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
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BANCROFT CONVERTIBLE FUND, INC.
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(Exact name of registrant as specified in charter)
65 Madison Avenue, Morristown, New Jersey 07960-7308
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(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
Date of reporting period: October 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
-------------------------BANCROFT CONVERTIBLE FUND, INC.------------------------
[LOGO]
2004 Annual Report
October 31, 2004
2004 ANNUAL REPORT
OCTOBER 31, 2004
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 OCTOBER 31, 2004 WITH DIVIDENDS REINVESTED
Calendar
YTD 1 Year 5 Years 10 Years
--------- ---------- ----------- ----------
Bancroft market price (a,b) ............................ 0.18% (3.83)% 34.70% 172.40%
Bancroft net asset value (b,c,d) ....................... (0.16) 1.32 14.93 137.12
Closed-end convertible fund average (d) ................ 3.44 8.04 21.81 117.15
S&P 500 (a) ............................................ 3.06 9.42 (10.60) 183.96
Russell 2000 (d) ....................................... 5.75 11.73 45.19 162.41
Lehman Aggregate Bond Total Return Index (d) ........... 4.22 5.53 44.10 111.12
PERFORMANCE DATA REPRESENT PAST RESULTS AND DO NOT REFLECT FUTURE PERFORMANCE.
(a) From Bloomberg L.P. pricing service.
(b) Performance is not adjusted for dilution due to the rights offering.
(c) Net asset value dilution resulting from the Bancroft rights offering was
2.38%.
(d) From Lipper, Inc. Closed-End Fund Performance Analysis, dated October 31,
2004.
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QUARTERLY HISTORY OF NAV AND MARKET PRICE
Net Asset Values Market Prices (AMEX, symbol BCV)
Qtr. Ended High Low Close High Low Close
---------- -------- -------- -------- -------- -------- --------
Jan. 04 $21.75 $20.73 $21.51 $20.14 $18.59 $19.59
Apr. 04 21.79 20.79 20.79 19.74 18.35 18.35
Jul. 04 20.98 20.06 20.23 18.71 17.87 17.87
Oct. 04 20.65 19.79 20.40 18.50 17.65 18.23
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DIVIDEND DISTRIBUTIONS (12 MONTHS)
Record Payment Capital *Corporate
Date Date Income Gains Deduction
-------- --------- -------- --------- -------------
11/28/03 12/26/03 $0.21 -- 6%
3/16/04 3/30/04 0.17 -- 12
6/15/04 6/29/04 0.17 -- 12
9/15/04 9/29/04 0.17 -- 12
--------
$0.72
========
*Percentage of each ordinary income distribution qualifiying for the corporate
dividend received tax deduction.
TO OUR SHAREHOLDERS
December 6, 2004
The election is over. Investors can now turn their attention to the economy and
the war on terror. The economy has grown this year through strong personal
consumption and productivity growth. The 3.9% growth in the third quarter would
have been greater, but for high oil prices, sluggish business investment and the
growing trade deficit. In addition, next year's growth could be slowed by
reduced federal fiscal stimulus as the government seeks to reduce its deficit
and by the low personal savings rate. Finally, as the dollar declines in value
versus almost all other currencies (including the euro, the yen, the Mexican
peso and many others) we expect U.S. exports to pick up and imports to become
more expensive. Inflation has not been an issue because of the competition of
imported goods and the growth of productivity at a rate greater than labor
costs. This may not continue and many economists have predicted that inflation
is likely to increase. Unless oil prices spike up again we do not believe that
inflation will become a problem next year.
This last year has been one of great change. Because of the malfeasance of some,
the legislators, litigators and the regulators have put in place substantial
changes to the corporate governance of all public companies. In the end,
investors should see more ethical corporate governance from these new rules. We
have spent great time, effort and money in our effort to comply with all of
these new requirements. As investors, we are looking forward to seeing if the
requirements lead to better and more productive corporate governance.
Performance of the Fund was affected by its industry exposure. Energy companies,
led by Amerada Hess Corp. and Valero Energy Corp., provided the best performance
for the Fund as energy prices rose most of the year. Lagging industries such as
the automotive industry and the banking/savings & loan industry held back
performance. Both of these industries have been hurt by the expected rise in
interest rates and by slower than expected economic growth.
George R. Lieberman retired from the Fund's Board of Directors in October. He
served as an independent director for nearly seventeen years. In a period of
great change in corporate governance his experience, ethical drive and calm were
of great help to the Board and to management. We wish him well.
Bancroft Convertible Fund is the oldest closed-end convertible fund. Founded in
1971, the Fund's strategy has consistently been to use convertible securities as
an equity alternative to reduce risk and volatility. This strategy tends to
outperform in bear markets and lag in bull markets. The Fund underperformed the
average of its peer-group for the quarter ended October 31, 2004. Our peers
consist of the thirteen closed-end convertible funds in the LIPPER CLOSED-END
PERFORMANCE ANALYSIS survey. Of these thirteen funds, only four, including the
Fund, remain unleveraged convertible funds. In addition, we believe that many of
our competitors have greater exposure to non-convertible, low-rated, high yield
debt than we do. We believe these factors contributed to the difference in
performance between Bancroft and many of the other funds in the group.
Visit our website, www.bancroftfund.com, for additional information on the Fund.
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.
CONTINUED ON THE FOLLOWING PAGE
PAGE 1
TO OUR SHAREHOLDERS (CONTINUED)
At its November 22, 2004 meeting, the Board of Directors declared a dividend of
18.8 cents ($0.188) per share. The dividend consists of undistributed net
investment income and will be payable on December 28, 2004 to shareholders of
record on December 3, 2004.
The 2005 annual meeting of shareholders will be held at our offices in
Morristown, New Jersey on February 14, 2005. Time and location will be included
in the proxy statement, scheduled to be mailed to shareholders on December 28,
2004. All shareholders are welcome to attend, we hope to see you there.
/s/ Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board
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MAJOR PORTFOLIO CHANGES by underlying common stock
Six months ended October 31, 2004
ADDITIONS REDUCTIONS
Albertson's, Inc. Allscripts Healthcare Solutions, Inc.
Allscripts Healthcare Solutions, Inc. Amerada Hess Corp.
Armor Holdings, Inc. Costco Wholesale Corp.
Devon Energy Corp. Devon Energy Corp.
(EXCHANGEABLE FROM KERR-MCGEE CORP.)
Four Seasons Hotels, Inc. Gilead Sciences, Inc.
General Mills, Inc. ImClone Systems, Inc.
(EXCHANGEABLE FROM LEHMAN BROTHERS HOLDINGS, INC.)
Kulicke & Soffa Industries, Inc.
ImClone Systems, Inc.
McMoRan Exploration Co.
Kulicke & Soffa Industries, Inc.
Medarex, Inc.
Leucadia National Corp.
Novell, Inc.
Novell, Inc.
State Street Corp.
Ocwen Financial Corp.
STMicroelectronics, N.V.
Per-Se Technologies, Inc.
Teekay Shipping Corp.
Schering-Plough Corp.
Temple-Inland, Inc.
Titan International, Inc.
Teva Pharmaceuticals Industries Ltd.
The Walt Disney Company (EXCHANGEABLE FROM TEVA PHARM. FINANCE B.V.)
Weatherford International Ltd. Washington Mutual, Inc.
PAGE 2
LARGEST INVESTMENT HOLDINGS by underlying common stock
Value % Total
(Note 1) Net Assets
----------- ----------
Sovereign Bancorp, Inc. ................................................................ $ 2,400,000 2.1 %
A HOLDING COMPANY FOR SOVEREIGN BANK. THE BANK'S PRIMARY BUSINESS
CONSISTS OF ATTRACTING DEPOSITS FROM ITS NETWORK OF BANKING OFFICES, AND
ORIGINATING COMMERCIAL, CONSUMER AND RESIDENTIAL MORTGAGE LOANS, AS
WELL AS AUTOMOBILE LOANS.
Capital One Financial Corp. ............................................................ 2,371,050 2.1
THROUGH ITS SUBSIDIARIES, PROVIDES CREDIT CARD PRODUCTS, CERTAIN CONSUMER
LENDING AND DEPOSIT SERVICES.
Leucadia National Corp. ................................................................ 2,240,000 2.0
A DIVERSIFIED HOLDING COMPANY THAT PROVIDES BANKING AND LENDING SERVICES,
MANUFACTURING, REAL ESTATE ACTIVITIES, WINERY OPERATIONS, DEVELOPMENT OF A
COPPER MINE AND PROPERTY AND CASUALTY REINSURANCE.
The St. Paul Travelers Companies, Inc. ................................................. 2,211,000 2.0
PROVIDES A BROAD RANGE OF INSURANCE PRODUCTS AND SERVICES FOR THE
COMMERCIAL AND CONSUMER MARKETS.
Church & Dwight Co., Inc. .............................................................. 2,189,250 1.9
PRODUCES SODIUM BICARBONATE AND SODIUM BICARBONATE-BASED PRODUCTS.
THE COMPANY SELLS ITS PRODUCTS PRIMARILY UNDER THE ARM & HAMMER
TRADEMARK, TO CONSUMERS AND TO INDUSTRIAL CUSTOMERS AND DISTRIBUTORS.
Amerada Hess Corp. ..................................................................... 2,185,050 1.9
TOGETHER WITH ITS SUBSIDIARIES EXPLORES FOR, PRODUCES, PURCHASES, TRANSPORTS
AND SELLS CRUDE OIL AND NATURAL GAS. THE COMPANY ALSO MANUFACTURES, PURCHASES,
TRANSPORTS AND MARKETS REFINED PETROLEUM PRODUCTS.
Conexant Systems, Inc. ................................................................. 2,106,099 1.9
PROVIDES SEMICONDUCTOR PRODUCTS FOR COMMUNICATIONS ELECTRONICS. THE
COMPANY OFFERS PRODUCTS FOR USE IN WIRELESS COMMUNICATIONS, NETWORK
ACCESS AND PROCESSING, DIGITAL ENTERTAINMENT, AND PERSONAL COMPUTING.
The TJX Companies, Inc. ................................................................ 2,056,500 1.8
RETAILS OFF-PRICE APPAREL AND HOME FASHIONS. THE COMPANY CURRENTLY
OPERATES T.J. MAXX, MARSHALLS, HOMEGOODS, A.J. WRIGHT, WINNERS AND
T.K. MAXX STORES.
Lucent Technologies, Inc. .............................................................. 2,036,005 1.8
DESIGNS, BUILDS AND DELIVERS A WIDE RANGE OF PUBLIC AND PRIVATE NETWORKS,
COMMUNICATIONS SYSTEMS AND SOFTWARE, BUSINESS TELEPHONE SYSTEMS AND DATA
NETWORKING SYSTEMS.
Kerr-McGee Corp. ....................................................................... 2,034,881 1.8
EXPLORES FOR AND PRODUCES OIL AND NATURAL GAS IN VARIOUS COUNTRIES AROUND THE ----------- ----------
WORLD. THE COMPANY FOCUSES ON OFFSHORE ACTIVITES PRIMARILY IN THE GULF OF MEXICO
AND THE NORTH SEA.
Total .................................................................................. $21,829,835 19.3%
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PAGE 3
MAJOR INDUSTRY EXPOSURE
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Automotive 4.4%
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Banking/Savings & Loan 10.2%
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-----------------------------------
Energy 8.8%
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Entertainment 4.3%
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Financial & Insurance 11.6%
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Health Care 5.0%
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Pharmaceuticals 9.4%
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Retail 7.4%
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Technology 9.0%
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Telecommunications 6.9%
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DIVERSIFICATION OF ASSETS
% Total Net Assets
October 31,
Value ----------------------
Cost (Note 1) 2004 2003
------------ ------------ ---------- ----------
Advertising ................ $ 980,625 $ 1,079,375 0.9% 2.5%
Aerospace & Defense ........ 4,051,736 3,746,485 3.3 4.9
Automotive ................. 5,030,505 4,987,306 4.4 2.4
Banking/Savings & Loan ..... 11,402,075 11,545,287 10.2 10.6
Consumer Goods ............. 3,265,210 3,839,250 3.4 3.1
Data-Processing Services ... 1,939,687 1,889,076 1.7 2.0
Electrical Supplies ........ 1,472,188 1,346,250 1.2 --
Energy ..................... 8,222,351 9,919,521 8.8 7.6
Entertainment .............. 5,004,635 4,898,932 4.3 4.5
Financial & Insurance ...... 12,939,839 13,196,750 11.6 10.9
Foods ...................... 1,509,343 1,492,500 1.3 --
Health Care ................ 5,722,902 5,629,274 5.0 6.7
Hotel Services ............. 1,045,000 1,128,750 1.0 --
Mining ..................... 1,481,988 1,411,220 1.3 --
Office Equipment ........... 1,746,250 1,791,563 1.6 1.7
Paper and Paper Products ... -- -- -- 1.3
Pharmaceuticals ............ 11,143,900 10,750,823 9.4 9.4
Retail ..................... 8,366,932 8,372,428 7.4 9.5
Technology ................. 11,668,207 10,182,006 9.0 7.3
Telecommunications ......... 7,371,769 7,873,130 6.9 9.9
Transportation ............. -- -- -- 2.0
Utilities .................. 1,275,424 1,299,000 1.1 2.3
Short-Term Securities ...... 6,809,726 6,809,692 6.0 0.0
------------ ------------ ---------- ----------
TOTAL INVESTMENTS ...... 112,450,292 113,188,618 99.8 98.6
Other Assets, Net of
Liabilities .............. -- 184,864 0.2 1.4
------------ ------------ ---------- ----------
TOTAL NET ASSETS ....... $112,450,292 $113,373,482 100.0% 100.0%
============ ============ ========== ==========
PAGE 4
PORTFOLIO OF INVESTMENTS October 31, 2004
Principal Identified Value
Amount Cost (Note 1)
---------- ---------- ------------
CONVERTIBLE BONDS AND NOTES -- 55.6%
ADVERTISING -- 0.9%
$1,000,000 Lamar Advertising Company 2.875% 2010 cv. sub. notes (B2) ............. $ 980,625 $1,079,375
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AEROSPACE AND DEFENSE -- 2.4%
1,250,000 Armor Holdings, Inc. 2% 2024 sr. sub. cv. notes (B+) (1) .............. 1,237,500 1,240,625
1,500,000 The Goldman Sachs Group, Inc. 1% 2009 exch. equity-linked notes
(Aa3) (exch. for General Dynamics Corp. common stock) (1) ............. 1,721,213 1,481,760
---------- ------------
2,958,713 2,722,385
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AUTOMOTIVE -- 3.2%
1,000,000 American Axle & Manufacturing Holdings, Inc. 2% 2024
cv. sr. notes (Baa3) (1) .............................................. 1,060,053 889,400
3,500,000 Lear Corp. 0% 2022 cv. sr. notes (Baa3) ............................... 1,654,014 1,722,656
1,000,000 Titan International, Inc. 5.25% 2009 sr. cv. notes (NR) ............... 1,000,938 1,031,250
---------- ------------
3,715,005 3,643,306
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BANKING/SAVINGS AND LOAN -- 2.8%
2,078,000 The Bear Stearns Companies, Inc. 0.25% 2010 medium term notes (A1)
(exch. for Fifth Third Bancorp common stock) (1) ...................... 2,299,565 1,974,381
1,250,000 Ocwen Financial Corp. 3.25% 2024 contingent cv. sr. unsecured notes
(B-) (Acquired 07/22/04 - 09/27/04; Cost $1,263,750) (2) .............. 1,263,750 1,168,750
---------- ------------
3,563,315 3,143,131
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CONSUMER GOODS -- 1.9%
1,875,000 Church & Dwight Co., Inc. 5.25% 2033 cv. sr. deb. (Ba3) ............... 1,875,000 2,189,250
---------- ------------
DATA-PROCESSING SERVICES -- 1.7%
1,500,000 Pegasus Solutions, Inc. 3.875% 2023 cv. sr. notes (NR) ................ 1,431,562 1,333,076
500,000 Per-Se Technologies, Inc. 3.25% 2024 cv. sub. deb. (B-)
(Acquired 06/24/04 - 06/25/04; Cost $508,125) (2) ..................... 508,125 556,000
---------- ------------
1,939,687 1,889,076
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ELECTRICAL SUPPLIES -- 1.2%
1,500,000 Graftech International LTD 1.625% 2024 cv. sr. deb. (B2) .............. 1,472,188 1,346,250
---------- ------------
ENERGY -- 2.9%
1,000,000 Devon Energy Corp. 0% 2020 cv. sr. deb. (BBB) ......................... 562,365 563,150
1,900,000 Kerr-McGee Corp. 5.25% 2010 cv. sub. deb. (Ba1) ....................... 1,992,938 2,034,881
1,000,000 Weatherford International Ltd. 0% 2020 cv. sr. deb. (Baa1) ............ 639,338 645,520
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3,194,641 3,243,551
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ENTERTAINMENT -- 1.9%
1,250,000 Citadel Broadcasting Corp. 1.875% 2011 cv. sub. notes (NR) ............ 1,246,250 1,095,125
1,000,000 The Walt Disney Company 2.125% 2023 cv. sr. notes (Baa1) .............. 1,053,800 1,068,370
---------- ------------
2,300,050 2,163,495
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FINANCIAL AND INSURANCE -- 2.8%
2,000,000 Leucadia National Corp. 3.75% 2014 cv. sr. sub. notes (Ba3) ........... 2,038,123 2,240,000
1,000,000 Swiss Re America Holding Corp. 3.25% 2021 euro. sub. cv. bonds
(Aa1) (conv. into Swiss Reinsurance Company common stock)
(Acquired 11/15/01 - 12/05/01; Cost $1,007,750) (2) ................... 1,007,750 969,250
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3,045,873 3,209,250
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PAGE 5
PORTFOLIO OF INVESTMENTS October 31, 2004 (continued)
Principal Identified Value
Amount Cost (Note 1)
--------- ------------ ------------
CONVERTIBLE BONDS AND NOTES -- CONTINUED
HEALTH CARE -- 3.8%
$1,000,000 AmerisourceBergen Corp. 5% 2007 cv. sub. notes (B1) ................... $1,103,673 $1,064,850
1,000,000 Community Health Systems, Inc. 4.25% 2008 cv. sub. notes (B3) ......... 988,600 1,034,200
500,000 Isolagen, Inc. 3.5% 2024 cv. sub. notes 144A (NR)
(Acquired 10/29/04; Cost $500,000) (2)................................. 500,000 521,250
500,000 LifePoint Hospitals, Inc. 4.50% 2009 cv. sub. notes (B3) .............. 490,000 498,125
875,000 Mentor Corp. 2.75% 2024 cv. deb. (NR) ................................. 941,250 1,153,359
---------- ------------
4,023,523 4,271,784
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HOTEL SERVICES -- 1.0%
1,000,000 Four Seasons Hotels, Inc. 1.875% 2024 cv. sr. notes (Baa3) ............ 1,045,000 1,128,750
---------- ------------
OFFICE EQUIPMENT -- 1.6%
1,750,000 IOS Capital, LLC 5% 2007 cv. sub. notes (Ba3)
(exch. for IKON Office Solutions, Inc. common stock)
(Acquired 05/08/02 - 06/02/03; Cost $1,746,250) (2) ................... 1,746,250 1,791,563
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PHARMACEUTICALS -- 7.1%
2,000,000 Alza Corp. 0% 2020 cv. sub. deb. (Aa1)
(exch. for Johnson & Johnson common stock) ............................ 1,633,292 1,612,500
2,000,000 Amgen, Inc. 0% 2032 LYONs (A2) (1) .................................... 1,614,756 1,478,980
1,500,000 Impax Laboratories, Inc. 1.25% 2024 cv. sr. sub. deb. (NR)
(Acquired 03/31/04 - 07/21/04; Cost $1,543,813) (2) ................... 1,543,813 1,315,440
500,000 Ivax Corp. 4.50% 2008 cv. sr. sub. notes (NR) ......................... 495,000 502,500
1,250,000 Ivax Corp. 1.50% 2024 cv. sr. notes (NR) (1) .......................... 1,297,218 1,269,088
1,000,000 Teva Pharmaceutical Finance II, LLC series A 0.50% 2024 cv. sr. deb.
(BBB) (exch. for Teva Pharmaceuticals Industries Ltd. ADR) ............ 1,000,000 960,000
1,000,000 Teva Pharmaceutical Finance II, LLC series B 0.25% 2024 cv. sr. deb.
(BBB) (exch. for Teva Pharmaceuticals Industries Ltd. ADR) ............ 1,000,000 963,750
---------- ------------
8,584,079 8,102,258
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RETAIL -- 7.4%
1,250,000 Casual Male Retail Group, Inc. 5% 2024 cv. sr. sub. notes (NR) ........ 1,261,073 1,079,688
1,500,000 Charming Shoppes, Inc. 4.75% 2012 sr. cv. notes (B2) .................. 1,539,180 1,625,621
250,000 Costco Wholesale Corp. 0% 2017 cv. sub. notes (A3) .................... 186,483 273,345
1,250,000 Dick's Sporting Goods, Inc. 1.6061% 2024 sr. cv. notes (NR) ........... 859,705 986,719
1,000,000 Reebok International Ltd. 2% 2024 cv. deb. (BBB)
(Acquired 04/27/04; Cost $1,011,230) (1) (2) .......................... 1,017,937 1,022,500
1,500,000 Saks, Inc. 2% 2024 cv. sr. notes (Ba3) ................................ 1,483,785 1,328,055
2,400,000 The TJX Companies, Inc. 0% 2021 LYONs (Baa1) .......................... 2,018,769 2,056,500
---------- ------------
8,366,932 8,372,428
---------- ------------
TECHNOLOGY -- 6.1%
1,500,000 Axcelis Technologies, Inc. 4.25% 2007 cv. sub. notes (NR) ............. 1,437,188 1,478,438
2,191,000 Conexant Systems, Inc. 5.25% 2006 cv. sub. notes (NR) ................. 2,226,604 2,106,099
2,378,000 Hewlett-Packard Co., Inc. 0% 2017 LYONs (Baa1) ........................ 1,360,808 1,328,708
2,000,000 International Rectifier Corp. 4.25% 2007 cv. sub. notes (B2) .......... 1,988,750 1,977,500
---------- ------------
7,013,350 6,890,745
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PAGE 6
PORTFOLIO OF INVESTMENTS October 31, 2004 (continued)
Principal Identified Value
Amount Cost (Note 1)
--------- ------------ ------------
CONVERTIBLE BONDS AND NOTES -- CONTINUED
TELECOMMUNICATIONS -- 6.9%
$1,500,000 Comverse Technology, Inc. 0% 2023 ZYPS (BB-) (3) ..................... $ 1,631,775 $ 1,940,250
1,000,000 Lucent Technologies, Inc. 2.75% 2023 series A cv. sr. deb. (B2) ...... 1,000,000 1,335,980
500,000 Lucent Technologies, Inc. 2.75% 2025 series B cv. sr. deb. (B2) ...... 500,000 700,025
1,250,000 Nortel Networks Corp. 4.25% 2008 cv. sr. notes (B3) .................. 1,287,500 1,206,250
1,250,000 Tekelec, Inc. 2.25% 2008 cv. sub. discount notes (NR) ................ 1,315,469 1,665,625
1,000,000 UTStarcom, Inc. 0.875% 2008 cv. notes (NR) ........................... 1,637,025 1,025,000
----------- ------------
7,371,769 7,873,130
----------- ------------
TOTAL CONVERTIBLE BONDS AND NOTES .................................... $63,196,000 $63,059,727
----------- ------------
Shares
----------
CONVERTIBLE PREFERRED STOCKS -- 19.3%
AUTOMOTIVE -- 1.2%
50,000 General Motors Corp. 6.25% series C cv. sr. deb. (Baa1) .............. 1,315,500 1,344,000
----------- ------------
BANKING/SAVINGS AND LOAN -- 7.4%
17,500 Commerce Capital Trust II 5.95% cv. trust pfd. (Baa1) (exch. for
Commerce Bancorp, Inc. common stock) ................................. 939,531 1,092,656
40,000 National Australia Bank Ltd. 7.875% exch. capital units (NR) ......... 1,038,700 1,432,000
30,000 New York Community Bancorp, Inc. 6% BONUSES units (Baa2) ............. 1,504,706 1,605,000
50,000 Sovereign Capital Trust IV 4.375% PIERS (Ba1)
(exch. for Sovereign Bancorp, Inc. common stock) (1) ................. 2,582,698 2,400,000
35,000 Washington Mutual Capital Trust PIERS units (Baa1) (exch. for
Washington Mutual, Inc. common stock) ................................ 1,773,125 1,872,500
----------- ------------
7,838,760 8,402,156
----------- ------------
ENERGY -- 2.8%
7,500 Chesapeake Energy Corp. 6% cum. cv. pfd. (B3) ........................ 489,375 619,350
1,000 Chesapeake Energy Corp. 4.125% cum. cv. pfd. (B3) .................... 1,000,000 1,137,500
20,000 The Williams Companies, Inc. 5.50% 2033 jr. sub. cv. deb. (B-) ....... 1,015,000 1,445,000
----------- ------------
2,504,375 3,201,850
----------- ------------
ENTERTAINMENT -- 2.4%
22,500 Emmis Communications Corp. 6.25% series A cum. cv. pfd. (Caa1) ....... 919,590 957,656
1,750 Radio One, Inc. 6.50% HIGH TIDES (B3) ................................ 1,784,995 1,777,781
----------- ------------
2,704,585 2,735,437
----------- ------------
FINANCIAL AND INSURANCE -- 3.0%
20,000 Reinsurance Group of America, Inc. 5.75% PIERS (Baa2) ................ 1,000,000 1,190,000
100,000 The St. Paul Travelers Companies, Inc. 4.50% 2032 cv. jr. sub. notes
(Baa1) ............................................................... 2,478,055 2,211,000
----------- ------------
3,478,055 3,401,000
----------- ------------
HEALTH CARE -- 1.2%
29,000 Omnicare Capital Trust I 4% PIERS (Ba3) (exch. for Omnicare, Inc.
common stock) (1) .................................................... 1,699,379 1,357,490
----------- ------------
MINING -- 1.3%
1,500 Freeport-McMoRan Copper and Gold, Inc. 5.50% cv. perpeptual pfd.
(CCC+) ............................................................... 1,481,988 1,411,220
----------- ------------
TOTAL CONVERTIBLE PREFERRED STOCKS ................................... $21,022,642 $21,853,153
----------- ------------
PAGE 7
PORTFOLIO OF INVESTMENTS October 31, 2004 (continued)
Principal
Amount Identified Value
or Shares Cost (Note 1)
--------- ------------ ------------
MANDATORY CONVERTIBLE SECURITIES -- 18.9% (4)
AEROSPACE AND DEFENSE -- 0.9%
10,000 shs Northrop Grumman Corp. 7.25% equity units (NR) (1) ............... $ 1,093,023 $ 1,024,100
----------- ------------
CONSUMER GOODS -- 1.5%
50,000 shs Constellation Brands, Inc. dep. shs. representing 5.75% series A
mand. cv. pfd. (B) ............................................... 1,390,210 1,650,000
----------- ------------
ENERGY -- 3.1%
30,000 shs Amerada Hess Corp.7% mandatory cv. pfd. ACES (Ba3) ............... 1,597,685 2,185,050
30,000 shs Valero Energy Corp. 2% mandatory cv. pfd. (BB+) .................. 925,650 1,289,070
----------- ------------
2,523,335 3,474,120
----------- ------------
FINANCIAL AND INSURANCE -- 5.8%
45,000 shs Capital One Financial Corp. 6.25% Upper DECS (Baa3) (1) .......... 2,247,456 2,371,050
15,000 shs The Chubb Corp. 7% 2005 equity units (A) (1) ..................... 419,784 419,100
54,000 shs The Chubb Corp. 7% 2006 equity units (A) (1) ..................... 1,480,683 1,525,500
40,000 shs Platinum Underwriters Holdings, Ltd. 7% eq. sec. units (NR) (1) .. 1,130,988 1,179,600
45,000 shs XL Capital, Ltd. 6.5% equity security units (A2) ................. 1,137,000 1,091,250
----------- ------------
6,415,911 6,586,500
----------- ------------
FOODS -- 1.3%
40,000 shs Albertson's, Inc. 7.25% HITS units (Baa2) (1) .................... 1,005,343 985,000
20,000 shs Lehman Brothers Holdings, Inc. 6.25% PIES (A) (exch. for General
Mills, Inc. common stock) ........................................ 504,000 507,500
----------- ------------
1,509,343 1,492,500
----------- ------------
PHARMACEUTICALS -- 2.3%
31,500 shs Baxter International, Inc. 7% equity units (Baa1) (1) ............ 1,535,071 1,622,565
20,000 shs Schering-Plough Corp. 6% mand. cv. pfd. (Baa3) ................... 1,024,750 1,026,000
----------- ------------
2,559,821 2,648,565
----------- ------------
TECHNOLOGY -- 2.9%
105,550 shs The Goldman Sachs Group, Inc. 7.50% mand. exch. notes (Aa3)
(exch. for EMC Corp. common stock) ............................... 1,500,086 1,402,390
36,395 shs The Goldman Sachs Group, Inc. 5.625% mand. exch. notes (Aa3)
(exch. for Intel Corp. common stock) ............................. 999,771 831,371
$2,000,000 Lehman Brothers Holdings, Inc. 6% 2005 YEELDS (A) (performance
linked to LSI Logic Corp. common stock) .......................... 2,155,000 1,057,500
----------- ------------
4,654,857 3,291,261
----------- ------------
UTILITIES -- 1.1%
50,000 shs DTE Energy Co. 8.75% equity security units (BBB) (1) ............. 1,275,424 1,299,000
----------- ------------
TOTAL MANDATORY CONVERTIBLE SECURITIES (4) ....................... $21,421,924 $21,466,046
----------- ------------
SHORT-TERM SECURITIES -- 6.0%
COMMERCIAL PAPER -- 6.0%
6,800,000 American Express Credit Corp. (P1) (1.70% maturing 11/02/04) ..... 6,798,716 6,798,716
----------- ------------
PAGE 8
PORTFOLIO OF INVESTMENTS October 31, 2004 (continued)
Principal Identified Value
Amount Cost (Note 1)
--------- ------------ ------------
SHORT-TERM SECURITIES -- CONTINUED
U.S. GOVERNMENT OBLIGATIONS -- 0.0%
$11,000 U.S. Treasury notes 1.625% 04/30/05 (Aaa) (5) ....................... $ 11,010 $ 10,976
------------ ------------
TOTAL SHORT-TERM SECURITIES ......................................... $ 6,809,726 $ 6,809,692
------------ ------------
TOTAL CONVERTIBLE BONDS AND NOTES -- 55.6% .......................... 63,196,000 63,059,727
TOTAL CONVERTIBLE PREFERRED STOCKS -- 19.3% ......................... 21,022,642 21,853,153
TOTAL MANDATORY CONVERTIBLE SECURITIES -- 18.9% ..................... 21,421,924 21,466,046
TOTAL SHORT-TERM SECURITIES -- 6.0% ................................. 6,809,726 6,809,692
------------ ------------
TOTAL INVESTMENTS -- 99.8% .......................................... $112,450,292 113,188,618
============
OTHER ASSETS AND LIABILITIES, NET -- 0.2% ........................... 184,864
------------
TOTAL NET ASSETS -- 100.0% .......................................... $113,373,482
============
(1) Contingent payment debt instrument which accrues contingent interest.
See Note 1(b).
(2) Security not registered under the Securities Act of 1933, as amended
(e.g., the security was purchased in a Rule 144A ransaction). The security
may be resold only pursuant to an exemption from registration under the
1933 Act, typically to qualified institutional buyers. The Fund generally
has no rights to demand registration of these securities. The aggregate
market value of these securities at October 31, 2004 was $7,344,753 which
represented 6.5% of the Fund's net assets.
(3) Non-income producing security.
(4) Mandatory convertible. See Note 1(e).
(5) Collateral for a letter of credit.
ACES Automatic Convertible Equity Securities.
ADR American Depositary Receipts.
BONUSES Bifurcated Option Note Unit Securities.
DECS Debt Exchangeable for Common Stock.
HIGH TIDES Remarketable Term Income Deferrable Equity Securities.
HITS Hybrid Income Term Security.
LYONs Liquid Yield Option Notes.
PIES Premium Income Exchangeable Securities.
PIERS Preferred Income Equity Redeemable Securities.
YEELDS Yield Enhanced Equity Linked Debt Securities.
ZYPS Zero Yield Puttable Securities.
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's,
a division of McGraw-Hill Companies, Inc., have been obtained from sources
believed reliable but have not been examined by PricewaterhouseCoopers LLP. NR
is used whenever a rating is unavailable.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 9
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
----------------
ASSETS:
Investments at value (cost $112,450,292) (Note 1) .............. $113,188,618
Cash ........................................................... 358,754
Dividends and interest receivable .............................. 648,618
Other assets ................................................... 31,058
------------
Total assets ................................................... 114,227,048
------------
LIABILITIES:
Payable for securities purchased ............................... 730,270
Accrued management fee (Note 2) ................................ 73,866
Accrued expenses ............................................... 29,116
Other liabilities .............................................. 20,314
------------
Total liabilities .............................................. 853,566
------------
NET ASSETS ............................................................. $113,373,482
============
NET ASSETS CONSIST OF:
Undistributed net investment income ............................. $ 1,037,260
Accumulated net realized loss from investment transactions ...... (4,470,204)
Unrealized appreciation on investments .......................... 738,326
Capital shares (Note 3) ......................................... 55,571
Additional paid-in capital ...................................... 116,012,529
------------
NET ASSETS .............................................................. $113,373,482
============
Net asset value per share ($113,373,482 / 5,557,138 outstanding shares) . $ 20.40
============
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2004
INVESTMENT INCOME (NOTE 1):
Interest ....................................................... $ 2,816,757
Dividends ...................................................... 2,352,552
------------
Total Income ........................................... 5,169,309
------------
EXPENSES (NOTE 2):
Management fee ................................................. 823,572
Custodian ...................................................... 33,680
Transfer agent ................................................. 27,923
Professional fees .............................................. 119,478
Directors' fees ................................................ 112,600
Reports to shareholders ........................................ 33,838
Insurance ...................................................... 29,440
Treasurer's office ............................................. 25,000
Other .......................................................... 85,073
------------
Total Expenses ......................................... 1,290,604
------------
NET INVESTMENT INCOME .................................................. 3,878,705
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions ................. 3,760,644
Net change in unrealized appreciation of investments ........... (3,604,190)
------------
Net gain on investments ........................................ 156,454
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................... $ 4,035,159
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 10
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER, 2004 AND 2003
2004 2003
------------ ------------
CHANGE IN NET ASSETS FROM OPERATIONS:
Net investment income ........................................... $ 3,878,705 $ 3,352,240
Net realized gain (loss) from investment transactions ........... 3,760,644 (424,570)
Net change in unrealized appreciation of investments ............ (3,604,190) 11,355,567
------------ ------------
Net increase in net assets resulting from operations .... 4,035,159 14,283,237
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ........................................... (3,826,570) (3,445,042)
CAPITAL SHARE TRANSACTIONS (NOTE 3)
Value of shares issued on reinvestment of distributions ......... 628,542 742,900
Net proceeds from rights offering ............................... 14,050,851 --
------------ ------------
Total capital share transactions ........................ 14,679,393 742,900
------------ ------------
CHANGE IN NET ASSETS .................................................... 14,887,982 11,581,095
Net assets at beginning of period ....................................... 98,485,500 86,904,405
------------ ------------
NET ASSETS AT END OF PERIOD (including undistributed net investment
income of $1,037,260 and $985,125, respectively) ........................ $113,373,482 $ 98,485,500
============ ============
--------------------------------------------------------------------------------
Financial Highlights
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING:
YEARS ENDED OCTOBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
OPERATING PERFORMANCE:
Net asset value, beginning of year ...... $20.84 $18.55 $20.72 $27.09 $27.35
---------- ---------- ---------- ---------- ----------
Net investment income ................... 0.70 0.71 0.79 1.07 1.04
Net realized and unrealized gain (loss) . 0.08 2.31 (2.02) (3.23) 2.29
---------- ---------- ---------- ---------- ----------
Total from investment operations ...... 0.78 3.02 (1.23) (2.16) 3.33
LESS DISTRIBUTIONS:
Dividends from net investment income .... (0.72) (0.73) (0.94) (1.11) (0.80)
Distributions from realized gains ....... -- -- -- (3.10) (2.90)
---------- ---------- ---------- ---------- ----------
Total distributions ................... (0.72) (0.73) (0.94) (4.21) (3.70)
CAPITAL SHARE TRANSACTIONS:
Effect of rights offering ............... (0.50) -- -- -- --
Capital share repurchases ............... -- -- -- -- 0.11
---------- ---------- ---------- ---------- ----------
Total capital share transactions ...... (0.50) -- -- -- 0.11
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ............ $20.40 $20.84 $18.55 $20.72 $27.09
========== ========== ========== ========== ==========
Market value, end of year ............... $18.23 $19.70 $17.54 $18.75 $22.63
Total Net Asset Value Return (%)(a,c) ... 1.3 16.7 (6.3) (8.7) 13.6
Total Investment Return (%)(b,c) ........ (3.8) 16.7 (1.8) 1.3 20.6
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year ($000's) ........ $113,373 $98,486 $86,904 $95,864 $111,336
Ratio of expenses to average net
assets (%) ............................ 1.1 1.2 1.2 1.1 1.1
Ratio of net investment income to average
net assets (%) ........................ 3.4 3.6 4.0 4.9 3.8
Portfolio turnover rate (%) ............. 66 87 78 83 93
-----------------
(a) Assumes valuation of the Fund's shares, and reinvestment of dividends,
at net asset values.
(b) Assumes valuation of the Fund's shares at market price and reinvestment of
dividends at actual reinvestment price.
(c) Return is not adjusted for dilution due to the 2004 rights offering.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 11
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Bancroft Convertible Fund, Inc. (the "Fund"), established in 1971, 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.
Unlisted securities traded in the over-the-counter market and 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. Securities for
which quotations are not readily available, restricted securities and other
assets are valued at fair value as determined in good faith by management with
the approval of the Board of Directors. Short-term debt securities with initial
maturities of 60 days or less are valued at amortized cost.
(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 11 cents per share for the year ended October 31, 2004. In addition,
Federal tax regulations require the Fund to reclassify realized gains on
contingent payment debt instruments to interest income. At October 31, 2004
there were unrealized losses of approximately 4 cent per share on contingent
payment debt instruments.
(C) FEDERAL INCOME TAXES
The Fund's policy is 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 capital loss carryforward represents tax basis capital losses which may be
carried over to offset future realized capital gains. To the extent that the
carryforward is used, no capital gains distributions will be made. At October
31, 2004, the Fund had available for federal income tax purposes unused capital
losses of $4,470,204, available to offset future net capital gains, $4,045,634
of which expires in 2010 and $424,570 of which expires in 2011. The Fund
utilized net capital loss carryforwards of $3,760,644 during the year ended
October 31, 2004.
PAGE 12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income are recorded by the
Fund on the ex-dividend date. Distributions from capital gains, if any, are
recorded on the ex-dividend date and paid annually. The amount and character of
income and capital gains to be distributed are determined in accordance with
income tax regulations, which may differ from generally accepted accounting
principles. The tax character of distributions paid during the years ended
October 31, 2004 and 2003 were $3,826,570 and $3,445,042, respectively, both
from ordinary income.
At October 31, 2004 the components of distributable net assets and the federal
tax cost were as follows:
Unrealized appreciation $ 6,074,008
Unrealized depreciation (5,335,682)
------------
Net unrealized appreciation 738,326
Undistributed ordinary income 1,037,260
Tax basis capital loss carryforward (4,470,204)
Cost for federal income tax purposes $112,450,292
(E) MARKET RISK
It is the Fund's policy 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
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. The market value of those securities was $21,466,046 at October
31, 2004, representing 18.9% 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 furnishes investment advice, office equipment and facilities, and
pays the salaries of all executive officers of the Fund. The Fund pays all
expenses incurred by it and not assumed by the Adviser and in addition will pay
the costs and expenses of its Treasurer's office, up to a maximum of $25,000 per
year, incurred in connection with its performance of certain services for the
Fund. These services include the valuation of securities owned by the Fund, and
the preparation of financial statements and schedules of the Fund's investments
for inclusion in certain periodic reports to the Fund's Board of Directors and
to the U.S. Securities and Exchange Commission.
PAGE 13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. CAPITAL STOCK
At October 31, 2004 there were 5,557,138 shares of $.01 par value common stock
outstanding, (9,000,000 shares authorized). During the years ended October 31,
2004 and 2003, 33,362 shares and 41,388 shares were issued in connection with
reinvestment of dividends from net investment income, resulting in an increase
in paid-in capital of $628,542 and $742,900 respectively.
On December 16, 2003, the Fund completed a rights offering of Common Stock to
its stockholders at the rate of one common share for each 6 rights held by
stockholders of record on November 13, 2003. The rights offering was fully
subscribed, resulting in the issuance of 797,918 common shares at a price of
$17.82, and proceeds of $14,218,899 to the Fund prior to the deduction of
offering costs. These offering costs, of approximately $169,000 ($0.04 per
share), were charged to paid-in capital in excess of par value upon completion
of the offering. The net asset value per share of the Fund's Common Stock was
reduced by approximately $0.50 per share as a result of the issuance.
4. PORTFOLIO ACTIVITY
Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated $79,249,157 and $71,187,359, respectively, for the year ended October
31, 2004.
--------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In accordance with subchapter M of the Internal Revenue Code of 1986, as
amended, for the year ended October 31, 2004, 12.2% of the dividends paid from
ordinary income qualified for the dividends received deduction for corporations.
Certain dividends paid by the Fund for the fiscal year ended October 31, 2004
may be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate up
to a maximum amount of $465,743 as taxed at a maximum rate of 15%.
Shareholders should not use the above information to prepare their tax returns.
Since the Fund's fiscal year is not the calendar year, another notification will
be sent with respect to calendar year 2004. Such notification, which will
reflect the amount to be used by taxpayers on their federal income tax returns,
will be made in conjunction with Form 1099 DIV and will be mailed in January
2005. Shareholders are advised to consult their own tax advisers with respect to
the tax consequences of their investment in the Fund.
PAGE 14
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
BANCROFT CONVERTIBLE FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Bancroft Convertible Fund, Inc.
(the "Fund") at October 31, 2004, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 19, 2004
PAGE 15
MISCELLANEOUS NOTES
AUTOMATIC DIVIDEND INVESTMENT AND CASH PAYMENT PLAN
The Fund has an Automatic Dividend Investment and Cash Payment Plan (the
"Plan"). Any shareholder may elect to join the Plan by sending an application to
American Stock Transfer & Trust Company, P.O. Box 922, Church Street Station, NY
10269-0560 (the "Plan Agent"). You may also obtain additional information about
the Plan by calling the Plan Agent toll free at (800) 937-5449. If your shares
are held by a broker or other nominee, you should instruct the nominee to join
the Plan on your behalf. Some brokers may require that your shares be taken out
of the broker's "street name" and re-registered in your own name. Shareholders
should also contact their broker to determine whether shares acquired through
participation in the Plan can be transferred to another broker, and thereafter,
whether the shareholder can continue to participate in the Plan.
Under the Plan, all dividends and distributions are automatically invested in
additional Fund shares. Depending on the circumstances, shares may either be
issued by the Fund or acquired through open market purchases at the current
market price or net asset value, whichever is lower (but not less than 95% of
market price). When the market price is lower, the Plan Agent will combine your
dividends with those of other Plan participants and purchase shares in the
market, thereby taking advantage of the lower commissions on larger purchases.
There is no other charge for this service.
All dividends and distributions made by the Fund (including capital gain
dividends and dividends designated as qualified dividend income, which are
eligible for taxation at lower rates) remain taxable to Plan participants,
regardless of whether such dividends and distributions are reinvested in
additional shares of the Fund through open market purchases or through the
issuance of new shares. Plan participants will be treated as receiving the cash
used to purchase shares on the open market and, in the case of any dividend or
distribution made in the form of newly issued shares, will be treated as
receiving an amount equal to the fair market value of such shares as of the
reinvestment date. Accordingly, a shareholder may incur a tax liability even
though such shareholder has not received a cash distribution with which to pay
the tax.
Plan participants may also voluntarily send cash payments of $100 to $10,000 per
month to the Plan Agent, to be combined with other Plan monies, for purchase of
additional Fund shares in the open market. You pay only a bank service charge of
$1.25 per transaction, plus your proportionate share of the brokerage
commission. All shares and fractional shares purchased will be held by the Plan
Agent in your dividend reinvestment account. You may deposit with the Plan Agent
any Bancroft stock certificates you hold, for a one-time fee of $7.50.
At any time, a Plan participant may instruct the Plan Agent to liquidate all or
any portion of such Plan participant's account. To do so, a Plan participant
must deliver written notice to the Plan Agent prior to the record date of any
dividend or distribution requesting either liquidation or a stock certificate.
The Plan Agent will combine all liquidation requests it receives from Plan
participants on a particular day and will then sell shares of the Fund that are
subject to liquidation requests in the open market. The amount of proceeds a
Plan participant will receive shall be determined by the average sales price per
share, after deducting brokerage commissions, of all shares sold by the Plan
Agent for all Plan participants who have given the Plan Agent liquidation
requests.
The Plan Agent or the Fund may terminate the Plan for any reason at any time by
sending written notice addressed to Plan participant's address as shown on the
Plan Agent's records. Following the date of termination, the Plan Agent shall
send the Plan participant either the proceeds of liquidation, or a stock
certificate or certificates for the full shares held by the Plan Agent in the
Plan participant's account. Additionally, a check will be sent for the value of
any fractional interest in the Plan participant's account based on the market
price of the Fund's Common Stock on that date.
PAGE 16
MISCELLANEOUS NOTES (CONTINUED)
NOTICE OF PRIVACY POLICY
The Fund has adopted a privacy policy in order to protect the confidentiality of
nonpublic personal information that we have about you. We receive personal
information, such as your name, address and account balances, when transactions
occur in Bancroft shares registered in your name.
We may disclose this information to companies that perform services for the
Fund, such as the Fund's transfer agent or proxy solicitors. These companies may
only use this information in connection with the services they provide to the
Fund, and not for any other purpose. We will not otherwise disclose any
nonpublic personal information about our stockholders or former stockholders to
anyone else, except as required by law.
Access to nonpublic information about you is restricted to our employees and
service providers who need that information in order to provide services to you.
We maintain physical, electronic and procedural safeguards that comply with
federal standards to guard your nonpublic personal information.
--------------------------------------------------------------------------------
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
In addition to the semi-annual and annual reports that Bancroft delivers to
shareholders and makes available through the Bancroft public website, the Fund
files a complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the Fund's first and third fiscal quarters on Form N-Q.
Bancroft does not deliver the schedule for the first and third fiscal quarters
to shareholders, however the schedule is posted to the Bancroft public website,
www.bancroftfund.com. You may obtain the Form N-Q filings by accessing the SEC's
website at www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the SEC's
Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. You
can also request copies of this information, upon payment of a fee for
duplication, at the SEC's email address (publicinfo@sec.gov) or by writing the
Public Reference section of the SEC, Washington, DC 20549-0102.
--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES / PROXY VOTING RECORD
The Fund's policies and procedures with respect to the voting of proxies
relating to the Fund's porfolio securities is available without charge, upon
request, by calling (973) 631-1177, or at our website at www.bancroftfund.com.
This information is also available on the SEC's website at www.sec.gov. In
addition, information on how the Fund voted such proxies relating to portfolio
securities during the most recent twelve-month period ended June 30, is
available without charge at the above sources.
--------------------------------------------------------------------------------
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 its own 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.
--------------------------------------------------------------------------------
The Fund is a member of the Closed-End Fund Association (CEFA). Its website
address is www.cefa.com. CEFA is solely responsible for the content of its
website.
PAGE 17
------------------------------------DIRECTORS-----------------------------------
Each director is also a director of Ellsworth Convertible Growth & Income Fund,
Inc. (Ellsworth) (a closed-end management investment company). Davis-Dinsmore
Management Company (Davis-Dinsmore) is the Fund's investment adviser and is also
the investment adviser to Ellsworth. Because of this connection, the Fund and
Ellsworth make up a Fund Complex. Therefore, each director oversees two
investment companies in the Fund Complex.
--------------------------------------------------------------------------------
Personal Principal Occupation(s) During Past Five Years;
Information Other Directorship(s)
--------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
Gordon F. Ahalt Retired. Prior to 2001, President of G.F.A. Inc.
65 Madison Avenue (petroleum industry consulting company).
Suite 550 Director of Ellsworth and CalDive International.
Morristown, NJ 07960
Term expires 2007
Director since 1982
Age 76
--------------------------------------------------------------------------------
William A. Benton Retired. Prior to 2001, Partner of BE Partners
65 Madison Avenue (small options market maker). Prior to 2000,
Suite 550 Limited Partner of Gavin, Benton & Co.
Morristown, NJ 07960 (NYSE specialist); Director of Ellsworth.
Term expires 2006
Director since 1994
Age 71
--------------------------------------------------------------------------------
Elizabeth C. Bogan, Ph.D. Senior Lecturer in Economics at Princeton
65 Madison Avenue University; Director of Ellsworth.
Suite 550
Morristown, NJ 07960
Term expires 2006
Director since 1990
Age 60
--------------------------------------------------------------------------------
Donald M. Halsted, Jr. Retired Business Executive; Director of
65 Madison Avenue Ellsworth.
Suite 550
Morristown, NJ 07960
Term expires 2005
Director since 1970
Age 77
--------------------------------------------------------------------------------
Duncan O. McKee Retired Attorney; Director of Ellsworth.
65 Madison Avenue
Suite 550
Morristown, NJ 07960
Term expires 2005
Director since 1996
Age 73
PAGE 18
------------------------------DIRECTORS (CONTINUED)-----------------------------
Personal Principal Occupation(s) During Past Five Years;
Information Other Directorship(s)
--------------------------------------------------------------------------------
INDEPENDENT DIRECTORS (CONTINUED)
Nicolas W. Platt Since January 2003, President of CNC-US (an
65 Madison Avenue international consulting company). Prior to
Suite 550 January 2003, Senior Partner of Platt &
Morristown, NJ 07960 Rickenbach (public relations firm). Prior to May
Term expires 2007 2001, with WPP Group, UK, as Executive Vice
Director since 1997 President of Ogilvy Public Relations Worldwide;
Age 51 Director of Ellsworth.
--------------------------------------------------------------------------------
INTERESTED DIRECTORS
Thomas H. Dinsmore, C.F.A. (1) Chairman and Chief Executive Officer of the
65 Madison Avenue Fund, Ellsworth and Davis-Dinsmore; Director of
Suite 550 Ellsworth and Davis-Dinsmore.
Morristown, NJ 07960
Term expires 2005
Director since 1985
Age 51
--------------------------------------------------------------------------------
Jane D. O'Keeffe (1) President of the Fund, Ellsworth and
65 Madison Avenue Davis-Dinsmore; Director of Ellsworth and
Suite 550 Davis-Dinsmore.
Morristown, NJ 07960
Term expires 2007
Director since 1995
Age 49
--------------------------------------------------------------------------------
George R. Lieberman retired as Director of the Fund as of October 18, 2004.
--------------------------------------------------------------------------------
As of the date of this report, the Board of Directors did not have an audit
committee financial expert serving on its audit committee as the Board was still
in the process of identifying an appropriate candidate. However, the Fund's
directors subsequently elected Robert J. McMullan to the Board of Directors,
effective November 15, 2004, and have appointed Mr. McMullan to serve on the
Fund's audit committee. The Board of Directors has determined that Mr. McMullan
possesses the attributes required to be considered an audit committee financial
expert under applicable federal securities laws. Mr. McMullan's background and
experience will be included in the Proxy Statement for the Fund's 2005 annual
meeting, at which time shareholders will vote to approve the election of Mr.
McMullan as a director.
(1) Mr. Dinsmore and Ms. O'Keeffe are considered interested persons because they
are officers and directors of Davis-Dinsmore. They are brother and sister.
PAGE 19
-------------------------------PRINCIPAL OFFICERS-------------------------------
The business address of each officer is 65 Madison Avenue, Suite 550,
Morristown, NJ 07960-7308. Officers are elected by and serve at the pleasure of
the Board of Directors. Each officer holds office until the annual meeting to be
held in 2005, and thereafter until his or her respective successor is duly
elected and qualified.
--------------------------------------------------------------------------------
Personal Principal Occupation(s) During Past Five Years;
Information Other Directorship(s)
--------------------------------------------------------------------------------
Thomas H. Dinsmore, C.F. A (1,2,3)
Director, Chairman and Director, Chairman and Chief Executive Officer
Chief Executive Officer of the Fund, Ellsworth and Davis-Dinsmore.
Officer since 1986
Age 51
--------------------------------------------------------------------------------
Jane D. O'Keeffe (1,2,3) Director and President of the Fund, Ellsworth
Director and President and Davis-Dinsmore.
Officer since 1994
Age 49
--------------------------------------------------------------------------------
Gary I. Levine Since 2004, Executive Vice President and Chief
Executive Vice President, Financial Officer, and since 2003 Secretary, and
Chief Financial Officer and prior thereto, Treasurer and Assistant Secretary
Secretary of the Fund, Ellsworth and Davis-Dinsmore.
Officer since 1993
Age 47
--------------------------------------------------------------------------------
H. Tucker Lake, Jr. (2,4) Since 2002, Vice President, and prior thereto
Vice President Vice President, Trading, of the Fund, Ellsworth
Officer since 1994 and Davis-Dinsmore.
Age 57
--------------------------------------------------------------------------------
Germaine M. Ortiz Since 1999, Vice President of the Fund,
Vice President Ellsworth and Davis-Dinsmore.
Officer since 1996
Age 35
--------------------------------------------------------------------------------
Mercedes A. Pierre Vice President and Chief Compliance Officer
Vice President, Chief since 2004, and Assistant Treasurer since 1998
Compliance Officer and of the Fund, Ellsworth and Davis-Dinsmore. Prior
Assistant Treasurer thereto Assistant Treasurer of Davis-Dinsmore.
Officer since 1998
Age 43
--------------------------------------------------------------------------------
Joshua P. Lake (3,4) Since 2004, Treasurer and Assistant Secretary.
Treasurer and Assistant Prior to 2004, Assistant Treasurer and Assistant
Secretary Secretary and prior to 2002 Research Associate
Officer since 2002 of the Fund, Ellsworth and Davis-Dinsmore.
Age 28
--------------------------------------------------------------------------------
(1) Mr. Dinsmore and Ms. O'Keefe are brother and sister.
(2) Mr. H. Tucker Lake is the cousin of Mr. Dinsmore and Ms. O'Keeffe.
(3) Mr. Joshua Lake is the cousin of Mr. Dinsmore and Ms. O'Keeffe.
(4) Mr. H. Tucker Lake is the father of Mr. Joshua Lake.
PAGE 20
BOARD OF DIRECTORS
GORDON F. AHALT PETROLEUM CONSULTANT
WILLIAM A. BENTON RETIRED STOCK EXCHANGE SPECIALIST
ELIZABETH C. BOGAN SENIOR LECTURER IN ECONOMICS AT PRINCETON
UNIVERSITY
THOMAS H. DINSMORE, C.F.A. CHAIRMAN OF THE BOARD OF BANCROFT
DONALD M. HALSTED, JR. INVESTOR
GEORGE R. LIEBERMAN RETIRED ADVERTISING EXECUTIVE
Mr. Lieberman retired as a director as of October 18, 2004.
DUNCAN O. MCKEE RETIRED ATTORNEY
JANE D. O'KEEFFE PRESIDENT OF BANCROFT
NICOLAS W. PLATT PUBLIC RELATIONS EXECUTIVE
OFFICERS
THOMAS H. DINSMORE CHAIRMAN OF THE BOARD
JANE D. O'KEEFFE PRESIDENT
GARY I. LEVINE EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY
H. TUCKER LAKE VICE PRESIDENT
GERMAINE M. ORTIZ VICE PRESIDENT
MERCEDES A. PIERRE VICE PRESIDENT, CHIEF COMPLIANCE OFFICER AND
ASSISTANT TREASURER
JOSHUA P. LAKE TREASURER AND ASSISTANT SECRETARY
JESSICA K. LAKE ASSISTANT VICE PRESIDENT
JOANN VENEZIA ASSISTANT VICE PRESIDENT
--------------------------------------------------------------------------------
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
BANCROFT CONVERTIBLE FUND, INC.
65 MADISON AVENUE, SUITE 550
MORRISTOWN, NEW JERSEY 07960
www.bancroftfund.com
[LOGO]
AMERICAN
STOCK EXCHANGE(R)
LISTED
BCV(TM)
ITEM 2. CODE OF ETHICS.
Effective May 15, 2003, the Board of Directors of the Fund has adopted a
code of ethics that applies to the Fund's principal executive officer and
principal financial officer. See attached Exhibit EX-99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the date of this report, the Board of Directors did not have an audit
committee financial expert serving on its audit committee as the Board was still
in the process of identifying an appropriate candidate. However, the Fund's
directors subsequently elected Robert J. McMullan to the Board of Directors,
effective November 15, 2004, and have appointed Mr. McMullan to serve on the
Fund's audit committee. Mr. McMullan is an independent director. The Board of
Directors has determined that Mr. McMullan possesses the attributes required to
be considered an audit committee financial expert under applicable federal
securities laws. Mr. McMullan's background and experience will be included in
the Proxy Statement for the Fund's 2005 annual meeting, at which time
shareholders will vote to approve the election of Mr. McMullan as a director.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Set forth in the table below are the aggregate fees billed to the Company
by PricewaterhouseCoopers LLP ("PwC") for services rendered to the Company
during the Company's last two fiscal years ended October 31, 2003 and
October 31, 2004.
Fiscal YE Audit Audit-Related All Other
October 31 Fees Fees (1) Tax Fees (2) Fees
2003 $32,847 $0 $2,200 $0
2004 $34,400 $9,785 $2,500 $0
(1) "Audit-Related Fees" include those fees billed to the Company by PwC in
connection with its review of the Company's Registration Statement on Form N-
2 relating to the Company's Rights Offering. All Audit-Related Fees were pre-
approved by the Company's audit committee and no Audit-Related Fees were
approved by the Company's audit committee pursuant to section
2.01(c)(7)(i)(C) of Regulation S-X, which waives the pre-approval requirement
for certain de minimus fees.
(2) "Tax Fees" include those fees billed by PwC in connection with its
review of the Company's income tax returns. All Tax Fees were pre-approved
by the Company's audit committee and no Tax Fees were approved by the
Company's audit committee pursuant to section 2.01(c)(7)(i)(C) of Regulation
S-X, which waives the pre-approval requirement for certain de minimus fees.
Non-Audit Services
During each of the last two fiscal years ended October 31, 2003 and
October 31, 2004, PwC did not provide any non-audit services to the Company or
Davis-Dinsmore or its affiliates or otherwise bill the Company or Davis-Dinsmore
or its affiliates for any such non-audit services.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee pre-approves all audit and permissible non-audit
services that are proposed to be provided to the Company by its independent
auditors before they are provided to the Company. Such pre-approval also
includes the proposed fees to be charged by the independent auditors for such
services. The Audit Committee may delegate the pre-approval of audit and
permissible non-audit services and related fees to one or more members of the
Audit Committee who are "independent," as such term is defined in Rule 10A-
3(b)(1)(iii) under the Exchange Act. Any such member's decision to pre-approve
audit and/or non-audit services and related fees shall be presented to the full
Audit Committee, solely for informational purposes, at their next scheduled
meeting.
The Audit Committee also pre-approves non-audit services to be provided by
the Company's independent auditors to the Company's investment adviser if the
engagement relates directly to the operations and financial reporting of the
Company and if the Company's independent auditors are the same as, or affiliated
with, the investment adviser's auditors.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The Fund has a designated Audit Committee in accordance with
Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee
include:
WILLIAM A. BENTON
ELIZABETH C. BOGAN, PH.D.
DONALD M. HALSTED, JR.
George R. Lieberman was a member of the Audit Committee through October 18,
2004, on which date Mr. Lieberman retired as a director of the Fund. Mr.
Lieberman will be replaced on the Audit Committee by Robert J. McMullan.
(b) Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments in securities of unaffiliated issuers is included as
part of the report to shareholders, filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Bancroft Convertible Fund, Inc.
Ellsworth Convertible Growth and Income Fund, Inc.
Davis-Dinsmore Management Company
Proxy Voting Guidelines
(Adopted April 14, 2003)
These proxy voting guidelines have been adopted by the Boards of Directors of
Bancroft Convertible Fund, Inc. and Ellsworth Convertible Growth and Income
Fund, Inc. (collectively, the "Funds"), as well as by the Board of Directors of
Davis-Dinsmore Management Company ("Davis-Dinsmore").
The Boards of Directors of the Funds have delegated to Davis-Dinsmore
responsibility for voting proxies received by the Funds in their capacities as
shareholders of various companies. The Boards recognize that, due to the nature
of the Funds' investments, the Funds do not frequently receive proxies.
Davis-Dinsmore exercises its voting responsibility with the overall goal of
maximizing the value of the Funds' investments. The portfolio managers at
Davis-Dinsmore oversee the voting policies and decisions for the Funds.
In evaluating voting issues, the portfolio managers may consider information
from many sources, including management of a company presenting a proposal,
shareholder groups, research analysts, and independent proxy research services.
Set forth below are the proxy voting guidelines:
A. Matters Related to the Board of Directors
1. The Funds generally will support the election of nominees recommended
by management for election as directors. In determining whether to support a
particular nominee, Davis-Dinsmore will consider whether the election of that
nominee will cause a company to have less than a majority of independent
directors.
2. The Funds generally will support proposals to de-classify boards of
directors if fewer than 66 2/3% of the directors are independent, and will
generally vote against proposals to classify boards of directors.
3. The Funds generally will withhold a vote in favor of a director who
has served on a committee which has approved excessive compensation arrangements
or proposed equity-based compensation plans that unduly dilute the ownership
interests of stockholders.
B. Matters Related to Independent Auditors
1. The Funds generally will vote in favor of independent accountants
approved by the company. Prior to such vote, however, Davis-Dinsmore will take
into consideration whether non-audit fees make up more than 50 to 75% of the
total fees paid by the company to the independent auditors, and the nature of
the non-audit services provided.
C. Corporate Governance Matters
1. As a general rule, the Funds will vote against proposals recommended
by management of a company that are being made primarily to implement anti-
takeover measures, and will vote in favor of proposals to eliminate policies
that are primarily intended to act as anti-takeover measures.
2. Subject to the other provisions of these guidelines, including without
limitation provision C.1. above, the Funds generally will vote in accordance
with management's recommendations regarding routine matters, including the
following:
a. Fixing number of directors;
b. Stock splits; and
c. Change of state of incorporation for specific corporate purposes.
D. Matters Related to Equity-Based Compensation Plans
1. The Fund generally will vote in favor of broad-based stock option
plans for executives, employees or directors which would not increase the
aggregate number of shares of stock available for grant under all currently
active plans to over 10% of the total number of shares outstanding.
2. The Funds generally will vote in favor of employee stock purchase
plans and employee stock ownership plans permitting purchase of company stock at
85% or more of fair market value.
E. Contested Matters
1. Contested situations will be evaluated on a case by case basis by the
portfolio manager at Davis-Dinsmore principally responsible for the particular
portfolio security.
F. Miscellaneous Matters
1. The Funds may in their discretion abstain from voting shares that have
been recently sold.
2. The Funds generally will abstain from voting on issues relating to
social and/or political responsibility.
3. Proposals that are not covered by the above-stated guidelines will be
evaluated on a case by case basis by the portfolio manager at Davis-Dinsmore
principally responsible for the particular portfolio security.
G. Material Conflicts of Interest
1. Conflicts of interest may arise from time to time between Davis-
Dinsmore and the Funds. Examples of conflicts of interests include:
a. Davis-Dinsmore may manage a pension plan, administer employee
benefit plans, or provide services to a company whose management is
soliciting proxies;
b. Davis-Dinsmore or its officers or directors may have a business
or personal relationship with corporate directors, candidates for
directorships, or participants in proxy contests;
c. Davis-Dinsmore may hold a position in a security contrary to
shareholder interests.
2. If a conflict of interest arises with respect to a proxy voting
matter, the portfolio manager will promptly notify the Funds' Audit Committee
and counsel for independent directors and the proxies will be voted in
accordance with direction received from the Audit Committee.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not currently applicable to registrant.
ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
There were no purchases made by or on behalf of the registrant or any
"affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act
(17 CFR 240.10b-18(a)(3)), of shares or other units of any class of the
registrant's equity securities that is registered by the registrant pursuant to
Section 12 of the Exchange Act(15 U.S.C. 781).
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant adopted Shareholder Communication Procedures (the "Procedures")
as amended effective July 22, 2004. The Procedures are intended to set forth
the process by which shareholders of the registrant may send communications to
the Board. If a shareholder sends a recommendation of a nominee to the Board or
to an individual director, such communication would be covered by the
Procedures. Shareholder proposals submitted pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
communications made in connection with such proposals are not subject to the
Procedures. The Registrant's Bylaws also contain provisions requiring a
shareholder to provide advance notice of his or her intention to nominate, at
the Registrant's annual meeting of shareholders, an individual for election as
director.
Pursuant to the Procedures, shareholders should send their communications to the
Shareholder Relations Group. Communications may be sent by regular mail or
delivery service to the following address: 65 Madison Avenue, Suite 550,
Morristown, NJ 07960. Email communications may be sent to:
info@bancroftfund.com. All shareholder communications received by the
Shareholder Relations Group shall be promptly forwarded to the individual
director of the registrant to whom they were addressed or to the full Board, as
applicable. Copies of all such shareholder communications will also be
distributed to the Chairs of each of the registrant's Audit Committee, and
Nominating and Administration Committee, and to counsel for the registrant and
for the independent directors. Counsel for the registrant and for the
independent directors, upon receipt of its copy of a shareholder communication,
shall work with such Chairs and counsel for the independent directors to
determine whether such shareholder communication should be distributed to any
directors to whom it was not sent and whether and in what manner the directors
should respond to such shareholder communication. Responses, if any, to
shareholder communications shall be coordinated by counsel for the registrant
and for the independent directors, working with the Chairs.
ITEM 11. CONTROLS AND PROCEDURES
Conclusions of principal officers concerning controls and procedures
(a) As of December 15, 2004, an evaluation was performed under the supervision
and with the participation of the officers of Bancroft Convertible Fund, Inc.
(the "Registrant"), including the Principal Executive Officer ("PEO") and
Principal Financial Officer ("PFO"), to assess the effectiveness of the
Registrant's disclosure controls and procedures, as that term is defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "Act").
Based on that evaluation, the Registrant's officers, including the PEO and PFO,
concluded that, as of December 15, 2004, the Registrant's disclosure controls
and procedures were reasonably designed so as to ensure: (1) that information
required to be disclosed by the Registrant on Form N-CSR and Form N-Q is
recorded, processed, summarized and reported within the time periods specified
by the rules and forms of the Securities and Exchange Commission; and (2) that
material information relating to the Registrant is made known to the PEO and
PFO as appropriate to allow timely decisions regarding required disclosure.
(b) There have been no significant changes in the Registrant'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 Registrant's second 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)(1) A code of ethics, effective May 15, 2003, that applies to the Fund's
principal executive officer and principal financial officer is attached
hereto.
(a)(2) Certifications of the principal executive officer and the principal
financial officer pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940, are attached hereto.
(a)(3) There were no written solicitations to purchase securities under Rule
23c-1 under the Investment Company Act of 1940 during the period covered by the
report.
(b) Certifications of the principal executive officer and the principal
financial officer, as required by Rule 30a-2(b) under the Investment Company Act
of 1940, are attached hereto.
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 and
Chief Executive Officer
(Principal Executive Officer)
Date: December 21, 2004
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 and
Chief Executive Officer
(Principal Executive Officer)
Date: December 21, 2004
By: /s/Gary I. Levine
Gary I. Levine
Chief Financial Officer
(Principal Financial Officer)
Date: December 21, 2004