-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ItR4YTGqojMujwciTKLymOwifRJctGIgHE3cOtoiMh2kbKC7hYKC9iMtbIymS37n EKNs2Ca8qh86S8tcslQJdA== 0000009521-03-000006.txt : 20030630 0000009521-03-000006.hdr.sgml : 20030630 20030630131229 ACCESSION NUMBER: 0000009521-03-000006 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030430 FILED AS OF DATE: 20030630 EFFECTIVENESS DATE: 20030630 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANCROFT CONVERTIBLE FUND INC CENTRAL INDEX KEY: 0000009521 IRS NUMBER: 042476994 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-02151 FILM NUMBER: 03763418 BUSINESS ADDRESS: STREET 1: 65 MADISON AVENUE STREET 2: SUITE 550 CITY: MORRISTOWN STATE: NJ ZIP: 07960 BUSINESS PHONE: (973) 631-1177 MAIL ADDRESS: STREET 1: 65 MADISON AVENUE STREET 2: SUITE 550 CITY: MORRISTOWN STATE: NJ ZIP: 07960 N-CSR 1 b0403ncsr.txt N-CSR 1 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: 811-2151 -------------------------------------------- BANCROFT CONVERTIBLE FUND, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 65 Madison Avenue, Morristown, New Jersey 07960-7308 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Thomas H. Dinsmore Bancroft Convertible Fund, Inc. 65 Madison Avenue Morristown, New Jersey 07960-7308 (Name and address of agent for service) Copy to: Martha J. Hays, Esq. Ballard Spahr Andrews & Ingersoll, LLP 1735 Market Street Philadelphia, PA 19103-7599 Registrant's telephone number, including area code: 973-631-1177 Date of fiscal year end: October 31, 2003 Date of reporting period: April 30, 2003 2 ITEM 1. REPORTS TO STOCKHOLDERS. [N-30D] Bancroft Convertible Fund [GRAPHIC OMITTED] BANCROFT LOGO 2003 Semi-Annual Report April 30, 2003 3 Bancroft Convertible Fund, Inc. (the "Fund") operates as a closed-end, diversified management investment company and invests primarily in convertible securities, with the objectives of providing income and the potential for capital appreciation -- which objectives the Fund considers to be relatively equal, over the long-term, due to the nature of the securities in which it invests. Highlights
Performance through April 30, 2003 with dividends reinvested 4 Months 1 Year 5 Years 10 Years -------- ------- ------- -------- Bancroft market value (a) .................... 8.20% 5.06% 20.56% 187.28% Bancroft net asset value (b) ................. 5.52 (1.56) 13.12 135.27 Closed-end Convertible Fund Average (b) ...... 7.52 (4.97) 7.90 108.03 S&P 500 (a) .................................. 4.83 (13.31) (11.54) 151.30 Russell 2000 (a) ............................. 4.57 (20.75) (11.35) 79.04(c) Lehman Aggregate Bond Total Return Index (b) . 2.23 10.47 44.07 101.19
Performance data represent past results and do not reflect future performance. (a) From Bloomberg L.P. pricing service. (b) From Lipper, Inc. Closed-End Fund Performance Analysis, dated April 30, 2003. (c) Simple appreciation of index. - --------------------------------------------------------------------------------
Quarterly History of NAV and Market Price Net Asset Values Market Prices (AMEX, symbol BCV) Qtr. Ended High Low Close High Low Close - ---------- ------ ------ ------ ------ ------ ------ Jul. 02 $20.86 $18.02 $18.71 $19.50 $16.50 $17.04 Oct. 02 19.11 17.82 18.55 18.40 17.05 17.54 Jan. 03 19.21 17.58 18.80 19.20 17.53 18.41 Apr. 03 19.55 18.17 19.55 19.25 17.68 18.95
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Dividend Distributions (12 Months) Record Payment Capital Date Date Income Gains Total - -------- -------- ------ ------- ------ 6/13/02 6/27/02 $0.180 --- $0.180 9/13/02 9/27/02 0.180 --- 0.180 11/29/02 12/27/02 0.231 --- 0.231 3/14/03 3/28/03 0.180 --- 0.180 ------ ------- ------ $0.771 --- $0.771 ====== ======= ======
4 TO OUR SHAREHOLDERS With the passage of a stimulative tax cut package and the upward movement of the stock market the economic slowdown of the past few years should be coming to an end. The decline in stock prices that began in March 2000 took the S&P 500 Index which was over 1500, to under 800 three times, the last in March 2003. Since then, the S&P 500 has moved up to near 1000. Historically, advances of this magnitude (roughly 25%) signal that a pick up in economic activity is near. If indeed the economy picks up as we expect, then the growth that should occur in corporate earnings should help the stock market to advance further. This may also signal the end of the rise in bond prices that we have seen since January 2000. Current economic conditions have affected the convertible securities markets. The low interest rate environment has reduced the rates paid on new issues of convertibles and, generally, the convertible market has become more interest rate sensitive and less equity sensitive. Since we believe that there is a significant probability of an interest rate rise as economic activity picks up, we have sought to reduce interest rate risk by buying convertibles that have relatively short maturities or that have "put" features that allow us to sell the bonds back to the issuer at a set price. We have also sought to increase the equity sensitivity of the portfolio by purchasing convertible issues known as "mandatories." These issues automatically convert to common stock upon maturity. A basic premise under which the Fund operates is that convertible securities can offer equity-like performance with less volatility over complete market cycles. As indicated on the chart on the facing Highlights page, the Fund's net asset and market values outperformed the Closed-end Convertible Fund average and the Russell 2000 Index for the one year, five year and ten year periods ended April 30, 2003. The Fund also outperformed the S&P 500 Index for the one year and five year periods ended April 30, 2003. We believe that past outperformance of these important indices and of our peer category, while no guarantee of future returns, is an historical validation of this premise. The Fund's website (www.bancroftfund.com) contains press releases, dividend information and daily net asset values. The Closed-End Fund Association (www.cefa.com), of which the Fund is a member, is another source of information on many closed-end funds.* Based upon data through May 31, 2003, Morningstar ** has continued to rate the Fund's performance at four stars (above average) overall as measured on the "Quicktake Report" on their website. In addition, shareholders who wish to obtain a copy of the most recent report on the Fund issued by Standard and Poor's should contact us. The results of the 2003 annual shareholders' meeting are shown in the Miscellaneous Notes section of this report. Thank you for your support. At its May meeting the Board of Directors declared a dividend of 16 cents per share. The dividend consists of undistributed net investment income. This dividend will be payable on June 27, 2003 to shareholders of record on June 13, 2003. _/s/Thomas H. Dinsmore________ Thomas H. Dinsmore Chairman of the Board June 12, 2003 * The Closed-End Fund Association is solely responsible for the content of its website. ** Morningstar is a mutual fund analysis and statistical reporting service that reports on and rates most mutual funds. It is solely responsible for the content of its website. 5
Largest Investment Holdings by underlying common stock Value % Total (Note 1) Net Assets ----------- ---------- Washington Mutual, Inc.......................................$ 2,576,250 2.8% A financial services company that provides a diversified line of products and services to consumers and small to mid-sized businesses. Offshore Logistics, Inc...................................... 2,317,500 2.5 Provides helicopter transportation services to the offshore oil and gas industry. The Company offers transportation services in oil and gas producing regions around the world. New York Community Bancorp, Inc.............................. 2,292,500 2.5 A holding company for New York Community Bank, a thrift, that operates through divisional banks in New York and New Jersey. Commerce Bancorp, Inc........................................ 2,207,500 2.4 A multi-bank holding company with subsidiaries in New York, New Jersey, Delaware and Pennsylvania. The banks provide retail and commercial banking services and products. Reinsurance Group of America, Inc............................ 2,010,000 2.2 An insurance holding company that is engaged in traditional life reinsurance in the United States, Canada and various international markets. The Company also provides reinsurance of asset-intensive products and financial reinsurance. Travelers Property Casualty Corp............................. 1,940,000 2.1 Provides a broad range of insurance products and services for the commercial and consumer markets. Anixter International, Inc................................... 1,870,313 2.0 Distributes communications and specialty wire and cable products. Also distributes wiring systems for voice, data, and video networks and electrical power applications. Capital One Financial Corp................................... 1,849,000 2.0 Through its subsidiaries, provides credit card products, certain consumer lending, and deposit services. Johnson & Johnson............................................ 1,590,000 1.7 Manufactures health care products and provides related services for the consumer, pharmaceutical, and medical devices and diagnostics markets. (exchangeable from Alza Corp. 0% due 2020) Affiliated Computer Services, Inc............................ 1,578,000 1.7 Provides a variety of business services including business process outsourcing, electronic commerce, technology outsourcing, and professional and systems integration services. ----------- ---------- Total........................................................$20,230,763 21.9% =========== ==========
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Major Industry Exposure % Total Net Assets ---------- Financial & Insurance...... 11.0% Banking/Savings & Loan..... 10.3 Retail..................... 8.4 Energy..................... 8.2 Technology................. 8.0 Pharmaceuticals............ 7.6 Aerospace & Defense........ 5.9 Health Care................ 5.2 Entertainment.............. 4.2 Telecommunications......... 3.8 ---------- Total...................... 72.6% ==========
Major Portfolio Changes Six months ended April 30, 2003 ADDITIONS REDUCTIONS British Sky Broadcasting Group plc American Express Company (exchangeable from News Corp. (exchangeable from Exchange Finance Trust II) Certificates Corp.) The Chubb Corp. British Sky Broadcasting Group plc (exchangeable from News Corp. Commerce Bancorp, Inc. Finance Trust II) (exchangeable from Commerce Capital Trust II) GATX Corp. General Mills, Inc. General Electric Corp. (exchangeable from Credit Suisse New York Community Bancorp, Inc. First Boston Corp.) Offshore Logistics, Inc. General Mills, Inc. ONEOK, Inc. GenCorp, Inc. Radio One, Inc. Lehman Brothers Holdings, Inc. (based on the value of the 10 Uncommon Robbins & Myers, Inc. Values Index) Siebel Systems, Inc. Microsoft Corp. (exchangeable from Credit Suisse State Street Corp. First Boston Corp.) Teva Pharmaceuticals Ltd. Telecom Corp. of New Zealand (exchangeable from Teva Pharm. (exchangeable from Bell Atlantic Finance B.V.) Financial Services, Inc.) Travelers Property Casualty Corp. Telecom Italia S.p.A (exchangeable from Tecnost Verizon Communications, Inc. International, N.V.) (exchangeable from The Goldman Sachs Group, Inc.)
7
Statement of Assets and Liabilities (unaudited) April 30, 2003 -------------- Assets: Investments at value (Cost $92,555,676)(Note 1)............................... $91,730,631 Cash......................................................... 101,862 Dividends and interest receivable............................ 541,224 Other assets................................................. 39,014 ----------- Total assets................................................. 92,412,731 ----------- Liabilities: Accrued management fee(Note 2)............................... 8,547 Accrued expenses............................................. 10,213 ----------- Total liabilities............................................ 18,760 ----------- Net Assets.................................................... $92,393,971 =========== Net assets consist of: Undistributed net investment income.......................... $ 415,707 Accumulated net realized loss from investment transactions... (8,600,241) Unrealized depreciation on investments....................... (825,045) Capital shares (Note 3)...................................... 47,255 Additional paid-in capital................................... 101,356,295 ----------- Net Assets.................................................... $92,393,971 =========== Net asset value per share ($92,393,971/4,725,858 outstanding shares)....................................... $ 19.55 ===========
Statement of Operations (unaudited) Six Months Ended April 30, 2003 Investment Income (Note 1): Interest..................................................... $ 915,816 Dividends.................................................... 896,729 ----------- Total Income............................................... 1,812,545 ----------- Expenses (Note 2): Management fee............................................... 331,292 Custodian.................................................... 11,453 Transfer agent............................................... 15,524 Professional fees............................................ 42,863 Directors' fees.............................................. 53,100 Reports to shareholders...................................... 22,755 Treasurer's office........................................... 12,500 Other........................................................ 37,668 ----------- Total Expenses............................................ 527,155 ----------- Net Investment Income......................................... 1,285,390 ----------- Realized and Unrealized Gain on Investments: Net realized loss from investment transactions............... (793,963) Net unrealized appreciation of investments................... 6,188,006 ----------- Net gain on investments...................................... 5,394,043 ----------- Net Increase in Net Assets Resulting from Operations.......... $ 6,679,433 ===========
See accompanying notes to financial statements. 8
Statement of Changes in Net Assets Six Months Year Ended Ended October 31, April 30, 2003(a) 2002 ----------------- ------------- Change in net assets from operations: Net investment income...................................... $ 1,285,390 $ 3,705,894 Net realized loss from investment transactions............. (793,963) (5,477,832) Net change in appreciation of investments.................. 6,188,006 (3,974,229) ----------- ----------- Net change in net assets resulting from operations...... 6,679,433 (5,746,167) ----------- ----------- Dividends to shareholders from: Net investment income...................................... (1,932,767) (4,381,151) ----------- ----------- Capital share transactions (Note 3).......................... 742,900 1,168,112 ----------- ----------- Change in net assets......................................... 5,489,566 (8,959,206) ----------- ----------- Net assets at beginning of period............................ 86,904,405 95,863,611 ----------- ----------- Net assets at end of period (including undistributed net investment income of $415,707 and $1,077,927, respectively) $92,393,971 $86,904,405 =========== ===========
Financial Highlights Selected data for a share of common stock outstanding: Six Months Ended Years Ended October 31, April 30, ------------------------------------------ 2003(a) 2002 2001 2000 1999 1998 ---------- ------- ------- -------- -------- ------- Operating Performance: Net asset value, beginning of period. $18.55 $20.72 $27.09 $27.35 $26.89 $30.48 ------- ------- ------- -------- -------- ------- Net investment income................ 0.27 0.79 1.07 1.04 0.78 0.87 Net realized and unrealized gain (loss).............................. 1.14 (2.02) (3.23) 2.29 3.40 (0.01) ------- ------- ------- -------- -------- ------- Total from investment operations... 1.41 (1.23) (2.16) 3.33 4.18 (0.86) Less Distributions: Dividends from net investment income. (0.41) (0.94) (1.11) (0.80) (0.78) (0.88) Distributions from realized gains.... --- --- (3.10) (2.90) (2.94) (3.57) ------- ------- ------- -------- -------- ------- Total distributions................ (0.41) (0.94) (4.21) (3.70) (3.72) (4.45) Capital share repurchases............ --- --- --- 0.11 --- --- ------- ------- ------- -------- -------- ------- Net asset value, end of period....... $19.55 $18.55 $20.72 $27.09 $27.35 $26.89 ======= ======= ======= ======== ======== ======= Market value, end of period.......... $18.95 $17.54 $18.75 $22.63 $22.25 $26.75 Total Net Asset Value Return (%)(b).. 7.71 (6.29) (8.68) 13.62 16.36 3.16 Total Investment Return (%)(c)....... 10.50 (1.82) 1.31 20.63 (2.96) 18.17 Ratios/Supplemental Data: Net assets, end of period (in thousands)...................... $92,394 $86,904 $95,864 $111,336 $103,791 $93,433 Ratio of expenses to average net assets (%).......................... 1.2(d) 1.2 1.1 1.1 1.1 1.1 Ratio of net investment income to average net assets (%)............. 2.9(d) 4.0 4.9 3.8 3.0 3.1 Portfolio turnover rate (%).......... 39 78 83 93 72 55
(a)Unaudited. (b)Assumes valuation of the Fund's shares, and reinvestment of dividends, at net asset values. (c)Assumes valuation of the Fund's shares at market price and reinvestment of dividends at actual reinvestment price. (d)Annualized. See accompanying notes to financial statements. 9
Portfolio of Investments April 30, 2003 (unaudited) Principal Amount Value or Shares (Note 1) - ---------- ----------- ADVERTISING -- 3.3% $1,550,000 The Interpublic Group Cos., Inc. 1.80% 2004 cv. sub. notes (NR).............$ 1,470,563 1,600,000 WPP Group plc 3% 2005 cv. sub. notes (Baa2)................................. 1,564,000 ----------- 3,034,563 ----------- AEROSPACE & DEFENSE -- 5.9% 1,500,000 The Goldman Sachs Group, Inc. 1.00% 2009 exch. equity-linked notes * (Aa3) (exch. for General Dynamics Corp. common stock)............................. 1,348,995 750,000 L-3 Communications Holdings, Inc. 5.25% 2009 cv. sr. sub. notes 144A (Ba3).. 914,063 450,000 L-3 Communications Holdings, Inc. 5.25% 2009 cv. sr. sub. notes (Ba3)....... 548,438 15,000 shs Northrop Grumman Corp. 7.25% equity units *,** (NR)......................... 1,533,750 20,000 shs RC Trust I 8.25% equity security units *,** (BB) (exch. for Raytheon Co. class B common stock)............................... 1,076,000 ----------- 5,421,246 ----------- AUTOMOTIVE -- 3.2% 20,000 shs Ford Motor Co. Capital Trust II 6.50% cv. pfd. (Baa2) (exch. for Ford Motor Co. common stock)..................................... 875,000 40,500 shs General Motors Corp. series B cv. sr. deb. (A3)............................. 962,685 2,500,000 Lear Corp. 0% 2022 cv. sr. notes 144A (Ba1)................................. 1,148,438 ----------- 2,986,123 ----------- BANKING/SAVINGS & LOAN -- 10.3% 20,000 shs Commerce Capital Trust II 5.95% cv. trust pfd. 144A (Baa1) (exch. for Commerce Bancorp, Inc. common stock)............................. 1,103,750 20,000 shs Commerce Capital Trust II 5.95% cv. trust pfd. (Baa1) (exch. for Commerce Bancorp, Inc. common stock)............................. 1,103,750 40,000 shs National Australia Bank Ltd. 7.875% exch. capital units (NR)................ 1,460,000 40,000 shs New York Community Bancorp, Inc. 6% BONUSES units (Ba1)..................... 2,292,200 5,000 shs State Street Corp. 6.75% treasury backed ACES ** (NR)....................... 948,125 35,000 shs Washington Mutual Capital Trust PIERS units 144A (Baa1) (exch. for Washington Mutual, Inc. common stock)............................ 2,003,750 10,000 shs Washington Mutual Capital Trust PIERS units (Baa1) (exch. for Washington Mutual, Inc. common stock)............................ 572,500 ----------- 9,484,075 ----------- CABLE -- 1.6% 1,000,000 Charter Communications, Inc. 5.75% 2005 cv. sr. notes (Ca).................. 425,000 42,500 shs Equity Securities Trust II 6.25% ** (NR) (exch. for Cablevision Systems Corp. common stock).......................... 1,065,688 ----------- 1,490,688 ----------- CONSUMER GOODS -- 1.3% 16,300 shs Newell Financial Trust I 5.25% (Baa2) (exch. for Newell Rubbermaid, Inc. common stock)............................ 788,676 ----------- DATA-PROCESSING SERVICES -- 1.3% 965,000 The BISYS Group, Inc. 4% 2006 cv. sub. notes 144A (NR)...................... 946,906 285,000 The BISYS Group, Inc. 4% 2006 cv. sub. notes (NR)........................... 279,656 ----------- 1,226,562 -----------
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Portfolio of Investments April 30, 2003 (continued) Principal Amount Value or Shares (Note 1) - ---------- ----------- ENERGY -- 8.2% $ 500,000 Devon Energy Corp. 4.90% 2008 cv. sub. deb. * (Baa2) (conv. into ChevronTexaco Corp. common stock)...............................$ 510,000 1,000,000 Devon Energy Corp. 4.95% 2008 cv. sub. deb. * (Baa2) (conv. into ChevronTexaco Corp. common stock)............................... 1,022,500 1,300,000 Kerr-McGee Corp. 5.25% 2010 cv. sub. deb. (Baa2)............................ 1,394,965 30,000 shs Kerr-McGee Corp. 5.50% 2004 DECS ** (Baa2) (exch. for Devon Energy Corp. common stock)................................. 1,272,600 2,250,000 Offshore Logistics, Inc. 6% 2003 cv. sub. notes (B2)........................ 2,317,500 37,500 shs ONEOK, Inc. 8.50% equity units *,** (Baa1).................................. 1,027,125 ----------- 7,544,690 ----------- ENTERTAINMENT -- 4.2% 22,500 shs Emmis Communications Corp. 6.25% series A cum.cv. pfd. (Caa1)............... 939,375 2,500,000 News America, Inc. 0% 2021 LYONs 144A (Baa3) (exch. for ADSs representing The News Corp. Limited common stock)........... 1,362,500 1,500 shs Radio One, Inc. 6.50% HIGH TIDES (B3)....................................... 1,540,125 ----------- 3,842,000 ----------- FINANCIAL & INSURANCE -- 11.0% 50,000 shs Capital One Financial Corp. 6.25% Upper DECS *,** (Baa3).................... 1,849,000 40,000 shs The Chubb Corp. 7% equity units *,** (NR)................................... 964,000 40,000 shs Platinum Underwriters Holdings, Ltd. 7% equity security units *,** (NR)..... 1,153,200 40,000 shs Reinsurance Group of America, Inc. 5.75% PIERS (Baa2)....................... 2,010,000 1,000,000 Swiss Re America Holding Corp. 3.25% 2021 euro. sub. cv. bonds 144A (Aa1) (conv. into Swiss Reinsurance Company common stock)......................... 928,200 80,000 shs Travelers Property Casualty Corp. 4.50% 2032 cv. jr. sub. notes (A3)........ 1,940,000 1,500,000 XL Capital, Ltd. 0% 2021 cv. deb. 144A * (A1)............................... 963,375 500,000 XL Capital, Ltd. 0% 2021 cv. deb. * (A1).................................... 321,125 ----------- 10,128,900 ----------- HEALTH CARE -- 5.2% 750,000 AmerisourceBergen Corp. 5% 2007 cv. sub. notes 144A (Ba3)................... 988,463 1,000,000 Community Health Systems, Inc. 4.25% 2008 cv. sub. notes (B3)............... 987,600 500,000 LifePoint Hospitals, Inc. 4.50% 2009 cv. sub. notes 144A (B3)............... 469,375 500,000 LifePoint Hospitals, Inc. 4.50% 2009 cv. sub. notes (B3).................... 469,375 1,000,000 Province Healthcare Company 4.25% 2008 cv. sub. notes 144A (B3)............. 870,000 600,000 Sunrise Assisted Living, Inc. 5.25% 2009 cv. sub. notes 144A (B1)........... 636,375 400,000 Sunrise Assisted Living, Inc. 5.25% 2009 cv. sub. notes (B1)................ 424,250 ----------- 4,845,438 ----------- OFFICE EQUIPMENT -- 1.3% 1,250,000 IOS Capital, LLC 5% 2007 cv. sub. notes 144A (Baa3) (exch. for IKON Office Solutions, Inc. common stock)........................ 1,205,625 ----------- PAPER & PAPER PRODUCTS -- 1.3% 25,000 shs Temple-Inland, Inc. 7.50% Upper DECS *,** (Baa3)............................ 1,157,500 -----------
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Portfolio of Investments April 30, 2003 (continued) Principal Amount Value or Shares (Note 1) - ---------- ----------- PHARMACEUTICALS -- 7.6% $2,000,000 Alza Corp. 0% 2020 cv. sub. deb. (Aa1) (exch. for Johnson & Johnson common stock)..................................$ 1,590,000 750,000 Cephalon, Inc. 2.50% 2006 cv. sub. notes 144A (NR).......................... 695,625 750,000 Cephalon, Inc. 2.50% 2006 cv. sub. notes (NR)............................... 695,625 500,000 Gilead Sciences, Inc. 2% 2007 cv. sr. notes 144A (NR)....................... 609,063 1,500,000 Ivax Corp. 5.50% 2007 cv. sr. sub. notes (NR)............................... 1,509,375 800,000 Sepracor, Inc. 7% 2005 cv. sub. deb. 144A (CCC+)............................ 761,000 1,000,000 Teva Pharmaceutical Finance B.V. 0.75% 2021 cv. sub. deb. (BBB-) (exch. for Teva Pharmaceuticals Industries Ltd. ADRs)....................... 1,202,500 ----------- 7,063,188 ----------- RETAIL -- 8.4% 1,028,000 Barnes & Noble, Inc. 5.25% 2009 cv. sub. notes (Ba3)........................ 1,016,435 500,000 Brinker International, Inc. 0% 2021 cv. sr. deb. 144A (Baa2)................ 346,400 750,000 Brinker International, Inc. 0% 2021 cv. sr. deb. (Baa2)..................... 519,600 1,500,000 Charming Shoppes, Inc. 4.75% 2012 sr. cv. notes 144A (B2)................... 1,331,250 250,000 Charming Shoppes, Inc. 4.75% 2012 sr. cv. notes (B2)........................ 221,875 1,750,000 Costco Wholesale Corp. 0% 2017 cv. sub. notes (A3).......................... 1,415,313 1,225,000 Duane Reade, Inc. 2.148% 2022 cv. sr. notes 144A (Ba3)...................... 604,844 525,000 Duane Reade, Inc. 2.148% 2022 cv. sr. notes (Ba3)........................... 259,219 850,000 School Specialty, Inc. 6% 2008 cv. sub. notes 144A (B+)..................... 841,305 250,000 School Specialty, Inc. 6% 2008 cv. sub. notes (B+).......................... 247,443 500,000 Skechers U.S.A., Inc. 4.50% 2007 cv. bonds 144A (NR)........................ 427,500 15,000 shs Toys "R" Us, Inc. 6.25% equity securities units *,** (NR)................... 512,550 ----------- 7,743,734 ----------- TECHNOLOGY -- 8.0% 250,000 Affiliated Computer Services, Inc. 3.50% 2006 cv. sub. notes 144A (Baa2).... 315,600 1,000,000 Affiliated Computer Services, Inc. 3.50% 2006 cv. sub. notes (Baa2)......... 1,262,400 1,250,000 Analog Devices, Inc. 4.75% 2005 cv. sub. notes 144A (Baa1).................. 1,270,313 500,000 Hutchinson Technology, Inc. 2.25% 2010 cv. sub. notes 144A (NR)............. 547,751 500,000 LSI Logic Corp. 4.25% 2004 cv. sub. notes (Ba3)............................. 495,000 500,000 Kulicke & Soffa Industries, Inc. 4.75% 2006 cv. sub. notes (B3)............. 340,000 1,500,000 STMicroelectronics N.V. 0% 2009 LYONs (Baa1)................................ 1,343,438 500,000 Sanmina Corp. 4.25% 2004 cv. sub. notes (B1)................................ 495,000 1,300,000 Siebel Systems, Inc. 5.50% 2006 cv. sub. notes (B+)......................... 1,313,000 ----------- 7,382,502 ----------- TELECOMMUNICATIONS -- 3.8% 4,000,000 Anixter International, Inc. 0% 2020 LYONs 144A (Ba3)........................ 1,312,500 1,700,000 Anixter International, Inc. 0% 2020 LYONs (Ba3)............................. 557,813 27,700 shs The Goldman Sachs Group, Inc. 7.30% mandatory exchangeable notes ** (NR) (exch. for Verizon Communications, Inc. common stock)....................... 1,037,587 500,000 UTStarcom, Inc. 0.875% 2008 cv. notes 144A (NR)............................. 577,813 ----------- 3,485,713 ----------- TRANSPORTATION -- 1.8% 1,000,000 Continental Airlines, Inc. 4.50% 2007 cv. notes (Caa2)...................... 608,000 1,000,000 United Parcel Service, Inc. 1.75% 2007 cash-settled cv. sr. notes (Aaa)..... 1,031,875 ----------- 1,639,875 -----------
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Portfolio of Investments April 30, 2003 (continued) Principal Amount Value or Shares (Note 1) - ---------- ----------- UTILITIES -- 2.2% 25,000 shs American Electric Power Co., Inc. 9.25% equity units *,** (Baa3)............$ 1,037,250 40,000 shs DTE Energy Co. 8.75% equity security units *,** (Baa2)...................... 1,012,000 ----------- 2,049,250 ----------- SHORT-TERM SECURITIES -- 10.0% $9,200,000 American Express Credit Corp. (P1) (1.25% maturing 5/2/03)..................................................... 9,199,042 11,000 U.S. Treasury notes 3.375% 4/30/04 # (Aaa).................................. 11,241 ----------- 9,210,283 ----------- Total Convertible Bonds and Notes - 53.3%................................... 49,282,162 Total Convertible Preferred Stocks - 19.0%.................................. 17,591,811 Total Mandatory Convertible Securities - 17.0%.............................. 15,646,375 Total Short-Term Securities - 10.0%......................................... 9,210,283 ----------- Total Investments - 99.3%................................................... 91,730,631 Other assets and liabilities, net - 0.7%.................................... 663,340 ----------- Total Net Assets - 100.0%...................................................$92,393,971 ===========
* Contingent payment debt instrument which accrues contingent interest income. See Note 1(b). ** Mandatory convertible. See Note 1(e). # Collateral for a letter of credit. ACES Automatic Convertible Equity Securities. ADRs American Depositary Receipts. ADSs American Depositary Shares. BONUSES Bifurcated Option Note Unit Securities. DECS Debt Exchangeable for Common Stock. HIGH TIDES Remarketable Term Income Deferrable Equity Securities. LYONs Liquid Yield Option Notes. PIERS Preferred Income Equity Redeemable Securities. Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's, a division of McGraw-Hill Companies. NR is used whenever a rating is unavailable. The cost of investments for federal income tax purposes is $92,555,676 resulting in gross unrealized appreciation and depreciation of $3,176,045 and $4,001,090, respectively, or net unrealized depreciation of $825,045 on a tax cost basis. See accompanying notes to financial statements. 13 Notes to Financial Statements (unaudited) 1. Significant Accounting Policies Bancroft Convertible Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 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 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. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements: (a) Security Valuation Investments in securities traded on a national securities exchange are valued at market using the last reported sales price as of the close of regular trading. Securities traded in the over-the-counter market and listed securities for which no sales were reported are valued at the mean between reported bid and asked prices as of the close of regular trading. Where no closing prices are available, value is determined by management, with the approval of the Board of Directors. (b) Securities Transactions and Related Investment Income Security transactions are accounted for on the trade date (date the order to buy or sell is executed) with gain or loss on the sale of securities being determined based upon identified cost. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis, including accretion of discounts and amortization of non-equity premium. For certain securities, known as "contingent payment debt instruments," Federal tax regulations require the Fund to record non-cash, "contingent" interest income in addition to interest income actually received. Contingent interest income amounted to 4 cents per share for the six months ended April 30, 2003. (c) Federal Income Taxes It is the policy of the Fund to distribute substantially all of its taxable income within the prescribed time and to otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provision for federal income or excise taxes is believed necessary. The Fund has capital loss carryovers of approximately $2,328,000 and $5,478,000 available to offset any future net capital gains which will expire on October 31, 2009 and October 31, 2010, respectively. (d) Dividends and Distributions to Shareholders The liability for dividends and distributions payable is recorded on the ex-dividend date. 14 Notes to Financial Statements (continued) (e) Market Risk It is the Fund's policy, under normal circumstances, to invest at least 80% of its assets in convertible securities. Although convertible securities do derive part of their value from that of the securities into which they are convertible, they are not considered derivative financial instruments. However, certain of the Fund's investments, known as Mandatory Convertible Securities, include features which render them more sensitive to price changes in their underlying securities. Thus they expose the Fund to greater downside risk than traditional convertible securities, but still less than that of the underlying common stock. At April 30, 2003, the market value of such securities was $15,646,375, representing 17% of net assets. 2. Management Fee and Other Transactions with Affiliates The management fee is paid to the investment adviser, Davis-Dinsmore Management Company (the "Adviser"). The contract provides for payment of a monthly advisory fee, computed at an annual rate of 3/4 of 1% of the first $100,000,000 and 1/2 of 1% of the excess over $100,000,000 of the Fund's net asset value in such month. The Adviser invests the Fund's asets, furnishes office equipment and facilities, and pays the salaries of all executive officers of the Fund, except that the costs associated with personnel and certain non- personnel expenses of the office of the Treasurer, up to a maximum of $25,000 a year, are reimbursed by the Fund. Such reimbursements amounted to $12,500 for the six months ended April 30, 2003. The officers of the Fund are also directors, officers or employees of the Adviser, and are compensated by the Adviser. 3. Portfolio Activity At April 30, 2003 there were 4,725,858 shares of $.01 par value common stock outstanding, (9,000,000 shares authorized). During the six months ended April 30, 2003, 41,388 shares were issued in connection with reinvestment of dividends from net investment income, resulting in an increase in paid-in capital of $742,900. Purchases and sales of investments, exclusive of corporate short-term notes, aggregated $31,909,111 and $37,970,671, respectively, for the six months ended April 30, 2003. A distribution of $0.16 per share from net investment income was declared on May 15, 2003, payable June 27, 2003 to shareholders of record at the close of business June 13, 2003. 15 Miscellaneous Notes Results of the 2003 Annual Shareholders Meeting The results of the shareholder vote at the Annual Meeting of Shareholders held on February 10, 2003 were:
1. All directors nominated by management were elected for terms expiring in 2006. Shares voted for Shares withheld ---------------- --------------- William A. Benton 4,115,374 57,676 Elizabeth C. Bogan, Ph.D. 4,118,311 54,739 George R. Lieberman 4,111,826 61,224
2. The Audit Committee's appointment of PricewaterhouseCoopers LLP as independent accountants was ratified with 4,095,917 shares voted for, 40,526 shares voted against and 36,607 shares abstaining. - ------------------------------------------------------------------------------ Visit us on the Internet at www.bancroftfund.com. The site provides information about the Fund including daily net asset values (NAV), historical dividends and press releases, as well as information about Davis-Dinsmore Management Company, the Fund's adviser. In addition you can send email to us at info@bancroftfund.com. - ------------------------------------------------------------------------------ The Fund is a member of the Closed-End Fund Association (CEFA). The group's website address is www.cefa.com. CEFA is solely responsible for the content of its website. - ------------------------------------------------------------------------------ Pursuant to Section 23 of the Investment Company Act of 1940, notice is hereby given that the Fund may, in the future, purchase shares of Bancroft Convertible Fund, Inc. Common Stock from time to time, at such times, and in such amounts, as may be deemed advantageous to the Fund. Nothing herein shall be considered a commitment to purchase such shares. 16 Board of Directors GORDON F. AHALT Petroleum Consultant WILLIAM A. BENTON Retired Stock Exchange Specialist ELIZABETH C. BOGAN, PH.D. Senior Lecturer in Economics at Princeton University THOMAS H. DINSMORE, C.F.A. Chairman of the Board of the Fund DONALD M. HALSTED, JR. Investor GEORGE R. LIEBERMAN Retired Advertising Executive DUNCAN O. MCKEE Retired Attorney JANE D. O'KEEFFE President of the Fund NICOLAS W. PLATT Public Relations Executive Officers THOMAS H. DINSMORE Chief Executive Officer JANE D. O'KEEFFE President GARY I. LEVINE Vice President, Treasurer and Chief Financial Officer H. TUCKER LAKE Vice President GERMAINE M. ORTIZ Vice President SIGMUND LEVINE Secretary JOSHUA P. LAKE Assistant Treasurer and Assistant Secretary MERCEDES A. PIERRE Assistant Treasurer - -------------------------------------------------------------------------------- Internet www.bancroftfund.com email: info@bancroftfund.com Investment Adviser Davis-Dinsmore Management Company 65 Madison Avenue, Morristown, NJ 07960-7308 (973)631-1177 Shareholder Services and Transfer Agent American Stock Transfer & Trust Company 59 Maiden Lane New York, NY 10038 (800) 937-5449 www.amstock.com Common Stock Listing American Stock Exchange Symbol: BCV 17 BANCROFT CONVERTIBLE FUND, INC. 65 MADISON AVENUE, SUITE 550 MORRISTOWN, NEW JERSEY 07960 www.bancroftfund.com [GRAPHIC OMITTED] AMERICAN STOCK EXCHANGE LOGO [GRAPHIC OMITTED] RECYCLE GRAPHIC Printed on recycled paper 18 ITEM 2. CODE OF ETHICS. Form N-CSR disclosure requirement not yet effective with respect to the registrant. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Form N-CSR disclosure requirement not yet effective with respect to the registrant. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Form N-CSR disclosure requirement not yet effective with respect to the registrant. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Form N-CSR disclosure requirement not yet effective with respect to the registrant. ITEM 6. [RESERVED BY SEC FOR FUTURE USE.] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Form N-CSR disclosure requirement not yet effective with respect to the registrant. ITEM 8. [RESERVED BY SEC FOR FUTURE USE.] ITEM 9. CONTROLS AND PROCEDURES. Conclusions of principal officers concerning controls and procedures (a) As of June 20, 2003, an evaluation was performed under the supervision and with the participation of the officers of Bancroft Convertible Fund, Inc. (the "Company"), including the principal executive officer ("PEO") and principal financial officer ("PFO"), of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the Company's officers, including the PEO and PFO, concluded that, as of June 20, 2003, the Company's disclosure controls and procedures were reasonably designed so as to ensure that material information relating to the Company is made known to the PEO and PFO. (b) There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation and until the filing of this report, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS (a) Form N-CSR disclosure requirement not yet effective with respect to the registrant. (b) The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. 19 SIGNATURES Pursuant to the requirements of the Securities and 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. Bancroft Convertible Fund, Inc. By: /s/Thomas H. Dinsmore Thomas H. Dinsmore Chairman of the Board (Principal Executive Officer) Date: June 26, 2003 Pursuant to the requirements of the Securities and 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/Thomas H. Dinsmore Thomas H. Dinsmore Chairman of the Board (Principal Executive Officer) Date: June 26, 2003 By: /s/Gary I. Levine Gary I. Levine Vice President and Treasurer (Principal Financial Officer) Date: June 26, 2003 EX-99.CERT 3 b0403ex-99_cert.txt EXHIBIT 99.CERT EX-99.CERT Certifications I, Thomas H. Dinsmore certify that: 1. I have reviewed this report on Form N-CSR of Bancroft Convertible Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have; a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 26, 2003 By: /s/Thomas H. Dinsmore Thomas H. Dinsmore Chairman of the Board (Principal Executive Officer) I, Gary I. Levine certify that: 1. I have reviewed this report on Form N-CSR of Bancroft Convertible Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have; a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 26, 2003 By: /s/Gary I. Levine Gary I. Levine Vice President, Treasurer (Principal Financial Officer) EX-99.906CERT 4 b0403ex-99_906cert.txt EXHIBIT 99.906CERT Exhibit 99.906CERT Certification of Principal Executive Officer In connection with the Certified Shareholder Report of Bancroft Convertible Fund, Inc. (the "Company") on Form N-CSR for the period ended April 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas H. Dinsmore, Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: June 26,2003 /s/Thomas H. Dinsmore Thomas H. Dinsmore Chairman of the Board A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Certification of Principal Financial Officer In connection with the Certified Shareholder Report of Bancroft Convertible Fund, Inc. (the "Company") on Form N-CSR for the period ended April 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gary I. Levine, Vice President and Treasurer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: June 26, 2003 /s/Gary I. Levine Gary I. Levine Vice President and Treasurer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----