MANHATTAN BOND FUND, INC.

15 EXCHANGE PLACE

JERSEY city, N. J.
 

TO OUR SHAREHOLDERS:

We are pleased to submit herewith a report on the operations of your
Corporation for the fiscal year ended January 31, 1941. On pages 5 to 7,
inclusive, will be found a balance sheet and list of bonds owned by the Cor¬
poration as at January 31, 1941, together with statement of profit and loss
and surplus accounts for the annual period ended on that date, all as certified
by Messrs. Prankard & Zimmermann, Certified Public Accountants.

The twelve months covered by this report represent a period of generally
rising industrial activity under the stimulus of foreign war orders and the
defense program. It was also a period of increased gross earnings for most
corporations and, in the majority of instances, of increased net earnings even
after provision for higher normal income tax rates and excess profits taxes.
While showing strongly divergent trends as between individual issues as well
as between various industrial classifications, the securities market generally
failed to reflect this improvement in business and earnings. Bonds of the
character of those held by your Corporation, however, did respond to the
expansion of business. Such bonds showed an over-all advance for the period,
reflecting recognition by investors of the fact that bond interest constitutes a
charge against earnings prior to corporate income and excess profits taxes,
and the further fact that increased earnings naturally provide improved cov¬
erage of bond interest requirements.

The net asset value per share of Capital Stock of your Corporation on
January 31, 1941 was $7.07 compared with $6.66 per share a year earlier or
a net gain of 6.16% contrasted with a decline of 16.41% in the Standard
Statistics Ninety Stock Price Index during the same period. This gain in
asset value was recorded alter distribution to shareholders totalling 45^ per
share. Of these distributions 41^ were derived from the "ordinary distribu¬
tion account" or, in other words, represented primarily bond interest received
less expenses. The remaining 4^ per share was paid from the "extraordinary
distribution account," representing net profits realized on bonds sold out of
the portfolio. The total payments were equivalent to a yield of 6.4% on
asset value per share as of the closing day of the fiscal year.