N-Q 1 a432254_nq.htm FORM N-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number 811-02151

 

 

Bancroft Fund Ltd.

 

(Exact name of registrant as specified in charter)

 

65 Madison Avenue, Morristown, New Jersey 07960-7308

 

(Address of principal executive offices) (Zip code)

 

Jane D. O’Keeffe

Bancroft Fund Ltd.

65 Madison Avenue

Morristown, New Jersey 07960-7308

(Name and address of agent for service)

 

Registrant's telephone number, including area code: 973-631-1177

 

Date of fiscal year end: October 31, 2016

 

Date of reporting period: January 31, 2016

 

ITEM 1. SCHEDULE OF INVESTMENTS.

 

 
 

 

Bancroft Fund Ltd. - Schedule of Investments - unaudited

January 31, 2016

  

   Principal   Market 
   Amount   Value 
Convertible Bonds and Notes - 65.6%          
           
Air Freight & Logistics - 1.9%          
Atlas Air Worldwide Holdings, Inc., 2.25%, 6/1/22  $1,250,000   $970,312 
Echo Global Logistics, Inc.,  2.50%, 5/1/20   1,125,000    975,938 
         1,946,250 
Automobiles - 0.4%          
Tesla Motors, Inc., 1.25%, 3/1/21   500,000    404,375 
           
Biotechnology - 3.9%          
Array BioPharma Inc., 3.00%, 6/1/20   250,000    205,469 
Exelixis, Inc., 4.25%, 8/15/19   500,000    519,062 
Gilead Sciences, Inc., 1.625%, 5/1/16   300,000    1,106,064 
Incyte Corp., 1.25%, 11/15/20   500,000    762,188 
OPKO Health Inc., 3.00%, 2/1/33   200,000    276,250 
Regeneron Pharmaceuticals, Inc., 1.875%, 10/1/16   250,000    1,249,844 
         4,118,877 
Capital Markets - 1.5%          
BlackRock Kelso Capital Corp., 5.50%, 2/15/18   1,500,000    1,544,062 
           
Communications Equipment - 5.7%          
CalAmp Corp., 1.625%, 5/15/20 (a)   1,550,000    1,419,219 
Harmonic Inc., 4.00%, 12/1/20  (a)   1,000,000    836,250 
Infinera Corp., 1.75%, 6/1/18   1,000,000    1,363,125 
InterDigital, Inc., 1.50%, 3/1/20 (a)   1,750,000    1,641,719 
Oclaro, Inc., 6.00%, 2/15/20   400,000    757,250 
         6,017,563 
Construction & Engineering - 0.9%          
Dycom Industries, Inc., 0.75%, 9/15/21 (a)   1,000,000    984,375 
           
Consumer Finance - 0.8%          
Encore Capital Group, Inc., 3.00%, 7/1/20   1,250,000    826,562 
           
Diversified Consumer Services - 1.1%          
Carriage Services, Inc., 2.75%, 3/15/21   1,000,000    1,118,125 
           
Diversified Telecommunication - 0.9%          
Alaska Communications Systems Group, Inc., 6.25%, 5/1/18   1,000,000    980,000 
           
Electrical Equipment - 0.8%          
SolarCity Corp., 2.75%, 11/1/18   1,000,000    818,125 
           
Energy Equipment & Services - 0.5%          
Hornbeck Offshore Services, Inc., 1.50%, 9/1/19   1,000,000    535,625 
           
Health Care Equipment & Supplies - 0.8%          
Quidel Corp., 3.25%, 12/15/20   500,000    444,375 
Trinity Biotech Investment Ltd., 4.00%, 4/1/45   500,000    430,625 
         875,000 
Health Care Providers & Services - 1.8%          
Aceto Corp., 2.00%, 11/1/20 (a)   500,000    464,375 
Molina Healthcare Inc., 1.125%, 1/15/20   1,000,000    1,450,000 
         1,914,375 

  

 
 

  

Bancroft Fund Ltd. - Schedule of Investments - continued

January 31, 2016

  

   Principal   Market 
   Amount   Value 
Convertible Bonds and Notes - continued          
           
Household Durables - 2.0%          
Jarden Corp., 1.875%, 9/15/18  $750,000   $1,271,250 
Jarden Corp., 1.125%, 3/15/34   750,000    877,969 
         2,149,219 
Internet & Catalog Retail - 1.89%          
The Priceline Group Inc., 1.00%, 3/15/18   1,500,000    1,906,875 
           
Internet Software & Services - 5.7%          
Blucora, Inc., 4.25%, 4/1/19   1,500,000    1,193,438 
Equinix Inc., 4.75%, 6/15/16   500,000    2,025,312 
Monster Worldwide, Inc., 3.50%, 10/15/19   500,000    575,625 
Twitter, Inc., 1.00%, 9/15/21   1,000,000    815,625 
Web.com Group, Inc., 1.00%, 8/15/18   1,500,000    1,389,375 
         5,999,375 
IT Services - 1.5%          
CSG Systems International, Inc., 3.00%, 3/1/17   1,000,000    1,546,250 
           
Leisure Products - 0.6%          
JAKKS Pacific, Inc., 4.875%, 6/1/20 (a)   616,000    575,575 
           
Media - 0.9%          
Global Eagle Entertainment Inc., 2.75%, 2/15/35   1,125,000    955,547 
           
Metals & Mining - 1.0%          
Royal Gold, Inc., 2.875%, 6/15/19   600,000    528,375 
RTI International Metals, Inc., 1.625%, 10/15/19   500,000    469,375 
         997,750 
Oil, Gas & Consumable Fuels - 0.9%          
Cheniere Energy, Inc., 4.25%, 3/15/45   1,500,000    737,812 
Clean Energy Fuels Corp., 5.25%, 10/1/18   500,000    217,188 
Goodrich Petroleum Corp., 5.00%, 10/1/32   259,000    35,612 
         990,612 
Personal Products - 0.6%          
Teligent, Inc., 3.75%, 12/15/19   750,000    663,750 
           
Pharmaceuticals - 3.3%          
ANI Pharmaceuticals, Inc., 3.00%, 12/1/19   750,000    644,531 
Horizon Pharma Investment Ltd., 2.50%, 3/15/22           
cv. into Horizon Pharma plc ordinary shares (a)   1,000,000    880,000 
Jazz Investments I Ltd., 1.875%, 8/15/21          
guaranteed by Jazz Pharmaceuticals plc and          
cv. into Jazz Pharmaceuticals plc ordinary shares)   710,000    725,531 
The Medicines Co., 2.50%, 1/15/22 (a)   1,000,000    1,192,500 
         3,442,562 
Real Estate Investment Trusts - 3.3%          
Colony Capital, Inc., 5.00%, 4/15/23   1,000,000    906,875 
Extra Space Storage LP, 3.125%, 10/1/35 (a)   1,000,000    1,120,000 
IAS Operating Partnership LP, 5.00%, 3/15/18           
exchangeable for Invesco Mortgage Capital Inc. common stock   1,000,000    943,750 
           
Spirit Realty Capital, Inc., 3.75%, 5/15/21   500,000    484,690 
         3,455,315 
Real Estate Management & Development - 1.0%          
Forest City Enterprises, Inc., 3.625%, 8/15/20   1,000,000    1,018,125 

 

 

 

 
 

  

Bancroft Fund Ltd. - Schedule of Investments - continued

January 31, 2016

  

   Principal   Market 
   Amount   Value 
Convertible Bonds and Notes - continued          
           
Semiconductor Equipment - 7.4%          
Inphi Corporation, 1.125%, 12/1/20 (a)  $750,000   $726,094 
Micron Technology, Inc., 3.00%, 11/15/43   2,000,000    1,413,750 
NVIDIA Corp., 1.00%, 12/1/18   1,000,000    1,507,500 
NXP Semiconductors N.V., 1.00%, 12/1/19   1,500,000    1,588,125 
Spansion LLC, 2.00%, 9/1/20   200,000    307,250 
SunEdison, Inc., 2.75%, 1/1/21   500,000    155,000 
SunEdison, Inc., 0.25%, 1/15/20 (a)   750,000    156,094 
SunPower Corp., 0.875%, 6/1/21   1,000,000    800,000 
SunPower Corp., 4.00%, 1/15/23 (a)   1,000,000    1,076,875 
         7,730,688 
Software - 12.3%          
Bottomline Technologies, Inc., 1.50%, 12/1/17   1,500,000    1,656,562 
EnerNOC, Inc., 2.25%, 8/15/19   850,000    576,406 
FireEye, Inc., 1.625%, 6/1/35 (a)   1,500,000    1,152,188 
Mentor Graphics Corp., 4.00%, 4/1/31   1,500,000    1,546,875 
MercadoLibre, Inc., 2.25%, 7/1/19   500,000    515,312 
Nuance Communications, Inc., 1.50%, 11/1/35   1,000,000    1,015,625 
Proofpoint, Inc., 0.75%, 6/15/20 (a)   1,250,000    1,175,781 
PROS Holdings, Inc., 2.00%, 12/1/19   1,000,000    786,250 
Red Hat, Inc., 0.25%, 10/1/19   725,000    863,203 
Synchronoss Technologies, Inc., 0.75%, 8/15/19   1,250,000    1,194,531 
Take-Two Interactive Software, Inc., 1.75%, 12/1/16   400,000    729,000 
TeleCommunication Systems, Inc., 7.75%, 6/30/18   500,000    510,000 
Verint Systems Inc., 1.50%, 6/1/21   1,250,000    1,146,875 
         12,868,608 
Technology, Hardware & Storage - 1.4%          
SanDisk Corp., 1.50%, 8/15/17   1,000,000    1,508,750 
           
Trading Companies & Distributors - 0.9%          
Kaman Corp., 3.25%, 11/15/17   750,000    948,750 
           
Total Convertible Bonds and Notes        68,841,065 

 

    Shares      
Convertible Preferred Stocks - 10.7%          
           
Capital Markets - 0.3%          
Cowen Group, Inc., 5.625%   500    279,188 
           
Commercial Banks - 3.3%          
Huntington Bancshares, Inc., 8.50%   1,250    1,725,000 
Wells Fargo & Co., 7.50%   1,500    1,758,000 
         3,483,000 
Diversified Financial Services - 1.6%          
Bank of America Corp., 7.25%   1,500    1,645,620 
           
Food Products - 1.5%          
Bunge Ltd., 4.875%   10,000    886,161 
Post Holdings, Inc., 3.75%   5,000    658,300 
         1,544,461 
Machinery - 1.0%          
Stanley Black & Decker, Inc., 6.25%   10,000    1,060,800 

  

 
 

  

Bancroft Fund Ltd. - Schedule of Investments - continued

January 31, 2016

  

       Market 
   Shares   Value 
Convertible Preferred Stocks - continued        
         
Oil, Gas & Consumable Fuels - 0.1%        
Chesapeake Energy Corp., 5.75%   1,050   $157,500 
           
Real Estate Investment Trusts - 1.1%          
Welltower Inc., 6.50%   20,000    1,135,200 
           
Specialty Retail - 0.7%          
Amerivon Holdings LLC, 4.00%, (a,b,c)   694,670    733,636 
Amerivon Holdings LLC, common equity units, (a,b,c)   272,728    16,364 
         750,000 
Thrift & Mortgage Finance - 1.1%          
New York Community Capital Trust V, 6.00%   24,000    1,158,000 
           
Total Convertible Preferred Stocks        11,213,769 
           
Mandatory Convertible Securities - 23.5% (d)          
           
Automobiles - 0.3%          
Fiat Chrysler Automobiles N.V., 7.875%, 12/15/16   5,000    317,750 
           
Biotechnology - 1.8%          
AmSurg Corp., 5.25%, 7/1/17   14,000    1,934,660 
           
Commercial Services & Supplies - 0.9%          
Stericycle, Inc., 5.25%, 9/15/18   10,000    909,300 
           
Diversified Telecommunication Services - 0.9%          
Frontier Communications Corp, 11.125%, 6/29/18   10,000    893,800 
           
Electric Utilities - 1.6%          
NextEra Energy, Inc., 6.371%, 9/1/18   30,000    1,653,000 
           
Food Products - 1.4%          
Tyson Foods, Inc., 4.75%, 7/15/17   25,000    1,501,000 
           
Health Care Providers & Services - 1.9%          
Anthem, Inc., 5.25%, 5/1/18   30,000    1,322,700 
Kindred Healthcare, Inc., 7.50%, 11/19/17   1,250    691,562 
         2,014,262 
Insurance - 0.9%          
Maiden Holdings, Ltd., 7.25%, 9/15/16   20,000    957,400 
           
Multi-Utilities - 1.0%          
Dominion Resources, Inc., 6.375%, 7/1/17   20,000    995,200 
           
Oil, Gas & Consumable Fuels - 1.8%          
Anadarko Petroleum Corp, 7.50%, 6/7/18           
cv into Western Gas Equity Partners LP   15,000    413,250 
Kinder Morgan, Inc., 9.75%, 10/26/18   35,000    1,510,250 
         1,923,500 
Pharmaceuticals - 3.8%          
Allergan plc, 5.50%, 3/1/18   2,300    2,181,067 
Teva Pharmaceutical Industries, 7.00%, Due 12/15/18   1,882    1,838,413 
         4,019,480 

 

 

 

 
 

  

Bancroft Fund Ltd. - Schedule of Investments - continued

January 31, 2016

  

       Market 
   Shares   Value 
Mandatory Convertible Securities - continued          
           
Real Estate Investment Trusts - 5.1%          
American Tower Corp., 5.50%, 2/15/18   20,000   $1,975,000 
Crown Castle International Corp., 4.50%, 11/1/16   20,000    2,119,800 
Weyerhaeuser Co., 6.375%, 7/1/16   30,000    1,374,900 
         5,469,700 
Wireless Telecommunication Services - 1.8%          
T-Mobile US, Inc., 5.50%, 12/15/17   30,000    2,070,600 
           
Total Mandatory Convertible Securities (d)        24,659,652 
           
Common Stock - 0.2%          
           
Automobiles - 0.2%          
Ferrari N.V.   3,868    153,830 
           
Convertible Bonds and Notes - 65.6%        68,841,065 
Convertible Preferred Stocks - 10.7%        11,213,769 
Mandatory Convertible Securities - 23.5%        24,659,652 
Common Stocks - 0.2%        153,830 
Total Investments - 100.0%        104,868,316 
           
Other Assets and Liabilites (Net)        2,659,601 
           
Net Assets          
(5,247,989 common shares outstanding)       $107,527,917 
Net Asset Value Per Share          
($107,527,917 ÷ 5,247,989 shares outstanding)       $20.49 

 

 

(a) Security exempt from registration under Rule 144A or Regulation D of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At January 31, 2016, the market value of these unregistered securities amounted to $14,151,045 or 13.5% of total investments.

 

(b) Investment is valued at fair value as determined in good faith pursuant to procedures adopted by the Board of Trustees. It is possible that the estimated value may differ significantly from the amount that might ultimately be realized in the near term, and the difference could be material. The fair value of these securities amounted to $750,000 at January 31, 2016, which represented 0.72% of total investments.

 

(c) At January 31, 2016, the Fund held investments in restricted and illiquid securities amounting to $750,000 or 0.72% of total investments, which were valued under methods approved by the Board of Trustees as follows:

 

           1/31/16 
           Carrying 
       Acquisition   Value 
Issuer and Acquisition Date  Shares   Cost   Per Share 
             
Amerivon Holdings LLC, series A cv. pfd. - April 1, 2010   694,670   $1,500,000   $1.056 
Amerivon Holdings LLC, common equity units - April 1, 2010   272,728    -    0.060 

 

(d) Mandatory Convertible Securities are required to be converted on the dates disclosed; they generally may be converted prior to these dates at the option of the holder.

 

 
 

 

Bancroft Fund Ltd. - Selected Notes to Financial Statements - unaudited

 

Bancroft Fund Ltd. (the “Fund”), is registered under the Investment Company Act of 1940, as amended, (the “Act”) as a diversified, closed-end management investment company.

 

Note 1 - Security Valuation - Investments in securities traded on a national securities exchange are valued at market using the last reported sales price, supplied by an independent pricing service, as of the close of regular trading. Listed securities, for which no sales were reported, are valued at the mean between closing reported bid and asked prices as of the close of regular trading. Unlisted securities traded in the over-the-counter market are valued using an evaluated quote provided by the independent pricing service, or, if an evaluated quote is unavailable, such securities are valued using prices received from dealers, provided that if the dealer supplies both bid and asked prices, the price to be used is the mean of the bid and asked prices. The independent pricing service derives an evaluated quote by obtaining dealer quotes, analyzing the listed markets, reviewing trade execution data and employing sensitivity analysis. Evaluated quotes may also reflect appropriate factors such as individual characteristics of the issue, communications with broker-dealers, and other market data. Securities for which quotations are not readily available, restricted securities and other assets are valued at fair value as determined in good faith pursuant to procedures approved by the Board of Trustees. Short-term debt securities with original maturities of 60 days or less are valued at amortized cost.

 

The Fund has adopted authoritative fair valuation accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion in changes in valuation techniques and related inputs during the period. These inputs are summarized in the three broad levels listed below:

 

Level 1 - Quoted unadjusted prices for identical instruments in active markets.

 

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-driven valuation in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers, and those received from an independent pricing service.

 

Level 3 - Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price an asset or liability based on the best available information.

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of the markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

 

 
 

  

The following is a summary of the inputs used to value the investments of the Fund as of January 31, 2016:

 

   Level 1   Level 2   Level 3   Total 
                 
Investments in Securities:                
Common Stock:                
Consumer Discretionary  $153,830   $   $   $153,830 
                     
Convertible Bonds and Notes:                    
Consumer Discretionary       7,109,716        7,109,716 
Consumer Staples       663,750        663,750 
Energy       1,526,237        1,526,237 
Financials       6,844,064        6,844,064 
Health Care       10,350,814        10,350,814 
Industrials       4,697,500        4,697,500 
Information Technology       35,671,234        35,671,234 
Materials       997,750        997,750 
Telecommunication Services       980,000        980,000 
Total Convertible Bonds and Notes       68,841,065        68,841,065 
                     
Convertible Preferred Stock:                    
Consumer Discretionary           750,000    750,000 
Consumer Staples       1,544,461        1,544,461 
Energy       157,500        157,500 
Financials       7,701,008        7,701,008 
Industrials       1,060,800        1,060,800 
Total Convertible Preferred Stock       10,463,769    750,000    11,213,769 
                     
Mandatory Convertible Securities:                    
Consumer Discretionary       317,750        317,750 
Consumer Staples       1,501,000        1,501,000 
Energy       1,923,500        1,923,500 
Financials       6,427,100        6,427,100 
Health Care       7,968,402        7,968,402 
Industrials       909,300        909,300 
Telecommunication Services       2,964,400        2,964,400 
Utilities       2,648,200        2,648,200 
Total Mandatory Convertible Securities       24,659,652        24,659,652 
                     
Total Investments  $153,830   $103,964,486   $750,000   $104,868,316 

 

Refer to the Fund’s Schedule of Investments for a detailed breakdown of Common Stock, Convertible Bonds and Notes, Convertible Preferred Stock and Mandatory Convertible Securities. Transfers between levels are recognized at January 31, 2016, the end of the reporting period. The Fund recognized no transfers to or from Level 1 to Level 2.

 

The following is a reconciliation of assets for which Level 3 inputs were used in determining value:

  

   Investments 
Description  in Securities 
Beginning balance as of October 31, 2015  $750,000 
Proceeds from sales    
Gain/loss    
Change in unrealized appreciation (depreciation)    
Net transfers in/out of Level 3    
Balance as of January 31, 2016  $750,000 

 

   

 

The following table presents additional information about valuation methodologies and inputs used for investments that are measured at fair value and categorized within Level 3 as of January 31, 2016:

 

   Fair Value
January 31, 2016
   Valuation
Methodologies
  Unobservable
Input (1)
  Impact to
Valuation from
an Increase in
Input (2)
Amerivon Holdings LLC
series A cv. pfd. and
common equity units
  $750,000   Market
Comparables/
Sum of the
Parts
Valuation/
Dividend
Analysis
  Liquidity
Discount
  Increase

 

(1) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments.

 

(2) This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect.

 

Note 2 - Securities Transactions and Related Investment Income - Securities transactions are accounted for on the trade date (the 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.

 

Note 3 - Federal Income Tax Cost - At January 31, 2016, the cost basis of investments for federal income tax purposes, as well as unrealized appreciation (depreciation) of investment securities on a tax basis were as follows:

  

Unrealized appreciation  $9,734,388 
Unrealized depreciation   (12,387,711)
Net unrealized appreciation   (2,653,323)
      
Cost for federal income tax purposes  $107,521,639 

 

   

 

ITEM 2. CONTROLS AND PROCEDURES.

 

Conclusions of principal officers concerning controls and procedures.

 

(a) The Fund’s principal executive officer and principal financial officer have concluded that the Fund’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c)) are effective as of February 29, 2016 based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 17 CFR 240.15d-15(b)).

 

(b) There have been no changes in the Fund’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the Fund’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

ITEM 3. EXHIBITS.

 

Certifications of the principal executive officer and the principal financial officer of the Fund, as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)), are filed herewith.

 

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.

 

Bancroft Fund Ltd.

 

By: /s/ Jane D. O’Keeffe  
  Jane D. O’Keeffe  
  President and  
  Chief Executive Officer  
  (Principal Executive Officer)  
     
Date: February 29, 2016  

 

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/ Jane D. O’Keeffe  
  Jane D. O’Keeffe  
  President and  
  Chief Executive Officer  
  (Principal Executive Officer)  
     
Date: February 29, 2016  

 

By: /s/ Agnes Mullady  
  Agnes Mullady  
  Treasurer  
  (Principal Financial Officer)  
   
Date: February 29, 2016