<PAGE>
January 11, 1996
TO THE SHAREHOLDER:
The Fund ended the quarter December 31, 1995 with a Net Asset Value of $22.17
per share. This represents a 4.1% increase from $21.29 per share on September
30, 1995 and a 13.2% increase from $19.58 per share a year earlier. The Fund's
share price closed the calendar year at $21.00 per share, a 5.3% discount from
Net Asset Value.
The performance of the Fund continues to compare favorably with the average of
the 19 other closed-end bond funds with which we have compared ourselves as
shown below:
Total Return-Percentage Change in Net Asset Value
Per Share with All Distributions Reinvested(1)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
10 Years 5 Years 3 Years 2 Years 1 Year Quarter
To 12/31/95 To 12/31/95 To 12/31/95 To 12/31/95 To 12/31/95 To 12/31/95
- -------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1838 Bond Fund(2) 175.63% 78.21% 32.61% 16.88% 22.42% 6.04%
Average of 19 Other 159.94% 72.42% 31.14% 15.99% 20.54% 4.51%
Closed-End Bond Funds(2)
Salomon Bros. Bond Index(3) 192.35% 77.98% 35.73% 19.90% 27.20% 6.69%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) - This is historical information and should not be construed as indicative
of any 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 recent performance of the Fund is particularly gratifying to management as
the portfolio has been able to continue to participate in a very significant
bond market rally to the extent that through a bear market in 1994 and a bull
market in 1995, the Fund exceeded the average total return of the comparable
universe for that two-year cycle.
We believe the positive trend in the bond market will continue as the economic
fundamentals of modest GDP growth, low inflation and a Federal Reserve Bank that
is easing monetary policy support lower interest rates. The impasse in budget
negotiations in Washington is one potential short-term concern for the markets.
The Fund has been able to commit the modest cash reserves held at year-end at
lower bond prices and more advantageous yields as the bond market has sold off
in early January due to those concerns.
On December 14, 1995, the Board of Directors declared a dividend of $0.41 per
share, payable January 22, 1996 to shareholders of record December 26, 1995. As
discussed in the previous shareholder report, the income level of the Fund will
reflect the longer term trend in interest rates. During 1995, the yield on
30-year U.S. Treasury Bonds fell from 7.88% to 5.95%. The Fund's total return
for the 12 months is representative of the capital appreciation tied to that
degree of lower interest rates. The Fund's primary investment objective remains
to seek a high rate of return from interest income and trading activity, from a
portfolio principally consisting of debt securities. Future dividend
declarations will depend on the general level of interest rates, but the Board
and Management are unwilling to either impair long-term total return or
materially increase other risks in order to artificially maintain a specific
dividend rate.
1
<PAGE>
The table below updates the portfolio quality of the Fund's assets.
<TABLE>
<CAPTION>
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
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1995 29.7% 0.0% 25.0% 30.7% 8.8% 5.5% 0.3%
March 31, 1995 34.3% 3.7% 20.5% 34.5% 5.5% 1.3% 0.3%
March 31, 1994 32.7% 1.5% 19.1% 37.9% 5.0% 3.5% 0.3%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund's management welcomes any questions or comments from shareholders and
would like to thank all shareholders for their continued support.
Sincerely,
/s/ JOHN H. DONALDSON
------------------------
John H. Donaldson
President
2
<PAGE>
SCHEDULE OF NET ASSETS DECEMBER 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Moody's/
Standard &
Poor's Principal
Rating for Amount (000's)
Debt or Number Identified Cost Value
Securities of Shares (Note 2) (Note 1)
---------- --------- -------- --------
LONG TERM DEBT SECURITIES (97.10%)
ELECTRIC UTILITIES (12.52%)
<S> <C> <C> <C> <C>
Cleveland Electric Illuminating, 1st Mtge., 9.00%, 07/01/23 Ba2/BB 1,800 $1,662,876 $1,773,000
Commonwealth Edison, 1st Mtge., 9.125%, 10/15/21 ......... Baa2/BBB 2,000 2,062,500 2,352,500
Hydro Quebec, Gtd. Debs., 8.25%, 04/15/26 ................. A2/A+ 1,550 1,475,994 1,770,875
K N Energy Inc., Debs., 8.75%, 10/15/24 .................. A2/A 1,000 1,092,500 1,140,000
Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 ......... Ba1/BB 1,000 1,028,220 955,000
Toledo Edison Co., Debs., 8.70%, 09/01/02 ................. B1/B+ 500 486,430 451,875
Utilicorp United Inc., Senior Notes, 10.50%, 12/01/20 ..... Baa3/BBB 1,500 1,560,938 1,740,000
---------- -----------
9,369,458 10,183,250
---------- -----------
TELEPHONE UTILITIES (1.32%)
GTE Corp., Debs., 7.83%, 05/01/23 ......................... Baa1/BBB+ 1,000 1,006,280 1,077,500
---------- -----------
FINANCIAL (3.50%)
Chrysler Financial Corp., Notes, 12.75%, 11/01/99 ........ A3/A- 1,000 1,090,125 1,226,250
Leucadia National Corp., Senior Notes, 7.75%, 08/15/13 .... Baa3/BBB+ 1,000 990,000 1,017,500
Leucadia National Corp., Senior Sub. Notes, 10.375%, 06/15/02 Ba1/BBB 550 549,775 604,312
---------- -----------
2,629,900 2,848,062
---------- -----------
INDUSTRIAL & MISCELLANEOUS (52.91%)
AMR Corp., Debs., 10.00%, 04/15/21 ........................ Baa3/BB+ 2,000 2,148,940 2,470,690
Auburn Hills Trust, Gtd. Exchangeable Ctfs., 12.00%, 05/01/20 A3/A- 1,000 1,000,000 1,556,647
Columbia/HCA Healthcare, Debs., 7.50% 11/15/95 ............ A3/BBB+ 1,850 1,913,048 1,912,438
Comcast Corp., Senior Sub., Debs., 9.50%, 01/15/08 ........ B1/B+ 500 532,500 522,500
Cox Communications, Inc., Notes, 6.875%, 06/15/05 ........ Baa2/A- 500 499,445 516,250
Ford Holdings, Gtd. Debs, 9.375%, 03/01/20 ............... A1/A+ 1,000 1,117,790 1,296,250
Ford Motor Co., Debs., 8.875%, 01/15/22 ................... A1/A+ 1,500 1,480,350 1,871,250
Georgia Pacific Corp., Debs., 9.625%, 03/15/22 ............ Baa2/BBB- 1,000 1,059,240 1,171,250
Greater Orlando Aviation Auth., 8.20%, 10/01/12 .......... Aaa/AAA 500 551,875 540,350
Harnischfeger Industries, Inc., Debs., 7.25%, 12/15/25 ... Baa2/BBB 1,900 1,871,215 1,911,875
May Department Stores Co., Debs., 10.75%, 06/15/18 ........ A2/A 150 154,385 160,500
Missouri Pacific Railroad, Income Debs., 5.00%, 01/01/45 .. Baa2/A- 1,122 692,960 806,438
News America Holdings Inc., Gtd. Debs., 10.125%, 10/15/12 . Baa3/BBB 2,050 2,163,503 2,393,375
North Dakota State Municipal Bond Bank, Water Sys. Rev.,
10.50%, 04/01/14 ......................................... Aaa/AAA 1,000 1,159,780 1,113,750
Occidental Petroleum, Senior Debs., 11.75%, 03/15/11 ...... Baa3/BBB 2,000 2,200,000 2,117,500
Owens Corning Fiberglas, Debs., 9.375%, 06/01/12 .......... Baa3/BBB- 1,140 1,157,140 1,369,425
Penn Central Corp., Sub. Notes, 10.625%, 04/15/00 ......... Ba3/B+ 1,750 2,013,620 1,804,687
Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 ......... Ba3/B+ 1,500 1,634,965 1,625,625
Pope & Talbot Inc., Debs., 8.375%, 06/01/13 ............... Ba2/BB+ 1,750 1,699,110 1,739,063
Province of Quebec, Debs., 7.50% 07/15/23 ................ A2/A+ 1,000 978,510 1,052,500
Rohm & Haas Co., Notes, 9.50%, 04/01/21 ................... A1/A 1,500 1,494,375 1,816,875
Smurfit Capital Funding, Gtd. Debs., 7.50%, 11/20/25 ..... Baa1/A- 2,000 1,990,780 2,075,000
Telecommunications Inc., Senior Debs., 9.25%, 01/15/23 .... Baa3/BBB- 2,000 1,991,940 2,191,880
Telecommunications Inc., Senior Debs., 8.75%, 02/15/23 .... Baa3/BBB- 1,000 1,083,180 1,042,005
Time Warner Inc., Debs., 9.125%, 01/15/13 ................ Ba1/BBB- 1,000 1,116,220 1,132,500
Time Warner Inc., Debs., 9.15%, 02/01/23 .................. Ba1/BBB- 1,000 1,030,020 1,143,750
TRW Inc., Notes, 9.375%, 04/15/21 ........................ A2/A 303 320,893 402,611
Union Camp Corp., Debs., 9.25%, 02/01/11 .................. A1/A- 1,500 1,486,305 1,848,750
</TABLE>
See notes to financial statements.
3
<PAGE>
SCHEDULE OF NET ASSETS DECEMBER 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Moody's/
Standard &
Poor's Principal
Rating for Amount (000's)
Debt or Number Identified Cost Value
Securities of Shares (Note 2) (Note 1)
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Union Pacific Co., Debs. 8.625%, 05/15/22 ................ A3/A- 1,000 $1,062,430 $1,166,250
Western Atlas Inc., Debs., 8.55%, 06/15/24 ............... Baa1/A- 939 935,865 1,098,630
Williams Cos. Inc., Debs., 8.875%, 09/15/12 ............... Baa2/BBB- 1,000 974,870 1,162,500
---------- -----------
39,515,254 43,033,114
---------- -----------
COLLATERALIZED MORTGAGE OBLIGATIONS (7.04%)
CMO Mortgage Investors Trust, Series 5-C, 8.75%, 02/22/04 . Aaa/AAA 14 13,485 14,021
CMSI Collateralized Mtge. Oblig., Series 1994-7 A4, 6.25%,
04/25/24 ................................................... Aaa/AAA 1,000 801,476 910,000
CWFC Collateral Mtge. Oblig., Series 1993-5 A9, 7.125%,
12/25/23 ................................................... Aaa/NR 850 714,000 838,844
FHLMC Collateral Mtge. Oblig., Series 40-F, 10.00%,
05/15/20 ................................................... NR/NR 600 660,000 684,972
FNMA Collateral Mtge. Oblig., Series 1989 50-G, 8.60%,
08/25/19 ................................................... NR/NR 1,000 1,065,937 1,075,566
FNMA Collateral Mtge. Oblig., Series G-8 E, 9.00%,
04/25/21 ................................................... NR/NR 2,000 2,143,750 2,200,653
---------- -----------
5,398,648 5,724,056
---------- -----------
U.S. GOVERNMENT & AGENCIES (19.81%)
Big Rivers Utility Corp., Cooperative Utility Trust Ctfs.,
U.S. Gov't. Guaranteed, 9.50%, 02/15/17................. Aaa/NR 2,750 2,900,154 3,045,625
Cajun Electric Power, Coop. Utility Trust Ctfs., 9.52%,
03/15/19 .................................................. Aaa/AAA 1,000 1,058,990 1,110,000
Federal National Mortgage Association Notes, 9.50%,
11/10/20 .................................................. NR/NR 1,000 1,078,125 1,066,620
U.S. Treasury Bonds, 10.75%, 08/15/05 .................... NR/NR 1,600 2,120,750 2,199,424
U.S. Treasury Bonds, 7.875%, 02/15/21 .................... NR/NR 2,900 2,888,219 3,568,189
U.S. Treasury Bonds, 8.125%, 08/15/21 .................... NR/NR 1,000 1,016,406 1,264,640
U.S. Treasury Bonds, 6.25%, 08/15/23 ..................... NR/NR 3,750 3,236,544 3,857,587
---------- -----------
14,299,188 16,112,085
---------- -----------
TOTAL LONG TERM DEBT SECURITIES............................. 72,218,728 78,978,067
---------- -----------
INVESTMENT COMPANIES (0.27%)
High Yield Plus Fund .................................... NR/NR 25,000 167,178 215,625
---------- -----------
TOTAL INVESTMENTS (97.37%) ................................. $72,385,906* $79,193,692
=========== ===========
CASH AND OTHER ASSETS, LESS LIABILITIES (2.63%)............. 2,139,168
-----------
NET ASSETS (100.00%)........................................ $81,332,860
===========
</TABLE>
* Also the cost for Federal income tax purposes. The aggregate gross unrealized
appreciation in which there was an excess of market value over tax cost was
$7,454,679, and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value was $646,893.
See notes to financial statements.
4
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES (unaudited)
December 31, 1995
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments in securities at value (identified cost $72,385,906)(Note 1)...................... $79,193,692
Cash.......................................................................................... 2,073,153
Interest receivable........................................................................... 1,632,311
Dividends receivable.......................................................................... 1,750
Prepaid expenses.............................................................................. 8,308
-----------
TOTAL ASSETS............................................................................... 82,909,214
-----------
Liabilities:
Dividends payable............................................................................. 1,504,047
Accrued expenses payable...................................................................... 72,307
-----------
TOTAL LIABILITIES.......................................................................... 1,576,354
Net Assets: (equivalent to $22.17 per share based on 3,668,407 shares of capital
stock outstanding)............................................................................ $81,332,860
===========
NET ASSETS consisted of:
Capital paid-in............................................................................... $76,225,274
Distributions in excess of net investment income.............................................. (1,792,391)
Accumulated net realized gain................................................................. 92,191
Net unrealized appreciation of investments.................................................... 6,807,786
-----------
$81,332,860
STATEMENT OF OPERATIONS (unaudited)
For the nine months ended December 31, 1995
Investment Income:
Interest..................................................................... $4,880,370
Dividends.................................................................... 16,000
-----------
Total Investment Income................................................... 4,896,370
-----------
Expenses:
Investment advisory fees (Note 4)............................................ $337,919
Transfer agent fees.......................................................... 39,996
Insurance.................................................................... 8,597
Directors' fees and expenses................................................. 20,065
Audit fees................................................................... 18,786
State and local taxes........................................................ 16,233
Legal fees and expenses...................................................... 9,801
Reports to shareholders...................................................... 14,150
Custodian fees............................................................... 2,933
Miscellaneous................................................................ 42,999
-----------
Total Expenses............................................................ 511,479
-----------
Net Investment Income.................................................. 4,384,891
-----------
Realized and unrealized gain on investments (Note 1):
Net realized gain from security transactions................................. 1,020,556
Unrealized appreciation of investments:
Beginning of period....................................................... 438,534
End of period............................................................. 6,807,786
-----------
Change in unrealized appreciation of investments....................... 6,369,252
-----------
Net realized and unrealized gain on investments..................... 7,389,808
-----------
Net increase in net assets resulting from operations................ $11,774,699
===========
</TABLE>
See notes to financial statements.
5
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Nine Months Ended
December 31, 1995 Year Ended
(unaudited) March 31, 1995
------------------ --------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income........................................................ $4,384,891 $5,780,031
Net realized gain (loss) from security transactions (Note 2)................. 1,020,556 (928,365)
Change in unrealized appreciation (depreciation) of investments.............. 6,369,252 (1,541,820)
---------- ----------
Net increase in net assets resulting from operations......................... 11,774,699 3,309,846
---------- ----------
Dividends to shareholders from net investment income............................ (4,384,891) (5,780,031)
Dividends to shareholders in excess of net investment income.................... (1,765,138) (27,253)
Distributions to shareholders from return of capital............................ 0 (468,712)
---------- ----------
(6,150,029) (6,275,996)
Capital share transactions:
Net asset value of shares issued to shareholders in reinvestment of dividends
from net investment income (Note 5)....................................... 324,089 230,025
---------- ----------
Increase (decrease) in net assets............................................ 5,948,759 (2,736,125)
Net Assets:
Beginning of period.......................................................... 75,384,101 78,120,226
---------- ----------
End of period................................................................ $81,332,860 $75,384,101
=========== ===========
</TABLE>
================================================================================
|| 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. ||
================================================================================
See notes to financial statements.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Nine Months Ended Year Ended March 31,
December 31, 1995 ---------------------------------------------------
(unaudited) 1995 1994 1993 1992 1991
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period........... $20.64 $21.45 $22.27 $21.39 $20.27 $20.04
------ ------ ------ ------ ------ ------
Net investment income....................... 1.20 1.58 1.61 1.68 1.83 1.85
Net realized and unrealized gain on
investments.............................. 2.01 (0.67) (0.68) 1.36 1.12 0.25
------ ------ ------ ------ ------ ------
Total from investment operations............... 3.21 0.91 0.93 3.04 2.95 2.10
------ ------ ------ ------ ------ ------
Less distributions
Dividends from net investment income........ (1.20) (1.58) (1.73) (1.84) (1.83) (1.87)
Dividends in excess of net investment income (0.48) (0.01) 0.00 0.00 0.00 0.00
Distributions from net realized gain........ 0.00 0.00 0.00 (0.32) 0.00 0.00
Distributions in excess of net realized gain 0.00 0.00 (0.02) 0.00 0.00 0.00
Distributions from return of capital........ 0.00 (0.13) 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------
Total distributions............................ (1.68) (1.72) (1.75) (2.16) (1.83) (1.87)
------ ------ ------ ------ ------ ------
Net asset value, end of period................. $22.17 $20.64 $21.45 $22.27 $21.39 $20.27
====== ====== ====== ====== ====== ======
Per share market price, end of period.......... $21.00 $20.13 $21.13 $24.75 $22.63 $21.38
====== ====== ====== ====== ====== ======
Total Investment Return
Based on market value....................... 12.67% 3.41% (7.72)% 18.91% 14.41% 18.44%
Ratios/Supplemental Data
Net assets, end of period (in 000's)........ $81,333 $75,384 $ 78,120 $73,595 $56,163 $52,793
Ratio of expenses to average net assets
(does not include loan interest expenses) 0.87%* 0.86% 0.92% 0.91% 0.97% 1.05%
Ratio of net investment income to average
net assets............................... 7.42%* 7.83% 7.11% 7.95% 8.85% 9.39%
Portfolio Turnover.......................... 35.20%* 35.38% 18.91% 68.56% 73.11% 88.26%
Number of shares outstanding at end of
period (in 000's)........................... 3,668 3,653 3,642 3,304 2,626 2,605
Amount of bank loans outstanding at end
of period (in 000's)........................ $0 $0 $0 $0 $1,679 $0
Average amount of bank loans outstanding
during the period (in 000's)................ $0 $0 $0 $46 $299 $4,774
Amount of maximum month-end bank loans
during the period (in 000's)................ $0 $0 $0 $0 $2,171 $7,797
Average amount of bank loans per share
during the period........................... $0.00 $0.00 $0.00 $0.01 $0.11 $1.84
Weighted average interest rate of bank loans
during the period........................... 0.00% 0.00% 0.00% 6.31% 5.42% 9.11%
</TABLE>
* Annualized
See notes to financial statements.
7
<PAGE>
Note 1 -- Significant Accounting Policies -- The 1838 Bond-Debenture Trading
Fund ("the Fund") is registered under the Investment Company Act of 1940, as
amended, as a diversified closed-end management investment company. The
following is a summary of significant accounting policies consistently followed
by the Fund in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. Security Valuation-- Securities which are primarily traded in the
over-the-counter market are valued at the mean of the bid prices on the last
business day of the period generally obtained from at least two dealers
regularly making a market in the security. Securities which are primarily
traded on a national securities exchange are valued at the last reported
sales price. The Fund believes that, because of the size of its position in
securities, the primary market for the listed debt securities in its
portfolio is the over-the-counter market. Short-term money market
instruments which have a maturity of more than 60 days are valued at the
mean bid prices for securities of a similar type, yield and maturity
obtained from at least two dealers. Short-term money market instruments
which have a maturity of 60 days or less are valued at amortized cost which
approximates market value. At December 31, 1995, the Fund had invested
97.10% of its portfolio in long-term debt obligations of issuers engaged in
electric utilities, telephone utilities, financial, 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. The
Fund has a net tax basis capital loss carryforward of approximately $224,000
as of March 31, 1995, which may be applied against any realized net taxable
capital gains of each succeeding fiscal year until fully utilized or until
the expiration date, whichever occurs first. The carry-forward expires on
March 31, 2003. The Fund had deferred post-October 31, 1994 losses of
$732,044 to offset future net capital gains through March 31, 1996.
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.
Note 2 -- Portfolio Transactions -- The following is a summary of the security
transactions for the nine months ended December 31, 1995:
Proceeds
Cost of from Sales
Purchases or Maturities
--------- -------------
Long Term Debt Securities................... $23,048,952 $20,344,893
Other Securities............................ $1,600,000 $4,950,000
8
<PAGE>
Note 3-- Capital Stock-- At December 31, 1995, there were 10,000,000 shares of
capital stock ($1.00 par value) authorized.
Note 4 -- Investment Advisory Contract and Payments to Affiliated Persons --
Under the terms of the current contract, advisory fees are paid monthly to the
Investment Advisor at an annual rate of 5/8 of 1% on the first $40 million of
the Fund's month end net assets and 1/2 of 1% on the excess.
Certain directors and officers of the Fund are also directors, officers and/or
employees of the Investment Advisor or its corporate general partner, 1838
Investment Advisors, Inc. None of the directors so affiliated receives
compensation for his services as a director of the Fund. Similarly, none of the
Fund's officers receives compensation from the Fund. Legal fees aggregating
$1,341 during the nine months ended December 31, 1995 were paid to Stradley,
Ronon, Stevens & Young of which the Secretary of the Fund is a partner.
Note 5 -- Dividend and Distribution Reinvestments -- In accordance with the
terms of the Automatic Dividend Investment Plan, for shareholders who so elect,
dividends and distributions are made in the form of previously unissued Fund
shares at net asset value if on the Friday preceding the payment date (the
"Valuation Date") the closing New York Stock Exchange price per share, plus the
brokerage commisions applicable to one such share, equals or exceeds the net
asset value per share, however, if the net asset value is less than 95% of the
market price on the Valuation Date, the shares issued will be valued at 95% of
the market price. If the net asset value per share exceeds market price plus
commissions, the dividend or distribution proceeds are used to purchase Fund
shares on the open market for participants in the Plan. During the nine months
ended December 31, 1995, the Fund issued 15,369 shares under this Plan.
Note 6 -- Selected Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
Net Increase
Net Realized (Decrease)
Total Net and Unrealized in Net Assets
Investment Per Investment Per Gain (Loss) on Per Resulting from Per
Income Share Income Share Investments Share Operations Share
------ ----- ------ ----- ----------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995
- -----------------
March 31, 1995 $1,586,318 $0.43 $1,433,198 $0.39 $2,422,137 $0.67 $3,855,335 $1.06
June 30, 1995 1,632,322 0.45 1,466,901 0.40 4,333,323 1.18 5,800,224 1.58
September 30, 1995 1,637,419 0.45 1,464,970 0.40 (218,850) (0.06) 1,246,120 0.34
December 31, 1995 1,626,629 0.44 1,453,020 0.40 3,275,335 0.89 4,728,355 1.29
--------- ---- --------- ---- --------- ---- --------- ----
$6,482,688 $1.77 $5,818,089 $1.59 $9,811,945 $2.68 $15,630,034 $4.27
========== ===== ========== ===== ========== ===== =========== =====
1994
- -----------------
March 31, 1994 $1,488,861 $0.45 $1,293,206 $0.39 $(4,503,943) $(1.40) $(3,210,737) $(1.01)
June 30, 1994 1,605,101 0.44 1,434,079 0.39 (3,268,964) (0.89) (1,834,885) (0.50)
September 30, 1994 1,599,577 0.44 1,438,752 0.40 (1,150,004) (0.32) 288,748 0.08
December 31, 1994 1,626,623 0.45 1,474,002 0.40 (473,354) (0.13) 1,000,648 0.27
--------- ---- --------- ---- --------- ---- --------- ----
$6,320,162 $1.78 $5,640,039 $1.58 $(9,396,265) $(2.74) $(3,756,226) $(1.16)
========== ===== ========== ===== =========== ====== =========== ======
</TABLE>
9
<PAGE>
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 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 commisions 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 commisions 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
<PAGE>
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11
<PAGE>
DIRECTORS
---------------------
W. THACHER BROWN
JOHN GILRAY CHRISTY
JOHN H. DONALDSON
MORRIS LLOYD, JR.
JOHN J. McELROY, III
J. LAWRENCE SHANE
OFFICERS
---------------------
JOHN H. DONALDSON
President
KEVIN D. BARRY
Vice President
ANNA M. BENCROWSKY
Vice President
and Assistant Secretary
STEVEN H. TYRE
Vice President
MARCIA ZERCOE
Vice President
JOSEPH V. DEL RASO
Secretary
INVESTMENT ADVISOR
---------------------
1838 INVESTMENT ADVISORS, L.P.
FIVE RADNOR CORPORATE CENTER, SUITE 320
100 MATSONFORD ROAD
RADNOR, PA 19087
CUSTODIAN AND
TRANSFER AGENT
---------------------
FIRST CHICAGO TRUST COMPANY OF NEW YORK
P.O. BOX 2500
JERSEY CITY, NJ 07303-2500
COUNSEL
---------------------
STRADLEY, RONON, STEVENS & YOUNG
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PA 19103
AUDITORS
---------------------
COOPERS & LYBRAND L.L.P.
2400 ELEVEN PENN CENTER
PHILADELPHIA, PA 19103
1838
BOND-DEBENTURE TRADING FUND
---------------------
FIVE RADNOR COPORATE CENTER,
SUITE 320
100 MATSONFORD ROAD
RADNOR, PA 19087
GRAPHIC
Quarterly Report
December 31, 1995
