<PAGE>
October 21, 1999
TO THE SHAREHOLDER:
The Fund ended the quarter September 30, 1999 with a Net Asset Value of $20.51
per share. This represents a 7.6% decrease from $22.20 per share at the end of
the March 31, 1999 Fiscal Year and an 8.6% decrease from $22.45 per share at
December 31, 1998. On September 30, 1999, the Fund's closing stock price on the
New York Stock Exchange was $17.50 per share, representing a 14.7% discount to
Net Asset Value.
The performance of the Fund is compared below to the average of the 18 other
closed-end bond funds with which we have historically compared ourselves:
Total Return-Percentage Change in Net Asset Value
Per Share with All Distributions Reinvested(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
10 Years 5 Years 2 Years 1 Year Quarter
to 9/30/99 to 9/30/99 to 9/30/99 to 9/30/99 to 9/30/99
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1838 Bond Fund(2) 127.10% 42.14% 6.63% -4.87% -1.33%
Average of 18 Other
Closed-End Bond Funds(2) 126.12% 43.29% 8.81% -0.64% 0.18%
Salomon Bros. Bond Index(3) 132.83% 52.41% 8.09% -5.91% -0.47%
</TABLE>
(1) - This is historical information and should not be construed as indicative
of any likely future performance.
(2) - Source: Lipper Inc.
(3) - Comprised of long-term AAA and AA corporate bonds; series has been changed
to include mortgage-backed securities.
Long-term U.S. bond yields have risen for most of the first nine months of
1999. The benchmark U.S. Treasury 30-year bond began the year at 5.09% and rose
to a peak of 6.28% in August before declining to 6.05% at September 30th. In
recent days, that yield has risen to a new peak of 6.36%. The price of the
Funds largest Treasury holding, 7.875% bonds due 2/15/21, fell 11.7% for the
nine-month period and 6.1% since the end of the March 31, 1999 Fiscal Year.
Bond yields rose as the Federal Reserve Bank has twice increased short-term
interest rates in response to accelerating economic growth. The strength of the
U.S. economy has been further buoyed by an economic rebound around the world,
most notably in Asia, which had seen a very difficult 1998 following the
expansion of the currency crises in 1997. During its October meeting, the Fed's
policy-making Board chose to leave rates unchanged, but adopted a bias toward
further increases. Continued strength in the domestic employment market and a
modest pickup in inflation indicators are cited as the primary reasons for the
vigilant stance. The corporate bond market has seen additional pressure from an
exceedingly large calendar of new issues as corporate treasurers have sought to
lock-in financing costs ahead of both the Federal Reserve's increases in rates
and any potential market disruptions due to Y2K concerns. This has resulted in
wider yield spreads and underperformance from the corporate bond holdings in
the Fund.
1
<PAGE>
Looking past the Fourth Quarter, we expect the Federal Reserve to keep its
attention focused on the potential for any inflation and to act to raise rates
in anticipation if it believes that would be necessary. We also believe that
the wide yield spreads on corporate bonds that have resulted from supply will
tighten up in the new year. This will benefit the fund's holdings as yield
spreads tighten.
The table below updates the portfolio quality of the Fund's assets compared to
the end of recent quarter end and two prior fiscal years:
- --------------------------------------------------------------------------------
Percent of Total Investment (Standard & Poor's Ratings)
- --------------------------------------------------------------------------------
<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>
September 30, 1999 15.4% 3.4% 28.8% 46.9% 4.8% 0.3% 0.3%
June 30, 1999 17.4% 3.3% 28.4% 45.3% 5.3% 0.3% 0.3%
March 31, 1999 16.9% 3.4% 29.2% 44.6% 5.3% 0.3% 0.3%
March 31, 1998 19.9% 0.0% 31.9% 44.0% 3.0% 0.9% 0.3%
</TABLE>
On September 16, 1999 the Board of Directors declared a dividend payment of
$0.3625 per share payable November 9, 1999 to shareholders of record on
September 30, 1999. Also, approved at this meeting were new pricing procedures
for the Fund which may be found on Page 8 of this financial report under Note
1, A.
The Fund's shares have traded on the New York Stock Exchange at a wider
discount to Net Asset Value per share than has been typical compared to the
last few years. The Fund's assets have declined less in value (8.6%) than the
prices on long-term Treasury bonds (11.7%), yet the stock price of the Fund has
declined more (15.4%) than either bond prices or the value of the underlying
assets since December 31, 1998.
We would like to remind shareholders of the opportunities presented by the
Fund's dividend reinvestment plan as detailed in the Fund's prospectus and
referred to inside the back cover of this report. The dividend reinvestment
plan affords shareholders a price advantage by purchasing shares at the lower
of NAV or market price.
This means that the reinvestment is at New Asset Value when the Fund is trading
at a discount to Net Asset Value or at Net Asset Value per share when market
trading is at a premium to that value. To participate in the plan, please
contact Equiserve, First Chicago Trust Division, the Fund's Transfer Agent and
Dividend Paying Agent, at 201-324-0498.
Sincerely,
/s/ John H. Donaldson
------------------------
John H. Donaldson, CFA
President
2
<PAGE>
SCHEDULE OF NET ASSETS September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Moody's/
Standard &
Poor's Principal Identified Cost Value
Rating Amount (000's) (Note 2) (Note 1)
----------- ---------------- ---------------- --------------
<S> <C> <C> C> <C>
LONG TERM DEBT SECURITIES (97.43%)
ELECTRIC UTILITIES (9.57%) $ 249,845 $ 235,625
Calpine Corp., 7.75%, 4/15/09 .................................... Ba2/BB $ 250 1,662,876 1,868,855
Cleveland Electric Illum., 1st Mtge, 9.00%, 7/1/23 ............... Ba1/BB+ 1,800 1,000,000 927,425
CMS Energy Corp., 7.5%, 1/15/09 .................................. Ba3/BB 1,000 1,475,994 1,662,499
Hydro-Quebec Debs, 8.25%, 4/15/26 ................................ A2/A+ 1,550 500,000 441,869
Midamerican Funding LLC, 6.927%, 3/1/29, 144A .................... Baa1/BBB+ 500 1,028,220 1,041,827
Niagra Mowhawk Power Co., 1st Mtge, 8.75%, 4/1/22 ................ Baa2/BBB+ 1,000 1,090,000 1,032,005
Utilicorp United Inc., Sr. Notes, 8.27%, 11/15/21 ................ Baa3/BBB 1,000 ------------ ------------
7,006,935 7,210,105
------------ ------------
FINANCIAL (17.63%)
Chrysler Financial Corp., Debs, 12.75%, 11/1/99 .................. A1/A+ 1,000 1,090,125 1,005,154
Citicorp Capital II, Capital Securities, 8.015%, 02/15/27 ........ Aa3/A 2,000 2,012,070 1,931,734
EOP Operating LP, Notes, 7.25%, 02/15/18 ......................... Baa1/BBB+ 1,000 991,900 882,814
FBS Capital I, Capital Securities, 8.09%, 11/15/26 ............... A1/BBB+ 2,000 1,993,370 1,979,788
HSBC America Capital II, 8.38%, 5/15/27, 144A .................... A2/BBB+ 2,500 2,570,605 2,420,975
Liberty Property Trust, 7.5%, 01/15/18 ........................... Baa3/BBB- 1,000 998,430 887,111
Penn Central Corp., Sub Notes, 10.625%, 04/15/00 ................. Baa3/BBB 1,000 1,150,640 1,018,715
Penn Central Corp., Sub Notes, 10.875%, 05/1/11 .................. Baa3/BBB 1,500 1,634,965 1,842,828
Spieker Properties, 7.875%, 12/01/16 ............................. Baa2/BBB 1,000 1,001,830 948,015
West Deutsche LB, NY, 6.05%, 01/15/09 ............................ Aa1/AA+ 400 398,988 365,967
------------ ------------
13,842,923 13,283,101
------------ ------------
INDUSTRIAL & MISCELLANEOUS (36.97%)
Apache Corp., 7.7%, 3/15/26 ...................................... Baa1/BBB+ 500 525,280 493,050
Chiquita Brands Int'l, Inc., Sr. Notes, 10.25%, 11/01/06 ......... B1/B+ 250 255,625 215,000
Dell Computer Corp., Sr. Debs, 7.10%, 04/15/28 ................... Baa1/BBB+ 1,500 1,503,520 1,389,743
Georgia-Pacific Corp., Debs., 9.625%, 03/15/22 ................... Baa2/BBB- 1,000 1,059,240 1,059,857
Harcourt General Inc., Sr. Debs, 8.875%, 06/01/22 ................ Baa2/BBB 2,000 2,157,020 2,115,366
Harcourt General Inc., Debs, 7.300%, 08/01/97 .................... Baa2/BBB 1,500 1,488,886 1,244,903
K N Energy Inc., Debs., 8.75%, 10/15/24 .......................... Baa2/BBB- 1,150 1,263,799 1,138,500
News America Holdings Inc., Gtd. Sr. Debs, 10.125%, 10/15/12 ..... Baa3/BBB- 2,050 2,163,503 2,257,716
News America Holdings Inc., Notes, 7.90%, 12/01/95 ............... Baa3/BBB- 1,400 1,298,624 1,282,102
Owens Corning, 7.7%, 05/1/08 ..................................... Baa3/BBB- 500 482,889 486,381
Phillip Morris Co., Inc, Debs., 7.75% 01/15/27 ................... A2/A 3,000 3,007,020 2,921,577
Smurfit Capital Funding, Gtd. Debs., 7.50%, 11/20/25 ............. Baa1/A- 2,000 1,990,780 1,857,568
Texaco Capital Inc., Gtd. Debs., 7.5% 03/01/43 ................... A1/A+ 2,000 1,977,920 1,936,920
Time Warner Inc., Debs., 9.15%, 02/01/23 ......................... Baa3/BBB 3,000 3,159,700 3,448,257
Tricon Global Restaurant, Sr. Notes, 7.65%, 05/15/08 ............. Ba1/BB 500 498,875 492,752
TRW Inc., Sr. Notes, 9.375%, 04/15/21 ............................ Baa1/BBB 303 320,893 347,178
Union Camp Corp., 9.25%, 02/01/11 ................................ A3/BBB+ 1,500 1,486,305 1,691,462
Union Pacific Resources Co., 7.00%, 10/15/06 ..................... Baa3/BBB- 750 728,985 721,052
Western Atlas Inc., Debs., 8.55%, 06/15/24 ....................... A2/A 2,539 2,651,998 2,752,789
------------ ------------
28,020,862 27,852,173
------------ ------------
TELEPHONE & COMMUNICATIONS (9.23%)
Continental Cablevision, Sr. Debs., 9.50%, 08/01/13 .............. Baa3/BBB 1,000 1,120,000 1,108,864
New York Telephone, 9.375%, 07/15/31 ............................. A2/A+ 1,250 1,426,113 1,367,486
Sprint Capital Corp., 6.875%, 11/15/28 ........................... Baa1/BBB+ 1,000 992,220 911,765
TCI Communications, Inc., Sr. Debs., 9.25%, 01/15/23 ............. A2/AA- 2,000 1,991,940 2,166,690
Worldcom, Inc., 6.95%, 08/15/28 .................................. A3/A- 1,500 1,485,975 1,395,648
------------ ------------
7,016,248 6,950,453
------------ ------------
</TABLE>
3
<PAGE>
SCHEDULE OF NET ASSETS--continued September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Moody's/
Standard &
Poor's Principal Identified Cost Value
Rating Amount (000's) (Note 2) (Note 1)
----------- ---------------- ----------------- -------------
<S> <C> <C> <C> <C>
TRANSPORTATION (8.96%)
AMR Corp., Debs., 10.00%, 04/15/21 ...................... Baa2/BBB- 2,000 $ 2,148,940 $ 2,335,154
Auburn Hills Trust, Gtd. Ctfs., 12.00%, 05/01/20 ........ A1/A+ 1,000 1,000,000 1,496,284
Ford Holdings, Inc., Gtd. Debs., 9.375%, 03/01/20 ....... A1/A 1,000 1,117,790 1,193,842
Ford Motor Co., Debs., 8.90%, 01/15/32 .................. A1/A 1,500 1,480,350 1,725,053
------------- -----------
5,747,080 6,750,333
------------- -----------
MORTGAGE BACKED SECURITIES (3.52%)
FNMA Pool #313411, 7.60%, 03/01/04 ...................... NR/NR 737 745,206 740,077
GNMA Pool #780374, 7.5%, 12/15/23 ....................... NR/NR 499 495,269 502,917
GNMA Pool #417239, 7.00%, 02/15/26 ...................... NR/NR 1,431 1,452,035 1,406,207
------------- -----------
2,692,510 2,649,201
------------- -----------
TAXABLE MUNICIPAL BONDS (0.69%)
Greater Orlando Aviation Authority, 8.20%, 10/01/12 ..... Aaa/AAA 500 551,875 524,418
------------- -----------
U.S. GOVERNMENT & AGENCIES (10.86%)
U.S. Treasury Bonds, 10.75%, 08/15/05 ................... NR/NR 1,600 2,120,750 1,962,501
U.S. Treasury Bonds, 7.875%, 02/15/21 ................... NR/NR 3,900 4,051,031 4,537,408
U.S. Treasury Bonds, 8.125%, 08/15/21 ................... NR/NR 1,000 1,016,406 1,194,063
U.S. Treasury Bonds, 6.25%, 08/15/23 .................... NR/NR 500 548,125 491,875
------------- -----------
7,736,312 8,185,847
------------- -----------
TOTAL LONG TERM DEBT SECURITIES ......................... 72,614,745 73,405,631
------------- -----------
Shares
--------
INVESTMENT COMPANIES (2.24%)
High Yield Plus Fund .................................... 33,333 223,876 241,664
Republic U.S. Govt. M/M Fund ............................ 1,442,139 1,442,139 1,442,139
------------- -----------
1,666,015 1,683,803
------------- -----------
TOTAL INVESTMENTS (99.67%) .............................. $ 74,280,760* $75,089,434
============= ===========
OTHER ASSETS AND LIABILITIES (0.33%) .................... 250,123
-----------
NET ASSETS (100%) ....................................... $75,339,557
===========
</TABLE>
* The cost for Federal income tax purposes was $74,332,947. The aggregate gross
unrealized appreciation in which there was an excess of market value over
tax cost was $3,200,540 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value was
$2,444,053.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 3.8% of net assets.
Legend
Ctfs -- Certificates
Debs -- Debentures
Gtd -- Guaranteed
Sr -- Senior
Sub -- Subordinated
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES (unaudited)
September 30, 1999
<TABLE>
<S> <C>
Assets:
Investment in securities at value (identified cost $74,280,760) (Note 1) $ 75,089,434
Cash .................................................................... 449
Interest receivable ..................................................... 1,614,253
Dividends receivable .................................................... 2,417
Other assets ............................................................ 4,377
------------
TOTAL ASSETS .......................................................... 76,710,930
------------
Liabilities:
Dividends payable ....................................................... 1,331,556
Due to Advisor .......................................................... 35,069
Accrued expenses payable ................................................ 4,748
------------
TOTAL LIABILITIES ..................................................... 1,371,373
------------
Net assets: (equivalent to $20.51 per share based on 3,673,258 shares
of capital stock outstanding) ............................................. $ 75,339,557
============
NET ASSETS consisted of:
Par value ............................................................... $ 3,673,258
Capital paid-in ......................................................... 72,405,142
Dividends paid in excess of net investment income ....................... (1,346,306)
Accumulated net realized loss on investments ............................ (201,211)
Net unrealized appreciation on investments .............................. 808,674
------------
$ 75,339,557
============
</TABLE>
<TABLE>
<S> <C> <C>
STATEMENT OF OPERATIONS (unaudited)
For the six months ended September 30, 1999
Investment Income:
Interest ............................................................ $ 3,027,538
Dividends ........................................................... 7,250
------------
Total Investment Income ........................................... 3,034,788
------------
Expenses:
Investment advisory fees (Note 4) ................................... $ 221,292
Transfer agent fees ................................................. 23,937
Insurance ........................................................... 180
NYSE ................................................................ 8,350
Directors' fees and expenses ........................................ 13,603
Audit fees .......................................................... 12,169
State and local taxes ............................................... 11,200
Legal fees and expenses ............................................. 12,172
Reports to shareholders ............................................. 10,032
Custodian fees ...................................................... 4,131
Miscellaneous ....................................................... 13,174
----------
Total Expenses .................................................... 330,240
------------
Net Investment Income .......................................... 2,704,548
------------
Realized and unrealized gain (loss) on investments (Note 1):
Net realized loss from security transactions ........................ (149,024)
------------
Unrealized appreciation of investments:
Beginning of period ............................................... 5,525,189
End of period ..................................................... 808,674
----------
Change in unrealized appreciation of investments ............... (4,716,515)
------------
Net realized and unrealized loss on investments .............. (4,865,539)
------------
Net decrease in net assets resulting from operations ......... $ (2,160,991)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
September 30, 1999 Year Ended
(unaudited) March 31, 1999
-------------------- ---------------
Increase (Decrease) in net assets:
<S> <C> <C>
Operations:
Net investment income ................................................................ $ 2,704,548 $ 5,560,689
Net realized gain (loss) from security transactions (Note 2) ......................... (149,024) 340,192
Change in unrealized appreciation of investments ..................................... (4,716,515) (1,825,507)
------------ ------------
Net increase (decrease) in net assets resulting from operations ...................... (2,160,991) 4,075,374
------------ ------------
Dividends to shareholders from net investment income .................................. (2,704,548) (5,472,586)
Dividends to shareholders in excess of net investment income .......................... (1,354,402) --
Distributions to shareholders from net realized gain .................................. -- (422,993)
------------ ------------
(4,058,950) (5,895,579)
------------ ------------
Capital share transactions:
Net asset value of shares issued to shareholders in reinvestment of dividends from
net investment income (Note 5) ..................................................... -- --
------------ ------------
Decrease net assets .................................................................. (6,219,941) (1,820,205)
Net Assets:
Beginning of period .................................................................. 81,559,498 83,379,703
------------ ------------
End of period ........................................................................ $ 75,339,557 $ 81,559,498
============ ============
</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 Equiserve,
First Chicago Trust Division, to act as the Agent of each shareholder
electing to participate in the plan. Information and application forms
are available from Equiserve, First Chicago Trust Division, P.O. Box
2500, Jersey City, New Jersey 07303-2500.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended March 31,
September 30, 1999 -------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-------------------- ---- ---- ---- ---- ----
<S> <C> C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ............. $ 22.20 $ 22.70 $ 20.61 $ 21.15 $ 20.64 $ 21.45
--------- -------- -------- -------- -------- --------
Net investment income ........................... 0.74 1.52 1.51 1.51 1.58 1.58
Net realized and unrealized gain (loss) on
investments ................................... (1.32) (0.41) 2.11 (0.49) 0.61 (0.67)
--------- -------- -------- -------- -------- --------
Total from investment operations ................. (0.58) 1.11 3.62 1.02 2.19 0.91
--------- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment income ............ (0.74) (1.48) (1.51) (1.51) (1.58) (1.58)
Dividends in excess of net investment income..... (0.37) 0.00 (0.02) (0.02) 0.00 (0.01)
Distributions from net realized gain ............ 0.00 (0.13) 0.00 0.00 (0.06) 0.00
Distributions from tax return of capital ........ 0.00 0.00 0.00 (0.03) (0.04) (0.13)
--------- -------- -------- -------- -------- --------
Total distributions .............................. (1.11) (1.61) (1.53) (1.56) (1.68) (1.72)
--------- -------- -------- -------- -------- --------
Net asset value, end of period ................... $ 20.51 $ 22.20 $ 22.70 $ 20.61 $ 21.15 $ 20.64
========== ======== ======== ======== ======== ========
Per share market price, end of period ............ $ 17.50 $ 20.69 $ 20.81 $ 19.75 $ 21.25 $ 20.13
========== ======== ======== ======== ======== ========
Total Investment Return
Based on market value ........................... (10.41)% 7.28% 13.11% 0.28% 13.91% 3.41%
Ratios/Supplemental Data
Net assets, end of period (in 000's) ............. $ 75,340 $ 81,559 $ 83,380 $ 75,721 $ 77,581 $ 75,384
Ratio of expenses to average net assets ......... 0.85%* 0.77% 0.85% 0.87% 0.86% 0.86%
Ratio of net investment income to average net
assets ........................................ 6.92%* 6.70% 6.89% 7.27% 7.37% 7.83%
Portfolio turnover rate ......................... 4.91% 17.89% 18.88% 32.83% 43.25% 35.38%
Number of shares outstanding at the end of
period (in 000's) ............................... 3,673 3,673 3,673 3,673 3,668 3,653
</TABLE>
* Annualized
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Note 1 -- Significant Accounting Policies -- The 1838 Bond-Debenture Trading
Fund ("the Fund") is registered under the Investment Company Act of 1940, as
amended, as a diversified closed-end management investment company. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. Security Valuation -- Effective September 16, 1999, the Fund's Board of
Directors authorized the following new pricing procedures for the Fund: In
valuing the Fund's net assets, all securities for which representative
market quotations are available will be valued at the last quoted sales
price on the security's principal exchange on the day of valuation. If
there are no sales of the relevant security on such day, the security will
be valued at the bid price at the time of computation. Prices for
securities traded in the over-the-counter market, including listed debt and
preferred securities, whose primary market is believed to be
over-the-counter, normally are supplied by independent pricing services.
Securities for which market quotations are not readily available will be
valued at their respective fair values as determined in good faith by, or
under procedures established by the Board of Directors. At September 30,
1999 there were no securities valued by, or under procedures established by
the Board of Directors.
At September 30, 1999, the Fund had invested 36.97% of its portfolio in
long-term debt obligations of issuers engaged in industrial and other
miscellaneous activities. The issuers' ability to meet these obligations may
be affected by economic developments in their respective industries.
B. Determination of Gains or Losses on Sale of Securities -- Gains or losses on
the sale of securities are calculated for accounting and tax purposes on
the identified cost basis.
C. Federal Income Taxes -- It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
D. Other -- Security transactions are accounted for on the date the securities
are purchased or sold. The Fund records interest income on the accrual basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
E. Distributions to Shareholders -- Distributions of net investment income will
be made quarterly. Distributions of net capital gains realized will be made
annually. Income distributions and capital gain distributions are
determined in accordance with U.S. Federal Income Tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments in market discount and mortgage
backed securities.
Note 2 -- Portfolio Transactions -- The following is a summary of the security
transactions (excluding short-term securities) for the six month period ended
September 30, 1999:
<TABLE>
<CAPTION>
Proceeds
Cost of from Sales
Purchases or Maturities
------------- --------------
<S> <C> <C>
U.S. Government Securities .......... $ 0 $ 403,756
Other Investment Securities ......... $3,714,860 $4,197,483
</TABLE>
Note 3 -- Capital Stock -- At September 30, 1999, there were 10,000,000 shares
of capital stock ($1.00 par value) authorized, with 3,673,258 shares issued and
outstanding.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)--continued
Note 4 -- Investment Advisory Contract and Payments to Affiliated
Persons -- Under the terms of the current contract with 1838 Investment
Advisors, Inc. (the "Advisor"), advisory fees are paid monthly to the
Investment Advisor at an annual rate of 1% on the first $40 million of the
Fund's month end net assets and 1/2 of 1% on the excess.
Certain directors and officers of the Fund are also directors, officers and/or
employees of the Advisor. None of the directors so affiliated receives
compensation for services as a director of the Fund. Similarly, none of the
Fund's officers receive compensation from the Fund.
Note 5 -- Dividend and Distribution Reinvestment -- In accordance with the
terms of the Automatic Dividend Investment Plan, for shareholders who so elect,
dividends and distributions are made in the form of previously unissued Fund
shares at the net asset value if on the Friday preceding the payment date (the
"Valuation Date") the closing New York Stock Exchange price per share, plus the
brokerage commissions applicable to one such share equals or exceeds the net
asset value per share. However, if the net asset value is less than 95% of the
market price on the Valuation Date, the shares issued will be valued at 95% of
the market price. If the net asset value per share exceeds market price plus
commissions, the dividend or distribution proceeds are used to purchase Fund
shares on the open market for participants in the Plan. During the period ended
September 30, 1999, the Fund issued no shares under this Plan.
9
<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. Equiserve, First Chicago Trust Division, acts as the
agent (the "Agent") for participants under the Plan.
Shareholders whose shares are registered in their own names may elect to
participate in the Plan by completing an authorization form and returning it to
the Agent. Shareholders whose shares are held in the name of a broker or
nominee should contact such broker or nominee to determine whether or how they
may participate in the Plan.
Dividends and distributions are reinvested under the Plan as follows. If the
market price per share on the Friday before the payment date for the dividend
or distribution (the "Valuation Date"), plus the brokerage commissions
applicable to one such share, equals or exceeds the net asset value per share
on that date, the Fund will issue new shares to participants valued at the net
asset value or, if the net asset value is less than 95% of the market price on
the Valuation Date, then valued at 95% of the market price. If net asset value
per share on the Valuation Date exceeds the market price per share on that
date, plus the brokerage commissions applicable to one such share, the Agent
will buy shares on the open market, on the New York Stock Exchange, for the
participants' accounts. If before the Agent has completed its purchases, the
market price exceeds the net asset value of shares, the average per share
purchase price paid by the Agent may exceed the net asset value of shares,
resulting in the acquisition of fewer shares than if the dividend or
distribution has been paid in shares issued by the Fund at net asset value.
There is no charge to participants for reinvesting dividends or distributions
payable in either shares or cash. The Agent's fees for handling of reinvestment
of such dividends and distributions will be paid by the Fund. There will be no
brokerage charges with respect to shares issued directly by the Fund as a
result of dividends or distributions payable either in shares or cash. However,
each participant will be charged by the Agent a pro rata share of brokerage
commissions incurred with respect to Agent's open market purchases in
connection with the reinvestment of dividends or distributions payable only in
cash.
For purposes of determining the number of shares to be distributed under the
Plan, the net asset value is computed on the Valuation Date and compared to the
market value of such shares on such date. The Plan may be terminated by a
participant by delivery of written notice of termination to the Agent at the
address shown below. Upon termination, the Agent will cause a certificate or
certificates for the full shares held for a participant under the Plan and a
check for any fractional shares to be delivered to the former participant.
Distributions of investment company taxable income that are invested in
additional shares generally are taxable to shareholders as ordinary income. A
capital gain distribution that is reinvested in shares is taxable to
shareholders as long-term capital gain, regardless of the length of time a
shareholder has held the shares or whether such gain was realized by the Fund
before the shareholder acquired such shares and was reflected in the price paid
for the shares.
Plan information and authorization forms are available from Equiserve, First
Chicago Trust Division, P.O. Box 2500, Jersey City, New Jersey, 07303-2500.
================================================================================
HOW TO GET ASSISTANCE WITH SHARE TRANSFER OR DIVIDENDS
Contact Your Transfer Agent, Equiserve, First Chicago Trust Division,
P.O. Box 2500, Jersey City, New Jersey 07303-2500, or call 201-324-0498
================================================================================
10
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<PAGE>
directors
- -----------------------------------------
w. Thacher brown
John gilray christy
morris lloyd, jr.
j. lawrence shane
officers
- -----------------------------------------
john h. donaldson
President
anna m. bencrowsky
Vice President
and Secretary
clifford d. corso
Vice President
1838
Investment advisor
- -----------------------------------------
BOND--DEBENTURE TRADING FUND
1838 investment advisors, inc. ------------------------------
five radnor corporate Center, suite 320
100 matsonford road FIVE RADNOR CORPORATE CENTER,
radnor, pa 19087
SUITE 320
CUSTODIAN 100 MATSONFORD ROAD
- -----------------------------------------
RADNOR, PA 19087
Republic National Bank of new york
452 Fifth Avenue
New York, NY 10018
Transfer Agent Semi-Annual Report
- -----------------------------------------
September 30, 1999
Equiserve, First chicago trust division
p.o. box 2500
jersey city, nj 07303-2500
COUNSEL
- -----------------------------------------
Pepper hamilton llp
3000 two Logan Square
eighteenth & arch streets
Philadelphia, PA 19103
AUDITORS
- -----------------------------------------
PricewaterhouseCoopers LLP
1177 avenue of the americas
new york, ny 10036
