chicago trust division 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 LLP 1177 avenue of the americas new york, ny 10036 -----END PRIVACY-ENHANCED MESSAGE-----