UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
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: July 31, 2005
ITEM 1. SCHEDULE OF INVESTMENTS.
PORTFOLIO OF INVESTMENTS JULY 31, 2005 (UNAUDITED)
Principal Value
Amount (Note 1)
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CONVERTIBLE BONDS AND NOTES -- 51.2%
AEROSPACE AND DEFENSE -- 1.3%
$1,500,000 L-3 Communications Holdings, Inc. 3% 2035 CODES (Ba3)
(Acquired 07/27/05 - 07/28/05; Cost $1,515,938) (1,2)................. $1,526,250
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AUTOMOTIVE -- 2.3%
625,000 CSK Auto, Inc. 3.375% 2025 sr. exch. notes (NR)
(conv. into CSK Auto Corp. common stock)
(Acquired 07/26/05; Cost $637,500) (2)................................ 654,688
4,500,000 Lear Corp. 0% 2022 cv. sr. notes (Ba2)................................. 2,055,938
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2,710,626
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BANKING/SAVINGS AND LOAN -- 1.5%
2,078,000 The Bear Stearns Companies, Inc. 0.25% 2010 medium-term notes (A1)
(exch. for Fifth Third Bancorp common stock) (1)...................... 1,813,678
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CONSUMER GOODS -- 1.6%
1,375,000 Church & Dwight Co., Inc. 5.25% 2033 cv. sr. deb. (Ba2)................ 1,872,695
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ENERGY -- 5.1%
1,250,000 OMI Corp. 2.875% 2024 cv. sr. notes (B+)............................... 1,139,063
2,000,000 Oil States International, Inc. 2.375% 2025 contingent cv. sr. notes
(NR) (Acquired 06/16/05; Cost $1,980,000) (2)......................... 2,288,750
4,000,000 Weatherford International Ltd. 0% 2020 cv. sr. deb. (Baa1)............. 2,608,960
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6,036,773
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ENTERTAINMENT -- 2.6%
3,000,000 The Walt Disney Company 2.125% 2023 cv. sr. notes (Baa1)............... 3,105,900
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FINANCIAL AND INSURANCE -- 1.6%
1,000,000 FTI Consulting, Inc. 3.75% 2012 cv. sr. notes (Ba3)
(Acquired 07/29/05; Cost $1,028,125) (2).............................. 1,027,500
1,000,000 Swiss Re America Holding Corp. 3.25% 2021 euro. sub. cv. bonds (A1)
(conv. into Swiss Reinsurance Company common stock)
(Acquired 11/15/01 - 12/05/01; Cost $1,007,750) (2)................... 930,700
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1,958,200
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HEALTH CARE -- 4.8%
1,500,000 Community Health Systems, Inc. 4.25% 2008 cv. sub. notes (B3).......... 1,750,350
1,750,000 Isolagen, Inc. 3.5% 2024 cv. sub. notes (NR)
(Acquired 10/29/04 - 02/17/05; Cost $1,771,250) (2)................... 1,432,813
1,250,000 Manor Care, Inc. 2.125% 2035 cv. sr. notes (Baa3)
(Acquired 07/27/05 - 07/28/05; Cost $1,268,125) (2)................... 1,271,875
750,000 Mentor Corp. 2.75% 2024 cv. sub. notes (NR)............................ 1,301,250
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5,756,288
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MULTI-INDUSTRY -- 0.8%
1,000,000 Lehman Brothers Holdings, Inc. 1% 2011 medium-term notes (A1)
(performance linked to Cendant Corp. common stock) (1)................ 950,000
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OFFICE EQUIPMENT -- 1.4%
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)................... 1,728,125
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PORTFOLIO OF INVESTMENTS JULY 31, 2005 (CONTINUED)
Principal Value
Amount (Note 1)
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CONVERTIBLE BONDS AND NOTES -- (CONTINUED)
PHARMACEUTICALS -- 8.3%
$2,000,000 Alza Corp. 0% 2020 cv. sub. deb. (Aa1)
(exch. for Johnson & Johnson common stock)............................. $ 1,763,400
2,000,000 Amgen, Inc. 0% 2032 LYONs (A2) (1)..................................... 1,565,130
550,000 CV Therapeutics, Inc. 3.25% 2013 sr. sub. cv. notes (NR)............... 685,438
1,500,000 Cephalon, Inc. 2% 2015 cv. sr. sub. notes (B-)......................... 1,558,125
1,250,000 Encysive Pharmaceuticals, Inc. 2.5% 2012 cv. sr. notes (NR)............ 1,362,500
1,000,000 Ivax Corp. 4.5% 2008 cv. sr. sub. notes (NR).......................... 1,010,000
1,000,000 Teva Pharmaceutical Finance II, LLC series A 0.5% 2024 cv. sr. deb.
(BBB) (exch. for ADR representing Teva Pharmaceutical Industries
Ltd. common stock).................................................... 977,500
1,000,000 Teva Pharmaceutical Finance II, LLC series B 0.25% 2024 cv. sr. deb.
(BBB) (exch. for ADR representing Teva Pharmaceutical Industries
Ltd. common stock).................................................... 991,250
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9,913,343
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RETAIL -- 3.3%
1,250,000 Casual Male Retail Group, Inc. 5% 2024 cv. sr. sub. notes (NR)......... 1,175,000
1,000,000 Dick's Sporting Goods, Inc. 1.6061% 2024 sr. cv. notes (B)............. 789,000
2,400,000 The TJX Companies, Inc. 0% 2021 LYONs (Baa1).......................... 1,937,160
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3,901,160
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TECHNOLOGY -- 9.6%
1,250,000 Advanced Micro Devices, Inc. 4.75% 2022 cv. sr. deb. (B3) (1).......... 1,310,938
1,250,000 Agilent Technologies, Inc. 3% 2021 sr. cv. deb. (Ba2) (1)............. 1,235,938
2,000,000 Citigroup Funding, Inc. 1% 2010 medium-term notes (Aa1)
(exch. into cash equivalent of a basket of technology stocks) (1)..... 1,964,200
2,750,000 International Rectifier Corp. 4.25% 2007 cv. sub. notes (B2)........... 2,719,063
1,500,000 LSI Logic Corp. 4% 2010 cv. sub. notes (B)............................. 1,582,500
1,500,000 Sybase, Inc. 1.75% 2025 cv. sub. notes (NR)
(Acquired 2/15/05 - 04/20/05; Cost $1,491,557) (2).................... 1,536,045
1,000,000 Vishay Intertechnology, Inc. 3.625% 2023 cv. sub. notes (B3)........... 1,002,500
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11,351,184
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TELECOMMUNICATIONS -- 5.4%
1,000,000 Comverse Technology, Inc. 0% 2023 ZYPS (BB-) (3)....................... 1,453,150
1,000,000 Lucent Technologies, Inc. 2.75% 2023 series A cv. sr. deb. (B1)........ 1,080,530
500,000 Lucent Technologies, Inc. 2.75% 2025 series B cv. sr. deb. (B1)........ 565,025
1,250,000 Nortel Networks Corp. 4.25% 2008 cv. sr. notes (B3).................... 1,175,000
2,000,000 Tekelec, Inc. 2.25% 2008 sr. sub. cv. notes (NR)....................... 2,102,400
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6,376,105
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UTILITIES -- 1.6%
1,500,000 CMS Energy Corp. 2.875% 2024 cv. sr. notes (B1)........................ 1,878,750
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TOTAL CONVERTIBLE BONDS AND NOTES...................................... $60,879,077
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Shares
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CONVERTIBLE PREFERRED STOCKS -- 26.7%
BANKING/SAVINGS AND LOAN -- 7.9%
17,500 Commerce Capital Trust II 5.95% cv. trust pfd. (Baa1)
(exch. for Commerce Bancorp, Inc. common stock)....................... 1,129,275
40,000 National Australia Bank Ltd. 7.875% exch. capital units (NR)........... 1,574,000
45,000 New York Community Bancorp, Inc. 6% BONUSES units (Baa2)............... 2,317,500
35,000 Sovereign Capital Trust IV 4.375% PIERS (Ba1)
(exch. for Sovereign Bancorp, Inc. common stock) (1).................. 1,631,875
50,000 Washington Mutual Capital Trust PIERS units (Baa1)
(exch. for Washington Mutual, Inc. common stock)...................... 2,700,000
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9,352,650
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PORTFOLIO OF INVESTMENTS JULY 31, 2005 (CONTINUED)
Value
Shares (Note 1)
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CONVERTIBLE PREFERRED STOCKS -- (CONTINUED)
CHEMICALS -- 2.0%
85,000 Celanese Corp. 4.25% cv. perp. pfd. (NR)............................... $ 2,385,950
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ENERGY -- 7.9%
33,000 Chesapeake Energy Corp. 5% cum. cv. pfd. (B-)
(Acquired 04/13/05 - 6/30/05; Cost $3,482,500) (2).................... 4,166,250
13,000 Semco Energy, Inc. 5% series B cv. cum. pfd. (B-)
(Acquired 03/09/05 - 07/21/05; Cost $2,637,904) (2)................... 2,712,938
25,000 The Williams Companies, Inc. 5.5% 2033 jr. sub. cv. deb. (B-).......... 2,503,125
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9,382,313
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ENTERTAINMENT -- 0.8%
22,500 Emmis Communications Corp. 6.25% series A cum. cv. pfd. (Caa1)......... 973,125
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FINANCIAL AND INSURANCE -- 5.0%
20 Fannie Mae 5.375% non-cumulative cv. pfd. (Aa3)
(Acquired 12/29/04 01/11/05; Cost $2,078,125) (2).................... 1,915,000
20,000 Reinsurance Group of America, Inc. 5.75% PIERS (Baa2).................. 1,138,438
120,000 The St. Paul Travelers Companies, Inc. 4.5% 2032 cv. jr. sub.
notes (Baa1).......................................................... 2,881,200
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5,934,638
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HEALTH CARE -- 1.5%
29,000 Omnicare Capital Trust II 4% PIERS (Ba3)
(exch. for Omnicare, Inc. common stock) (1)........................... 1,811,775
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MINING -- 1.6%
2,000 Freeport-McMoRan Copper and Gold, Inc. 5.5% cv. perpetual pfd. (B-).... 1,932,166
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TOTAL CONVERTIBLE PREFERRED STOCKS..................................... $31,772,617
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MANDATORY CONVERTIBLE SECURITIES -- 18.1%
CHEMICALS -- 1.7%
40,000 Huntsman Corp. 5% mand. cv. pfd. (NR).................................. 1,991,960
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CONSUMER GOODS -- 1.0%
30,000 Constellation Brands, Inc. dep. shs. representing 5.75% series A
mand. cv. pfd. (B).................................................... 1,247,700
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ENERGY -- 3.1%
20,000 Amerada Hess Corp. 7% mand. cv. pfd. ACES (Ba3)........................ 2,020,800
20,000 Valero Energy Corp. 2% mand. cv. pfd. (BB)............................. 1,639,700
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3,660,500
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FINANCIAL AND INSURANCE -- 6.6%
25,000 The Chubb Corp. 7% 2006 equity units (A2) (1).......................... 809,250
30,000 Merrill Lynch & Co., Inc. 6.75% mand. exch. sec. (Aa3)
(exch. for Nuveen Investments, Inc. common stock)..................... 1,110,210
80,000 MetLife, Inc. 6.375% common equity units (BBB+)........................ 2,234,400
42,500 Morgan Stanley, Inc. 5.875% mand. exch. sec. (Aa3)
(exch. for Nuveen Investments, Inc. common stock)..................... 1,559,750
40,000 The PMI Group, Inc. 5.875% HITS units (A1) (1)......................... 999,000
45,000 XL Capital, Ltd. 6.5% equity security units (A2)....................... 1,098,000
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7,810,610
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PORTFOLIO OF INVESTMENTS JULY 31, 2005 (CONTINUED)
Principal
Amount Value
or shares (Note 1)
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MANDATORY CONVERTIBLE SECURITIES -- (CONTINUED)
FOODS -- 1.6%
40,000 shs Albertson's, Inc. 7.25% HITS units (Baa2) (1)....................... $ 903,600
40,000 shs Lehman Brothers Holdings, Inc. 6.25% PIES (A1)
(exch. for General Mills, Inc. common stock)....................... 1,040,000
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1,943,600
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PHARMACEUTICALS -- 3.0%
20,000 shs Baxter International, Inc. 7% equity units (Baa1) (1)............... 1,130,800
45,000 shs Schering-Plough Corp. 6% mand. cv. pfd. (Baa3)...................... 2,461,500
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3,592,300
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UTILITIES -- 1.1%
50,000 shs DTE Energy Co. 8.75% equity security units (BBB-) (1)............... 1,267,500
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TOTAL MANDATORY CONVERTIBLE SECURITIES.............................. $ 21,514,170
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SHORT-TERM SECURITIES -- 3.4%
COMMERCIAL PAPER -- 3.4%
$4,000,000 American Express Credit Corp. (P1)
(3.18% maturing 08/02/05).......................................... 3,997,913
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U.S. GOVERNMENT OBLIGATIONS -- 0.0%
11,000 U.S. Treasury notes 2.25% 04/30/06 (Aaa) (4)........................ 10,876
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TOTAL SHORT-TERM SECURITIES......................................... $ 4,008,789
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TOTAL CONVERTIBLE BONDS AND NOTES -- 51.2%.......................... 60,879,077
TOTAL CONVERTIBLE PREFERRED STOCKS -- 26.7%......................... 31,772,617
TOTAL MANDATORY CONVERTIBLE SECURITIES -- 18.1%..................... 21,514,170
TOTAL SHORT-TERM SECURITIES -- 3.4%................................. 4,008,789
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TOTAL INVESTMENTS -- 99.4%.......................................... 118,174,653
OTHER ASSETS AND LIABILITIES, NET -- 0.6%........................... 658,341
TOTAL NET ASSETS -- 100.0%.......................................... $118,832,994
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(1) Contingent payment debt instrument which accrues contingent interest. See Note 1(B) below.
(2) Security not registered under the Securities Act of 1933, as amended (e.g., the security was
purchased in a Rule 144A transaction). 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 July 31, 2005 was $21,190,934 which represented 17.8% of the Fund's net
assets.
(3) Non-income producing security.
(4) Collateral for a letter of credit.
ACES Automatic Convertible Equity Securities.
ADR American Depositary Receipts.
BONUSES Bifurcated Option Note Unit Securities.
CODES Convertible Contingent Debt Securities.
HITS Hybrid Income Term Security.
LYONs Liquid Yield Option Notes.
PIES Premium Income Exchangeable Securities.
PIERS Preferred Income Equity Redeemable Securities.
ZYPS Zero Yield Puttable Securities.
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's.
NR is used whenever a rating is unavailable.
At July 31, 2005: (1) the aggregate cost of investments for Federal income tax purposes was
$111,648,222, (2) aggregate gross unrealized appreciation was $9,346,529, (3) aggregate gross
unrealized depreciation was $2,820,098, and (4) net unrealized appreciation was $6,526,431.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Bancroft Convertible Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified, closed-end management investment company.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements:
(A) SECURITY VALUATION
Investments in securities traded on a national securities exchange are valued at
market using the last reported sales price as of the close of regular trading.
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 original
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 9 cents per share for the nine months ended July 31, 2005. In
addition, Federal tax regulations require the Fund to reclassify realized gains
on contingent payment debt instruments to interest income. At July 31, 2005
there were unrealized losses of approximately 5 cents per share on contingent
payment debt instruments.
ITEM 2. CONTROLS AND PROCEDURES.
Conclusions of principal officers concerning controls and procedures
(a) The Registrant's principal executive officer and principal financial
officer, or persons performing similar functions, have concluded that the
Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940, as amended (the "Act"),
(17 CFR 270.30a-3(c))) are effective as of August 10, 2005, based on the
evaluation of these controls and procedures required by Rule 30a-3(b) under
the Act (and 15d-15(b) under the Securities Exchange Act of 1934, as amended
(17 CFR 240.15d-15(b)).
(b) There have been no 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 last fiscal quarter
that has materially affected, or is reasonably likely to materially affect,
the Registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
Separate certifications of the principal executive officer and the principal
financial officer of the Registrant, as required by Rule 30a-2(a) under the
Investment Company Act of 1940, 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 Convertible Fund, Inc.
By: /s/Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: September 28, 2005
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: September 28, 2005
By: /s/Gary I. Levine
Gary I. Levine
Chief Financial Officer
(Principal Financial Officer)
Date: September 28, 2005