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: 811-02151
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BANCROFT FUND LTD.
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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 FUND LTD.
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: April 30, 2007
ITEM 1. REPORTS TO STOCKHOLDERS.
BANCROFT FUND LTD.
[BANCROFT LOGO APPEARS HERE]
2007 Semi-Annual Report
April 30, 2007
2007 Semi-Annual Report
April 30, 2007
Bancroft Fund Ltd. operates as a closed-end, diversified management investment
company and invests primarily in convertible securities, with the objectives of
providing income and the potential for capital appreciation; which objectives
the Fund considers to be relatively equal, over the long-term, due to the nature
of the securities in which it invests.
Highlights
Performance through April 30, 2007 with dividends reinvested
Calendar Annualized 10 Year
YTD 1 Year 5 Years 10 Years Volatility
------ ------ ------- -------- ----------
Bancroft market price .................... 7.18% 18.38% 6.61% 9.07% 17.23%
Bancroft net asset value ................. 4.91 11.12 6.59 7.68 11.28
Merrill Lynch All Convertibles Index ..... 4.92 11.46 9.31 8.93 13.82
S&P 500 Index ............................ 5.10 15.24 8.53 8.04 18.01
Lehman Aggregate Bond Total Return Index . 2.05 7.36 5.06 6.36 4.17
The above data is from Bloomberg L.P. pricing service, with the exception of the
Lehman Aggregate Bond Total Return Index which is from Lipper, Inc. Closed-End
Fund Performance Analysis, dated April 30, 2007.
Bancroft's performance in the table above has not been adjusted for the fiscal
2004 rights offering; net asset value dilution was 2.38%. Volatility is a
measure of risk based on the standard deviation of the return. The greater the
volatility, the greater the chance of a profit or risk of a loss. Performance
data represent past results and do not reflect future performance.
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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
---------- ------ ------ ------ ------ ------ ------
Jul. 06 $22.38 $21.05 $21.72 $18.93 $18.08 $18.32
Oct. 06 22.63 21.58 22.55 19.33 18.34 19.30
Jan. 07 22.98 22.24 22.70 19.84 19.06 19.80
Apr. 07 23.43 22.23 23.27 20.68 19.59 20.68
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Dividend Distributions (12 Months)
Record Payment Capital
Date Date Income Gains Total
-------- -------- ---------- ---------- ----------
6/15/06 6/29/06 $ 0.180 -- $ 0.180
9/14/06 9/28/06 0.180 -- 0.180
12/01/06 12/26/06 0.265 $ 0.466 0.731
3/15/07 3/29/07 0.210 -- 0.210
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$ 0.835 $ 0.466 $ 1.301
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To Our Shareholders
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June 14, 2007
Five years ago the market environment was substantially different than it is
today. The yield on high-yield bonds is lower than in 2002, while the yield on
long-term (10 years or more) government bonds is very similar to where it was.
In looking back, it appears that the high-yield bond market was attractive
relative to the government bond market and the convertible market, which became
mostly equity insensitive in 2002. Currently, we think that these positions
have changed and that the convertible market has a higher potential value.
The U.S. domestic convertible securities market has been expanding in 2007.
Citigroup has measured this market at $331 billion on May 31, 2007, up from
$297 billion in December 2006 (this does not include the structured securities
discussed in last quarter's letter to shareholders). The overall convertible
market continues to provide attractive investment opportunities. While the
average yield has dropped from 3.2% in December 2006 to 3.0% in May 2007, the
average premium-to-conversion value has fallen from 27.5% to 24.4% during that
period. The reduced yield and premium appear to have resulted from higher
underlying stock prices.
An important measure of the convertible market is known as "delta." This is an
indicator of how "equity sensitive" convertibles are. For example, a delta of
50 would imply that if the common stock underlying the convertible security
were to move 10%, the convertible would move by half of that or 5%. During the
late 1990's delta ranged from 57.1 to 75.9, indicating that the movement of
most convertibles was substantially in proportion to that of their underlying
common stocks. In 2002, the weighted average delta of the Citigroup
Convertible Index fell to 36.1 indicating that the prices of many convertibles
were not moving substantially in tandem with their underlying common stocks.
Historically convertibles have been used as equity alternatives more than they
have been used as fixed income alternatives. The Citigroup Convertible Index,
with a delta of 36.1, was far more interest rate sensitive than equity
sensitive. This can have an impact on performance. Since 2002, delta has moved
back up to 66.1, a more traditional level that is consistent with the theme of
using convertibles as an equity alternative.
Performance for fiscal year-to-date has been enhanced by the Fund's exposure to
the multi-industry and chemical industries. Among the better-performing issues
in the portfolio were Celanese Corp. (chemical industry) and LSB Industries,
Inc. (multi-industry). Industries that underperformed included semiconductors,
financial services and real estate. The lesson we draw from this is that
investors appear to believe that basic industries are the most attractive in
this new world economy.
For the calendar year-to-date, one- and ten-year periods ended April 30, 2007,
Bancroft's market return outperformed the Merrill Lynch All Convertibles Index
while underperforming for the five-year period. The Fund's net asset value
(NAV) when adjusted for fund expenses (the index includes no expenses) and the
fiscal 2004 rights offering outperformed over the calendar year-to-date, one-
and ten-year periods, and underperformed for the five-year period. For that
ten-year period, the Fund's volatility as measured by the standard deviation
was lower than that of the Merrill Lynch All Convertibles Index. Many market
professionals consider the volatility of past returns to be a useful
approximation of the past levels of risk. This measure of historic results may
not reflect future performance but we believe that it is informative.
continued on the following page
Page 1
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To Our Shareholders (continued)
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The results of the 2007 annual meeting of shareholders are shown in the
Miscellaneous Notes section of this report. We thank you for your support. At
its May meeting, the Board of Trustees declared a dividend of $0.21 per share.
The dividend consists of undistributed net investment income and will be payable
on June 28, 2007 to shareholders of record on June 14, 2007.
/s/ Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board
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Major Portfolio Changes by underlying common stock
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Six months ended April 30, 2007
ADDITIONS REDUCTIONS
LSI Corp. American Medical Systems Holdings, Inc.
(exchangeable from Agere Systems Inc.) Cephalon, Inc.
Archer-Daniels-Midland Co. CMS Energy Corp.
(exchangeable from Merrill Lynch & Co., Inc.) EchoStar Communication Corp.
Chattem, Inc. Fannie Mae
Covanta Holding Corp. International Rectifier Corp.
Cypress Semicondcutor Corp. LSB Industries, Inc.
EMC Corp. Schering-Plough Corp.
ExpressJet Holdings, Inc. SEMCO Energy, Inc.
Fairchild Semiconductor Corp. The St. Paul Travelers Companies Inc.
Freeport-McMoRan Copper & Gold Inc. Tekelec, Inc.
Mylan Laboratories Inc. Texas Industries Inc.
NVIDIA Corp. (exchangeable from TXI Capital Trust I)
(exchangeable from IXIS Financial Products Inc.) Vishay Intertechnology, Inc.
Prudential Financial, Inc.
Wyeth
Page 2
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Largest Investment Holdings by underlying common stock
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Value % Total
(Note 1) Net Assets
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LSI Corp.................................................. $ 4,085,000 3.1%
LSI designs, develops, manufactures and markets
integrated circuits and storage systems. The company
offers products and services for a variety of electronic
systems applications that are marketed to original
equipment manufacturers in the telecommunications,
computers and storage industries.
(exchangeable from Agere Systems Inc. and LSI Corp.)
The Walt Disney Company................................... 3,682,500 2.8
Disney is an entertainment company with
operations that include media networks,
studio entertainment, theme parks and
resorts, consumer products and Internet
and direct marketing.
Celanese Corp............................................. 3,665,200 2.7
Celanese is a global industrial chemicals
company that processes raw materials and
natural products into chemicals and
chemical-based products.
U.S. Bancorp.............................................. 3,513,075 2.6
U.S. Bancorp is a diversified financial
services company that provides lending and
depository services, cash management,
foreign exchange, trust and investment
management services.
Nuveen Investments, Inc................................... 3,464,460 2.6
Nuveen's principal activities are asset
management and related research, and the
development, marketing and distribution
of investment products and services. The
company provides its services through
financial advisors who serve the affluent
and high net worth market segments.
(exchangeable from Merrill Lynch & Co., Inc.
and Morgan Stanley, Inc.)
Prudential Financial, Inc................................. 3,041,700 2.3
Prudential provides financial services
throughout the United States and several
locations worldwide. The company offers a
variety of products and services including
life insurance, mutual funds, annuities,
asset management and real estate brokerage.
Chesapeake Energy Corp.................................... 2,834,000 2.1
Chesapeake produces oil and natural gas. The company's
operations are focused on developmental drilling and
producing property acquisitions in onshore natural gas
producing areas of the United States and Canada.
MetLife, Inc.............................................. 2,631,200 2.0
MetLife provides insurance and financial
services to a range of individual and
institutional customers.
NVIDIA Corp............................................... 2,557,505 1.9
NVIDIA designs, develops and markets three-dimensional
(3D) graphics processors and related software. The
company's products provide interactive 3D graphics to
the mainstream personal computer market.
Genworth Financial, Inc................................... 2,531,250 1.9
Genworth provides life insurance products, long-term ----------- -----------
care insurance and mortgage guarantee insurance coverage
on residential mortgage loans.
(exchangeable from Citigroup Funding Inc.)
Total..................................................... $32,005,890 24.0%
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Page 3
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Major Industry Exposure
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Aerospace and Defense 4.4%
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Banking/Savings and Loan 7.7%
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Chemicals 4.0%
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Computer Hardware 5.2%
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Energy 8.8%
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Insurance 10.2%
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Multi-Industry 4.7%
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Pharmaceuticals 10.8%
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Semiconductors 10.2%
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Telecommunications 4.0%
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Diversification of Assets
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% Total Net Assets
----------------------------------
Value Six Months Ended Year Ended
(Note 1) April 30, 2007 October 31, 2006
------------ ---------------- ----------------
Aerospace and Defense............. $5,807,614 4.4% 5.0%
Agriculture....................... 2,061,800 1.6 --
Banking/Savings and Loan.......... 10,286,886 7.7 7.8
Chemicals......................... 5,362,000 4.0 3.2
Computer Hardware................. 6,938,775 5.2 3.1
Computer Software................. 2,653,000 2.0 3.0
Consumer Goods.................... 4,794,031 3.6 1.1
Energy............................ 11,742,569 8.8 8.8
Entertainment..................... 3,682,500 2.8 5.6
Finance........................... 3,464,460 2.6 3.7
Financial Services................ 4,083,200 3.1 2.7
Foods............................. 1,128,000 0.8 1.7
Health Care....................... 4,348,750 3.3 2.9
Insurance......................... 13,584,150 10.2 10.8
Mining............................ 2,170,800 1.6 0.1
Multi-Industry.................... 6,317,705 4.7 6.0
Pharmaceuticals................... 14,389,213 10.8 10.1
Real Estate....................... 3,414,375 2.6 1.2
Retail............................ 1,488,750 1.1 1.2
Semiconductors.................... 13,562,032 10.2 9.6
Transportation.................... 1,932,500 1.4 --
Telecommunications................ 5,387,885 4.0 4.1
Other............................. -- -- 3.1
Short-Term Securities............. 3,398,510 2.5 5.1
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Total Investments............... 131,999,505 99.0 99.9
Other Assets, Net of Liabilities.. 1,393,356 1.0 0.1
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Total Net Assets................ $133,392,861 100.0% 100.0%
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Page 4
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Portfolio of Investments April 30, 2007 (unaudited)
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Principal Value
Amount (Note 1)
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CONVERTIBLE BONDS AND NOTES - 61.3%
Aerospace and Defense - 3.9%
$1,500,000 AAR Corp. 1.75%, due 2026 cv. sr. notes (BB)....................................... $ 1,824,375
1,000,000 Alliant Techsystems Inc. 2.75%, due 2011 cv. sr. sub. notes (B1)................... 1,127,500
1,000,000 Ceradyne, Inc. 2.875%, due 2035 sr. sub. cv. notes (NR) (1)........................ 1,201,250
1,000,000 DRS Technologies, Inc. 2%, due 2026 cv. sr. notes (B1)
(Acquired 01/30/06; Cost $1,069,179) (1,2)........................................ 1,035,000
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5,188,125
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Agriculture - 1.6%
2,000,000 Merrill Lynch & Co., Inc. 1.5%, due 2012 cv. securities (Aa3)
(exchangeable into Archer-Daniels-Midland Co. common stock)
(Acquired 02/23/07; Cost $2,000,000) (2).......................................... 2,061,800
------------
Banking/Savings and Loan - 3.4%
1,000,000 PrivateBancorp, Inc. 3.625%, due 2027 cv. sr. notes (NR)
(Acquired 03/09/07; Cost $1,000,000) (2).......................................... 993,750
2,500,000 U.S. Bancorp floating rate, due 2035 cv. sr. deb. (Aa2)............................ 2,519,375
1,000,000 U.S. Bancorp floating rate, due 2037 cv. sr. deb. (Aa2)
(Acquired 02/01/07; Cost $988,750) (2)............................................ 993,700
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4,506,825
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Computer Hardware - 5.2%
1,000,000 C&D Technologies, Inc. 5.25%, due 2025 cv. sr. notes (NR).......................... 946,250
2,000,000 Credit Suisse, New York Branch 13.62%, due 2007 equity-linked notes (Aa3)
(exchangeable for Corning Inc. common stock)...................................... 2,174,400
1,000,000 EMC Corp. 1.75%, due 2011 cv. sr. notes (BBB+)..................................... 1,123,750
1,000,000 EMC Corp. 1.75%, due 2013 cv. sr. notes (BBB+)..................................... 1,128,750
500,000 Komag, Inc. 2.125%, due 2014 cv. sr. sub. notes (NR)
(Acquired 03/23/07; Cost $500,000) (2)............................................ 468,750
1,000,000 Richardson Electronics, Ltd. 8%, due 2011 cv. sr. sub. notes (NR).................. 1,096,875
------------
6,938,775
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Computer Software - 2.0%
1,500,000 Lehman Brothers Holdings Inc. 1%, due 2009 medium-term notes (A1)
(performance linked to Microsoft Corp. common stock) (1).......................... 1,559,250
1,000,000 Symantec Corp. 1%, due 2013 cv. sr. notes (NR)..................................... 1,093,750
------------
2,653,000
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Consumer Goods - 2.4%
1,500,000 Chattem, Inc. 1.625%, due 2014 cv. sr. notes (NR)
(Acquired 04/04/07 - 04/13/07; Cost $1,528,938) (2)............................... 1,481,250
1,000,000 Church & Dwight Co., Inc. 5.25%, due 2033 cv. sr. deb. (Ba1)....................... 1,693,750
------------
3,175,000
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Energy - 5.1%
1,000,000 Cameron International Corp. 2.50%, due 2026 cv. sr. notes (Baa1)................... 1,157,500
1,500,000 Covanta Holding Corp. 1%, due 2027 sr. cv. deb. (B1) (1)........................... 1,552,500
1,500,000 Nabors Industries, Inc. 0.94%, due 2011 sr. exchangeable notes (A-)
(exchangeable for Nabors Industries Ltd. common stock)............................ 1,455,000
1,225,000 Oil States International, Inc. 2.375%, due 2025 contingent cv. sr. notes (NR)...... 1,578,719
1,250,000 Rentech, Inc. 4%, due 2013 cv. sr. notes (NR)...................................... 1,114,850
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6,858,569
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Entertainment - 2.8%
3,000,000 The Walt Disney Company 2.125%, due 2023 cv. sr. notes (A3)........................ 3,682,500
Page 5
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Portfolio of Investments April 30, 2007 (continued)
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Principal Value
Amount (Note 1)
---------- ------------
CONVERTIBLE BONDS AND NOTES - continued
Financial Services - 1.6%
$2,000,000 Euronet Worldwide, Inc. 3.50%, due 2025 cv. deb. (B+) (1).......................... $ 2,070,000
------------
Health Care - 3.3%
1,000,000 China Medical Technologies, Inc. 3.5%, due 2011 cv. sr. sub. notes (NR)............ 1,023,750
1,000,000 Manor Care, Inc. 2.125%, due 2035 cv. sr. notes (Baa3)............................. 1,487,500
1,000,000 Omnicare, Inc. 3.25%, due 2035 cv. sr. deb. (B2) (1)............................... 835,000
1,000,000 St. Jude Medical, Inc. 1.22%, due 2008 cv. sr. deb. (BBB+)
(Acquired 04/20/07; Cost $1,005,938) (2).......................................... 1,002,500
------------
4,348,750
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Insurance - 2.3%
3,000,000 Prudential Financial, Inc. floating rate, due 2036 cv. sr. notes (A3).............. 3,041,700
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Multi-Industry - 3.3%
2,000,000 Citigroup Funding Inc. 1%, due 2010 medium-term notes (Aa1)
(exchangeable for the cash value of a basket of technology stocks) (1)............ 1,973,200
750,000 Diversa Corp. 5.5%, due 2027 cv. sr. notes (NR)
(Acquired 03/23/07; Cost $750,000) (2)............................................ 822,188
1,125,000 FTI Consulting, Inc. 3.75%, due 2012 cv. sr. sub. notes (B1)....................... 1,556,717
------------
4,352,105
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Pharmaceuticals - 9.7%
2,000,000 Alza Corp. 0%, due 2020 cv. sub. deb. (Aa1)
(exchangeable for Johnson & Johnson common stock)................................. 1,775,000
1,250,000 Amgen Inc. 0.125%, due 2011 cv. sr. notes (A2)..................................... 1,201,563
500,000 Amgen Inc. 0.375%, due 2013 cv. sr. notes (A2)..................................... 478,950
2,500,000 Bristol-Myers Squibb Co. floating rate, due 2023 cv. sr. deb. (A2)................. 2,518,750
1,000,000 Ivax Corp. 4.5%, due 2008 cv. sr. sub. notes (NR)
(exchangeable for Teva Pharmaceutical Industries Ltd. ADR and cash)............... 1,013,750
1,625,000 Mylan Laboratories Inc. 1.25%, due 2012 sr. cv. notes (BBB-)....................... 1,787,500
2,000,000 Teva Pharmaceutical Finance Co. B.V. 1.75%, due 2026 cv. sr. deb. (Baa2)
(exchangeable for Teva Pharmaceutical Industries Ltd. ADR)........................ 1,952,500
2,000,000 Wyeth floating rate, due 2024 cv. sr. deb. (A3).................................... 2,218,600
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12,946,613
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Real Estate - 2.6%
1,000,000 ProLogis 2.25%, due 2037 cv. sr. notes (BBB+)
(Acquired 03/20/07 - 04/16/07; Cost $982,038) (2)................................. 986,250
1,000,000 United Dominion Realty Trust, Inc. 3.625%, due 2011 cv. sr. notes (NR)............. 997,500
1,500,000 Vornado Realty Trust 2.85%, due 2027 cv. sr. deb. (Baa2)........................... 1,430,625
------------
3,414,375
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Retail - 1.1%
1,500,000 Amazon.com, Inc. 4.75%, due 2009 cv. sub. notes (Ba3).............................. 1,488,750
------------
Semiconductors - 7.2%
2,500,000 Agere Systems Inc. 6.5%, due 2009 cv. sub. notes (B1)
(exchangeable for LSI Corp. common stock)......................................... 2,571,875
1,500,000 Cypress Semiconductor Corp. 1%, due 2009 cv. sr. unsecured notes (B-)
(Acquired 03/07/07 - 04/13/07; Cost $1,527,050) (2)............................... 1,655,625
2,000,000 Fairchild Semiconductor Corp. 5%, due 2008 cv. sr. sub. notes (B)
(exchangeable into Fairchild Semiconductor International, Inc. common stock)...... 1,990,000
2,000,000 Intel Corp. 2.95%, due 2035 jr. sub. cv. deb. (A-) (1)............................. 1,830,000
1,500,000 LSI Corp. 4%, due 2010 cv. sub. notes (B+)......................................... 1,513,125
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9,560,625
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Page 6
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Portfolio of Investments April 30, 2007 (continued)
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Principal Value
Amount (Note 1)
---------- ------------
CONVERTIBLE BONDS AND NOTES - continued
Transportation - 1.4%
$2,000,000 ExpressJet Holdings, Inc. 4.25%, due 2023 cv. notes (NR)........................... $ 1,932,500
------------
Telecommunications - 2.7%
1,000,000 Anixter International, Inc. 1%, due 2013 sr. cv. notes (BB-)
(Acquired 02/12/07 - 04/13/07; Cost $1,132,813) (2)............................... 1,248,750
1,000,000 Equinix, Inc. 2.5%, due 2012 cv. sub. notes (NR)................................... 999,900
1,000,000 Time Warner Telecom Inc. 2.375%, due 2026 cv. sr. deb. (Caa1)...................... 1,290,000
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3,538,650
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TOTAL CONVERTIBLE BONDS AND NOTES.................................................. $ 81,758,662
============
Shares CONVERTIBLE PREFERRED STOCKS - 12.5%
----------
Aerospace and Defense - 0.4%
40,000 Ionatron, Inc. 6.5% Series A redeemable cv. pfd. (NR)
(Acquired 10/27/05; Cost $1,000,000) (2).......................................... 600,000
------------
Banking/Savings and Loan - 3.7%
46,679 New York Community Bancorp, Inc. 6% BONUSES units (Baa1)........................... 2,248,061
20,000 Sovereign Capital Trust IV 4.375% PIERS (Baa1)
(exchangeable for Sovereign Bancorp, Inc. common stock) (1)....................... 987,500
30,000 Washington Mutual Capital Trust 5.375% PIERS units (BBB)
(exchangeable for Washington Mutual, Inc. common stock)........................... 1,658,700
------------
4,894,261
------------
Chemicals - 2.7%
85,000 Celanese Corp. 4.25% cv. perpetual pfd. (NR)....................................... 3,665,200
------------
Energy - 1.9%
25,000 Chesapeake Energy Corp. 4.5% cum. cv. pfd. (B+).................................... 2,550,000
------------
Insurance - 3.1%
75,000 Citigroup Funding Inc. variable rate exch. notes (Aa1)
(exchangeable for Genworth Financial, Inc. common stock).......................... 2,531,250
20,000 Reinsurance Group of America, Inc. 5.75% PIERS (Baa2).............................. 1,565,000
------------
4,096,250
------------
Telecommunications - 0.6%
100 Medis Technologies Ltd 7.25% Series A cum. cv. perpetual pfd. (NR)
(Acquired 11/10/06; Cost $1,000,000) (2).......................................... 809,735
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TOTAL CONVERTIBLE PREFERRED STOCKS................................................. $ 16,615,446
============
MANDATORY CONVERTIBLE SECURITIES - 20.5% (3)
Chemicals - 1.3%
40,000 Huntsman Corp. 5% mandatory cv. pfd., due 02/16/08 (NR)............................ 1,696,800
------------
Consumer Goods - 1.2%
1,500 The Stanley Works floating rate equity units, due 05/17/12 (A2).................... 1,619,031
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Page 7
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Portfolio of Investments April 30, 2007 (continued)
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Value
Shares (Note 1)
---------- ------------
MANDATORY CONVERTIBLE SECURITIES - continued
Energy - 1.7%
40,000 Bristow Group Inc. 5.5% mandatory cv. pfd., due 09/15/09 (B)....................... $ 2,050,000
1,000 Chesapeake Energy Corp. 6.25% mandatory cv. pfd., due 06/15/09 (B+)................ 284,000
------------
2,334,000
------------
Finance - 2.6%
30,000 Merrill Lynch & Co., Inc. 6.75% mandatorily exchangeable securities,
due 10/15/07 (Aa3)
(exchangeable for Nuveen Investments, Inc. common stock).......................... 1,359,375
45,500 Morgan Stanley, Inc. 5.875% mandatorily exchangeable securities,
due 10/15/08 (Aa3)
(exchangeable for Nuveen Investments, Inc. common stock).......................... 2,105,085
------------
3,464,460
------------
Financial Services - 1.5%
70,000 E*TRADE Financial Corp. 6.125% equity units, due 11/18/08 (Ba3).................... 2,013,200
------------
Foods - 0.8%
40,000 Lehman Brothers Holdings Inc. 6.25% PIES, due 10/15/07 (A1)
(exchangeable for General Mills, Inc. common stock)............................... 1,128,000
------------
Insurance - 4.8%
7,000 Alleghany Corp. 5.75% mandatory cv. pfd., due 06/15/09 (BBB-)...................... 2,376,500
80,000 MetLife, Inc. 6.375% common equity units, due 08/15/08 (BBB+)...................... 2,631,200
52,500 XL Capital, Ltd. 7% equity security units, due 02/15/09 (A3)....................... 1,438,500
------------
6,446,200
------------
Mining - 1.6%
20,000 Freeport-McMoRan Copper & Gold Inc. 6.75% mandatory cv. pfd.,
due 05/01/10 (B+)................................................................. 2,170,800
------------
Pharmaceuticals - 1.1%
20,000 Schering-Plough Corp. 6% mandatory cv. pfd., due 09/14/07 (Baa3)................... 1,442,600
------------
Semiconductors - 3.0%
98,850 The Goldman Sachs Group, Inc. 14.75% mandatory exchangeable notes,
due 06/22/07 (NR)
(exchangeable for Advanced Micro Devices, Inc. common stock)
(Acquired 06/14/06; Cost $2,500,411) (2).......................................... 1,443,902
76,080 IXIS Financial Products Inc. 8.9% mandatory trigger exchangeable notes,
due 08/28/07 (NR)
(exchangeable for NVIDIA Corp. common stock)
(Acquired 02/23/07; Cost $2,499,989) (2).......................................... 2,557,505
------------
4,001,407
------------
Telecommunications - 0.8%
14,000 Credit Suisse Securities (USA), Inc. 5.5% SAILS, due 11/15/08 (Aa1)
(exchangeable for Equinix, Inc. common stock)..................................... 1,039,500
------------
TOTAL MANDATORY CONVERTIBLE SECURITIES (3)......................................... $ 27,355,998
============
Page 8
--------------------------------------------------------------------------------
Portfolio of Investments April 30, 2007 (continued)
--------------------------------------------------------------------------------
Value
Shares (Note 1)
---------- ------------
COMMON STOCKS - 2.2%
Aerospace and Defense - 0.0%
3,169 Ionatron, Inc.
(Acquired 04/12/07; Cost $16,250) (2,4).......................................... $ 19,489
------------
Banking/Savings and Loan - 0.7%
4,982 National Australia Bank Ltd. ADR.................................................. 885,800
------------
Multi-Industry - 1.5%
120,000 LSB Industries, Inc. (4).......................................................... 1,965,600
------------
TOTAL COMMON STOCKS............................................................... $ 2,870,889
============
Principal
Amount SHORT-TERM SECURITIES - 2.5%
----------
Commercial Paper - 2.5%
$3,400,000 American Express Credit Corp. 5.26%, due 05/03/07 (P1)............................ 3,398,510
------------
Total Convertible Bonds and Notes - 61.3%......................................... 81,758,662
Total Convertible Preferred Stocks - 12.5%........................................ 16,615,446
Total Mandatory Convertible Securities - 20.5%.................................... 27,355,998
Total Common Stocks - 2.2%........................................................ 2,870,889
Total Short-Term Securities - 2.5%................................................ 3,398,510
------------
Total Investments - 99.0%......................................................... 131,999,505
Other assets and liabilities, net - 1.0%.......................................... 1,393,356
------------
Total Net Assets - 100.0%......................................................... $133,392,861
============
(1) Contingent payment debt instrument which accrues contingent interest.
See Note 1(f).
(2) Security not registered under the Securities Act of 1933, as amended
(i.e., the security was purchased in a Rule 144A or a Reg D
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 April 30, 2007 was $18,180,194 which represented 13.6% of
the Fund's net assets.
(3) These securities are required to be converted on the dates listed; they
generally may be converted prior to these dates at the option of the
holder.
(4) Non-income producing security.
Investment Abbreviations:
ADR American Depositary Receipts.
BONUSES Bifurcated Option Note Unit Securities.
PIES Premium Income Exchangeable Securities.
PIERS Preferred Income Equity Redeemable Securities.
SAILS Shared Appreciation Income Linked Securities.
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's.
NR is used whenever a rating is unavailable.
See accompanying notes to financial statements
Page 9
--------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited)
--------------------------------------------------------------------------------
April 30, 2007
--------------
Assets:
Investments at value (cost $123,758,901) (Note 1)....................... $ 131,999,505
Cash.................................................................... 2,012,137
Receivable for securities sold.......................................... 505,702
Dividends and interest receivable....................................... 801,252
Other assets.......................................................... 41,110
--------------
Total assets...................................................... 135,359,706
--------------
Liabilities:
Payable for securities purchased........................................ 1,948,366
Accrued management fee (Note 2)......................................... 10,770
Accrued expenses........................................................ 7,709
--------------
Total Liabilities..................................................... 1,966,845
--------------
Net Assets.................................................................. $ 133,392,861
==============
Net assets consist of:
Undistributed net investment income..................................... 385,602
Undistributed net realized gain from investment transactions............ 5,363,359
Unrealized appreciation on investments.................................. 8,240,604
Capital shares (Note 3)................................................. 57,330
Additional paid-in capital.............................................. 119,345,966
--------------
Net Assets.................................................................. $ 133,392,861
==============
Net asset value per share ($133,392,861 / 5,733,016 outstanding shares)..... $ 23.27
==============
--------------------------------------------------------------------------------
Statement of Operations (unaudited)
--------------------------------------------------------------------------------
For the Six Months Ended April 30, 2007
Investment Income (Note 1):
Interest................................................................ $ 1,848,471
Dividends............................................................... 1,175,842
--------------
Total Income........................................................ 3,024,313
--------------
Expenses (Note 2):
Management fee.......................................................... 447,340
Custodian............................................................... 9,959
Transfer agent.......................................................... 15,520
Audit fees.............................................................. 17,876
Legal fees.............................................................. 38,944
Trustees' fees.......................................................... 59,500
Reports to shareholders................................................. 23,761
Administrative services fees............................................ 26,547
Other................................................................... 47,298
--------------
Total Expenses...................................................... 686,745
--------------
Net Investment Income....................................................... 2,337,568
--------------
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions.......................... 4,753,922
Net unrealized appreciation of investments.............................. 2,673,342
--------------
Net gain on investments.............................................. 7,427,264
--------------
Net Increase in Net Assets Resulting from Operations........................ $ 9,764,832
==============
See accompanying notes to financial statements
Page 10
---------------------------------------------------------------------------------------------------
Statement of Changes in Net Assets
---------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
April 30, 2007(a) October 31, 2006
----------------- ------------------
Change in net assets from operations:
Net investment income................................... $ 2,337,568 $ 4,479,182
Net realized gain from investment transactions.......... 4,753,922 7,233,885
Net change in appreciation of investments............... 2,673,342 1,251,584
------------- -------------
Net increase in net assets resulting from operations.. 9,764,832 12,964,651
------------- -------------
Distributions to shareholders from:
Net investment income................................... (2,694,594) (4,395,566)
Net realized gain on investments........................ (2,621,312) --
------------- -------------
Total distributions................................... (5,315,906) (4,395,566)
------------- -------------
Capital share transactions (Note 3)......................... 2,097,228 655,492
------------- -------------
Change in net assets........................................ 6,546,154 9,224,577
Net assets at beginning of period........................... 126,846,707 117,622,130
------------- -------------
Net assets at end of period................................. $133,392,861 $126,846,707
============= =============
Undistributed net investment income at end of period.... $ 385,602 $ 742,627
============= =============
___________________
(a) Unaudited.
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) Organization -- Bancroft Fund Ltd. (the "Fund"), established in 1971, is
registered under the Investment Company Act of 1940 as a diversified, closed-end
management investment company.
(b) Use of Estimates -- 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.
(c) Indemnification -- Under the Fund's organizational documents, each trustee,
officer and other agent of the Fund (including the Fund's investment adviser) is
indemnified against certain liabilities that may arise out of performance of
their duties to the Fund. Additionally, in the normal course of business, the
Fund enters into contracts that contain a variety of indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. The risk of material loss as a result of such indemnification is
considered remote.
(d) 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. At October 31, 2006, the Fund utilized capital loss
carryforward of $4,596,296 available to the extent allowed by tax law to offset
net capital gains.
Page 11
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax return to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. Management has not completed
their analysis on whether the adoption of FIN 48 will have an impact to the
financial statements.
(e) 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. Listed securities for which no sales were
reported, are valued at the mean between closing reported bid and asked prices
as of the close of regular trading. Unlisted securities traded in the
over-the-counter market are valued using an evaluated quote provided by an
independent pricing service. The independent pricing service derives an
evaluated quote by obtaining dealer quotes, analyzing the listed markets,
reviewing trade execution data and employing sensitivity analysis. Evaluated
quotes may also reflect appropriate factors such as individual characteristics
of the issue, communications with broker-dealers, and other market data.
Securities for which quotations are not readily available, restricted securities
and other assets are valued at fair value as determined in good faith by
management pursuant to procedures approved by the Board of Trustees. Short-term
debt securities with original maturities of 60 days or less are valued at
amortized cost.
(f) 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 6 cents per
share for the six months ended April 30, 2007. In addition, Federal tax
regulations require the Fund to reclassify realized gains on contingent payment
debt instruments to interest income. At April 30, 2007 there were unrealized
losses of approximately 9 cents per share on contingent payment debt
instruments.
(g) Change in Method of Accounting -- Effective November 1, 2004, the Fund began
amortizing discounts and premiums on all debt securities. Prior to November 1,
2004, the Fund amortized discounts only on original issue discount debt
securities. The new method of amortization was adopted in accordance with the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies and the financial highlights and statement of changes in net assets
presented herein have been restated to reflect the new method retroactive to
November 1, 2001. The effect of this accounting change is included in the
financial highlights for the years ended October 31, 2002, 2003 and 2004. The
cumulative effect of this accounting change had no impact on the total net
assets of the Fund or on distributions for tax purposes, but resulted in a
$103,986 increase in the cost of securities held and a corresponding $103,986
reduction in the net unrealized gains based on the securities held on
November 1, 2001. These changes had no effect on previously reported total net
assets or total returns.
(h) 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 fiscal years ended October 31, 2006 and 2005
were $4,395,566 and $3,894,853, respectively, both from ordinary income.
Page 12
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
At April 30, 2007 unrealized appreciation (depreciation) of investment
securities on a tax basis were as follows:
Unrealized appreciation $ 11,838,936
Unrealized depreciation (3,614,635)
------------
Net unrealized appreciation 8,224,301
Cost for federal income tax purposes $123,775,204
(i) Market Risk -- It is the Fund's policy to invest at least 65% 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 of their underlying securities. Thus they expose the Fund to greater
downside risk than traditional convertible securities, but generally less than
that of the underlying common stock. The market value of those securities was
$27,355,998 at April 30, 2007, representing 20.5% of net assets.
(j) New Accounting Pronouncements -- In September 2006, the Financial Accounting
Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS)
No. 157, "Fair Value Measurements." This standard establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value and requires additional disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. The changes to current generally accepted accounting
principles from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded disclosures
about fair value measurements. As of April 30, 2007, the Funds do not believe
the adoption of SFAS No. 157 will impact the financial statement amounts,
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
NOTE 2 - MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into an investment advisory agreement with Davis-Dinsmore
Management Company ("Davis-Dinsmore"). Pursuant to the investment advisory
agreement, Davis-Dinsmore provides the Fund with investment advice, office space
and facilities. Under the terms of the investment advisory agreement, the Fund
pays Davis-Dinsmore on the last day of each month an advisory fee for such month
computed at an annual rate of 0.75% of the first $100,000,000 and 0.50% of the
excess over $100,000,000 of the Fund's net asset value in such month.
The Fund, pursuant to an administrative services agreement with Davis-Dinsmore,
has agreed to pay Davis-Dinsmore for certain accounting and other administrative
services provided to the Fund. Under the administrative services agreement, the
Fund pays Davis-Dinsmore on the last day of each month a fee for such month
computed at an annual rate of 0.05% of the Fund's net asset value in such month.
Certain officers and trustees of the Fund are officers and directors of
Davis-Dinsmore.
NOTE 3 - PORTFOLIO ACTIVITY
At April 30, 2007 there were 5,733,016 shares of beneficial interest
outstanding, with a par value of $0.01 per share. During the six months ended
April 30, 2007, 107,882 shares were issued in connection with reinvestment of
dividends from net investment income, resulting in an increase in paid-in
capital of $2,097,228.
Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated $53,237,539 and $52,797,459, respectively, for the six months ended
April 30, 2007.
A distribution of $0.21 per share from net investment income was declared on
May 15, 2007, payable June 28, 2007 to shareholders of record at the close of
business June 14, 2007.
Page 13
--------------------------------------------------------------------------------
Financial Highlights
Selected data for a share of beneficial interest outstanding:
--------------------------------------------------------------------------------
Six Months
Ended Year Ended October 31,
April 30, -----------------------------------------------------
2007 (a) 2006 2005 2004 2003 2002
----------------------------------------------------------------
Operating Performance:
Net asset value, beginning of period....... $ 22.55 $ 21.05 $ 20.40 $ 20.84 $ 18.55 $ 20.72
----------------------------------------------------------------
Net investment income...................... 0.41 0.80 0.64 0.70(b) 0.71(b) 0.79(b)
Adjustment for change in
amortization policy...................... -- -- -- (0.02) (0.02) --
----------------------------------------------------------------
Net investment income, as adjusted...... 0.41 0.80 0.64 0.68 0.69 0.79
----------------------------------------------------------------
Net realized and unrealized gain (loss).... 1.26 1.48 0.71 0.08(b) 2.31(b) (2.02)(b)
Adjustment for change in
amortization policy...................... -- -- -- 0.02 0.02 --
----------------------------------------------------------------
Net realized and unrealized
gain (loss), as adjusted............... 1.26 1.48 0.71 0.10 2.33 (2.02)
----------------------------------------------------------------
Total from investment operations......... 1.67 2.28 1.35 0.78 3.02 (1.23)
----------------------------------------------------------------
Less Distributions:
Dividends from net investment income....... (0.48) (0.78) (0.70) (0.72) (0.73) (0.94)
Distributions from realized gains.......... (0.47) -- -- -- -- --
----------------------------------------------------------------
Total distributions...................... (0.95) (0.78) (0.70) (0.72) (0.73) (0.94)
----------------------------------------------------------------
Capital Share Transactions:
Effect of rights offering.................. -- -- -- (0.50) -- --
Capital share repurchases.................. -- -- -- -- -- --
----------------------------------------------------------------
Total capital share transactions......... -- -- -- (0.50) -- --
----------------------------------------------------------------
Net asset value, end of period............. $ 23.27 $ 22.55 $ 21.05 $ 20.40 $ 20.84 $ 18.55
================================================================
Market value, end of period................ $ 20.68 $ 19.30 $ 17.77 $ 18.23 $ 19.70 $ 17.54
Total Net Asset Value Return (%)(c)........ 7.5 11.1 6.7 1.3 16.7 (6.3)
Total Investment Return (%)(d)............. 12.2 13.3 1.3 (3.8) 16.7 (1.8)
Ratios/Supplemental Data:
Net assets, end of period (in thousands)... $133,393 $126,847 $117,622 $113,373 $98,486 $86,904
Ratio of expenses to average net assets (%) 1.1 1.1 1.2 1.2 1.2 1.2
Ratio of net investment income to
average net assets (%)................... 3.6 3.7 3.1 3.3(e) 3.6(e) 4.0(e)
Portfolio turnover rate (%)................ 43 58 86 66 87 78
___________________
(a) Unaudited.
(b) As previously reported. See Note 1(g).
(c) Assumes valuation of the Fund's shares, and reinvestment of dividends, at
net asset values.
(d) Assumes valuation of the Fund's shares at market price and reinvestment of
dividends at actual reinvestment price.
(e) Ratios for 2004, 2003 and 2002 reflect ratios adjusted for change in
amortization policy. Ratios previously reported for 2004, 2003 and 2002
were 3.4%, 3.6% and 4.0%, respectively.
See accompanying notes to financial statements
Page 14
--------------------------------------------------------------------------------
BOARD APPROVAL OF ADVISORY CONTRACT
--------------------------------------------------------------------------------
The independent trustees of Bancroft renewed the advisory contract with
Davis-Dinsmore Management Company in November 2006. The following are the
material factors and conclusions that formed the basis for that approval.
--------------------------------------------------------------------------------
The nature and extent of the advisory services provided by Davis-Dinsmore --
The Board (the "Board") of the Fund and the independent trustees reviewed the
services to be provided by Davis-Dinsmore under the Advisory Agreement. The
Board noted that under the Advisory Agreement, Davis-Dinsmore would supervise
all aspects of the Fund's operations including the investment and reinvestment
of cash, securities or other properties comprising the Fund's assets. In this
regard, the Board noted that under the Advisory Agreement it is Davis-Dinsmore's
responsibility to, among other things, (a) supervise all aspects of the
operations of the Fund; (b) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or any industry or
the Fund or any issuer of securities held or to be purchased by the Fund; (c)
determine which issuers and securities shall be represented in the Fund's
investment portfolio and regularly report thereon to the Board; (d) place orders
for the purchase and sale of securities for the Fund; and (e) take, on behalf of
the Fund, such other action as may be necessary or appropriate in connection
with the above.
Based on such review, both the Board and the independent trustees concluded that
the range of services to be provided by Davis-Dinsmore under the Advisory
Agreement was appropriate and that Davis-Dinsmore currently is providing
services in accordance with the terms of the Advisory Agreement.
The quality of services provided by Davis-Dinsmore -- In reviewing the
qualifications of Davis-Dinsmore to provide investment advisory services, both
the Board and the independent trustees reviewed the credentials and experience
of Davis-Dinsmore's investment personnel who will provide investment advisory
services to the Fund, and considered Davis-Dinsmore's (i) portfolio and product
review process, particularly its adherence to the Fund's investment mandate,
(ii) compliance function and its culture of compliance, (iii) use of technology,
including the use, from time to time, of direct satellite links to issuer
interviews and conferences, (iv) investment research operations (which involves
meetings with issuers and analysts, investment seminars and field trips to
issuers, and the review of: (a) financial newspapers, industry literature,
publications and periodicals, (b) research materials prepared by others, (c)
issuer annual reports and prospectuses, and (d) issuer press releases) and
trading operations (which involves computerized execution of orders), and (v)
focus on providing quality services while keeping the Fund's fees and expenses
as low as possible. The Board and the independent trustees also took into
consideration the presentations made by Davis-Dinsmore at prior Board meetings
pertaining to its management of the Fund.
Based on the review of these and other factors, both the Board and the
independent trustees determined and concluded that the quality of services to be
provided by Davis-Dinsmore was appropriate and that Davis-Dinsmore currently is
providing satisfactory services to the Fund in accordance with the terms of the
Advisory Agreement.
The performance of the Fund relative to comparable funds -- Both the Board and
the independent trustees reviewed the performance of the Fund (at net asset
value) during the past one, three, five and ten years ended September 30, 2006
against the performance of other closed-end funds categorized to be in the
Fund's peer group by Lipper, Inc. Both the Board and the independent trustees
noted that the Fund's performance for the one, three and five year periods was
below the average performance of all closed-end funds in the peer group, but was
above the average performance of such funds for the ten year period. In
evaluating the Fund's performance against other funds in its peer group, the
Board and the independent trustees took into account the fact that many of the
Fund's competitors engage in leverage, which has increased their returns, but
that the Fund does not engage in leverage. In addition, the Board and the
independent trustees recognized that many of the Fund's competitors have
Page 15
--------------------------------------------------------------------------------
BOARD APPROVAL OF ADVISORY CONTRACT (continued)
--------------------------------------------------------------------------------
a higher percentage of their assets invested in securities with lower credit
quality than does the Fund, and that such securities have performed better than
higher quality securities in recent years. The Board and the independent
trustees also noted that the portfolio manager's investment approach is to make
equity investments utilizing convertible securities to provide a total return
similar to that of equity securities, but with lower volatility and higher
income. The Board and the independent trustees recognized that only three of the
funds in the Fund's peer group followed a similar investment approach. Because
of the differences in how funds in the Fund's peer group are managed, the Board
and the independent trustees concluded that they should consider the performance
of the Fund against appropriate indices as a more relevant factor in assessing
the performance of the Fund.
The performance of the Fund relative to indices -- Both the Board and the
independent trustees reviewed the performance of the Fund (at net asset value)
during the past one, three, five and ten years ended September 30, 2006 against
the performance of the Merrill Lynch All Convertibles Index and Merrill Lynch
Investment Grade Convertibles Index. Both the Board and the independent trustees
noted that, for the one, three, five and ten year periods, the Fund's
performance was below the Merrill Lynch All Convertibles Index. The Board and
the independent trustees also considered the fact that currently a majority of
the securities held by the Fund have an investment grade rating or are of
comparable quality to securities with investment grade ratings, and noted that,
for the one, three, five and ten year periods, the Fund's performance was above
the Merrill Lynch Investment Grade Convertibles Index.
Based on this review and taking into account all of the other factors that the
Board and the independent trustees considered in determining whether to continue
the Advisory Agreement, the Board and the independent trustees concluded that no
changes should be made to the Fund's investment objective or policies, or the
portfolio management team.
Meetings with the Fund's portfolio manager and investment personnel -- Both the
Board and the independent trustees noted that they meet regularly with the
Fund's portfolio manager and investment personnel, and believe that such
individuals are competent and able to carry out their responsibilities under the
Advisory Agreement.
Overall performance of Davis-Dinsmore -- After considering the overall
performance of Davis-Dinsmore in providing investment advisory and
administrative services to the Fund, both the Board and the independent trustees
concluded that such performance was satisfactory.
Fees relative to those of clients of Davis-Dinsmore with comparable investment
strategies -- Both the Board and the independent trustees noted that the Fund
and Ellsworth Fund Ltd. (the "Funds") are the only clients of Davis-Dinsmore,
and that the advisory fee rates for the Funds are the same. Both the Board and
the independent trustees concluded that, because the fee rates are the same for
the Funds, the current advisory fee rate of the Fund was fair as compared to the
rate for Ellsworth Fund Ltd.
Fees relative to those of comparable funds with other advisors -- After
reviewing the advisory fee rate for the Fund against the advisory fee rates for
funds advised by other advisors in the Fund's peer group both the Board and the
independent trustees determined that the Fund's advisory fee rate was at
approximately the median of the funds in its peer group, and concluded that the
current advisory fee rate of the Fund was fair and reasonable.
Page 16
--------------------------------------------------------------------------------
BOARD APPROVAL OF ADVISORY CONTRACT (continued)
--------------------------------------------------------------------------------
Expense limitations and fee waivers -- Both the Board and the independent
trustees noted that, although there are no contractual expense limitations or
fee waivers in effect for the Fund, Davis-Dinsmore is very diligent in its
efforts to keep expenses of the Fund as low as possible. Both the Board and the
independent trustees also noted that the cost of compliance with regulatory
initiatives was increasing. Both the Board and the independent trustees
concluded that the current level of expenses for the Fund were fair and
reasonable.
Breakpoints and economies of scale -- Both the Board and the independent
trustees reviewed the structure of the Fund's advisory fee under the Advisory
Agreement, and noted that the fee includes one breakpoint when the Fund's assets
reach $100 million. Both the Board and the independent trustees noted that
breakpoints had become effective for the Fund as a result of the Fund's rights
offering that occurred during the 2004 fiscal year, which resulted in lower
management fee expenses as a percentage of assets. Both the Board and the
independent trustees concluded that the Fund's fee levels under the Advisory
Agreement therefore reflect economies of scale and that it was not necessary to
implement any further changes to the structure of the advisory fee for the Fund.
Profitability of Davis-Dinsmore -- Both the Board and the independent trustees
reviewed information concerning the profitability and financial condition of
Davis-Dinsmore. In particular, the Board reviewed Davis-Dinsmore's financial
statements including its statement of income and retained earnings, statement of
cash flows, and audited balance sheet. The Board also reviewed Davis-Dinsmore's
costs in providing services to the Funds. The Board noted that Davis-Dinsmore's
sole source of revenue was fees from the Funds for providing advisory and
administrative services to the Funds. The Board and the independent trustees
noted that Davis-Dinsmore's operations remain profitable and that increasing the
success of the Funds will positively impact Davis-Dinsmore's profitability.
Based on the review of the profitability of Davis-Dinsmore and its financial
condition, both the Board and the independent trustees concluded that the
compensation to be paid by the Fund to Davis-Dinsmore under the Advisory
Agreement was not excessive.
Benefits of soft dollars to Davis-Dinsmore -- Both the Board and the independent
trustees discussed the fact that there are no third-party soft dollar
arrangements in effect with respect to the Fund. Both the Board and the
independent trustees recognized that Davis-Dinsmore does receive proprietary
research from brokers with whom it executes portfolio transactions on behalf of
the Fund. This research is used by Davis-Dinsmore in making investment decisions
for the Fund. Both the Board and the independent trustees also considered
representations made by Davis-Dinsmore that portfolio transactions received best
execution. Because such research ultimately benefits the Fund, the Board and the
independent trustees concluded that it was appropriate to receive proprietary
research.
Davis-Dinsmore's financial soundness in light of the Fund's needs -- Both the
Board and the independent trustees considered whether Davis-Dinsmore is
financially sound and has the resources necessary to perform its obligations
under the Advisory Agreement, and concluded that Davis-Dinsmore has the
financial resources necessary to fulfill its obligations under the Advisory
Agreement.
Historical relationship between the Fund and Davis-Dinsmore -- In determining
whether to continue the Advisory Agreement for the Fund, both the Board and the
independent trustees also considered the prior relationship among Davis-Dinsmore
and the Fund, as well as the independent trustees' knowledge of Davis-Dinsmore's
operations, and concluded that it was beneficial to maintain the current
relationship, in part, because of such knowledge. Both the Board and the
independent trustees also reviewed the general nature of the non-investment
advisory services currently performed by Davis-Dinsmore, such as administrative
services, and the fees received by Davis-Dinsmore for
Page 17
--------------------------------------------------------------------------------
BOARD APPROVAL OF ADVISORY CONTRACT (continued)
--------------------------------------------------------------------------------
performing such services. In addition to reviewing such services, both the Board
and the independent trustees also considered the organizational structure
employed by Davis-Dinsmore to provide those services. Based on the review of
these and other factors, both the Board and the independent trustees concluded
that Davis-Dinsmore was qualified to provide non-investment advisory services to
the Fund, including administrative services, and that Davis-Dinsmore currently
is providing satisfactory non-investment advisory services to the Fund.
Other factors and current trends -- Both the Board and the independent trustees
considered the culture of compliance and high ethical standards at
Davis-Dinsmore, and the efforts historically and currently undertaken by
Davis-Dinsmore to engage in best practices. Both the Board and the independent
trustees noted Davis-Dinsmore's historical adherence to compliance procedures,
as well as the Fund's investment objectives, policies and restrictions. Both the
Board and the independent trustees concluded that this commitment to adhere to
the highest ethical standards was an important factor in their determination
that they should approve the continuance of the Advisory Agreement for the Fund.
--------------------------------------------------------------------------------
After considering all of the above factors and based on informed business
judgment, the Board determined that the Advisory Agreement is in the best
interests of the Fund and its shareholders and that the compensation to
Davis-Dinsmore under the Advisory Agreement is fair and reasonable. As a result,
the Board continued the Advisory Agreement.
Page 18
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MISCELLANEOUS NOTES
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Results of the 2007 Annual Shareholders Meeting
The Annual Meeting of Shareholders of the Fund was held on February 12, 2007.
The results of the shareholder vote were:
1. All persons nominated were elected.
Terms expiring in 2010 Shares voted for Shares withheld
---------------------- ---------------- ---------------
Gordon F. Ahalt 4,758,314 256,348
Jane D. O'Keeffe 4,762,952 251,710
Nicolas W. Platt 4,760,633 254,029
2. The Audit Committee's appointment of Tait, Weller & Baker LLP as
independent accountants was ratified, as 4,908,029 shares voted for,
49,711 shares voted against and 56,922 shares abstained.
--------------------------------------------------------------------------------
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 Fund 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 shareholders or former shareholders 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 Fund's 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 of portfolio holdings for the first and
third fiscal quarters to shareholders, however the schedule is posted to the
Fund's 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.
--------------------------------------------------------------------------------
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 portfolio 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.
Page 19
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MISCELLANEOUS NOTES (continued)
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Disclosure of Portfolio Holdings to Broker-Dealers
From time to time, brokers with whom the Fund's Adviser, Davis-Dinsmore
Management Company, has a pre-existing relationship may request that
Davis-Dinsmore disclose Fund portfolio holdings to such broker in advance of the
public disclosure of such portfolio holdings. Davis-Dinsmore may make such
disclosure under the following conditions: (i) the specific purpose of the
disclosure is to assist Davis-Dinsmore in identifying potential investment
opportunities for the Fund; (ii) prior to the receipt of nonpublic portfolio
holdings, the broker, by means of e-mail or other written communication, shall
agree to keep the nonpublic portfolio holdings confidential and not to use the
information for the broker's own benefit, except in connection with the above
described purpose for which it was disclosed; (iii) Davis-Dinsmore shall keep
written records of its agreement with each broker to which it distributes
nonpublic portfolio holdings; and (iv) Davis-Dinsmore will secure a new
agreement with a broker any time the broker directs the nonpublic portfolio
holdings to be sent to a new recipient.
--------------------------------------------------------------------------------
The Fund is a member of the Closed-End Fund Association (www.cefa.com). The
association is solely responsible for the content of its website.
--------------------------------------------------------------------------------
Pursuant to Section 23 of the Investment Company Act of 1940, notice is hereby
given that the Fund may in the future purchase its own shares 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.
Page 20
Board of Trustees Internet
GORDON F. AHALT www.bancroftfund.com
ELIZABETH C. BOGAN, Ph.D. email: info@bancroftfund.com
THOMAS H. DINSMORE, C.F.A.
DANIEL D. HARDING Investment Adviser
DUNCAN O. MCKEE Davis-Dinsmore Management Company
ROBERT J. MCMULLAN 65 Madison Avenue, Suite 550
JANE D. O'KEEFFE Morristown, NJ 07960-7308
NICOLAS W. PLATT (973) 631-1177
Officers Shareholder Services and Transfer Agent
American Stock Transfer & Trust Company
THOMAS H. DINSMORE, C.F.A. 59 Maiden Lane
Chairman of the Board New York, NY 10038
and Chief Executive Officer (800) 937-5449
www.amstock.com
JANE D. O'KEEFFE
President Beneficial Share Listing
American Stock Exchange Symbol: BCV
GARY I. LEVINE
Executive Vice President, Legal Counsel
Chief Financial Officer and Ballard Spahr Andrews & Ingersoll LLP
Secretary
Independent Accountants
H. TUCKER LAKE, JR. Tait, Weller & Baker LLP
Vice President
GERMAINE M. ORTIZ
Vice President
MERCEDES A. PIERRE
Vice President and Chief Compliance Officer
JOSHUA P. LAKE, C.T.P.
Treasurer and Assistant Secretary
JAMES A. DINSMORE
Assistant Vice President
JOANN VENEZIA
Assistant Vice President and
Assistant Secretary
BANCROFT FUND LTD.
65 MADISON AVENUE, SUITE 550
MORRISTOWN, NEW JERSEY 07960
www.bancroftfund.com
[LOGO]
AMERICAN
STOCK EXCHANGE
--------------
LISTED
--------------
BCV(TM)
ITEM 2. CODE OF ETHICS.
Not applicable to this semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this semi-annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this semi-annual report.
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.
Not applicable to this semi-annual report.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this semi-annual report.
ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
During the period covered by this report, there were no purchases made by or
on behalf of Bancroft Fund Ltd. 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.
There were no changes to the procedures by which shareholders may recommend
nominees to the registrant's board of trustees, after the registrant last
provided disclosure in response to the requirements of this item.
ITEM 11. CONTROLS AND PROCEDURES.
Conclusions of principal officers concerning controls and procedures
(a) As of May 23, 2007 an evaluation was performed under the supervision
and with the participation of the officers of Bancroft Fund Ltd. (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 (the "Act"), as amended. Based on that
evaluation, the Registrant's officers, including the PEO and PFO, concluded
that, as of May 23, 2007, 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 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 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 second fiscal quarter of the
period covered by this report that has materially affected, or is reasonably
likely to materially affect, the Registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS
(a)(1) The code of ethics disclosure required by Item 2 is not applicable to
this semi-annual report.
(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 Fund Ltd.
By: /s/Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: July 3, 2007
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: July 3, 2007
By: /s/Gary I. Levine
Gary I. Levine
Chief Financial Officer
(Principal Financial Officer)
Date: July 3, 2007