UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-08902
Exact Name of Registrant as specified in charter:
1838 Investment Advisors Funds
Address of principal executive offices: 2701 Renaissance Blvd., 4th Fl.,
King of Prussia, PA 19406
Name and address of agent for service: Daniel N. Mullen, 2701 Renaissance Blvd.
4th Fl., King of Prussia, PA 19406
Copies to: Thomas E. Stabile, 113 King Street, Armonk, NY 10504
Registrant's telephone number, including area code: (484) 322-4300
Date of fiscal year end: October 31
Date of reporting period: November 1, 2004 - April 30, 2005
<page>
ITEM 1. REPORTS TO STOCKHOLDERS.
1838
INVESTMENT ADVISORS FUNDS
-------------------------
INTERNATIONAL EQUITY FUND
FIXED INCOME FUND
SEMI-ANNUAL REPORT
APRIL 30, 2005
1838 INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
FELLOW SHAREHOLDER:
The international equity markets showed strong performances over the past six
months, with the MSCI EAFE Index indicating net total return of 8.71%. During
this period, the net asset value per share for the 1838 International Equity
Fund ("the Fund") increased by 9.47% outperforming its benchmark by 0.76%.
REGIONAL DEVELOPMENTS:
In spite of recent disappointing economic news, particularly from Europe, most
of the world's stock markets posted impressive gains over the last six months.
MSCI's Non-Japan Asia and Europe regions advanced 12.67% and 9.78%,
respectively. Performance in our Emerging Market holdings were slightly positive
in spite of the decline in Indonesian wireless provider IndoSat on news that the
Indonesian government issued a permit for a fifth wireless license. While any
competitive threat will not show itself for some time, the market regarded it
unfavorably nonetheless. Fortunately our holdings of Teva Pharmaceuticals in
Israel and ICICI Bank in India more than offset IndoSat's decline. On the
positive side, the Non-Japan Asia/Pacific holdings had a good six months. Hong
Kong-based women's sportswear company Esprit continues to execute well. Europe
was also positive from bank holdings in Ireland's growing economy and from our
holding in Spanish construction company Grupo Ferrovial. The company has been
delivering positive results.
SECTOR DEVELOPMENTS:
With the exception of Information Technology, Consumer Discretionary and
Telecommunications over the last six months, all of the MSCI sectors had double
to near-double digit gains with Consumer Staples and Utilities leading the pack
with gains of 12.61% and 11.89%, respectively. On a relative basis, the fund's
holdings in the Financial Services lagged somewhat from lack of exposure to the
large Swiss banks. Telecommunications also lagged from IndoSat. Consumer
Discretionary had a good six months from Esprit and also German auto component
manufacturer Continental - two of our best performing stocks for the period.
Consumer Staples also registered good performance from Reckitt Benckiser, a
leading household products maker that has both defensive and growth
characteristics.
1
1838 INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
OUTLOOK:
During the last months of 2004, the world's stock markets showed impressive
performance. However, in the first four months of 2005 the EAFE Index has traded
flat, partially due to disappointing economic news flow from Europe - the
European Central Bank has not cut interest rates since June of 2003, French
unemployment is at a five-year high, and German unemployment is at a post-WWII
high. However, Japan brought some good news to the table at the end of 2004 as
its stock market posted its first back-to-back annual gain since 1995 on the
back of improved economic growth. The Japanese economy has expanded for four
consecutive years, its longest streak since 1997 and unemployment is at its
lowest in six years. Also, it appears that oil prices peaked in March and
China's economy is slowing, thereby relieving commodity price pressures. This
mixed bag of economic news still points to the possibility that any growth in
the coming year or so could be somewhat muted. We anticipate this to favor
larger companies that can deliver consistent, albeit perhaps more subdued,
earnings growth in the near future.
Sincerely,
/S/Signature
Hans van den Berg
President & Portfolio Manager
May 17, 2005
2
1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
- ------------------------------------------------------------------------------------------------------------------
VALUE
INDUSTRY SHARES (NOTE 2)
--------- -------- -----------
COMMON STOCK -- 97.50%
AUSTRIA -- 1.97%
Erste Bank Der Oester Spark Banks............................... 9,300 $ 450,101
--------------
AUSTRALIA -- 1.94%
BHP Billiton Ltd. Metal & Mining...................... 35,300 442,098
--------------
CANADA -- 1.66%
Encana Corporation Oil & Gas........................... 5,900 378,649
--------------
FINLAND -- 1.78%
Fortum OYJ Electric-Intergrated................ 19,500 296,294
Neste Oil OYJ* Oil & Gas........................... 4,875 109,254
--------------
405,548
--------------
FRANCE -- 8.20%
AXA, Inc. Insurance........................... 16,100 394,695
BNP Paribas Banks............................... 4,500 295,693
Essilor International Health Care Equipment & Supplies.... 5,800 413,687
LVMH Moet-Hennessy L. Vuitton SA Consumer Durables & Apparel......... 3,960 278,614
Total SA (B Shares) Oil & Gas........................... 2,200 489,918
--------------
1,872,607
--------------
GERMANY -- 11.14%
Continental AG Automobiles & Components............ 6,700 493,881
Deutsche Bank AG Banks............................... 3,400 278,059
E. ON AG Utility............................. 5,400 454,868
Puma AG Consumer Durables & Apparel......... 1,550 357,775
SAP AG Software............................ 1,730 271,129
Siemens AG Industrial Conglomerate............. 4,560 334,250
Celesio AG Pharmaceuticals..................... 4,450 354,911
--------------
2,544,873
--------------
GREECE -- 2.77%
National Bank of Greece-Cstock Banks............................... 8,200 276,079
Coca-Cola Hellenic Bottling SA Beverages........................... 13,100 355,480
--------------
631,559
--------------
See notes to financial statements.
3
1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)-- CONTINUED APRIL 30, 2005
- ------------------------------------------------------------------------------------------------------------------
VALUE
INDUSTRY SHARES (NOTE 2)
--------- -------- -----------
HONG KONG -- 5.09%
CNOOC Ltd. Oil & Gas........................... 806,800 $ 437,252
Esprit Holdings Ltd. Retailing........................... 56,494 420,310
China Resources Power Holdings Electric-Generation................. 548,000 304,023
--------------
1,161,585
--------------
INDIA -- 1.61%
ICICI Bank Ltd. - Sponsored ADR Banks............................... 20,390 368,651
--------------
IRELAND -- 4.90%
Allied Irish Bank PLC. Banks............................... 17,770 361,768
Anglo Irish Bank Corp. Banks............................... 39,900 471,309
CRH PLC Construction Materials.............. 11,520 286,728
--------------
1,119,805
--------------
INDONESIA -- 0.91%
PT Indonesian Satellite - ADR Telecommunication Services.......... 9,200 207,276
--------------
ISRAEL -- 1.35%
TEVA Pharmaceutical Ind. - ADR Pharmaceuticals..................... 9,900 309,276
--------------
JAPAN -- 17.63%
Canon Inc. Office Electronics.................. 6,400 334,290
Casio Computer CO Ltd Electronic Equipment & Instruments.. 20,400 279,415
Daiwa Securities Group Diversified Financial Services...... 39,000 247,200
Hoya Corp. Health Care Equipment & Services.... 3,000 313,683
JSR Corp. Rubber & Vinyl...................... 13,700 276,834
Kobe Steel Ltd. Steel Producers..................... 185,000 335,033
Kubota Corporation Machinery ........................ 65,000 335,795
Sharp Corp. Electric Products................... 20,000 312,253
SMC Corp. Machinery ........................ 2,700 284,373
Sumitomo Realty & Dev. Co., Ltd. Real Estate......................... 25,000 284,992
Terumo Corp. Hospital Supplies................... 11,100 330,096
Toray Industries Inc. Industrial Materials................ 70,000 312,253
Toyota Motor Corp. Automobiles & Components............ 10,400 380,651
--------------
4,026,868
--------------
MEXICO -- 3.15%
America Movil SA (L Shares) - ADR Wireless Telecommunication Services. 8,600 426,990
Wal-Mart De Mexico - Sponsored ADR Retail-Hypermarkets................. 8,100 292,815
--------------
719,805
--------------
See notes to financial statements.
4
1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)-- CONTINUED APRIL 30, 2005
- ------------------------------------------------------------------------------------------------------------------
VALUE
INDUSTRY SHARES (NOTE 2)
--------- -------- -----------
NETHERLANDS -- 4.79%
ING Groep NV Diversified Financial Services...... 14,800 $ 403,140
Koninklijke Numico NV Food Products....................... 9,100 375,926
Reed Elsevier NV Media............................... 22,000 316,103
--------------
1,095,169
--------------
NORWAY -- 1.38%
Telenor ASA Telecommunication Services.......... 37,700 314,486
--------------
SINGAPORE -- 3.04%
DBS Group Holdings Ltd. Banks............................... 32,255 282,194
Keppel Corp. Ltd. Construction &Engineering........... 62,900 411,765
--------------
693,959
--------------
SPAIN -- 2.79%
Banco Popular Espanol SA Banks............................... 4,750 296,177
Grupo Ferrovial SA Construction & Engineering.......... 6,000 341,200
--------------
637,377
--------------
SWEDEN -- 2.84%
Ericsson (LM) Tel - Sponsored ADR Telecommunications Equipment........ 10,300 303,335
Getinge AB (B Shares) Health Care Equipment & Services.... 24,200 346,452
--------------
649,787
--------------
SWITZERLAND -- 4.27%
Nestle SA - Sponsored ADR Food Products....................... 4,600 301,300
Novartis AG - Registered Shares Pharmaceuticals..................... 8,040 391,042
SGS SA Commercial Services................. 420 284,010
--------------
976,352
--------------
UNITED KINGDOM -- 14.29%
Barclays PLC Banks............................... 32,400 332,298
BP PLC Oil & Gas........................... 59,900 611,481
Capita Group PLC Commercial Services & Supplies...... 38,400 276,124
HSBC Holdings PLC Banks............................... 19,600 312,760
Reckitt Benckiser PLC Household Products.................. 10,700 345,979
Royal Bank of Scotland Group PLC Banks............................... 11,593 348,727
Sabmiller PLC Brewery............................. 21,950 324,268
See notes to financial statements.
5
1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)-- CONTINUED APRIL 30, 2005
- ------------------------------------------------------------------------------------------------------------------
VALUE
INDUSTRY SHARES (NOTE 2)
--------- -------- -----------
UNITED KINGDOM -- (CONTINUED)
Tesco PLC Food & Drug Retailing............... 58,032 $ 340,540
Vodafone Airtouch PLC Wireless Telecommunication
Services. ........................ 142,721 371,392
--------------
3,263,569
--------------
TOTAL COMMON STOCK (Cost $16,703,805) .................................... 22,269,400
--------------
SHORT-TERM INVESTMENT -- 2.01 %
Evergreen Institutional Money Market Fund - I Shares (Cost $460,367)........... 460,367 460,367
--------------
TOTAL INVESTMENTS (Cost $17,164,172) -- 99.51%.................................... $ 22,729,767
OTHER ASSETS AND LIABILITIES, NET-- 0.49% .................................... 111,070
--------------
NET ASSETS -- 100.00%.............................................................. $ 22,840,837
==============
MARKET SECTOR DIVERSIFICATION
As a Percentage of Total Investments
Consumer Discretionary -- 12.37% Information Technology -- 6.62%
Consumer Staples -- 11.03% Materials -- 7.27%
Energy -- 8.92% Other -- 2.02%
Financials -- 25.59% Telecommunication Services -- 5.81%
Health Care -- 6.18% Utilities -- 4.64%
Industrials -- 9.55%
* Non-income producing security
ADR -- American Depositary Receipt
See notes to financial statements.
6
1838 FIXED INCOME FUND
- --------------------------------------------------------------------------------
TO THE SHAREHOLDER:
Fixed income investors might look back to the first five years of the new
millennium as somewhat of a golden age for the US bond market. The five year
annualized return for the Lehman Aggregate Index through 2004 is 7.71%.
Impressively, the index achieved this number with positive absolute returns in
each of those five years. But momentum was slowing towards the end of 2004 and
it appears to have reversed course in 2005.
The trouble for the US bond market began with yet another 0.25% increase in the
Fed Funds lending rate in February, 2005. The difference between this rate
increase from the previous five rate increases during 2004 was the new hawkish
tone from Chairman Greenspan concerning the rate of inflation. Year over year
increases in consumer prices were a moderate 3.0% for January and February, but
producer prices were a more than moderate 4.2% and 4.7% for those same months.
Eventually, these inflationary producer costs will be passed to the consumer.
The FOMC fortified the February hike and their hawkish jargon with another rate
increase in March, which brings the FOMC rate to 2.75% as of April 29, 2005.
The result in the bond market was a rapid sell off in treasury rates. Ten-year
notes traded from 4.13% to 4.48% from the end of January to the end of March.
Mortgage-backed securities took the brunt of the rapid sell off in February.
This sector experienced its first month of underperformance since April 2004.
Corporate credit had experienced positive performance right up until the last
few weeks in March. But then General Motors Corporation roiled the markets by
revising earnings, production guidance and operating cash flow downwards.
Operating cash flow targets were reduced from positive $2 billion to negative $2
billion for 2005. This is a big number. AIG Insurance Company added to the
malaise with their own earnings revisions, announcements of investigation by the
attorney general's office and ratings agency downgrades. In sum, all fixed
income sectors experienced negative absolute returns through the first quarter
and corporate credit experienced negative duration adjusted returns, according
to Lehman Brothers.
TABLE 1. TREASURY RATES.
TSY MATURITY 10/31/2003 4/30/2004 10/29/2004 4/29/2005
---------- -------- -------- ---------- ---------
2 Year 1.82 2.32 2.55 3.65
3 Year 2.24 2.77 2.76 3.71
5 Year 3.24 3.62 3.28 3.90
10 Year 4.29 4.51 4.02 4.20
30 Year 5.13 5.28 4.79 4.51
The Fund's exposure, based on long-term market value, compared to the Index at
April 29, 2005 was as follows:
1838 FIXED LEHMAN AGGREGATE
INCOME FUND BOND INDEX
----------- -------------
Corporate Bonds 37% 24%
Mortgage-Backed 35% 35%
Asset-Backed 11% 5%
Agencies 8% 11%
Treasuries 9% 25%
7
1838 FIXED INCOME FUND
- --------------------------------------------------------------------------------
OUTLOOK
From the volumes of statistics, data and indicators that can be used to
interpret the fixed income markets, two existing fixed income relationships may
serve as a guidepost of things to come. First as of March 31, 2005, the
relationship between the Fed Funds futures contract and the current Fed Funds
rate is pricing in a 4.0% lending rate by the end of 2005. This efficiently
priced market therefore predicts another 1.25% of rate increases. So with the
Federal Reserve still very much in play, we would predict that two-year treasury
yields (most sensitive to Fed Funds) should be poised to go higher. To the
extent that inflation continues to creep into the economy, or if the
compensation received for the shorter maturity two-year outweighs what investors
can earn on ten-year or thirty-year securities, we would expect longer maturity
treasury yields to rise as well.
The other significant data guidepost is the relationship between corporate
credit spreads today versus their historical averages. Credit spreads, or the
compensation received for taking corporate risk, remain at very low levels. We
recently compared the credit spread (from Lehman Brothers) for A-rated corporate
securities to their historical averages. As of March 28th that spread was 0.59%.
Data calculated from October, 2001 and August, 1988 resulted in a historical
mean of 1.15% and 1.20%. These results are also consistent with other ratings
strata and industry sectors. So it appears that the path of least resistance is
towards higher credit spreads, which would translate into further
underperformance in the corporate credit sector. GM and AIG seem to be the
catalyst for this inevitable revaluation.
Although it appears that doom and gloom is on the horizon, opportunities will
surface to invest at higher treasury rates and wider credit spreads. In addition
to many other positives, US GDP growth remains moderate and unemployment appears
to be declining. But like spring in the northeast, we will not count on those
sunny 80-degree days until they actually get here.
Sincerely,
/S/Signature
Clifford D. Corso
Vice President & Portfolio Manager
June 19, 2005
8
1838 FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
- ------------------------------------------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
------------ -------- -----------
CORPORATE BONDS -- 36.21%
FINANCIAL -- 13.04%
Capital One Financial Corp, 8.75%, 02/01/07.................... Baa3/BBB- $ 185,000 $ 198,263
Chubb Corp., 3.95%, 04/01/08................................... A2/A 300,000 296,335
Credit Suisse FB USA Inc., 3.875%, 01/15/09.................... Aa3/A+ 365,000 357,970
Ford Motor Credit Co., 7.00%, 10/01/13......................... Baa2/BB+ 185,000 166,495
GE Global Insurance Holding, 7.00%, 02/15/26................... Baa1/BBB+ 180,000 192,855
General Motors Acceptance Corp., 4.375%, 12/10/07.............. Baa2/BB 350,000 322,654
Goldman Sachs Group Inc., 6.125%, 02/15/33..................... Aa3/A+ 180,000 190,325
Washington Mutual Inc., 4.375%, 01/15/08....................... A3/A- 370,000 370,094
--------------
2,094,991
--------------
INDUSTRIAL & MISCELLANEOUS -- 16.01%
BAE Systems 2001 Asset Trust, 6.664%, 09/15/13, 144A*.......... Aaa/AAA 234,147 255,545
Centex Corp., 4.75%, 01/15/08.................................. Baa2/BBB 280,000 280,533
Ford Motor Co., 7.45%, 07/16/31................................ Baa3/BB+ 85,000 69,848
International Paper Co., 5.85%, 10/30/12....................... Baa2/BBB 345,000 357,122
Reed Elsevier Capital, 6.125%, 08/01/06........................ A3/A- 335,000 341,951
SAB Miller PLC, 6.625%, 08/15/33, 144A......................... Baa1/BBB+ 175,000 196,251
Tyco International Group, 6.125%, 01/15/09..................... Baa3/BBB 340,000 359,223
United Mexican States, 4.625%, 10/08/08........................ Baa1/BBB 380,000 377,340
Weyerhaeuser Co., 6.00%, 08/01/06.............................. Baa2/BBB 325,000 333,463
--------------
2,571,276
--------------
TELECOMMUNICATIONS & MULTIMEDIA -- 7.16%
AT&T Wireless Services Inc., 7.50%, 05/01/07................... Baa2/A 190,000 201,680
AOL Time Warner, 6.125%, 04/15/06.............................. Baa1/BBB+ 180,000 183,671
AOL Time Warner, 7.625%, 04/15/31.............................. Baa1/BBB+ 160,000 194,976
British Telecom PLC, 8.125%, 12/15/10.......................... Baa1/A- 175,000 205,305
Comcast Corp., 7.05%, 03/15/33................................. Baa2/BBB 35,000 40,903
France Telecom, 8.00%, 03/01/11................................ Baa1/A- 280,000 322,684
--------------
1,149,219
--------------
TOTAL CORPORATE BONDS (COST $5,815,210).................................................. 5,815,486
--------------
See notes to financial statements.
9
1838 FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)-- CONTINUED APRIL 30, 2005
- ------------------------------------------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
------------ -------- ---------
ASSET BACKED SECURITIES -- 11.32%
Bear Stearns Commercial Mortgage Sec., Ser. 1999-WF2, Cl. A2,
7.08%, 07/15/31.............................................. Aaa/AAA $ 285,000 $ 311,108
Carmax Auto Owner Trust, Ser. 2004-1, Cl. A3,
2.66%, 05/15/08.............................................. Aaa/AAA 425,000 420,136
Drivetime Auto Owner Trust, Ser. 2004-A, Cl. A3,
2.419%, 08/15/08, 144A....................................... Aaa/AAA 410,000 403,209
Franklin Auto Trust, Ser. 2003-1, Cl. A4,
2.27%, 05/20/11.............................................. Aaa/AAA 380,000 372,245
Long Beach Auto Receivables Trust, Ser. 2003-A, Cl. A3,
2.021%, 07/15/07............................................. Aaa/AAA 158,913 158,379
TF Auto Receivables Owner Trust, Ser. 2002-1, Cl. A3,
3.00%, 05/12/09, 144A........................................ Aaa/AAA 154,003 153,522
--------------
TOTAL ASSET BACKED SECURITIES (COST $1,807,528) 1,818,599
--------------
MORTGAGE BACKED SECURITIES -- 34.85%
FGCI, Pool # E92496, 5.50%, 11/01/17........................... Aaa/AAA 14,267 14,624
FGCI Pool # E01602, 4.5%, 03/01/19............................. Aaa/AAA 146,320 144,988
FGCI, Pool # B13342, 5.50%, 04/01/19........................... Aaa/AAA 158,820 162,749
FGCI, Pool # B13580, 5.00%, 04/01/19........................... Aaa/AAA 178,368 179,854
FGLMC, Pool # C72047, 7.00%, 09/01/32.......................... Aaa/AAA 4,240 4,478
FGLMC, Pool # A00930, 10.00%, 05/01/20......................... Aaa/AAA 5,039 5,674
FGLMC, Pool # A22212, 5.50%, 05/01/34.......................... Aaa/AAA 302,313 305,863
FGLMC, Pool # C80342, 6.50%, 09/01/25.......................... Aaa/AAA 23,987 25,032
FGLMC, Pool # D85515, 6.50%, 01/01/28.......................... Aaa/AAA 165,993 173,076
FGLMC, Pool # C16503, 6.50%, 10/01/28.......................... Aaa/AAA 1,891 1,971
FGLMC, Pool # A14640, 5.00%, 10/01/33.......................... Aaa/AAA 614,781 610,457
FGLMC Pool # C01361, 6.00%, 05/01/32........................... Aaa/AAA 170,675 175,369
FGLMC Pool # C00967, 8.50%, 02/01/30........................... Aaa/AAA 77,501 84,600
FNCI, Pool # 303728, 6.00%, 01/01/11........................... Aaa/AAA 147,515 152,944
FNCI, Pool # 535003, 7.00%, 11/01/14........................... Aaa/AAA 82,000 86,369
FNCI, Pool # 357279, 6.00%, 05/01/17........................... Aaa/AAA 245,652 254,696
FNCI, Pool # 701353, 5.50%, 04/01/18........................... Aaa/AAA 131,842 135,074
FNCI, Pool # 780962, 4.50%, 05/01/19........................... Aaa/AAA 218,025 215,920
FNCI, Pool # 695852, 5.00%, 05/01/18........................... Aaa/AAA 271,540 273,844
FNCI, Pool # 722798, 5.00%, 06/01/18........................... Aaa/AAA 221,377 223,255
FNCL, Pool # 481429, 6.00%, 01/01/29........................... Aaa/AAA 386,653 398,281
FNCL, Pool # 522898, 8.00%, 01/01/30........................... Aaa/AAA 57,906 63,199
FNCL, Pool # 526025, 8.00%, 01/01/30........................... Aaa/AAA 38,021 41,512
FNCL, Pool # 704096, 5.50%, 05/01/33........................... Aaa/AAA 683,963 691,315
FNCL, Pool # 743430, 5.50%, 10/01/33........................... Aaa/AAA 348,079 351,820
See notes to financial statements.
10
1838 FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)-- CONTINUED APRIL 30, 2005
- -----------------------------------------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
------------ -------- -----------
MORTGAGE BACKED SECURITIES -- (CONTINUED)
FNCL, Pool # 809275, 5.00%, 02/01/35........................... Aaa/AAA $ 338,509 $ 335,445
GNSF, Pool # 6937, 8.50%, 12/15/05............................. Aaa/AAA 218 220
GNSF, Pool # 780374, 7.50%, 12/15/23 .......................... Aaa/AAA 146,665 158,522
GNSF, Pool # 417239, 7.00%, 02/15/26........................... Aaa/AAA 209,741 222,906
GNSF, Pool # 569684, 6.00%, 02/15/32........................... Aaa/AAA 97,484 100,659
GNSF, Pool # 588967, 6.00%, 11/15/32........................... Aaa/AAA 2,510 2,591
--------------
TOTAL MORTGAGE BACKED SECURITIES (COST $5,507,366)....................................... 5,597,307
--------------
U.S. AGENCY OBLIGATIONS-- 8.07%
Freddie Mac MTN., 5%, 07/15/14................................. Aaa/AAA 210,000 217,019
FHLMC, 5.125%, 11/07/13........................................ Aaa/AAA 250,000 250,801
FHLMC, Sub. Notes, 6.25%, 03/05/12............................. Aa2/AA- 335,000 347,072
FNMA, 6.00%, 05/15/08.......................................... Aaa/AAA 170,000 179,451
FNMA, 3.125%, 03/16/09......................................... Aaa/AAA 145,000 139,600
Freddie Mac MTN., 3.60%, 05/07/08.............................. Aaa/AAA 165,000 162,860
--------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $1,300,998)............................... 1,296,803
--------------
U.S. TREASURY OBLIGATIONS**-- 8.29%
U.S. Treasury Notes, 1.50%, 03/31/06...................................... 35,000 34,415
U.S. Treasury Notes, 2.75%, 06/30/06...................................... 225,000 223,198
U.S. Treasury Notes, 4.00%, 02/15/15...................................... 255,000 250,866
U.S.Treasury Bonds, 5.375%, 02/15/31...................................... 730,000 824,502
--------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $1,302,416)........................................ 1,332,981
--------------
SHORT-TERM INVESTMENTS-- 0.45% SHARES
------
Evergreen Institutional Money Market Fund - I Shares (Cost $71,883)........ 71,883 71,883
--------------
TOTAL INVESTMENTS (Cost $15,805,401)-- 99.19%................................... $ 15,933,059
OTHER ASSETS AND LIABILITIES, NET-- 0.81%....................................... 129,177
--------------
NET ASSETS-- 100.00%............................................................ $ 16,062,236
==============
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. As of April 30, 2005, these securities amounted to
6.28% of net assets. These securities have been determined to be liquid
under the guidelines approved by the Board of Trustees.
* The bond's principal and interest payments are insured by MBIA, Inc., the
parent company of the Fund's sub advisor, MBIA Capital Management Corp.
** While no ratings are shown for U.S. Treasury Obligations, they are
considered to be of the highest quality, comparable to Moody's Aaa rating
and S&P's AAA rating.
See notes to financial statements.
11
1838 INVESTMENT ADVISORS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2005
- ------------------------------------------------------------------------------------------------------------------
INTERNATIONAL FIXED INCOME
EQUITY FUND FUND
------------- ------------
ASSETS:
Investments, at value (identified cost $17,164,172 and $15,805,401,
respectively) (Note 2) ........................................ $22,729,767 $15,933,059
Receivables:
Dividends, interest and foreign tax reclaims................... 136,011 141,352
Reimbursement due from advisor................................. 1,759 10,886
----------- -----------
Total assets................................................. 22,867,537 16,085,297
----------- -----------
LIABILITIES:
Accrued expenses.................................................. 26,700 23,061
----------- -----------
Total liabilities........................................... 26,700 23,061
----------- -----------
NET ASSETS........................................................ $22,840,837 $16,062,236
=========== ===========
NET ASSETS CONSIST OF:
Shares of beneficial interest..................................... $ 1,660 $ 1,807
Additional capital paid-in........................................ 23,652,989 15,890,729
Undistributed net investment income .............................. 73,382 1,783
Accumulated net realized gain (loss) on investments............... (6,482,937) 40,259
Net unrealized appreciation (depreciation) on:
Investments.................................................... 5,565,595 127,658
Translation of assets and liabilities in foreign currencies.... 30,148 --
----------- -----------
NET ASSETS........................................................ $22,840,837 $16,062,236
=========== ===========
Shares of beneficial interest outstanding......................... 1,659,570 1,807,337
----------- -----------
NET ASSET VALUE, offering and redemption price per share
(Net assets/Outstanding shares of beneficial interest)......... $ 13.76 $ 8.89
=========== ===========
See notes to financial statements.
12
1838 INVESTMENT ADVISORS FUNDS
STATEMENTS OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2005(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------
INTERNATIONAL FIXED INCOME
EQUITY FUND FUND
---------- ----------
INVESTMENT INCOME:
Dividends...................................................... $ 282,838 $ --
Interest....................................................... 3,661 395,119
Foreign taxes withheld ........................................ (28,799) --
----------- -----------
Total investment income.............................. 257,700 395,119
----------- -----------
EXPENSES:
Investment advisory fees (Note 4).............................. 110,659 42,214
Administration fees (Note 4)................................... 8,742 7,438
Accounting fees (Note 4)....................................... 29,587 19,725
Custodian fees ................................................ 11,546 963
Transfer agency fees (Note 4).................................. 9,862 9,862
Trustees' fees (Note 4)........................................ 15,302 9,800
Audit fees..................................................... 6,661 4,829
Legal fees..................................................... 15,806 12,961
Registration fees.............................................. 11,526 8,558
Reports to shareholders........................................ 5,662 1,885
Other.......................................................... 42,753 34,721
----------- -----------
Total expenses............................................ 268,106 152,956
Advisory fees waived (Note 4)............................. (83,788) (42,214)
Reimbursement from advisor (Note 4)....................... -- (60,090
----------- -----------
Total expenses, net....................................... 184,318 50,652
----------- -----------
Net investment income............................... 73,382 344,467
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain from:
Investment transactions...................................... 4,747,843 54,159
Foreign currency transactions............................. (50,673) --
----------- -----------
Total net realized gain ............................... 4,697,170 54,159
----------- -----------
Change in unrealized depreciation of:
Investments............................................... (1,309,774) (300,123)
Translation of assets and liabilities in foreign currencies (703) --
----------- -----------
Total change in unrealized depreciation................ (1,310,477) (300,123)
----------- -----------
Net realized gain (loss) on investments and
foreign currency................................ 3,386,693 (245,964)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $ 3,460,075 $ 98,503
=========== ===========
See notes to financial statements.
13
1838 INVESTMENT ADVISORS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
INTERNATIONAL FIXED INCOME
EQUITY FUND FUND
---------- ------------
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2005 (UNAUDITED)
DECREASE IN NET ASSETS:
Operations:
Net investment income ......................................... $ 73,382 $ 344,467
Net realized gain from investment and
foreign currency transactions................................ 4,697,170 54,159
Change in unrealized depreciation of
investments and foreign currency............................. (1,310,477) (300,123)
----------- ------------
Net increase in net assets resulting from operations...... 3,460,075 98,503
----------- ------------
Distributions to shareholders from:
Net investment income.......................................... -- (342,684)
Short-term gains............................................... -- (129,647)
Long-term gains................................................ -- (459,657)
----------- ------------
Total distributions....................................... -- (931,988)
----------- ------------
Decrease in net assets from Fund share transactions (Note 5)...... (10,659,501) (2,638,082)
----------- ------------
Decrease in net assets............................................ (7,199,426) (3,471,567)
NET ASSETS:
Beginning of period............................................... 30,040,263 19,533,803
----------- ------------
End of period (including undistributed net investment income of
$73,382 and $1,783, respectively)............................ $22,840,837 $1 6,062,236
=========== ============
FOR THE YEAR ENDED OCTOBER 31, 2004
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ......................................... $ 247,748 $ 1,009,681
Net realized gain from investment and
foreign currency transactions................................ 5,679,915 651,975
Change in unrealized appreciation (depreciation) of
investments and foreign currency............................. 1,883,650 (414,628)
----------- ------------
Net increase in net assets resulting from operations.............. 7,811,313 1,247,028
----------- ------------
Distributions to shareholders from:
Net investment income.......................................... -- (1,109,577)
Short-term gains............................................... -- (1,390,264)
Long-term gains................................................ -- (1,316,635)
----------- ------------
Total distributions....................................... -- (3,816,476)
----------- ------------
Decrease in net assets from Fund share transactions (Note 5)...... (27,861,758) (18,105,906)
----------- ------------
Decrease in net assets............................................ (20,050,445) (20,675,354)
NET ASSETS:
Beginning of period............................................... 50,090,708 40,209,157
----------- ------------
End of period (including undistributed net investment income of
$0 and $0, respectively)..................................... $30,040,263 $ 19,533,803
=========== ============
See notes to financial statements.
14
1838 INVESTMENT ADVISORS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each fiscal year or period and other performance information derived from the
financial statements. It should be read in conjuction with the financial
statements and notes thereto.
INTERNATIONAL EQUITY FUND
FOR THE
SIX-MONTH
PERIOD ENDED FOR THE FISCAL YEARS ENDED OCTOBER 31,
APRIL 30, 2005 --------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------
NET ASSET VALUE - BEGINNING OF PERIOD........ $12.57 $10.50 $8.50 $9.89 $14.59 $14.57
-----------------------------------------------------------------
INVESTMENT OPERATIONS:
Net investment income ................... 0.04 0.10 0.05 0.01 0.03 0.01
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions............................ 1.15 1.97 1.95 (1.40) (3.19) 0.78
-----------------------------------------------------------------
Total from investment operations........ 1.19 2.07 2.00 (1.39) (3.16) 0.79
-----------------------------------------------------------------
DISTRIBUTIONS:
From net investment income................ -- -- -- -- -- --
From net short-term realized gain
on investments.......................... -- -- -- -- (0.22) (0.45)
From net long-term realized gain
on investments.......................... -- -- -- -- (1.32) (0.32)
-----------------------------------------------------------------
Total distributions..................... -- -- -- -- (1.54) (0.77)
-----------------------------------------------------------------
NET ASSET VALUE - END OF PERIOD.............. $13.76 $12.57 $10.50 $8.50 $9.89 $14.59
=================================================================
TOTAL RETURN................................. 9.47%* 19.71% 23.53% (14.05)% (23.94)% 5.06%
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL DATA:
Expenses (net of fee waivers)(1).......... 1.24%** 1.25% 1.23% 1.10% 1.04% 1.10%
Expenses (excluding fee waivers).......... 1.81%** 1.48% N/A N/A N/A N/A
Net investment income..................... 0.49% 0.63% 0.55% 0.08% 0.26% 0.04%
Portfolio turnover rate...................... 9.39% 36.70% 45.93% 31.51% 41.58% 51.99%
Net assets, end of period (in 000's)......... $22,841 $30,040 $50,091 $56,507 $72,007 $101,686
* Total return not annualized.
** Annualized
1 1838 Investment Advisors, LP has voluntarily agreed to waive its fees
and/or reimbuse the Fund so the total operating expenses do not exceed
1.25% of average daily net assets.
See notes to financial statements.
15
1838 INVESTMENT ADVISORS FUNDS
FINANCIAL HIGHLIGHTS -- CONTINUED
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each fiscal year or period and other performance information derived from the
financial statements. It should be read in conjuction with the financial
statements and notes thereto.
FIXED INCOME FUND
FOR THE
SIX-MONTH
PERIOD ENDED FOR THE FISCAL YEARS ENDED OCTOBER 31,
APRIL 30, 2005 --------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------
NET ASSET VALUE - BEGINNING OF PERIOD....... $9.33 $10.16 $10.11 $10.49 $9.75 $9.81
-----------------------------------------------------------------
INVESTMENT OPERATIONS:
Net investment income(1)................. 0.18 0.39 0.48 0.56 0.61 0.63
Net realized and unrealized gain (loss)
on investments ..................... (0.12) 0.04 0.08 (0.19) 0.75 (0.04)
-----------------------------------------------------------------
Total from investment operations(1)... 0.06 0.43 0.56 0.37 1.36 0.59
-----------------------------------------------------------------
DISTRIBUTIONS:
From net investment income............... (0.18) (0.42) (0.45) (0.56) (0.62) (0.65)
From net short-term realized gain on
investments......................... (0.07) (0.43) -- (0.16) -- --
From net long-term realized gain on
investments........................... (0.25) (0.41) (0.06) (0.03) -- --
-----------------------------------------------------------------
Total distributions................... (0.50) (1.26) (0.51) (0.75) (0.62) (0.65)
-----------------------------------------------------------------
NET ASSET VALUE - END OF PERIOD............. $8.89 $9.33 $10.16 $10.11 $10.49 $9.75
=================================================================
TOTAL RETURN................................ 0.62%* 4.63% 5.67% 3.86% 14.36% 6.33%
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL DATA:
Expenses (net of fee waivers)(2)......... 0.60%** 0.60% 0.60% 0.60% 0.60% 0.60%
Expenses (excluding fee waivers)......... 1.80%** 1.25% 0.84% 0.74% 0.70% 0.75%
Net investment income1 .................. 4.06%** 4.11% 4.59% 5.58% 6.09% 6.57%
Portfolio turnover rate..................... 13.85% 82.95% 234.92% 205.61% 199.43% 361.63%
Net assets, end of period (in 000's)........ $16,062 $19,534 $40,209 $89,734 $128,671 $152,319
* Total return not annualized.
** Annualized
1 Effective November 1, 2001, the Fixed Income Fund adopted the required
provisions of the AICPA Audit and Accounting Guide for Investment Companies.
The effect of this change for the year ended October 31, 2002 was to increase
net investment income per share by $0.01, decrease net realized and
unrealized gains and losses per share by $0.01 and increase the ratio of net
investment income to average net assets by 0.09%. Per share ratios and
supplemental data prior to November 1, 2001 have not been restated to reflect
this change in accounting principle.
2 1838 Investment Advisors, LP has voluntarily agreed to waive its fees and/or
reimburse the Fund so the total operating expenses do not exceed 0.60% of
average daily net assets.
See notes to financial statements.
16
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) APRIL 30, 2005
- --------------------------------------------------------------------------------
NOTE 1 -- DESCRIPTION OF THE FUNDS
The 1838 Investment Advisors Funds (the "Trust") was organized as a Delaware
series business trust on December 9, 1994, and is an open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Trust's Agreement and Declaration of Trust permits
the Trustees to issue an unlimited number of shares of beneficial interest. The
Trust currently consists of two Funds: the 1838 International Equity Fund and
the 1838 Fixed Income Fund (each a "Fund" and collectively, the "Funds"). The
investment objectives of each Fund are set forth below.
The 1838 International Equity Fund (the "International Fund") commenced
operations on August 3, 1995. The Fund's investment objective is capital
appreciation, with a secondary objective of income. The Fund seeks to achieve
its objective by investing at least 80% of its total assets in a diversified
portfolio of equity securities of issuers located in countries other than the
United States.
The 1838 Fixed Income Fund (the "Fixed Income Fund") commenced operations on
September 2, 1997. The Fund's investment objective is maximum current income,
with a secondary objective of growth. The Fund seeks to achieve its objective by
investing, under normal circumstances, at least 80% of its assets in a
diversified portfolio of fixed income securities.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION. Each Fund's securities, except investments with remaining
maturities of 60 days or less, for which representative market quotations are
available will be valued at the last sale price or official closing price
(closing bid price or last evaluated quote if no sale has occurred) on the
security's principal market or exchange on which it trades. 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. If market quotations or
official closing prices are not readily available or do not accurately reflect
fair value for a security or if a security's value has been materially affected
by events occurring after the close of the exchange or market on which the
security is principally traded (for example, a foreign exchange or market), but
prior to the NAV calculation, then that security may be valued by another method
that the Board of Trustees believes accurately reflects fair value. Securities
for which market quotations are not readily available and all other assets will
be valued at their respective fair value as determined in good faith by, or
under procedures established by the Board of Trustees. In determining fair
value, the Trustees may employ an independent pricing service. As of April 30,
2005, there were no securities valued by, or under procedures established by,
the Board of Trustees.
FEDERAL INCOME TAXES. Each Fund is treated as a separate entity and intends to
remain qualified as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986 and to distribute all of its taxable income to its
shareholders. Therefore, no federal income or excise tax provision is required.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the International Fund
are maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, assets and liabilities at the
daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The International Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the International Fund's books, and the
U.S.
17
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)-- CONTINUED APRIL 30, 2005
- --------------------------------------------------------------------------------
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities, other than investments in securities, resulting from changes in
exchange rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
International Fund may enter into forward foreign currency exchange contracts
("FFCEC"). Additionally, the International Fund may enter into these contracts
to hedge certain foreign currency assets. Foreign currency exchange contracts
are recorded at fair value. Certain risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts. Realized gains or losses arising from such transactions are
included in net realized gain (loss) from foreign currency transactions. There
were no FFCEC to hedge foreign currency assets outstanding at April 30, 2005.
TRANSFERS IN-KIND. Shareholders may periodically contribute marketable
securities to a respective Fund, upon approval of the Fund's management, in
exchange for capital shares of the respective Fund. The exchange is conducted on
a taxable basis, whereby any unrealized appreciation or depreciation on the
marketable securities on the date of transfer is recognized by the shareholder
and the Fund's basis in the securities is the market value as of the date of
transfer. The number of shares issued to the shareholder is calculated by
dividing the market value of the marketable securities, determined using the
last quoted sales price on the security's principal exchange on that day, by the
current net asset value per share of the respective Fund on the date of
transfer.
DISTRIBUTIONS TO SHAREHOLDERS AND BOOK/TAX DIFFERENCES. The Fixed Income Fund
distributes net investment income monthly. All other distributions by the Funds
will be made annually in December. Additional distributions may be made by each
Fund to the extent necessary. Distributions of net investment income and net
realized gains are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles in the United States of
America ("GAAP"). These differences are primarily due to differing treatments of
gains or losses on foreign currency transactions and losses deferred due to wash
sales. Net investment income, short-term gains and foreign currency gains are
taxed as ordinary income and long-term gains are taxed as capital gains.
Distributions during the fiscal year ended October 31, 2004 were characterized
as follows for tax purposes:
ORDINARY CAPITAL TOTAL
FUND INCOME GAIN DISTRIBUTION
---- ----------- ----------- -----------
International Fund......... -- -- --
Fixed Income Fund.......... $2,499,841 $1,316,635 $3,816,476
Distributions during the fiscal year ended October 31, 2003 were characterized
as follows for tax purposes:
ORDINARY CAPITAL TOTAL
FUND INCOME GAIN DISTRIBUTION
----- ----------- ----------- -----------
International Fund......... -- -- --
Fixed Income Fund.......... $2,846,887 $499,526 $3,346,413
At October 31, 2004, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED
UNDISTRIBUTED LONG TERM CAPITAL LOSS UNREALIZED
FUND ORDINARY INCOME CAPITAL GAIN CARRYFORWARD APPRECIATION
---- --------------- ------------ ------------ ------------
International Fund....................... $ -- $ -- $(11,090,458) $6,816,571
Fixed Income Fund........................ 128,629 460,538 -- 414,018
18
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)-- CONTINUED APRIL 30, 2005
- --------------------------------------------------------------------------------
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
As of October 31, 2004, the following table shows the capital loss carryovers
available to offset possible future capital gains for the following Funds:
FUND AMOUNT EXPIRATION DATE
---- ----------- ---------------
International Fund.............. $6,950,076 10/31/2010
4,140,382 10/31/2011
At October 31, 2004, the following table shows for federal tax purposes the
aggregate cost of investments, the net unrealized appreciation/(depreciation) of
those investments, the aggregate gross unrealized appreciation of all securities
with an excess of market value over tax cost and the aggregate gross unrealized
depreciation of all securities with an excess of tax cost over market value.
NET UNREALIZED GROSS GROSS
AGGREGATE APPRECIATION/ UNREALIZED UNREALIZED
FUND TAX COST (DEPRECIATION) APPRECIATION DEPRECIATION
----------- ----------- ------------ ------------ ------------
International Fund.................. $23,220,543 $6,785,720 $7,342,257 $556,537
Fixed Income Fund................... 19,176,955 414,018 447,861 33,843
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that may affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
OTHER. Investment security transactions are accounted for on a trade date basis.
The specific identification method is utilized for determining realized gain or
loss on investments for both financial and federal income tax reporting
purposes. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on an accrual basis.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES
During the period ended April 30, 2005, purchases and sales of investment
securities, other than short-term investments, were as follows:
INTERNATIONAL FIXED INCOME
FUND FUND
------------ -------------
Purchases......................... $2,750,926 $2,279,306
Sales............................. 9,437,865 4,949,634
Purchases, sales and maturities of U.S. Government securities, during the period
ended April 30, 2005, were as follows:
INTERNATIONAL FIXED INCOME
FUND FUND
------------ -------------
Purchases......................... $ -- $1,378,431
Sales............................. -- 1,500,500
19
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)-- CONTINUED APRIL 30, 2005
- --------------------------------------------------------------------------------
NOTE 4 -- ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust, on behalf of each Fund, employs 1838 Investment Advisors, LP (the
"Investment Advisor"), a registered investment adviser under the 1940 Act, to
furnish investment advisory services to the Funds pursuant to an Investment
Advisory Agreement with the Trust. The Investment Advisor supervises the
investment of the assets of the Funds in accordance with each Fund's investment
objective, policies and restrictions.
The Trust pays the Investment Advisor a monthly fee at the following annual
rates of each Fund's average daily net assets: 0.75% for the International Fund
and 0.50% for the Fixed Income Fund. The Investment Advisor has voluntarily
agreed to waive its advisory fee and/or reimburse each Fund monthly to the
extent that the total operating expenses (excluding taxes, extraordinary
expenses, brokerage commissions and interest) will exceed the following annual
rates of each Fund's average daily net assets: 1.25% for the International Fund
and 0.60% for the Fixed Income Fund. This undertaking may be rescinded at any
time in the future.
MBIA CMC acts as sub-adviser to the 1838 Fixed Income Fund. Pursuant to a
sub-advisory agreement with the Investment Adviser, MBIA CMC receives a monthly
fee at an annual rate of 0.05% of the Fixed Income Fund's net asset value at the
end of each month.
The following table summarizes the advisory fees incurred by the Funds for the
period ended April 30, 2005:
GROSS ADVISORY FEE NET ADVISOR
ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENT
------------ ------------ ------------ -------------
International Fund.............. $110,659 $83,788 $26,871 $ 0
Fixed Income Fund............... 42,214 42,214 -- 60,090
MBIA Municipal Investors Services Corporation ("MBIA MISC"), a direct,
wholly-owned subsidiary of MBIA, Inc., serves as Administrator to the Trust
pursuant to an Administration Agreement with the Trust on behalf of each Fund.
As Administrator, MBIA MISC is responsible for services such as financial
reporting, compliance monitoring and corporate management. The Trust MBIA MISC
pays a monthly asset-based fee at the annual rate of 0.06% of each Fund's
average daily net assets, with a minimum annual fee per Fund of $15,000. For the
period ended April 30, 2005, administration fees amounted to $8,742 and $7,438,
for the International Fund and the Fixed Income Fund, respectively.
MBIA Municipal Investors Services Corporation ("MBIA MISC"), a direct,
wholly-owned subsidiary of MBIA, Inc., serves as Accounting Agent to the Trust.
As Accounting Agent, MBIA MISC determines each Fund's net asset value per share
and provides accounting services to the Funds pursuant to an Accounting Services
Agreement with the Trust. The Trust pays MBIA MISC a monthly asset-based fee at
the annual rate of $40,000, plus 0.03% of the Fund's average daily net assets in
excess of $50 million for the Fixed Income Fund. For the International Fund the
Trust pays at the annual rate of $60,000, plus 0.03% of average daily net assets
in excess of $50 million. For the period ended April 30, 2005, MBIA MISC's
accounting fees amounted to $60,059 and $40,009 for the International Fund and
the Fixed Income Fund, respectively.
MBIA MISC also serves as the Fund's transfer agent pursuant to a Transfer Agency
Agreement with the Trust. For these services, MBIA MISC receives an annual fee
per Fund of $20,000, and is reimbursed for out-of-pocket expenses. For the
period ended April 30, 2005, MBIA MISC's transfer agent fees amounted to $9,862
for each Fund.
MBIA Capital Management Corporation (the "distributor"), a direct, wholly-owned
subsidiary of MBIA, Inc., entered into a Distribution Agreement with the Trust
to assist in securing purchasers for shares of each Fund. The distributor also
directly or through its affiliates, provides investor support services. The
distributor receives no compensation for distributing the Funds' shares, except
for reimbursement of its out-of-pocket expenses.
The Trustees of the Trust who are "interested persons" of the Trust, the
Investment Advisor or its affiliates and all personnel of the Trust or the
Investment Advisor performing services related to research, statistical and
investment activities are paid by the Investment Advisor or its affiliates.
20
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)-- CONTINUED APRIL 30, 2005
- --------------------------------------------------------------------------------
NOTE 5 -- FUND SHARE TRANSACTIONS
At April 30, 2005, there were an unlimited number of shares of beneficial
interest with a $0.001 par value, authorized. The following table summarizes the
activity in shares of each Fund:
INTERNATIONAL FUND
FOR THE SIX-MONTH PERIOD FOR THE FISCAL YEAR
ENDED APRIL 30, 2005 ENDED OCTOBER 31, 2004
------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- ------------
Shares sold..................................... 275,916 $3,875,060 250,288 $2,908,449
Shares redeemed................................. (1,006,782) (14,534,561) (2,628,487) (30,770,207)
---------- ------------ ---------- ------------
Net increase................................... (730,866) $(10,659,501) (2,378,199) $(27,861,758)
============ ============
Shares outstanding:
Beginning of year....................... 2,390,436 4,768,635
---------- ----------
End of period.......................... 1,659,570 2,390,436
========== ==========
FIXED INCOME FUND
FOR THE SIX-MONTH PERIOD FOR THE FISCAL YEAR
ENDED APRIL 30, 2005 ENDED OCTOBER 31, 2004
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- ------------
Shares sold..................................... 12,152 $108,496 254,198 $2,422,201
Shares issued to shareholders in reinvestment
of distributions............................. 86,869 782,304 360,135 3,379,515
Shares redeemed................................. (384,924) (3,528,882) (2,476,839) (23,907,622)
---------- ------------ ---------- ------------
Net decrease................................... (285,903) ($2,638,082) (1,862,506) $(18,105,906)
============ ============
Shares outstanding:
Beginning of year....................... 2,093,240 3,955,746
---------- ----------
End of period.......................... 1,807,337 2,093,240
========== ==========
NOTE 6 -- CONCENTRATION OF RISKS
The International Fund invests in securities of foreign issuers in various
countries. These investments may involve certain considerations and risks not
typically associated with investments in the U.S., as a result of, among other
factors, the possibility of future political and economical developments and the
level of government supervision and regulation of securities markets in the
various countries.
NOTE 7 - POSSIBLE LIQUIDATION OF THE 1838 FIXED INCOME FUND
At a meeting held on June 13, 2005, the Board of Trustees of the Trust
unanimously determined that the 1838 Fixed Income Fund was not economically
viable and directed the orderly liquidation of its investments in order to meet
redemption requests. The Board also requested the Fund's officers to develop a
plan of liquidation.
21
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INVESTMENT ADVISER
AND ADMINISTRATOR
----------
1838 INVESTMENT ADVISORS, LLC
2701 RENAISSANCE BOULEVARD
FOURTH FLOOR
KING OF PRUSSIA, PA 19406
SUB-ADVISER
AND
DISTRIBUTOR
----------
MBIA CAPITAL MANAGEMENT CORPORATION
113 KING STREET
ARMONK, NY 10504
ACCOUNTING AND
TRANSFER AGENT
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MBIA MUNICIPAL INVESTORS SERVICE CORPORATION
113 KING STREET
ARMONK, NY 10504
CUSTODIAN
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WACHOVIA NATIONAL BANK
123 S. BROAD STREET
PHILADELPHIA, PA 19109
LEGAL COUNSEL
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PEPPER HAMILTON LLP
3000 TWO LOGAN SQUARE
EIGHTEENTH & ARCH STREETS
PHILADELPHIA, PA 19103
AUDITORS
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TAIT, WELLER & BAKER
1818 MARKET STREET
SUITE 2400
PHILADELPHIA, PA 19103
SAR 4/05
ITEM 2. CODE OF ETHICS.
Applicable only to an annual filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Applicable only to an annual filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Applicable only to an annual filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Applicable only to an annual filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
Attached as part of ITEM 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Applicable only to Closed-End Management Investment Companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No material changes.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive officer and principal financial
officer have evaluated the Registrant's disclosure controls and procedures
within 90 days of this filing and have concluded that the Registrant's
disclosure controls and procedures are effective, as of a date, in ensuring
that information required to be disclosed by the registrant in this
Form N-CSR was recorded, processed, summarized, and reported timely.
(b) The Registrant's principal executive officer and principal financial
officer are aware of no changes in the Registrant's internal control over
financial reporting that occurred during the Registrant's most recent fiscal
half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) Not applicable.
(b) Certifications.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
1838 Investment Advisors Funds
BY: /s/ Hans van den Berg
----------------------
Hans van den Berg
President
Date: July 8, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
BY: /s/ Hans van den Berg
------------------------------
Hans van den Berg
President
(Principal Executive Officer)
Date: July 8, 2005
BY: /s/ Daniel N. Mullen
-----------------------------
Daniel N. Mullen
Secretary and Treasurer
(Principal Financial Officer)
Date: July 8, 2005