<PAGE> 1
[BANCROFT LOGO]
Bancroft Convertible Funds, Inc.
1995 Annual Report
October 31, 1995
<PAGE> 2
1995 Annual Report
October 31, 1995
Bancroft Convertible Fund, Inc. operates as a closed-end, diversified
management company and invests primarily in convertible securities with the
objectives of providing income and the potential for capital appreciation (which
objectives the Company considers to be relatively equal due to the nature of the
securities in which it invests). The markets for and the features of convertible
securities have changed dramatically in recent years. In July 1995, in response
to these changes, the Board of Directors of the Company modified the Company's
nonfundamental investment policies. The Company now intends to seek its
objectives by investing at least 80% of the market value of its total assets,
excluding cash and government securities, in debt securities and preferred
stocks which are convertible into, or carry the right to purchase, common stock
or other equity securities. The debt security or preferred stock may itself be
convertible into or exchangeable for equity securities, or the conversion
privilege may be evidenced by warrants attached to the security or acquired as
part of a unit with the security. The remainder of the Company's total assets
may be invested in other securities, including non-convertible preferred stocks
and investment grade debt securities, common stock received upon conversion or
exchange of securities, options, warrants, securities of the U.S. Government,
its agencies and instrumentalities or repurchase agreements, or they may be held
as cash. The Company is not required to sell securities for the purpose of
assuring that 80% of its total assets are invested in convertible securities.
This change in the investment policies of the Company did not require the
approval of the stockholders of the Company.
Highlights
<TABLE>
<S> <C>
THE COMPANY
Began the period with net assets of ............................ $64,551,457
Earned net investment income of ................................ 3,285,250
Realized net capital gains from investment transactions of ..... 1,869,444
Had net unrealized appreciation of investments of .............. 5,012,325
Increased capital from capital share transactions .............. 1,554,561
-----------
76,273,037
Paid dividends on common stock:
from net investment income ..................................... 3,350,427
from net realized gains on investment transactions ............. 1,497,574
-----------
Ended the period with net assets of ............................ $71,425,036
===========
Common shares outstanding at end of period ..................... 2,875,280
THE COMMON SHAREHOLDERS
Began the period with each share owned having net asset value of $ 23.11
Earned net investment income per share of ...................... 1.14
Net realized and unrealized gain on investments of ............. 2.30
-----------
26.55
Received dividends on each share:*
from net investment income ..................................... 1.17
from net realized gains on investment transactions ............. 0.54
-----------
Ended the period with each share owned having net asset value of $ 24.84
===========
</TABLE>
*Does not include dividend of $0.92 per share to be paid in December, 1995
<PAGE> 3
BANCROFT CONVERTIBLE FUND, INC.
To Our Shareholders:
December 12, 1995
Bancroft Convertible Fund will mark its twenty-fifth anniversary in 1996. The
Fund became effective in April 1971 and has survived bull markets, bear markets,
crashes and booms. As we wrote to you in the semi-annual report issued in June,
the convertible market has undergone substantial changes. Your Fund has
participated in most of the new convertible formats that have evolved during the
last ten years and management fully intends to continue to take appropriate
advantage of any new convertible securities that fit the Fund's objectives of
providing income and the potential for capital appreciation.
During this period of change, the Fund has provided performance that has
allowed Morningstar, Inc.*, in their October 27, 1995 report on Bancroft, to
award the Fund four stars (out of five) for all three time periods that they
publish (three years, five years and ten years). Additionally, with this above
average performance rating, Morningstar, Inc. has estimated the Fund's risk to
be less than that of the average fund in our category. While all of this
reflects well on our past performance and is no guarantee of future returns or
risk levels, it does indicate that we have been on a good track.
Because of the evolution in the convertible market, the Board of Directors
of the Fund has approved, subject to shareholder approval, changes to certain
fundamental investment policies of the Fund. These changes are described in the
accompanying proxy statement for the annual meeting of shareholders, which will
be held on February 15, 1996 at the Hamilton Park Conference Center in Florham
Park, New Jersey. We hope you can attend.
We estimate that the Fund's net asset value (NAV) rose 5.91%, 18.81%,
96.77% and 197.67% for the three-month, one-year, five-year and ten-year periods
ended September 30, 1995 (assuming all dividends reinvested at NAV). The value
of the Fund's shares rose 2.47%, 16.82%, 107.87% and 188.50%** for those
three-month, one-year, five-year and ten-year periods (assuming all dividends
reinvested at actual reinvestment price). As quoted in Barron's, Lipper
Analytical Services, Inc. reported that the average open-end convertible Fund's
NAV + rose 5.61%, 14.24%, 106.04% and 191.78% for those same periods (also
assuming all dividends reinvested).
It is with our deepest regret that we must inform you of the passing of Dr.
Clinton O. Chichester, a director of this Fund since 1987. His advice, humor and
cosmopolitan perspective added greatly to the Board's effectiveness in
overseeing the Fund. We will miss him.
At its November meeting the Board of Directors declared a 92 cents per
share dividend consisting of 26.9 cents from net investment income, 5.8 cents
per share from realized short-term capital gains and 59.3 cents per share from
realized long-term capital gains. The payable date for this distribution is
December 28, 1995, to shareholders of record November 30, 1995. Also at this
meeting, the Board appointed Jane D. O'Keeffe to fill the vacancy on the Board.
Ms. O'Keeffe joined the Fund's advisers, Davis/Dinsmore Management Company, last
year as a portfolio manager after spending five years as a portfolio manager at
Fiduciary Trust Co. in New York. Before that, she worked for Simms Capital
Management, Soros Fund Management and IDS.
Chairman of the Board President
* Morningstar Inc., an independent statistical service.
** Assumes full exercise of rights issued in 1988.
+ Average NAV of the forty-one open-end convertible fund's followed by Lipper
Analytical Services, Inc., an independent statistical service.
(1)
<PAGE> 4
BANCROFT CONVERTIBLE FUND, INC.
Portfolio of Investments OCTOBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
------ ------ -----
<S> <C> <C> <C>
ADVERTISING--4.6%
$1,025,000 Interpublic Group Cos., Inc. 3 3/4% 2002 Euro. cv. sub. deb. $ 868,957 $ 912,250
650,000 Interpublic Group Cos., Inc. 3 3/4% 2002 cv. sub. deb.*........ 554,049 575,250
1,475,000 Omnicom Group, Inc. 4 1/2% 2000 cv. sub. deb.*................. 1,537,625 1,762,625
---------- ----------
2,960,631 3,250,125
---------- ----------
AEROSPACE--5.2%
16,432 shs Kaman Corp. depositary shares (representing 1/4 share
6.50% cv. pfd.) 829,977 807,222
2,000,000 Morgan Stanley Group, Inc. 0% 2000 medium-term exchangeable notes 1,815,812 1,750,000
(exch. for Boeing Company common stock)
1,006,000 Orbital Sciences Corp. 6 3/4% 2003 cv. sub. deb................ 1,262,928 1,161,930
---------- ----------
3,908,717 3,719,152
---------- ----------
AUTOMOTIVE--3.7%
15,000 shs Ford Motor Co. depositary shares (representing $4.20
cum. cv. A pfd.) 751,930 1,410,000
50,000 shs MascoTech Industries, Inc. 6% cv. pfd.......................... 978,075 625,000
600,000 Magna International, Inc. 5% 2002 cv. sub. deb................. 611,250 607,500
---------- ----------
2,341,255 2,642,500
---------- ----------
BANKING--10.7%
20,000 shs Barnett Banks, Inc. $4.50 cum. cv. A pfd....................... 1,188,843 2,100,000
15,375 shs Chemical Banking Corp. common stock........................... 663,097 874,453
25,000 shs First Commerce Corp. 7 1/4% cum. cv. pfd....................... 671,250 907,813
12,000 shs Fourth Financial Corp. depositary shares (representing
7% cum. cv. A pfd.) 376,500 384,000
19,100 shs National City Corp. depositary shares (representing $4.00
cum. cv. pfd.) 1,147,062 1,408,625
15,000 shs ONBANCorp, Inc. 6 3/4% cv. B pfd............................... 379,375 401,250
15,000 shs Washington Mutual Savings Bank $6.00 cv. perpetual D pfd....... 1,436,250 1,593,750
---------- ----------
5,862,377 7,669,891
---------- ----------
BROADCASTING & CABLE--3.7%
975,000 Comcast Corp. 3 3/8% 2005 cv. sub. deb......................... 893,594 921,375
600,000 International CableTel, Inc. 7 1/4% 2005 cv. sub. notes*....... 600,000 693,000
990,500 Time Warner, Inc. 8 3/4% 2015 cv. sub. deb..................... 1,036,807 1,031,358
---------- ----------
2,530,401 2,645,733
---------- ----------
CAPITAL GOODS--5.4%
70,000 shs Westinghouse Electric Corp. depositary shares (representing
$1.30 cv. C pfd.) 981,950 984,375
1,067,000 Cooper Industries, Inc. 7.05% 2015 cv. sub. deb................ 1,150,559 1,077,670
1,750,000 General Signal Corp. 5 3/4% 2002 cv. sub. notes................ 1,781,875 1,789,375
---------- ----------
3,914,384 3,851,420
---------- ----------
COMMUNICATIONS--3.4%
1,200,000 Comcast Cellular Corp. 0% 2000 senior participating zero coupon
redeemable series A notes...................................... 727,132 912,000
293 shs MFS Communications Co., Inc. common stock...................... 13,075 11,830
15,000 shs MFS Communications Co., Inc. depositary shares................. 502,500 592,500
(representing 8% cum. cv. A pfd.)
25,000 Sprint Corp. 8 1/4% 2000 FCENS#................................ 815,788 912,500
(exch. for Southern New England Telecommunications Corp.
common stock)
---------- ----------
2,058,495 2,428,830
---------- ----------
DATA-PROCESSING SERVICES--7.1%
15,000 shs General Motors Corp. (GME) depositary shares
(representing $3.25 cv. C pfd.) 844,950 1,005,000
45,000 American Express Company 6 1/4% 1996 FCENS#.................... 1,653,750 2,469,375
(exch. for First Data Corp. common stock)
1,000,000 First Financial Management Corp. 5% 1999 cv. sub. deb.......... 1,000,000 1,585,000
---------- ----------
3,498,700 5,059,375
---------- ----------
ENERGY--5.4%
41,000 shs Chieftain International Funding Corp. 7 1/4% cv. red. pfd...... 1,107,270 989,125
25,000 shs Unocal Corp. $3.50 cv. pfd.*................................... 1,255,625 1,262,500
500,000 Pennzoil Company 4 3/4% 2003 exch. sr. deb..................... 479,375 471,250
(exch. for Chevron Corp. common stock)
1,000,000 Pennzoil Company 6 1/2% 2003 exch. sr. deb.................... 1,079,719 1,165,000
(exch. for Chevron Corp. common stock)
---------- ----------
3,921,989 3,887,875
---------- ----------
</TABLE>
See accompanying notes to financial statements.
(2)
<PAGE> 5
BANCROFT CONVERTIBLE FUND, INC.
Portfolio of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
--------- ---------- --------
<S> <C> <C> <C>
ENVIRONMENTAL SERVICES--1.2%
$ 25,000 Browning-Ferris Industries, Inc. 7 1/4% 1998 FCENS#............ $ 890,625 $ 821,875
--------- ---------
FINANCIAL & INSURANCE--11.1%
30,000 shs American General Delaware, LLC 6% cv. A MIPS+.................. 1,515,875 1,552,500
60,110 shs Pioneer Financial Services, Inc. common stock.................. 654,440 841,540
10,000 shs St. Paul Capital LLC 6% cv. MIPS+.............................. 512,000 540,000
750,000 American Travellers Corp. 6 1/2% 2005 cv. sub. deb............. 750,000 886,875
1,300,000 Chubb Capital Corp. 6% 1998 Euro. cv. sub. deb................. 1,324,500 1,413,750
1,025,000 First Central Financial Corp. 9% 2000 cv. sub. deb............. 1,036,625 1,045,500
1,500,000 Old Republic International Corp. 5 3/4% 2002 cv. sub. deb...... 1,771,250 1,665,000
--------- ---------
7,564,690 7,945,165
--------- ---------
FOODS--4.4%
50,886 shs ConAgra, Inc. common stock..................................... 1,587,420 1,984,554
1,000,000 Grand Metropolitan Public Limited Co. 6 1/2% 2000 cv. sub. deb.* 1,000,000 1,135,000
--------- ---------
2,587,420 3,119,554
--------- ---------
HEALTH CARE & DRUGS--10.4%
1,475,000 Bindley Western Industries, Inc. 6 1/2% 2002 cv. sub. deb....... 1,388,870 1,504,500
500,000 Ciba Geigy Corp. 6 1/4% 2016 exch. sub. deb.*................... 478,750 507,500
(exch. for ALZA Corp. common stock)
1,250,000 Medco Containment Service, Inc. 6% 2001 cv. sub. deb........... 1,649,063 2,437,500
2,500,000 Roche Holdings, Inc. 0% 2010 liquid yield option notes*........ 927,254 1,037,500
1,050,000 Sandoz Capital BVI Ltd. 2% 2002 cv. sub. notes*................ 878,591 929,250
500,000 TheraTx, Inc. 8% 2002 cv. sub. notes*.......................... 500,000 467,500
500,000 United Technologies Corp. 0% 1997 pharmaceutical exch. notes... 520,928 600,000
--------- ---------
6,343,456 7,483,750
--------- ---------
OFFICE EQUIPMENT--0.9%
7,500 shs Alco Standard Corp. depositary shares
(representing 6 1/2% cv. BB pfd.).............................. 580,313 641,250
--------- ---------
PAPER & PAPER PRODUCTS--1.2%
20,000 shs International Paper Capital Trust Company 5 1/4% cv. pfd.*..... 1,000,000 892,500
--------- ---------
RETAIL--1.1%
500,000 Starbucks Corp. 4 1/4% 2002 cv. sub. deb....................... 500,500 507,500
525,000 Tops Appliance City, Inc. 6 1/2% 2003 cv. sub. deb............. 375,000 249,375
--------- ---------
875,500 756,875
--------- ---------
TECHNOLOGY--7.6%
750,000 Emerson Radio Corp. 8 1/2% 2002 sr. cv. sub. deb.*............. 750,000 652,500
350,000 Motorola, Inc. 0% 2013 liquid yield option notes............... 325,500 280,000
1,295,000 Seagate Technology, Inc. 6 3/4% 2012 cv. sub. deb.............. 1,094,075 1,450,400
150,000 Texas Instruments, Inc. 2 3/4% 2002 Euro. cv. sub. deb......... 285,750 247,875
975,000 Thermo Electron Corp. 5% 2001 cv. sub. deb.*................... 995,500 1,482,000
200,000 Thermo Optek Corp. 5% 2000 cv. sub. deb.*...................... 200,000 208,000
125,000 Thermo Quest Corp. 5% 2000 cv. sub. deb.*...................... 125,000 130,000
250,000 3Com Corp. 10 1/4% 2001 cv. sub. notes*........................ 341,875 400,938
600,000 VLSI Technology, Inc. 8 1/4% 2005 cv. sub. notes............... 613,750 571,500
--------- ---------
4,731,450 5,423,213
--------- ---------
TEXTILES--1.5%
1,085,000 Interface, Inc. 8% 2013 cv. sub. deb........................... 977,650 1,117,550
--------- ---------
TRANSPORTATION--3.1%
5,000 shs Delta Airlines, Inc. depositary shares
(representing $3.50 cum. cv. C pfd.).......................... 273,425 276,875
1,000,000 AMR Corp. 6 1/8% 2024 cv. sub. deb............................. 1,000,000 972,500
1,075,000 Delta Airlines, Inc. 3.23% 2003 cv. sub. notes................. 800,130 941,969
--------- ---------
2,073,555 2,191,344
--------- ---------
</TABLE>
See accompanying notes to financial statements.
(3)
<PAGE> 6
BANCROFT CONVERTIBLE FUND, INC.
Portfolio of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
------ ---------- --------
<S> <C> <C> <C>
U.S. TREASURY NOTES--1.4%
$ 952,000 4 1/4% 5/15/96................................................. $ 950,499 $ 945,454
25,000 6 5/8% 3/31/97**............................................... 24,980 25,336
----------- -----------
975,479 970,790
----------- -----------
CORPORATE SHORT-TERM NOTES--6.2%
3,025,000 General Electric Capital Services, Inc. 5.72% 11/2/95.......... 3,021,636 945,454
1,410,000 Sears Roebuck Acceptance Corp. 5.76% 11/7/95................... 1,408,195 25,336
----------- -----------
4,429,831 970,790
----------- -----------
TOTAL BONDS AND NOTES--62.2%..................................................... 40,345,884 44,432,105
TOTAL PREFERRED STOCKS--25.7%.................................................... 16,333,170 18,374,285
TOTAL COMMON STOCKS--5.2%........................................................ 2,918,033 3,712,377
TOTAL CORPORATE SHORT-TERM NOTES--6.2%........................................... 4,429,831 4,429,831
----------- -----------
TOTAL INVESTMENTS--99.3%......................................................... $64,026,918 70,948,598
=========== ===========
OTHER ASSETS AND LIABILITIES, NET--0.7%.......................................... 476,438
-----------
TOTAL NET ASSETS--100.0%......................................................... $71,425,036
===========
</TABLE>
* Rule 144A security may be sold only to qualified institutional buyers.
# Forced Conversion Exchangeable Notes.
+ Monthly Income Preferred Securities.
** Collateral for a letter of credit.
The cost of investments for federal income tax purposes is $64,041,618 resulting
in gross unrealized appreciation and depreciation of $8,370,217 and $1,463,237,
respectively, or net unrealized appreciation of $6,906,980 on a tax cost basis.
See accompanying notes to financial statements.
-------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
OCTOBER 31,
1995
-----------
<S> <C>
ASSETS:
Investments at value (Identified cost $64,026,918) (Note A)................................. $70,948,598
Dividends and interest receivable........................................................... 523,278
Other assets................................................................................ 10,942
-----------
Total assets............................................................................... 71,482,818
-----------
LIABILITIES:
Due to custodian bank....................................................................... 11,476
Accrued management fee (Note B)............................................................. 6,377
Accrued expenses............................................................................ 39,929
-----------
Total liabilities.......................................................................... 57,782
-----------
NET ASSETS................................................................................... $71,425,036
===========
NET ASSETS CONSIST OF:
Undistributed net investment income......................................................... $ 779,084
Undistributed net realized gain from investment transactions................................ 1,850,735
Unrealized appreciation on investments...................................................... 6,921,680
Capital shares (Note D)..................................................................... 28,753
Additional paid-in capital.................................................................. 61,844,784
-----------
NET ASSETS................................................................................... $71,425,036
===========
Net asset value per share ($71,425,036 / 2,875,280 outstanding shares)....................... $24.84
===========
</TABLE>
See accompanying notes to financial statements.
(4)
<PAGE> 7
BANCROFT CONVERTIBLE FUND, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income .......................................... $ 3,285,250 $ 3,361,777
Net realized gain from investment transactions ................. 1,869,444 1,482,684
Net unrealized appreciation (depreciation) of investments ...... 5,012,325 (4,706,310)
------------ ------------
Net increase in net assets resulting from operations .......... 10,167,019 138,151
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .......................................... (3,350,427) (3,442,107)
Net realized gain on investments ............................... (1,497,574) (1,812,617)
------------ ------------
Total dividends ............................................... (4,848,001) (5,254,724)
------------ ------------
CAPITAL SHARE TRANSACTIONS (Note D) ............................. 1,554,561 1,839,149
------------ ------------
Increase (decrease) in net assets ............................. 6,873,579 (3,277,424)
NET ASSETS AT BEGINNING OF YEAR ................................. 64,551,457 67,828,881
------------ ------------
NET ASSETS AT END OF YEAR (including undistributed net investment
income of $779,084 and $844,261, respectively) ................. $ 71,425,036 $ 64,551,457
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Statement of Operations FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME (Note A):
Interest ............................................ $ 2,709,802
Dividends ........................................... 1,358,656
-----------
4,068,458
-----------
EXPENSES (Note B):
Management fee ...................................... 504,164
Custodian ........................................... 27,659
Transfer agent ...................................... 45,612
Professional fees ................................... 46,579
Directors' fees ..................................... 37,800
Printing and shareholder mailings ................... 44,430
Treasurer's office .................................. 25,000
Other ............................................... 51,964
-----------
783,208
-----------
NET INVESTMENT INCOME ................................ 3,285,250
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions ...... 1,869,444
Net increase in unrealized appreciation of investments 5,012,325
-----------
Net gain on investments ............................ 6,881,769
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . $10,167,019
===========
</TABLE>
See accompanying notes to financial statements.
(5)
<PAGE> 8
BANCROFT CONVERTIBLE FUND, INC.
Financial Highlights
Selected data for a share of common stock outstanding
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------------------------
Per Share Operating Performance 1995 1994 1993 1992 1991
- ------------------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................. $ 23.11 $ 25.00 $ 22.75 $ 21.02 $ 17.86
-------- -------- -------- -------- --------
Net investment income .............................. 1.14 1.20 1.26 1.35 1.34
Net realized and unrealized gain (loss) ............ 2.30 (1.18) 3.07 1.70 3.28
-------- -------- -------- -------- --------
Total from investment operations ................... 3.44 .02 4.33 3.05 4.62
Less distributions:
Dividends from net investment income ............... (1.17) (1.24) (1.24) (1.32) (1.46)
Distributions from realized gains .................. (.54) (.67) (.84) -- --
-------- -------- -------- -------- --------
Total distributions ................................ (1.71) (1.91) (2.08) (1.32) (1.46)
-------- -------- -------- -------- --------
Net asset value, end of year ....................... $ 24.84 $ 23.11 $ 25.00 $ 22.75 $ 21.02
======== ======== ======== ======== ========
Market value, end of year .......................... $ 22.25 $ 20.13 $ 23.00 $ 20.63 $ 18.63
Total investment return:
Based on market value* ............................. 20.17% (4.88)% 22.90% 18.35% 33.90%
Based on net asset value# .......................... 15.79% .18% 20.12% 14.87% 26.64%
Ratios/Supplemental Data:
Net assets, end of year (000's) .................... $71,425 $64,551 $67,829 $59,436 $54,915
Ratio of expenses to average net assets ............ 1.2% 1.2% 1.2% 1.2% 1.3% +
Ratio of net investment income to average net assets 4.9% 5.2% 5.4% 6.1% 6.7%
Portfolio turnover rate ............................ 43% 39% 102% 71% 39%
</TABLE>
* Assumes valuation of the Fund's shares at market price, and reinvestment of
dividends at actual reinvestment price.
# Assumes valuation of the Fund's shares, and reinvestment of dividends, at
net asset values.
+ Includes $23,038 ($.01 per share) legal expenses for shareholder proposals.
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Principal Portfolio Changes AUGUST 1 to OCTOBER 31, 1995
(unaudited)
SHARES OR PRINCIPAL AMOUNT
HELD AT
ADDITIONS REDUCTIONS 10-31-95
---------------------------------
<S> <C> <C> <C>
American Travellers Corp. 6 1/2% 2005 cv. sub. deb. ...................... 750,000 750,000
Amoco Canada Petroleum Co. 6 1/2% 2000 cv. notes ......................... 1,500,000 --
CEMEX, S.A. 7.05% 2015 cv. sub. deb. ..................................... 550,000 --
CIGNA Corp. 8% 2013 cv. sub. deb. ........................................ 1,000,000 --
Corning Delaware 3 3/4% 2002 cv. sub. deb. ............................... 10,000 --
Emerson Radio Corp. 8 1/2% 2002 sr. cv. sub. deb. 144A ................... 750,000 750,000
Integrated Health Services, Inc. 5 3/4% 2001 cv. sr. sub. deb. 144A ...... 750,000 --
Magna International, Inc. 5% 2002 cv. sub. deb. .......................... 600,000 600,000
Morgan Stanley Group, Inc. 0% 2000 medium-term exch. notes ............... 2,000,000 2,000,000
Morgan Stanley Group, Inc. 7% 1997 notes ................................. 25,000 --
Pioneer Financial Services, Inc. common stock ............................ 25,000 60,110
Sandoz Capital BVI Ltd. 2% 2002 cv. sub. notes 144A ...................... 1,050,000 1,050,000
Staples, Inc. 4 1/2% 2000 cv. sub. deb. 144A ............................. 350,000 350,000 --
Starbucks Corp. 4 1/4% 2002 cv. sub. deb. ................................ 500,000 500,000
Time Warner, Inc. 8 3/4% 2015 cv. sub. deb. .............................. 810,750 990,500
VLSI Technology, Inc. 8 1/4% 2005 cv. sub. notes ......................... 600,000 600,000
</TABLE>
(6)
<PAGE> 9
BANCROFT CONVERTIBLE FUND, INC.
Notes to Financial Statements
(A) The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements:
1. Security Valuation
Investments in securities traded on a national securities exchange are valued at
market using the last reported sales price. Securities traded in the
over-the-counter market and listed securities for which no sales were reported
are valued at the mean between reported closing bid and asked prices. Where no
closing prices are available, value is determined by management, with the
approval of the Board of Directors.
2. 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. Premiums received from option contracts
written which are subsequently exercised or expire are included in the proceeds
from sales of investments in calculating the gain or loss. Dividend income is
recorded on the accrual basis.
3. Federal Taxes
It is the policy of the Fund to distribute substantially all of its taxable
income within the prescribed time and to otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no provision for federal income or excise taxes are believed
necessary.
4. Dividends and Distributions to Shareholders
The liability for dividends and distributions payable is recorded on the
ex-dividend date.
(B) The management fee is paid to Davis/Dinsmore Management Company, investment
adviser. The contract provides for payment of a monthly advisory fee, computed
at an annual rate of 3/4 of 1% of the first $100,000,000 and 1/2 of 1% of the
excess over $100,000,000 of the Fund's net asset value in such month. The annual
fee is subject to reduction to the extent that the ordinary expenses of the Fund
(excluding taxes and interest) exceed 1.5% of the first $100,000,000 and 1% of
the excess over $100,000,000 of the average of the monthly net asset values of
the Fund for the year.
The adviser's organization furnishes investment advice, office equipment and
facilities, and pays the salaries of all executive officers of the Fund, except
that the costs associated with personnel and certain non-personnel expenses of
the office of the Treasurer up to a maximum of $50,000 a year are reimbursed by
the Fund. Such reimbursements amounted to $25,000 for the year ended October 31,
1995. The officers of the Fund are also directors, officers or employees of the
investment adviser, and are compensated by the investment adviser.
(C) Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated 27,776,649 and 30,317,578 respectively, for the year ended October
31, 1995.
(D) At October 31, 1995 there were 2,875,280 shares of $.01 par value common
stock outstanding (9,000,000 shares authorized). During the year ended October
31, 1995, 81,819 shares were issued in connection with reinvestment of dividends
from net investment income and capital gains, resulting in an increase in
paid-in capital of $1,554,561. During the year ended October 31, 1994, 79,963
shares were issued.
(E) Distributions of 26.9 cents per share from net investment income and 65.1
cents per share from realized gains on investments were declared November 18,
1995 to shareholders of record at the close of business November 30, 1995,
payable December 28, 1995.
(7)
<PAGE> 10
BANCROFT CONVERTIBLE FUND, INC.
6.Quarterly Results of Operations (unaudited)
<TABLE>
<CAPTION>
REALIZED AND UNREALIZED NET INCREASE IN
NET NET GAIN (LOSS) NET ASSETS RESULTING
INVESTMENT INCOME INVESTMENT INCOME ON INVESTMENTS FROM OPERATIONS
----------------------- --------------------------------------------------------------------
PER PER PER PER
QUARTERS ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, 1994 $1,064,802 $.38 $880,944 $.32 $ 89,040 $ .03 $ 969,984 $ .35
April 30, 1994 970,727 .35 758,321 .27 (4,276,598) (1.56) (3,518,277) (1.29)
July 31, 1994 1,036,910 .37 856,197 .31 281,199 .10 1,137,396 .41
October 31, 1994 1,062,480 .38 866,315 .30 682,733 .25 1,549,048 .55
January 31, 1995 1,009,090 .35 833,801 .29 (1,732,814) (.70) (899,013) (.41)
April 30, 1995 963,605 .33 742,643 .26 3,942,570 1.37 4,685,213 1.63
July 31, 1995 1,051,093 .37 868,894 .30 3,885,941 1.36 4,754,835 1.66
October 31, 1995 1,044,670 .36 839,912 .29 786,072 .27 1,625,984 .56
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
TAX STATUS OF DIVIDENDS
(UNAUDITED)
Per share distributions to shareholders during the fiscal year ended October 31,
1995:
<TABLE>
<CAPTION>
TOTAL ORDINARY LONG-TERM QUALIFYING
PAYMENT DATE PAID INCOME CAPITAL GAIN DISTRIBUTION*
-------------------------- --------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
December 29, 1994 $0.84 $0.3039 $0.5361 44.7%
March 27, 1995 0.29 0.29 -- 40.6%
June 26, 1995 0.29 0.29 -- 40.6%
September 25, 1995 0.29 0.29 -- 40.6%
----- ----- -----
$1.71 $1.1739 $0.5361
* The percentages set forth above indicate the portion of each ordinary income
distribution which qualifies under the Internal Revenue Code for the deduction
for dividends received by corporate shareholders.
- ----------------------------------------------------------------------------------------------------
</TABLE>
Pursuant to Section 23 of the Investment
Company Act of 1940, notice is hereby given
that the Company may in the future purchase
shares of Bancroft Convertible Fund, Inc.
Common Stock from time to time, at such
times, and in such amounts as may be
deemed advantageous to the Company. Nothing
herein shall be considered a commitment to
purchase such shares.
(8)
<PAGE> 11
BANCROFT CONVERTIBLE FUND, INC.
Report of Independent Accountants
To the Shareholders and Board of Directors of
Bancroft Convertible Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Bancroft Convertible Fund, Inc. (the "Fund"), including the portfolio of
investments, as of October 31, 1995, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Bancroft Convertible Fund, Inc. as of October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
November 15, 1995
(9)
<PAGE> 12
BANCROFT CONVERTIBLE FUND, INC.
ADDITIONAL SERVICES AVAILABLE TO SHAREHOLDERS
OF
BANCROFT CONVERTIBLE FUND, INC.
AUTOMATIC DIVIDEND INVESTMENT PLAN You may wish to participate in our Automatic
Dividend Investment Plan whereby all of the dividends and distributions on your
Bancroft shares are automatically invested in additional shares of the Company's
stock at the then current market price or net asset value, whichever is lower.
When the market price is lower than net asset value, the Bank, as your agent,
will take your dividends or distributions in cash, combine them with those of
other Plan participants, and purchase shares in the market and thereby take
advantage of the lower commissions on larger purchases. There is no other charge
for this service. To join the Plan, fill out and mail the authorization form on
the next page.
CASH PAYMENT PLAN Members of the Dividend Investment Plan may also wish to
participate in our Cash Payment Plan which provides a convenient and economical
means to increase your investment in the Company's shares. The Cash Payment
Plan, for which Mellon Securities Trust Company (the "Bank") acts as your agent,
permits you to send cash payments of between $25 to $5,000 per month to the
Bank, which will be aggregated with the funds of other participants, to purchase
additional Bancroft shares. You pay only a service charge (5% of the amount to
be invested with a maximum of $3.00 per transaction) plus your proportionate
share of the brokerage commission which is typically at a savings because your
funds are combined with others to take advantage of the reduced commission on
larger purchases.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER:
Davis/Dinsmore Management Company
65 Madison Avenue
Morristown, NJ 07960
(201) 631-1177
CUSTODIAN:
The Bank of New York
TRANSFER AGENT, REGISTRAR AND
SHAREHOLDER SERVICES:
Chemical Mellon Shareholder Services, L.L.C.
P.O. Box 590
Ridgefield Park, NJ 07660
1-800-526-0801
COMMON STOCK LISTING:
American Stock Exchange
Symbol: BCV
(10)
<PAGE> 13
BANCROFT CONVERTIBLE FUND, INC.
AUTOMATIC DIVIDEND INVESTMENT PLAN
AUTHORIZATION FORM
MELLON SECURITIES TRUST COMPANY
Systematic Investment Services
P.O. Box 750
Pittsburgh, PA 15230
Dear Sirs:
I hold stock certificates, registered in my name, for . . . . . . . . . .
shares of Common Stock of Bancroft Convertible Fund, Inc. (the "Company").
I wish to invest all the dividends and distributions paid by the Company on
my shares automatically in additional shares from the date hereof until this
arrangement is terminated as stated below.
AUTHORIZATION
You are authorized to act as my agent as follows:
A. Establish an Account in my name.
B. Take into my Account all dividends and distributions paid by the Company
on all its Common Stock held in my name now or in the future and on all
additional shares of the Company (including fractions) held by you in my
Account.
C. Whenever the Company declares a dividend or distribution payable in cash
or, at the option all its shareholders, in Common Stock of the Company at market
price or net asset value, whichever is lower, take the dividend or distribution
in Common Stock.
D. Whenever the Company declares a dividend or distribution payable in cash
or, at the option of the shareholders for whom you act as agent under the Plan,
in the Company's Common Stock at net asset value, take the dividend or
distribution in Common Stock if the net asset value as determined by the Company
as of the close of business on the last trading day preceding the date of
payment is lower then (1) the asked price of the Company's Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau, if the
Common Stock is not listed on a national securities exchange, or (2) the closing
market price of the Common Stock on a national securities exchange, on that
trading day, plus brokerage commissions, if the Company's Common Stock is listed
on such exchange. If the market price is lower, take the dividend or
distribution in cash and add it to my Account.
E. As soon as practicable after each cash payment is made to my Account, use
the funds in my Account to buy in the over-the-counter market or on a national
securities exchange, as the case may be, as many additional full shares of the
Company's Common Stock as possible, plus a fractional interest in one share
computed to four decimal places.
F. You may mingle the cash in my Account with similar funds of other
shareholders of the Company for whom you act as agent under the Plan. The cost
of the shares and fractional interest you buy for my Account in connection with
a particular dividend or distribution shall be determined by the average cost
per share, including brokerage commission, of all shares bought by you for all
shareholders for whom you act under the Plan in connection with that dividend or
distribution.
G. Whenever you receive or purchase shares or fractional interests for my
Account, you will send me confirmation of the transaction as soon as
practicable. You will hold such shares and fractional interests as my agent in
your name or the name of your nominee. Do not send me stock certificates for
full shares until I so request in writing or until my Account is terminated as
stated below. You will vote any shares so held for me in accordance with any
proxy returned to the Company by me in respect of the shares of which I am a
record owner.
H. I understand that there is presently no service charge for your serving as
my agent and maintaining my Account. You may, however, charge me for extra
services performed at my request. I further understand that the Company reserves
the right to amend the Plan in the future to impose a service charge. You will
be liable only for willful misconduct or gross negligence in acting as my agent
under the Plan.
(11)
<PAGE> 14
BANCROFT CONVERTIBLE FUND, INC.
NAME AND ADDRESS
My name as shown on my Common Stock certificate or certificates (including
all names if more than one) and my address, are as follows:
PLEASE PRINT:
NAME OR NAMES................................................................
NUMBER AND STREET............................................................
CITY, STATE AND ZIP CODE.....................................................
STOCK CERTIFICATES
I understand that if I hold more than one Common Stock certificate registered
in similar but not identical names or if more than one address is shown for me
on the Company's Common Stock records, all my shares of Common Stock must be put
into the same name and address prior to signing this authorization if all of
them are to be covered by one Account. I understand that additional shares
subsequently acquired by me otherwise than through the Plan will be covered by
my Account if and when they are registered in the same name and address as the
shares in my Account.
INCOME TAX
I understand that participation in the Plan for automatic investment of
dividends and distributions does not relieve me of any income tax which may be
payable by me on such dividends and distributions.
AMENDMENTS AND CHANGE OF AGENT
I understand that the Company may amend the terms of the Plan and reserves
the right to change the agent which acts for all participants in the Plan at any
time by giving written notice thereof to each participant at his address as
shown on your records. Any such change shall be effective as to all dividends
and distributions payable to shareholders of record on any date more than 30
days after mailing of such notice. Further, I understand that the Company in
connection with any dividend or distribution will change the price at which
shares of its Common Stock are issued to participants in the Plan if the net
asset value of the shares is less than 95% of the fair market value of such
shares on the last trading day preceding the payment date of any distribution of
net investment income or net capital gain, unless the Board obtains a legal
opinion from independent counsel that the purchase of shares at net asset value
under these circumstances will not have a material adverse effect upon the
federal income tax liability of the Company. The Board may not authorize
issuance of shares offered to Plan participants only, if such issuance is at a
price less than net asset value, without the prior specific approval of the
Company's stockholders or of the Securities and Exchange Commission.
TERMINATION
I may terminate this authorization and my Account at any time by delivering
written notice to you, such termination to be effective as to all dividends and
distributions payable to shareholders of record on any date more than 15 days
after receipt of such notice by you. I understand that you or the Company may
terminate all authorizations for any reason at any time by sending written
notice addressed to participants at their addresses as shown on your records,
such termination to be effective as to all dividends and distributions payable
to shareholders of record on any date more than 30 days after mailing of such
notice. I understand you will terminate my Account if you are informed of the
transfer of all shares of the Company's Common Stock registered in my name.
Following the date of termination, you shall send me at my address shown on your
records a stock certificate or certificates for the full shares held by you in
my Account and a check for the value of any fractional interest in my Account
based on the market price of the Company's Common Stock on that date.
Date:......................................................................
Signature:.................................................................
Note: If shares are in more than one name, all must sign.
(12)
<PAGE> 15
BANCROFT CONVERTIBLE FUND, INC.
DIRECTORS
GORDON F. AHALT President
G.F.A., Inc.
WILLIAM A. BENTON Retired Stock Exchange Specialist
ELIZABETH C. BOGAN Senior Lecturer in Economics
Princeton University
RONALD E. DINSMORE Chairman of the Board
THOMAS H. DINSMORE, C.F.A. President
DONALD M. HALSTED, JR. Investor
GEORGE R. LIEBERMAN Retired Advertising Executive
JANE D. O'KEEFFE Vice President
DIRECTOR EMERITUS
DUNCAN O. MCKEE
OFFICERS
RONALD E. DINSMORE Chairman of the Board
THOMAS H. DINSMORE President
SIGMUND LEVINE Executive Vice President and
Secretary
JANE D. O'KEEFFE Vice President
H. TUCKER LAKE Vice President, Trading
GARY I. LEVINE Treasurer and
Assistant Secretary
The persons primarily responsible for the day-to-day management of the Fund's
portfolio are, Ronald E. Dinsmore, Chairman of the Board, Thomas H. Dinsmore,
President, and Jane D. O'Keeffe, Vice President. Ronald Dinsmore has served in
this capacity since inception of the Fund in 1971, Thomas Dinsmore has served
since 1982, and Ms. O'Keeffe has served since April 1994. During the previous
five years Ms. O'Keeffe was a portfolio manager and Vice President of Fiduciary
Trust International of New York City.
<PAGE> 16
[BANCROFT LOGO]
Bancroft Convertible Fund, Inc.
65 MADISON AVENUE - MORRISTOWN, NJ 07960
