<PAGE>
TO THE SHAREHOLDER:
The Fund ended its fiscal year March 31, 1997 with a Net Asset Value of $20.61
per share. This compares to $21.15 per share a year earlier and $20.99 per share
on December 31, 1996.
The recent quarter has been difficult for bond prices. The Federal Reserve Bank
increased its Federal Funds target to 5 1/2% from 5 1/4%, reacting to economic
strength in order to forestall any inflationary impact from that economic
growth. In particular, continued strength in employment data gave concern over
the possibility of wage gains translating into inflation. Interest rates
increased on U.S. Treasury securities by between 0.50% and 0.55% during the
quarter for intermediate maturities, and approximately 0.45% for longer
maturities. This increase resulted in a 5.4% price decline for the Treasury
6.25% bond due 2/15/2023, the Fund's largest Treasury bond holding.
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)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
10 Years 5 Years 2 Years 1 Year Quarter
To 3/31/97 To 3/31/97 To 3/31/97 To 3/31/97 To 3/31/97
- -----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
1838 Bond Fund (2) 134.52% 46.96% 16.45% 5.11% -1.81%
Average of 18 Other
Closed-End Bond Funds (2) 127.95% 48.21% 18.72% 5.84% -0.63%
Salomon Bros. Bond Index (3) 137.44% 49.45% 18.39% 4.21% -2.21%
</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.
At March 31st, the Fund had approximately 2.5% of its net assets in cash
reserves, offering some cushion against further declines in bond prices and
available for advantageous reinvestment.
The table below updates the portfolio quality of the Fund's assets:
Percent of Total Investment (Standard & Poor's Ratings)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
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>
March 31, 1997 22.3% 1.3% 31.9% 34.5% 9.3% 0.4% 0.3%
December 31, 1996 28.4% 0.0% 26.4% 34.9% 9.6% 0.4% 0.3%
March 31, 1996 31.4% 1.2% 26.2% 27.4% 9.6% 3.9% 0.3%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
On March 20, 1997, the Board of Directors declared a dividend of $0.39 per share
payable April 29, 1997, to shareholders of record April 10, 1997. Subsequent to
that declaration, a portfolio holding of $1,500,000 Utilicorp United 10.5%
Senior Notes due 12/1/2020 was subject to a tender offer at a substantial
premium to par value by the issuer. The Fund
1
<PAGE>
accepted the offer (which we believe to be very attractive for a Baa3/BBB rated
issue), and this resulted in a gain of $170,392. The retirement of that 10.5%
coupon will adversely impact the Fund's income dividend rate. The next dividend
declaration will be at a Board of Directors meeting scheduled for June 19, 1997,
and the precise determination of the future dividend rate will be made at that
time.
The Board of Directors and management appreciate the continued support of all
shareholders and welcome any shareholder inquiries.
Sincerely,
/s/ John H. Donaldson
---------------------
John H. Donaldson
President
2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
1838 Bond-Debenture Trading Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of net assets, of 1838 Bond-Debenture Trading Fund as of March 31,
1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1997, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of 1838
Bond-Debenture Trading Fund as of March 31, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and its financial highlights for each of the five
years in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 18, 1997
3
<PAGE>
SCHEDULE OF NET ASSETS MARCH 31, 1997
<TABLE>
<CAPTION>
Moody's/
Standard &
Poor's
Rating for Indentified
Debt Principal Cost Value
Securities+ Amount (000's) (Note 2) (Note 1)
----------- -------------- -------- --------
<S> <C> <C> <C> <C>
LONG TERM DEBT SECURITIES (94.06%)
ELECTRIC UTILITIES (8.42%)
Cleveland Electric Illuminating, 1st Mtge., 9.00%, 07/01/23 Ba2/BB $1,800 $1,662,876 $1,802,250
Commonwealth Edison, 1st Mtge., 9.125%, 10/15/21 ..... Baa2/BBB 2,000 2,062,500 2,020,000
Hydro Quebec, Gtd. Debs., 8.25%, 04/15/26 ............. A2/A+ 1,550 1,475,994 1,586,813
Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 ..... Ba3/BB- 1,000 1,028,220 965,235
--------- ---------
6,229,590 6,374,298
--------- ---------
FINANCIAL (11.27%)
Chrysler Financial Corp., Notes, 12.75%, 11/01/99 .... A3/A- 1,000 1,090,125 1,138,750
Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 A1/A- 2,000 2,012,070 1,965,000
FBS Capital I, Capital Securities, 8.09%, 11/15/26 .... A2/BBB+ 2,000 1,993,370 1,947,500
JPM, Capital Trust II, Capital Securities, 7.95%, 02/01/27 Aa2/AA- 1,000 986,950 971,250
Penn Central Corp., Sub. Notes, 10.625%, 04/15/00 ..... Ba1/BBB- 1,000 1,150,640 1,013,750
Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 ..... Ba1/BBB- 1,500 1,634,965 1,498,125
--------- ---------
8,868,120 8,534,375
--------- ---------
INDUSTRIAL & MISCELLANEOUS (53.72%)
ADT Operations, Sr. Notes, 9.25%, 08/01/03 ........... Ba3/BB+ 500 520,625 528,125
AMR Corp., Debs., 10.00%, 04/15/21 .................... Baa3/BB+ 2,000 2,148,940 2,361,670
Auburn Hills Trust, Gtd. Exchangeable Ctfs., 12.00%, 05/01/20 A3/A- 1,000 1,000,000 1,440,450
Chiquita Brands, Sr. Notes, 10.25%, 11/01/06 ........ B1/B+ 250 255,625 263,125
Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 ... Baa2/BBB+ 1,000 1,120,000 1,110,000
Ford Holdings, Gtd. Debs., 9.375%, 03/01/20 .......... A1/A+ 1,000 1,117,790 1,140,000
Ford Motor Co., Debs., 8.875%, 01/15/22 ............... A1/A+ 1,500 1,480,350 1,642,500
Georgia Pacific Corp., Debs., 9.625%, 03/15/22 ........ Baa2/BBB- 1,000 1,059,240 1,068,750
Greater Orlando Aviation Auth., 8.20%, 10/01/12 ...... Aaa/AAA 500 551,875 535,625
Harcourt General Inc., Sr. Debs., 8.875%, 06/01/22 .... Baa1/BBB+ 2,000 2,157,020 2,107,500
Harnischfeger Industries, Inc., Debs., 7.25%, 12/15/25 Baa2/BBB 2,000 1,962,952 1,752,500
K N Energy Inc., Debs., 8.75%, 10/15/24 .............. A3/BBB+ 1,150 1,263,799 1,178,750
Mark IV Industries, Inc., Debs., 7.75%, 04/01/06 .... Ba3/BB+ 500 462,650 475,000
May Department Stores Co., Debs., 10.75%, 06/15/18 .... A2/A 150 154,385 160,050
Missouri Pacific Railroad, Income Debs., 5.00%, 01/01/45 Baa2/BBB 1,122 692,960 647,955
News America Holdings Inc., Gtd. Debs., 10.125%, 10/15/12 Baa3/BBB 2,050 2,163,503 2,283,187
News America Holdings Inc., Gtd. Debs., 7.90%, 12/01/95 Baa3/BBB 1,000 898,540 910,000
North Dakota State Muni. Bond Bank, Water Sys. Rev., 10.50%,
04/01/14 ........................................... Aaa/AAA 1,000 1,159,780 1,057,500
Owens Corning Fiberglas, Debs., 9.375%, 06/01/12 ...... Baa3/BBB- 1,690 1,777,510 1,810,413
Philip Morris, Debs., 7.75%, 01/15/2027 ............... A2/A 3,000 3,007,020 2,853,750
Pope & Talbot Inc., Debs., 8.375%, 06/01/13 ........... Ba2/BB+ 750 728,190 645,000
Rohm & Haas Co., Notes, 9.50%, 04/01/21 ............... A1/A 1,500 1,494,375 1,636,875
Smurfit Capital Funding, Gtd., Debs., 7.50%, 11/20/25 Baa1/A- 2,000 1,990,780 1,815,000
TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 .. Ba1/BBB- 2,000 1,991,940 1,917,050
TCI Communications, Inc., Sr. Debs., 8.75%, 02/15/23 .. Ba1/BBB- 1,000 1,083,180 919,375
Texaco Capital Inc., Debs., 7.50%, 03/01/43 .......... A1/A+ 2,000 1,977,920 1,887,500
Time Warner Inc., Debs., 9.15%, 02/01/23 .............. Ba1/BBB- 2,000 2,050,000 2,125,000
TRW Inc., Notes, 9.25%, 12/30/11 ...................... A2/A 275 326,312 310,750
TRW Inc., Notes, 9.375%, 04/15/21 .................... A2/A 303 320,893 352,237
Union Camp Corp., Debs., 9.25%, 02/01/11 .............. A1/A- 1,500 1,486,305 1,674,375
Union Pacific Co., Debs., 8.625%, 05/15/22 ........... Baa2/BBB 1,000 1,062,430 1,008,750
Western Atlas Inc., Debs., 8.55%, 06/15/24 ........... A3/A- 1,039 1,048,483 1,062,378
--------- ---------
40,515,372 40,681,140
--------- ---------
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF NET ASSETS -- CONTINUED MARCH 31, 1997
Moody's/
Standard &
Poor's
Rating for Indentified
Debt Principal Cost Value
Securities+ Amount (000's) (Note 2) (Note 1)
----------- -------------- -------- --------
<S> <C> <C> <C> <C>
TELEPHONE UTILITIES (1.13%)
U.S. West Communications, Debs., 6.875%, 09/15/33 .... Aa3/A $1,000 $896,920 $853,750
--------- ---------
MORTGAGE BACKED SECURITIES (6.31%)
FNMA Pool #313411, 7.00%, 03/01/04 .................... NR/NR 1,994 2,017,050 1,977,171
GNMA Pool #780374, 7.50%, 12/15/23 ................... NR/NR 918 910,251 902,365
GNMA Pool #417239, 7.00%, 02/15/26 ................... NR/NR 1,990 2,018,385 1,897,754
--------- ---------
4,945,686 4,777,290
--------- ---------
U.S. GOVERNMENT & AGENCIES (13.21%)
U.S. Treasury Bonds, 10.75%, 08/15/05 ................ NR/NR 1,600 2,120,750 1,982,080
U.S. Treasury Bonds, 7.875%, 02/15/21 ................ NR/NR 2,900 2,888,219 3,109,003
U.S. Treasury Bonds, 8.125%, 08/15/21 ................ NR/NR 1,000 1,016,406 1,101,100
U.S. Treasury Bonds, 6.25%, 08/15/23 ................. NR/NR 4,300 4,038,492 3,812,724
--------- ---------
10,063,867 10,004,907
--------- ---------
TOTAL LONG TERM DEBT SECURITIES............................. 71,519,555 71,225,760
--------- ---------
COMMERCIAL PAPER (2.51%)
General Electric Capital Corp., 5.50%, 04/01/97 ....... A-1+/P-1 1,900 1,900,000 1,900,000
--------- ---------
Shares
------
INVESTMENT COMPANIES (0.30%)
High Yield Plus Fund ................................ NR/NR 25,000 167,178 225,000
--------- ---------
TOTAL INVESTMENTS (96.87%) ................................. $73,586,733* $73,350,760
=========== ===========
OTHER ASSETS AND LIABILITIES (3.13%)........................ 2,370,163
-----------
NET ASSETS (100.00%)........................................ $75,720,923
===========
</TABLE>
+ The Moody's/Standard & Poor's rating for debt securities is not covered by
the Report of Independent Accountants.
* The cost for Federal income tax purposes was $73,691,108. The aggregate
gross unrealized appreciation in which there was an excess of market value
over tax cost was $2,229,083, and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market
value was $2,569,431.
See notes to financial statements.
5
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments in securities at value (identified cost $73,586,733) (Note 1).................. $73,350,760
Cash....................................................................................... 79,012
Investment securities sold receivable...................................................... 1,783,830
Interest receivable........................................................................ 1,646,937
Dividends receivable....................................................................... 63,103
Prepaid expenses........................................................................... 11,882
----------
TOTAL ASSETS............................................................................ 76,935,524
----------
Liabilities:
Accrued expenses payable................................................................... 78,768
Investment securities purchased payable.................................................... 1,135,833
----------
TOTAL LIABILITIES ...................................................................... 1,214,601
----------
Net Assets: (equivalent to $20.61 per share based on 3,673,258 shares of capital
stock outstanding) ........................................................................ $75,720,923
===========
NET ASSETS consisted of:
Capital paid-in............................................................................ $76,078,400
Distributions in excess of net investment income .......................................... (61,312)
Accumulated net realized loss.............................................................. (60,192)
Net unrealized depreciation of investments................................................. (235,973)
----------
$75,720,923
===========
STATEMENT OF OPERATIONS
For the year ended March 31, 1997
Investment Income:
Interest................................................................................... $6,154,379
Dividends.................................................................................. 56,395
----------
Total Investment Income ................................................................ 6,210,774
----------
Expenses:
Investment advisory fees (Note 4).......................................................... $430,961
Transfer agent fees........................................................................ 53,004
Insurance.................................................................................. 12,932
Directors' fees and expenses............................................................... 27,000
Audit fees................................................................................. 24,903
State and local taxes...................................................................... 25,034
Legal fees and expenses.................................................................... 25,435
Reports to shareholders.................................................................... 20,263
Custodian fees............................................................................. 4,425
Miscellaneous.............................................................................. 39,398
----------
Total Expenses.......................................................................... 663,355
----------
Net Investment Income ............................................................... 5,547,419
----------
Realized and unrealized gain (loss) on investments (Note 1):
Net realized loss from security transactions............................................... (60,192)
----------
Unrealized appreciation (depreciation) of investments:
Beginning of year ...................................................................... 1,483,373
End of year ............................................................................ (235,973)
----------
Change in unrealized appreciation (depreciation) of investments...................... (1,719,346)
----------
Net realized and unrealized loss on investments.................................. (1,779,538)
----------
Net increase in net assets resulting from operations............................. $3,767,881
==========
</TABLE>
See notes to financial statements.
6
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income....................................................... $5,547,419 $5,801,610
Net realized gain (loss) from security transactions (Note 2)................ (60,192) 1,176,590
Change in unrealized appreciation (depreciation) of investments............. (1,719,346) 1,044,839
---------- ---------
Net increase in net assets resulting from operations........................ 3,767,881 8,023,039
---------- ---------
Dividends to shareholders from net investment income............................ (5,547,419) (5,801,610)
Dividends to shareholders in excess of net investment income.................... (61,312) 0
Distributions to shareholders from net realized gains........................... 0 (220,972)
Distributions to shareholders from tax return of capital........................ (119,660) (127,447)
---------- ---------
(5,728,391) (6,150,029)
---------- ---------
Capital share transactions:
Net asset value of shares issued to shareholders in reinvestment of dividends
from net investment income (Note 5)...................................... 100,233 324,089
---------- ---------
Increase (decrease) in net assets........................................... (1,860,277) 2,197,099
Net Assets:
Beginning of year........................................................... 77,581,200 75,384,101
----------- -----------
End of year................................................................. $75,720,923 $77,581,200
=========== ===========
</TABLE>
See notes to financial statements.
7
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of year................ $21.15 $20.64 $21.45 $22.27 $21.39
------ ------ ------ ------ ------
Net investment income.......................... 1.51 1.58 1.58 1.61 1.68
Net realized and unrealized gain (loss) on
investments................................ (0.49) 0.61 (0.67) (0.68) 1.36
------ ------ ------ ------ ------
Total from investment operations.................. 1.02 2.19 0.91 0.93 3.04
------ ------ ------ ------ ------
Less distributions
Dividends from net investment income........... (1.51) (1.58) (1.58) (1.73) (1.84)
Dividends in excess of net investment income... (0.02) 0.00 (0.01) 0.00 0.00
Distributions from net realized gain........... 0.00 (0.06) 0.00 0.00 (0.32)
Distributions in excess of net realized gain... 0.00 0.00 0.00 (0.02) 0.00
Distributions from tax return of capital....... (0.03) (0.04) (0.13) 0.00 0.00
------ ------ ------ ------ ------
Total distributions............................... (1.56) (1.68) (1.72) (1.75) (2.16)
------ ------ ------ ------ ------
Net asset value, end of year ..................... $20.61 $21.15 $20.64 $21.45 $22.27
====== ====== ====== ====== ======
Per share market price, end of year .............. $19.75 $21.25 $20.13 $21.13 $24.75
====== ====== ====== ====== ======
Total Investment Return
Based on market value........................... 0.28% 13.91% 3.41% (7.72)% 18.91%
Ratios/Supplemental Data
Net assets, end of year (in 000's)................ $75,721 $77,581 $75,384 $78,120 $73,595
Ratio of expenses to average net assets
(does not include loan interest expenses).... 0.87% 0.86% 0.86% 0.92% 0.91%
Ratio of net investment income to average
net assets................................... 7.27% 7.37% 7.83% 7.11% 7.95%
Portfolio Turnover.............................. 32.83% 43.25% 35.38% 18.91% 68.56%
Number of shares outstanding at end of
year (in 000's)................................. 3,673 3,668 3,653 3,642 3,304
Amount of bank loans outstanding at end
of year (in 000's).............................. $0 $0 $0 $0 $0
Average amount of bank loans outstanding
during the year (in 000's)...................... $0 $0 $0 $0 $46
Amount of maximum month-end bank loans
during the year (in 000's)...................... $0 $0 $0 $0 $0
Average amount of bank loans per share
during the year ................................ $0.00 $0.00 $0.00 $0.00 $0.01
Weighted average interest rate of bank loans
during the year ................................ 0.00% 0.00% 0.00% 0.00% 6.31%
</TABLE>
See notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1 -- Significant Accounting Policies -- The 1838 Bond-Debenture Trading
Fund ("the Fund") is registered under the Investment Company Act of 1940, as
amended, as a diversified closed-end management investment company. The
following is a summary of significant accounting policies consistently followed
by the Fund in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. Security Valuation-- Securities which are primarily traded in the
over-the-counter market are valued at the mean of the bid prices on the last
business day of the period generally obtained from at least two dealers
regularly making a market in the security. Securities which are primarily
traded on a national securities exchange are valued at the last reported
sales price. The Fund believes that, because of the size of its position in
securities, the primary market for the listed debt securities in its
portfolio is the over-the-counter market. Short-term money market
instruments which have a maturity of more than 60 days are valued at the
mean bid prices for securities of a similar type, yield and maturity
obtained from at least two dealers. Short-term money market instruments
which have a maturity of 60 days or less are valued at amortized cost which
approximates market value. At March 31, 1997, the Fund had invested 94.06%
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 had a net tax basis capital loss carry-forward of approximately $17,000
as of March 31, 1997, which may be applied against any realized net 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, 2005.
D. Other -- Security transactions are accounted for on the date the securities
are purchased or sold. The Fund records interest income on the accrual
basis. In computing net investment income, the Fund does not amortize
premiums or accrue discounts on fixed income securities in the portfolio.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
E. Distributions to Shareholders -- Distributions of net investment income will
be made quarterly. Distributions of net capital gains realized will be made
annually. Income distributions and capital gain distributions are determined
in accordance with U.S. Federal Income Tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments in market discount and mortgage backed
securities.
F. Use of Estimates in the Preparation of Financial Statements -- The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Note 2 -- Portfolio Transactions -- The following is a summary of the security
transactions for the year ended March 31, 1997:
Proceeds
Cost of from Sales
Purchases or Maturities
--------- -------------
Long Term Debt Securities......... $23,372,903 $24,347,017
Other Securities.................. $4,330,000 $4,175,000
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- continued
Note 3-- Capital Stock-- At March 31, 1997, there were 10,000,000 shares of
capital stock ($1.00 par value) authorized, with 3,673,258 shares issued and
outstanding.
Note 4 -- Investment Advisory Contract and Payments to Affiliated Persons --
Under the terms of the current contract with 1838 Investment Advisors, L.P.,
advisory fees are paid monthly to the Investment Advisor at an annual rate of
5/8 of 1% on the first $40 million of the Fund's month end net assets and 1/2 of
1% on the excess.
Certain directors and officers of the Fund are also directors, officers and/or
employees of the Investment Advisor or its corporate general partner, 1838
Investment Advisors, Inc. None of the directors so affiliated receives
compensation for his services as a director of the Fund. Similarly, none of the
Fund's officers receives compensation from the Fund.
Note 5 -- Dividend and Distribution Reinvestments -- In accordance with the
terms of the Automatic Dividend Investment Plan, for shareholders who so elect,
dividends and distributions are made in the form of previously unissued Fund
shares at net asset value if on the Friday preceding the payment date (the
"Valuation Date") the closing New York Stock Exchange price per share, plus the
brokerage commissions applicable to one such share, equals or exceeds the net
asset value per share, however, if the net asset value is less than 95% of the
market price on the Valuation Date, the shares issued will be valued at 95% of
the market price. If the net asset value per share exceeds market price plus
commissions, the dividend or distribution proceeds are used to purchase Fund
shares on the open market for participants in the Plan. During the year ended
March 31, 1997, the Fund issued 4,851 shares under this Plan.
===============================================================================
TAX INFORMATION (unaudited)
The Fund paid distributions of $5,608,731 from investment income (representing
$1.53 per share) taxable as ordinary income and $119,660 from return of capital
(representing $0.03 per share) for the Fund's tax period April 1, 1996 through
March 31, 1997.
================================================================================
HOW TO ENROLL IN THE DIVIDEND REINVESTMENT PLAN
1838 Bond-Debenture Trading Fund (the "Fund") has established a plan
for the automatic investment of dividends and distributions which
all shareholders of record are eligible to join. The method by which
shares are obtained is explained on page 11. The Fund has appointed
First Chicago Trust Company of New York to act as the Agent of each
shareholder electing to participate in the plan. Information and
application forms are available from First Chicago Trust Company of
New York, P.O. Box 2500, Jersey City, New Jersey 07303-2500.
================================================================================
10
<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
================================================================================
11
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DIRECTORS
-----------------
W. THACHER BROWN
JOHN GILRAY CHRISTY
JOHN H. DONALDSON
MORRIS LLOYD, JR.
JOHN J. McELROY, III
J. LAWRENCE SHANE
OFFICERS
-----------------
JOHN H. DONALDSON
President
ANNA M. BENCROWSKY
Vice President
and Secretary
MARCIA ZERCOE
Vice President
RHONDA L. McNAVISH
Assistant Vice President
INVESTMENT ADVISOR
-----------------
1838 INVESTMENT ADVISORS, L.P.
FIVE RADNOR CORPORATE CENTER, SUITE 320
100 MATSONFORD ROAD
RADNOR, PA 19087
CUSTODIAN
-----------------
REPUBLIC NATIONAL BANK OF NEW YORK
452 FIFTH AVENUE
NEW YORK, NY 10018
TRANSFER AGENT
-----------------
FIRST CHICAGO TRUST COMPANY OF NEW YORK
P.O. BOX 2500
JERSEY CITY, NJ 07303-2500
COUNSEL
-----------------
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PA 19103
AUDITORS
-----------------
COOPERS & LYBRAND L.L.P.
2400 ELEVEN PENN CENTER
PHILADELPHIA, PA 19103
12
<PAGE>
1838
BOND--DEBENTURE TRADING FUND
-----------------
FIVE RADNOR CORPORATE CENTER,
SUITE 320
100 MATSONFORD ROAD
RADNOR, PA 19087
GRAPHIC
Annual Report
March 31, 1997