<PAGE>
April 14, 1998
TO THE SHAREHOLDER:
The Fund ended its fiscal year March 31, 1998, with a Net Asset Value of $22.70
per share. This represents a 10.1% increase from $20.61 per share a year
earlier at March 31, 1997. The Fund's stock closed this fiscal year on the NYSE
at $20.81 per share, representing a 9.1% 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 Reinvested1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
10 Years 5 Years 2 Years 1 Year Quarter
To 3/31/98 To 3/31/98 To 3/31/98 To 3/31/98 To 3/31/98
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1838 Bond Fund (2) 165.71% 50.98% 24.32% 18.27% 2.39%
Average of 18 Other
Closed-End Bond Funds (2) 149.64% 47.11% 20.38% 13.63% 1.63%
Salomon Bros. Bond Index (3) 172.21% 49.99% 22.41% 17.46% 1.68%
</TABLE>
(1) - This is historical information and should not be construed as
indicative of likely future performance.
(2) - Source: Lipper Analytical Services Corporation.
(3) - Comprised of long-term AAA and AA corporate bonds; series has been
changed to include mortgage- backed securities.
We are very pleased to report to shareholders that your fund has been ranked
first in the category of Investment Grade Bond Funds by Lipper Analytical
Services Inc. for the 20 year period ending December 31, 1997.
The past year has been very favorable for bond prices as inflation has remained
benign, the economy has not been accelerating toward unacceptable growth rates,
and the Federal Budget is in the best shape it has been in many years. While we
see no near-term severe disruptions to this scenario, the fixed income markets
can be subject to volatility as various economic data releases either confirm
or disappoint market expectations.
1
<PAGE>
The table below updates the portfolio quality of the Fund's assets at the end
of the most recent fiscal years:
<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>
March 31, 1998 19.9% 0.0% 31.9% 44.0% 3.0% 0.9% 0.3%
March 31, 1997 22.3% 1.3% 31.9% 34.5% 9.3% 0.4% 0.3%
March 31, 1996 31.4% 1.2% 26.2% 27.4% 9.6% 3.9% 0.3%
</TABLE>
On March 19, 1998, the Board of Directors declared a dividend of $0.38 per
share to shareholders of record on April 9, 1998, payable April 28, 1998.
Should you wish to take advantage of the Fund's dividend reinvestment plan, you
may contact First Chicago Trust Co. of New York, the Fund's Transfer Agent, at
201-324-0498 for additional information.
The Board of Directors and management of the Fund appreciate the continued
support of shareholders and welcome any inquiries you may have.
Sincerely,
[GRAPHIC OMITTED]
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, 1998, 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 high-
lights 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, 1998, by correspondence with the custodian. 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, 1998, 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 22, 1998
3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF NET ASSETS MARCH 31, 1998
Moody's/
Standard &
Poor's
Rating for
Debt Principal
Securities Amount (000's)
------------ ----------------
<S> <C> <C>
LONG TERM DEBT SECURITIES (94.62%)
ELECTRIC UTILITIES (9.70%)
Cleveland Electric Illuminating, 1st Mtge., 9.00%, 07/01/23 ......... Ba1/BB+ $1,800
Commonwealth Edison, 1st Mtge., 9.125%, 10/15/21 .................... Baa2/BBB 2,000
Hydro Quebec, Gtd. Debs., 8.25%, 04/15/26 ........................... A2/A+ 1,550
Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 .................... Ba2/BBB- 1,000
Utilicorp United Inc., Sr. Note 9.00%, 11/15/21 ..................... Baa3/BBB 1,000
FINANCIAL (16.39%)
Chrysler Financial Corp., Notes, 12.75%, 11/01/99 ................... A3/A 1,000
Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 ........... Aa3/A- 2,000
EOP Operating LP, 7.25%, 02/15/18 ................................... Baa1/BBB 1,000
FBS Capital I, Capital Securities, 8.09%, 11/15/26 .................. A1/BBB+ 2,000
HSBC America Capital Corp., 8.38%, 05/15/27 ......................... A2/BBB+ 3,000
Liberty Property Trust, 7.50%, 01/15/18 ............................. Baa3/BBB- 1,000
Penn Central Corp., Sub. Notes, 10.625%, 04/15/00 ................... Ba1/BBB- 1,000
Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 ................... Ba1/BBB- 1,500
FOREIGN (.51%)
Korea Electric Power Inc., Debs., 7.00%, 02/01/27 ................... Ba1/B+ 500
INDUSTRIAL & MISCELLANEOUS (37.36%)
Chiquita Brands, Sr. Notes, 10.25%, 11/01/06 ........................ B1/B+ 250
Georgia Pacific Corp., Debs., 9.625%, 03/15/22 ...................... Baa2/BBB- 1,000
Harcourt General Inc., Sr. Debs., 8.875%, 06/01/22 .................. Baa1/BBB+ 2,000
Harcourt General Inc., Sr. Debs., 7.30%, 08/01/2097 ................. Baa1/BBB+ 1,500
K N Energy Inc., Debs., 8.75%, 10/15/24 ............................. A3/BBB+ 1,150
Mark IV Industries, Inc., Debs., 7.75%, 04/01/06 .................... Ba2/BB+ 500
May Department Stores Co., Debs., 10.75%, 06/15/18 .................. A2/A 150
News America Holdings Inc., Sr. Debs., 10.125%, 10/15/12 ............ Baa3/BBB- 2,050
News America Holdings Inc., Gtd. Debs., 7.90%, 12/01/2095 ........... Baa3/BBB- 1,400
North Dakota State Muni. Bond Bank, Water Sys. Rev., 10.50%, 04/01/14 Aaa/AAA 1,000
Phillip Morris, Debs., 7.75%, 01/15/27 .............................. A2/A 3,000
Rohm & Haas Co., Debs., 9.50%, 04/01/21 ............................. A1/A 1,500
Smurfit Capital Funding, Gtd., Debs., 7.50%, 11/20/25 ............... Baa1/A- 2,000
Societe Generale(NY), 7.40%, 06/01/06 ............................... A1/A+ 400
Texaco Capital Inc., Debs., 7.50%, 03/01/43 ......................... A1/A+ 2,000
Time Warner Inc., Debs., 9.15%, 02/01/23 ............................ Ba1/BBB- 3,000
TRW Inc., Notes, 9.25%, 12/30/11 .................................... A2/A 275
TRW Inc., Notes, 9.375%, 04/15/21 ................................... A2/A 303
Union Camp Corp., Debs., 9.25%, 02/01/11 ............................ A1/A- 1,500
Westren Atlas Inc., Debs., 8.55%, 06/15/24 .......................... A3/A- 2,539
TELEPHONE & COMMUNICATIONS (4.15%)
Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 ................. Baa3/BBB+ 1,000
TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 ................ Ba1/BBB- 2,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Identified Cost Value
(Note 2) (Note 1)
----------------- -------------
<S> <C> <C>
LONG TERM DEBT SECURITIES (94.62%)
ELECTRIC UTILITIES (9.70%)
Cleveland Electric Illuminating, 1st Mtge., 9.00%, 07/01/23 ......... $ 1,662,876 $ 1,967,584
Commonwealth Edison, 1st Mtge., 9.125%, 10/15/21 .................... 2,062,500 2,126,466
Hydro Quebec, Gtd. Debs., 8.25%, 04/15/26 ........................... 1,475,994 1,823,139
Niagara Mohawk Power, 1st Mtge., 8.75%, 04/01/22 .................... 1,028,220 1,082,620
Utilicorp United Inc., Sr. Note 9.00%, 11/15/21 ..................... 1,090,000 1,091,632
----------- -----------
7,319,590 8,091,441
----------- -----------
FINANCIAL (16.39%)
Chrysler Financial Corp., Notes, 12.75%, 11/01/99 ................... 1,090,125 1,099,961
Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 ........... 2,012,070 2,101,084
EOP Operating LP, 7.25%, 02/15/18 ................................... 991,900 989,959
FBS Capital I, Capital Securities, 8.09%, 11/15/26 .................. 1,993,370 2,173,034
HSBC America Capital Corp., 8.38%, 05/15/27 ......................... 3,080,350 3,194,991
Liberty Property Trust, 7.50%, 01/15/18 ............................. 998,430 1,000,000
Penn Central Corp., Sub. Notes, 10.625%, 04/15/00 ................... 1,150,640 1,084,420
Penn Central Corp., Sub. Notes, 10.875%, 05/01/11 ................... 1,634,965 2,021,340
----------- -----------
12,951,850 13,664,789
----------- -----------
FOREIGN (.51%)
Korea Electric Power Inc., Debs., 7.00%, 02/01/27 ................... 421,466 429,794
----------- -----------
INDUSTRIAL & MISCELLANEOUS (37.36%)
Chiquita Brands, Sr. Notes, 10.25%, 11/01/06 ........................ 255,625 275,000
Georgia Pacific Corp., Debs., 9.625%, 03/15/22 ...................... 1,059,240 1,135,184
Harcourt General Inc., Sr. Debs., 8.875%, 06/01/22 .................. 2,157,020 2,396,770
Harcourt General Inc., Sr. Debs., 7.30%, 08/01/2097 ................. 1,488,886 1,515,137
K N Energy Inc., Debs., 8.75%, 10/15/24 ............................. 1,263,799 1,308,125
Mark IV Industries, Inc., Debs., 7.75%, 04/01/06 .................... 462,650 513,935
May Department Stores Co., Debs., 10.75%, 06/15/18 .................. 154,385 159,336
News America Holdings Inc., Sr. Debs., 10.125%, 10/15/12 ............ 2,163,502 2,428,432
News America Holdings Inc., Gtd. Debs., 7.90%, 12/01/2095 ........... 1,298,624 1,487,268
North Dakota State Muni. Bond Bank, Water Sys. Rev., 10.50%, 04/01/14 1,159,780 1,044,040
Phillip Morris, Debs., 7.75%, 01/15/27 .............................. 3,007,020 3,205,647
Rohm & Haas Co., Debs., 9.50%, 04/01/21 ............................. 1,494,375 1,702,706
Smurfit Capital Funding, Gtd., Debs., 7.50%, 11/20/25 ............... 1,990,780 2,098,534
Societe Generale(NY), 7.40%, 06/01/06 ............................... 413,588 415,259
Texaco Capital Inc., Debs., 7.50%, 03/01/43 ......................... 1,977,920 2,096,890
Time Warner Inc., Debs., 9.15%, 02/01/23 ............................ 3,159,700 3,686,478
TRW Inc., Notes, 9.25%, 12/30/11 .................................... 326,312 347,821
TRW Inc., Notes, 9.375%, 04/15/21 ................................... 320,893 399,634
Union Camp Corp., Debs., 9.25%, 02/01/11 ............................ 1,486,305 1,858,686
Westren Atlas Inc., Debs., 8.55%, 06/15/24 .......................... 2,651,998 3,059,493
----------- -----------
28,292,402 31,134,375
----------- -----------
TELEPHONE & COMMUNICATIONS (4.15%)
Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 ................. 1,120,000 1,197,802
TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 ................ 1,991,940 2,264,960
----------- -----------
3,111,940 3,462,762
----------- -----------
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF NET ASSETS--continued MARCH 31, 1998
Moody's/
Standard &
Poor's
Rating for
Debt Principal
Securities Amount (000's)
------------ ---------------
<S> <C> <C>
TRANSPORTATION (10.80%)
AMR Corp., Debs., 10.00%, 04/15/21 ................................... Baa3/BBB- $ 2,000
Auburn Hills Trust, Gtd. Exchangeable Ctfs. 12.00%, 05/01/20 ......... A3/A 1,000
Ford Holdings, Gtd. Debs., 9.375%, 03/01/20 .......................... A1/A 1,000
Ford Motor Co., Debs., 8.875%, 01/15/22 .............................. A1/A 1,500
Greater Orlando Aviation Auth., 8.20%, 10/01/12 ...................... Aaa/AAA 500
Union Pacific Co., Debs., 8.625%, 05/15/22 ........................... Baa2/BBB 1,000
MORTGAGE BACKED SECURITIES (5.36%)
FNMA Pool #313411, 7.00%, 03/01/04 ................................... NR/NR 1,707
GNMA Pool #780374, 7.50%, 12/15/23 ................................... NR/NR 800
GNMA Pool #417239, 7.00%, 02/15/26 ................................... NR/NR 1,892
U.S. GOVERNMENT & AGENCIES (10.35%)
U.S. Treasury Bonds, 10.75%, 08/15/05 ................................ NR/NR 1,600
U.S. Treasury Bonds, 8.125%, 08/15/21 ................................ NR/NR 1,000
U.S. Treasury Bonds, 7.875%, 02/15/21 ................................ NR/NR 3,900
U.S. Treasury Bonds, 6.25%, 08/15/23 ................................. NR/NR 500
TOTAL LONG TERM DEBT SECURITIES ......................................
COMMERCIAL PAPER (3.12%)
American Express Credit Corp., 5.75%, 04/03/98 ....................... A-1/P-1 1,600
General Electric Capital Corp., 5.57%, 04/28/98 ...................... A-1+/P-1 1,000
TOTAL COMMERCIAL PAPER ...............................................
Shares
------
INVESTMENT COMPANIES (.27%)
High Yield Plus Fund ................................................. NR/NR 25,000
TOTAL INVESTMENTS (98.01%) ...........................................
OTHER ASSETS AND LIABILITIES (1.99%) .................................
NET ASSETS (100.00%) .................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Identified Cost Value
(Note 2) (Note 1)
----------------- -------------
<S> <C> <C>
TRANSPORTATION (10.80%)
AMR Corp., Debs., 10.00%, 04/15/21 ................................... $ 2,148,940 $ 2,640,000
Auburn Hills Trust, Gtd. Exchangeable Ctfs. 12.00%, 05/01/20 ......... 1,000,000 1,600,000
Ford Holdings, Gtd. Debs., 9.375%, 03/01/20 .......................... 1,117,790 1,276,313
Ford Motor Co., Debs., 8.875%, 01/15/22 .............................. 1,480,350 1,836,612
Greater Orlando Aviation Auth., 8.20%, 10/01/12 ...................... 551,875 556,250
Union Pacific Co., Debs., 8.625%, 05/15/22 ........................... 1,062,430 1,098,480
------------- -----------
7,361,385 9,007,655
------------- -----------
MORTGAGE BACKED SECURITIES (5.36%)
FNMA Pool #313411, 7.00%, 03/01/04 ................................... 1,727,062 1,733,016
GNMA Pool #780374, 7.50%, 12/15/23 ................................... 794,104 822,064
GNMA Pool #417239, 7.00%, 02/15/26 ................................... 1,919,100 1,911,750
------------- -----------
4,440,266 4,466,830
------------- -----------
U.S. GOVERNMENT & AGENCIES (10.35%)
U.S. Treasury Bonds, 10.75%, 08/15/05 ................................ 2,120,750 2,073,000
U.S. Treasury Bonds, 8.125%, 08/15/21 ................................ 1,016,407 1,260,625
U.S. Treasury Bonds, 7.875%, 02/15/21 ................................ 4,051,031 4,786,033
U.S. Treasury Bonds, 6.25%, 08/15/23 ................................. 515,625 515,157
------------- -----------
7,703,813 8,634,815
------------- -----------
TOTAL LONG TERM DEBT SECURITIES ...................................... 71,602,712 78,892,461
------------- -----------
COMMERCIAL PAPER (3.12%)
American Express Credit Corp., 5.75%, 04/03/98 ....................... 1,600,000 1,600,000
General Electric Capital Corp., 5.57%, 04/28/98 ...................... 1,000,000 1,000,000
------------- -----------
TOTAL COMMERCIAL PAPER ............................................... 2,600,000 2,600,000
------------- -----------
INVESTMENT COMPANIES (.27%)
High Yield Plus Fund ................................................. 167,178 228,125
------------- -----------
TOTAL INVESTMENTS (98.01%) ........................................... $ 74,369,890* $81,720,586
============= ===========
OTHER ASSETS AND LIABILITIES (1.99%) ................................. 1,659,117
-----------
NET ASSETS (100.00%) ................................................. $83,379,703
===========
</TABLE>
* The Moody's/Standard & Poor's rating for debt securities is not covered by
the Report of Independant Accountants.
* The cost for federal income tax purposes was $74,369,890. The aggregate gross
unrealized appreciation in which there was an excess of market value over
tax cost was $7,590,166, and aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over market value
was $239,470.
See notes to financial statements
5
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
<TABLE>
<S> <C>
Assets:
Investment in securities at value(identified cost $74,369,890) (Note 1) ............... $ 81,720,586
Cash .................................................................................. 83,110
Interest receivable ................................................................... 1,703,068
Prepaid expenses ...................................................................... 13,636
------------
TOTAL ASSETS ........................................................................ 83,520,400
------------
Liabilities:
Accrued expenses payable .............................................................. 140,697
------------
TOTAL LIABILITIES ................................................................... 140,697
------------
Net assets: (equivalent to $22.70 per share based on 3,673,258
shares of capital stock outstanding).................................................... $ 83,379,703
============
NET ASSETS consisted of:
Capital paid - in ..................................................................... $ 76,017,088
Accumulated undistributed net realized gain on investments ............................ 11,919
Net unrealized appreciation on investments ............................................ 7,350,696
------------
$ 83,379,703
============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended March 31, 1998
<TABLE>
<S> <C> <C>
Investment Income:
Interest ............................................................ $ 6,108,125
Dividends ........................................................... 99,730
-----------
Total Investment Income ........................................... 6,207,855
-----------
Expenses:
Investment advisory fees (Note 4) ................................... $ 446,510
Transfer agent fees ................................................. 51,025
Insurance ........................................................... 16,811
Directors' fees and expenses ........................................ 30,000
Audit fees .......................................................... 24,876
State and local taxes ............................................... 21,707
Legal fees and expenses ............................................. 27,268
Reports to shareholders ............................................. 25,766
Custodian fees ...................................................... 7,077
Miscellaneous ....................................................... 28,649
----------
Total Expenses .................................................... 679,689
-----------
Net Investment Income .......................................... 5,528,166
-----------
Realized and unrealized gain (loss) on investments (Note 1):
Net realized gain from security transactions ........................ 164,027
-----------
Unrealized appreciation of investments:
Beginning of year ................................................. (235,973)
End of year ....................................................... 7,350,696
----------
Change in unrealized appreciation of investments ............... 7,586,669
-----------
Net realized and unrealized gain on investments .............. 7,750,696
-----------
Net increase in net assets resulting from operations ......... $13,278,862
===========
</TABLE>
See notes to financial statements
6
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended Year ended
March 31, 1998 March 31, 1997
---------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ....................................................... $ 5,528,166 $ 5,547,419
Net realized gain (loss) from security transactions (Note 2) ................ 164,027 (60,192)
Change in unrealized appreciation (depreciation) of investments ............. 7,586,669 (1,719,346)
------------ ------------
Net increase in net assets resulting from operations ........................ 13,278,862 3,767,881
------------ ------------
Dividends to shareholders from net investment income ........................... (5,528,166) (5,547,419)
Dividends to shareholders in excess of net investment income ................... (86,494) (61,312)
Distributions to shareholders from net realized gain ........................... (5,422) 0
Distributions to shareholders from tax return of capital ....................... 0 (119,660)
------------ ------------
(5,620,082) (5,728,391)
------------ ------------
Capital share transactions:
Net asset value of shares issued to shareholders in reinvestment of dividends
from net investment income (Note 5) ........................................ 0 100,233
------------ ------------
Increase (decrease) in net assets ........................................... 7,658,780 (1,860,277)
Net Assets:
Beginning of year ........................................................... 75,720,923 77,581,200
------------ ------------
End of year ................................................................. $ 83,379,703 $ 75,720,923
============ ============
</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 11. The Fund has appointed First
Chicago Trust Company of New York to act as the Agent of each
shareholder electing to participate in the plan. Information and
application forms are available from First Chicago Trust Company of New
York, P.O. Box 2500, Jersey City, New Jersey 07303-2500.
See notes to financial statements
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,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of year .................... $20.61 $ 21.15 $ 20.64 $ 21.45 $ 22.27
------- ------- ------- ------- --------
Net investment income ................................ 1.51 1.51 1.58 1.58 1.61
Net realized and unrealized gain (loss) on
investments ........................................ 2.11 (0.49) 0.61 (0.67) (0.68)
------- ------- ------- ------- --------
Total from investment operations ...................... 3.62 1.02 2.19 0.91 0.93
------- ------- ------- ------- --------
Less distributions
Dividends from net investment income ................. (1.51) (1.51) (1.58) (1.58) (1.73)
Dividends in excess of net investment income . (0.02) (0.02) 0.00 (0.01) 0.00
Distributions from net realized gain ................. (0.00) 0.00 (0.06) 0.00 0.00
Distributions in excess of net realized gain ......... 0.00 0.00 0.00 0.00 (0.02)
Distributions from tax return of capital ............. 0.00 (0.03) (0.04) (0.13) 0.00
------- ------- ------- ------- --------
Total Distributions ................................... (1.53) (1.56) (1.68) (1.72) (1.75)
------- ------- ------- ------- --------
Net asset value, end of year .......................... $ 22.70 $ 20.61 $ 21.15 $ 20.64 $ 21.45
======= ======= ======= ======= ========
Per share market price, end of year ................... $ 20.81 $ 19.75 $ 21.25 $ 20.13 $ 21.13
======= ======= ======= ======= ========
Total Investment Return
Based on market value ................................ 13.11% 0.28% 13.91% 3.41% (7.72%)
Ratios/Supplemental Data
Net assets, end of year (in 000's) .................... $83,380 $75,721 $77,581 $75,384 $ 78,120
Ratio of expenses to average net assets .............. 0.85% 0.87% 0.86% 0.86% 0.92%
Ratio of net investment income to average net
assets ............................................. 6.89% 7.27% 7.37% 7.83% 7.11%
Portfolio Turnover Rate .............................. 18.88% 32.83% 43.25% 35.38% 18.91%
Number of shares outstanding at the end of year
(in 000's) ........................................... 3,673 3,673 3,668 3,653 3,642
</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, 1998, the Fund had invested 94.62%
of its portfolio in long-term debt obligations of issuers engaged in
financial, industrial, electric utilities, transportation, telephone &
communication, foreign and other miscellaneous activities. The issuers'
ability to meet these obligations may be affected by economic developments
in their respective industries.
B. Determination of Gains or Losses on Sale of Securities -- Gains or losses
on the sale of securities are calculated for accounting and tax purposes on
the identified cost basis.
C. Federal Income Taxes -- It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
D. Other -- Security transactions are accounted for on the date the securities
are purchased or sold. The Fund records interest income on the accrual
basis. In computing net investment income, the Fund does not amortize
premiums or accrue discounts on fixed income securities in the portfolio.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
E. Distributions to Shareholders -- Distributions of net investment income will
be made quarterly. Distributions of net capital gains realized will be made
annually. Income distributions and capital gain distributions are
determined in accordance with U.S. Federal Income Tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments in market discount and mortgage
backed securities.
F. Use of Estimates in the Preparation of Financial Statements -- The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Note 2 -- Portfolio Transactions -- The following is a summary of the security
transactions for the year ended March 31, 1998:
<TABLE>
<CAPTION>
Proceeds
Cost of from Sales
Purchases or Maturities
------------- --------------
<S> <C> <C>
U.S. Government Securities .......... $ 2,914,436 $ 5,300,402
Other Investment Securities ......... $17,038,069 $14,732,974
</TABLE>
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS--continued
Note 3 -- Capital Stock -- At March 31, 1998, 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 services as a director of the Fund. Similarly, none of the
Fund's officers receive 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, 1998, the Fund issued zero shares under this Plan.
10
<PAGE>
DIVIDEND REINVESTMENT PLAN
1838 Bond-Denture Trading Fund (the "Fund") has established a plan for the
automatic investment of dividends and distributions (the "Plan") pursuant to
which dividends and capital gain distributions to shareholders will be paid in
or reinvested in additional shares of the Fund. All shareholders of record are
eligible to join the Plan. First Chicago Trust Company of New York acts as the
agent (the "Agent") for participants under the Plan.
Shareholders whose shares are registered in their own names may elect to
participate in the Plan by completing an authorization form and returning it to
the Agent. Shareholders whose shares are held in the name of a broker or
nominee should contact such broker or nominee to determine whether or how they
may participate in the Plan.
Dividends and distributions are reinvested under the Plan as follows. If the
market price per share on the Friday before the payment date for the dividend
or distribution (the "Valuation Date"), plus the brokerage commissions
applicable to one such share, equals or exceeds the net asset value per share
on that date, the Fund will issue new shares to participants valued at the net
asset value or, if the net asset value is less than 95% of the market price on
the Valuation Date, then valued at 95% of the market price. If net asset value
per share on the Valuation Date exceeds the market price per share on that
date, plus the brokerage commissions applicable to one such share, the Agent
will buy shares on the open market, on the New York Stock Exchange, for the
participants' accounts. If, before the Agent has completed its purchases, the
market price exceeds the net asset value of shares, the average per share
purchase price paid by the Agent may exceed the net asset value of shares,
resulting in the acquisition of fewer shares than if the dividend or
distribution has been paid in shares issued by the Fund at net asset value.
There is no charge to participants for reinvesting dividends or distributions
payable in either shares or cash. The Agent's fees for handling of reinvestment
of such dividends and distributions will be paid by the Fund. There will be no
brokerage charges with respect to shares issued directly by the Fund as a
result of dividends or distributions payable either in shares or cash. However,
each participant will be charged by the Agent a pro rata share of brokerage
commissions incurred with respect to 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
<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
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
---------------------------------------
PEPPER HAMILTON LLP
3000 TWO LOGAN SQUARE
EIGHTEENTH & ARCH STREETS
PHILADELPHIA, PA 19103
AUDITORS
---------------------------------------
COOPERS & LYBRAND L.L.P.
2400 ELEVEN PENN CENTER
PHILADELPHIA, PA 19103
<PAGE>
1838
BOND-DEBENTURE TRADING FUND
---------------------------------------
FIVE RADNOR CORPORATE CENTER,
SUITE 320
100 MATSONFORD ROAD
RADNOR, PA 19087
[GRAPHIC OMITTED]
Annual Report
March 31, 1998
