<PAGE> 1
BANCROFT CONVERTIBLE FUND, INC.
(LOGO)
1999 Semi-Annual Report
April 30, 1999
<PAGE> 2
Bancroft Convertible Fund, Inc. 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 Company considers to be relatively equal, over the
long-term, due to the nature of the securities in which it invests.
Highlights
Performance thru 4/30/99 with dividends reinvested:
<TABLE>
<CAPTION>
Calendar
YTD 1 Year 5 Year 10 Year
-------- ------- ------- --------
<S> <C> <C> <C> <C>
Bancroft market value 1.17% (7.61)% 110.17% 261.68%
Bancroft net asset value * 4.84 5.62 110.38 236.78
Closed-end convertible fund average * 6.46 1.86 81.77 216.83
S&P 500 ** 9.05 4.98 228.70 460.06
Russell 2000 ** 3.03 (5.44) 71.38# 162.82#
</TABLE>
Performance data represent past results and do not reflect future performance.
* From Lipper, Inc. Closed-End Fund Performance Analysis.
** From Bloomberg L.P. pricing service.
# Simple appreciation of index.
Quarterly History of NAV and Market Price:
<TABLE>
<CAPTION>
Net Asset Values Market Prices (AMEX, symbol ECF)
--------------------- --------------------------------
Qtr Ended High Low Close High Low Close
- --------- ------ ------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Jul 98 $30.75 $28.19 $29.12 $29.00 $27.00 $27.75
Oct 98 26.89 24.55 26.89 27.63 22.38 26.75
Jan 99 28.24 24.83 27.03 27.56 21.56 22.69
Apr 99 27.86 26.06 27.16 23.75 22.00 22.81
</TABLE>
Dividend Distributions (12 Months):
<TABLE>
<CAPTION>
Record Payment Capital
Date Date Income Gains Total
- ------- ------- ------ ------- ------
<S> <C> <C> <C> <C>
6/16/98 6/30/98 $0.230 $ - $0.230
9/14/98 9/28/98 0.230 - 0.230
12/1/98 12/30/98 0.183 2.942 3.125
3/16/99 3/30/99 0.200 - 0.200
------ ------- ------
$0.843 $2.942 $3.785
====== ======= ======
</TABLE>
<PAGE> 3
To Our Shareholders: 80>
1999 has seen the stock market turned on its head as many high quality
companies have underperformed while other industries that performed poorly last
year have staged a comeback. The Standard & Poor's Drug stock index is down
nearly 15% from January 1, 1999 while the Standard & Poor's Integrated domestic
oil company index is up over 22%. The drug sector had done well from 1993 (when
our government tried and failed to socialize medicine) to 1998. Currently,
Washington is suggesting that prescription drugs should be included in Medicare
which we believe would undoubtedly cause price controls to be imposed and
thereby crimp the profitability (and innovativeness) of the drug companies.
Hence drug stocks are under pressure. The energy sector had been hurt by the
decline in demand from Asia that occurred as Japan, Thailand, Korea, Indonesia
and others fell into serious recessions. These economies are starting to
recover which has not only helped energy prices but has also prompted a modest
flow of funds back into emerging markets and possibly out of U.S. Treasury
bonds. We believe this has contributed to the recent move in interest rates to
over 6% on the thirty-year bond.
The Fund has a large exposure to the drug industry and this has been helpful
to the Fund's performance for several years. The current reversal in the price
of drug industry securities has caused some disappointing results this year so
far. We do expect the drug industry to rebound as the percentage of individuals
over 50 years of age (who are the largest users of prescription drugs)
increases. We expect that the debate in Washington on adding drugs to Medicare
will run into strong arguments against such a benefit as the actual costs are
likely to be exorbitant both in dollars and in lost incentives to do new
research and development. Further, we have expanded our investments in energy
as we believe that Asia will continue to recover.
In the May 31, 1999 edition of the Principia Pro for Closed-End Funds,
Morningstar * continued to rate Bancroft at four stars (above average).
Shareholders who wish a copy of this report should contact us.
At its May meeting, the Board of Directors declared a dividend of twenty cents
per share payable from net investment income. The dividend is payable
June 29, 1999 to shareholders of record on June 15, 1999.
/s/ Thomas H. Dinsmore
Chairman of the Board
June 11, 1999
<PAGE> 4
TEN LARGEST INVESTMENT HOLDINGS
<TABLE>
<CAPTION>
Principal
Amount Value % Total
or Shares (Note 1) Net Assets
- --------- -------- ----------
<C> <C> <C> <C>
1,500,000 The Home Depot, Inc............................................ $3,912,188 3.8%
The leading company in home center retailing.
1,250,000 NatWest Markets exch. for Lucent Technologies, Inc............. 3,808,750 3.7
Lucent designs, develops and manufactures communications
systems, software and products.
3,000,000 Bell Atlantic Financial Services, Inc. exch. for Telecom Corp.
of New Zealand Ltd............................................. 3,193,125 3.1
Telecom of New Zealand is the principal supplier of tele-
communications in New Zealand.
1,750,000 NTL, Inc....................................................... 2,526,563 2.5
Provider of communications services to residential, business,
and wholesale customers.
57,500 Nextel Communications, Inc..................................... 2,478,250 2.4
A major provider of wireless communications.
20,000 Jefferson-Pilot Corp. exch. for BankAmerica Corp............... 2,400,000 2.3
BankAmerica provides retail banking and financial services
throughout the United States.
65,000 WBK Trust exch. for Westpac Banking Corp., Ltd................. 2,254,688 2.2
Westpac provides general and savings bank services in
Australia.
3,500,000 Hewlett-Packard Co............................................. 2,027,813 2.0
Computer and peripheral manufacturer and global retailer.
2,000,000 Merrill Lynch Pierce Fenner and Smith exch.
for Time Warner, Inc........................................... 2,005,000 1.9
Time Warner is a media and entertainment company with
operations in cable networks and publishing.
1,750,000 AES Corp....................................................... 1,940,000 1.9
Owns or has an interest in power facilities in the
United States, Canada, Australia and other countries. ----------- ---------
Total.......................................................... $26,546,377 25.8%
=========== ==========
</TABLE>
<PAGE> 5
MAJOR INDUSTRY EXPOSURE
<TABLE>
<CAPTION>
% Total
Net Assets
----------
<S> <C>
Communications.............................................. 15.18%
Entertainment............................................... 11.27
Technology.................................................. 10.93
Health Care & Drugs......................................... 10.56
Banking..................................................... 8.61
Retail...................................................... 8.55
Capital Goods............................................... 6.02
Financial & Insurance....................................... 4.56
Energy...................................................... 3.95
Data-Processing Services.................................... 3.72
----------
Total....................................................... 83.35%
==========
</TABLE>
MAJOR PORTFOLIO CHANGES
Three months ended April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount
or Shares
---------
ADDITIONS
<S> <C>
Adelphia Communications Corp................................ 2,500
At Home Corp................................................ 500,000
The Bear Stearns Companies., Inc.
(exch. for Merck & Co., Inc. & Pfizer, Inc................. 2,000,000
Comcast Corp. (exch. for AT&T Corp.)........................ 24,500
Credit Suisse First Boston Corp. (exch. for Microsoft Corp.) 1,500,000
Estee Lauder Companies, Inc................................. 8,700
Exchangeable Certificates Corp.
(exch. for General Electric Corp.)......................... 500,000
Merrill Lynch Pierce Fenner and Smith
(exch. for Novartis AG).................................... 900,000
Merrill Lynch Pierce Fenner and Smith
(exch. for Time Warner, Inc.).............................. 2,000,000
NiSource, Inc............................................... 20,000
PSINet, Inc................................................. 7,500
Sanmina Corp................................................ 500,000
Sportsline USA, Inc......................................... 375,000
REDUCTIONS
Chancellor Media Corp....................................... 10,000
Deutsche Bank Finance N.V................................... 500,000
Estee Lauder Companies, Inc................................. 8,000
Houston Industries, Inc. (exch. for Time Warner, Inc.)...... 15,000
NatWest Markets (exch. for Lucent Technologies, Inc.)....... 250,000
Norddeutsche Landesbank Girozentrale
(exch. for Deutsche Telekom AG)............................ 500,000
Republic National Bank of NY (exch. for Merck & Co., Inc.).. 1,000,000
Sandoz Capital BVI, Ltd. (exch. for Novartis AG)............ 500,000
SmithKline Beecham PLC...................................... 32,080
Synoptics Communications, Inc.
(exch. for Northern Telecom, Ltd.)......................... 750,000
Telefonica De Espana, S.A................................... 500,000
Times Mirror Co. (exch. for America Online, Inc.)........... 2,500
</TABLE>
<PAGE> 6
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
or Shares (Note 1)
- ---------- ----------
<S> <C>
$ ADVERTISING -- 1.1%
1,000,000 Interpublic Group Cos., Inc. 1.80% 2004 cv. sub. deb. 144A (NR)................$1,132,500
----------
AEROSPACE -- 3.2%
1,500,000 Morgan Stanley Dean Witter Discover & Co. 0% 2000 medium-term exch. notes
(Aa3)(exch. for Boeing Company common stock).................................. 1,485,000
125,000 Orbital Sciences Corp. 5% 2002 cv. sub. notes (B2)............................. 125,625
350,000 Orbital Sciences Corp. 5% 2002 cv. sub. notes 144A (B2)........................ 351,750
925,000 Simula, Inc. 8% 2004 sr. cv. sub. notes (NR)................................... 763,125
705,000 SPACEHAB, Inc. 8% 2007 cv. sub. notes 144A (NR)................................ 528,750
----------
3,254,250
----------
BANKING -- 8.6%
50,000 shs CNB Capital Trust I 6% SPuRS (Baa2)
(exch. for CNB Bancshares, Inc. common stock)................................. 1,262,500
40,000 shs National Australia Bank Ltd. 7 7/8% exch. capital units (A1)................... 1,362,500
65,000 shs WBK Trust 10% STRYPES 144A * (NR)
(exch. for Westpac Banking Corp., Ltd. common stock).......................... 2,254,688
1,915,000 BankAtlantic Bancorp 5 5/8% 2007 cv. sub. deb. (NR)............................ 1,594,238
20,000 Jefferson-Pilot Corp. 7 1/4% 2000 ACES * (A1)
(exch. for BankAmerica Corp. common stock).................................... 2,400,000
----------
8,873,926
----------
CAPITAL GOODS -- 6.0%
1,700,000 CS First Boston, Inc. 2 1/4 % 2003 sr. medium-term exch. notes 144A (A1)
(exch. for General Electric Corp. common stock)............................... 1,861,500
1,250,000 CS First Boston, Inc. 2 5/8% 2003 sr. medium-term exch. notes (A1)
(exch. for Minnesota Mining and Manufacturing Co. common stock)............... 1,187,500
500,000 Exchangeable Certificate Corp. 1 1/4 % 2004 sr. medium-term exch. notes 144A
(AAA)(exch. for General Electric Corp. common stock).......................... 468,750
1,510,000 Robbins & Myers, Inc. 6 1/2% 2003 cv. sub. notes (NR).......................... 1,498,675
1,200,000 U.S. Filter Corp. 4 1/2% 2001 cv. sub. notes (Ba3)............................. 1,188,000
----------
6,204,425
----------
COMMUNICATIONS -- 15.2%
2,500 shs Adelphia Communications Corp. 5 1/2% perpetual pfd. (NR)....................... 510,625
30,000 shs Globalstar Communications, Ltd. 8% cv. pfd. 144A (NR).......................... 1,494,375
57,500 shs Nextel Communications, Inc. 0% 2013 cv. pfd. 144A (NR)......................... 2,478,250
3,000,000 Bell Atlantic Financial Services, Inc.5 3/4% 2003 cv. sub. deb. 144A (A1)
(exch. for cash equiv. of Telecom Corp. of New Zealand common stock).......... 3,193,125
1,000,000 Bell Atlantic Financial Services, Inc. 4 1/4% 2005 cv. sub. deb. 144A (A1)
(exch. for cash equiv. of Cable & Wireless Communications plc common stock)... 1,105,000
24,500 Comcast Corp. 1.75% 2029 exch. extendable sub. deb. (Ba3)
(exch. for cash based on the value of AT&T Corp. common stock)................ 1,852,813
15,000 MediaOne Group, Inc. 6 1/4% 2001 PIES-a * (Ba1)
(exch. for AirTouch Communications, Inc. common stock)........................ 1,200,000
1,250,000 NatWest Markets 0% 2003 exch. trust securities 144A + (NR)
(exch. for Lucent Technologies, Inc. common stock)............................ 3,808,750
----------
15,642,938
----------
CONSUMER GOODS -- 1.0%
17,500 shs Newell Financial Trust I 5 1/4% QUIPS 144A (Baa1)
(conv. into Newell Co. common stock).......................................... 1,001,875
----------
DATA-PROCESSING SERVICES -- 3.7%
500,000 Affiliated Computer Services, Inc. 4% 2005 cv. sub. notes 144A (Ba2)........... 551,250
1,100,00 American Express Credit Corp. 1 1/8% 2003 cash exch. notes (Aa3)............... 1,369,500
1,750,000 National Data Corp. 5% 2003 cv. sub. notes (Ba3)............................... 1,908,594
----------
3,829,344
----------
</TABLE>
<PAGE> 7
PORTFOLIO OF INVESTMENTS APRIL 30, 1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
or Shares (Note 1)
- ---------- ----------
<S> <C>
ELECTRIC UTILITIES -- 1.5%
20,000 shs NiSource, Inc. PIES-b * (Baa1).................................................$1,015,000
10,000 shs Texas Utilities Co. 9 1/4% FELINE PRIDES * (Baa3).............................. 514,375
----------
1,529,375
----------
$ ENERGY -- 4.0%
1,750,00 AES Corp. 4 1/2% 2005 cv. jr. sub. deb. (Ba1).................................. 1,969,844
1,000,00 Diamond Offshore Drilling, Inc. 3 3/4% 2007 cv. sub. notes (Baa2).............. 1,077,500
1,000,000 Swiss Life Financial Ltd. 2% 2005 GEMMS 144A (NR)
(exch. for Royal Dutch Petroleum common stock)................................. 1,025,000
----------
4,072,344
----------
ENTERTAINMENT -- 11.3%
15,000 shs Houston Industries, Inc. 7% 2000 ACES * (Baa1)
(exch. for Time Warner, Inc. common stock).................................... 1,770,000
10,000 shs News Corporation Exchange Trust 5% cv. trust originated pfd. 144A (BB)
(exch. for British Sky Broadcasting Group plc ADS's).......................... 965,000
50,000 shs Triathlon Broadcasting Co. depositary shares (NR)
(representing 9% mandatory cv. pfd.).......................................... 546,875
500,000 At Home Corp. 0% 2018 cv. sub. deb. (NR)....................................... 495,000
1,500,000 Clear Channel Communications, Inc. 2 5/8% 2003 sr. cv. notes (Baa3)............ 1,913,438
1,000,000 Imax Corp. 5 3/4% 2003 cv. sub. notes 144A (B1)................................ 1,070,625
2,000,000 Merrill Lynch Pierce Fenner & Smith 0.25% 2004 medium term notes (NR)
(exch. for Time Warner, Inc. common stock).................................... 2,005,000
1,750,000 NTL, Inc. 7% 2008 cv. sub. notes 144A (Caa1)................................... 2,526,563
375,000 SportsLine USA, Inc. 5% 2006 cv. sub. notes 144A (NR).......................... 318,750
----------
11,611,251
----------
FINANCIAL & INSURANCE -- 4.6%
13,000 shs American General Delaware, L.L.C. 6% cv. A MIPS (A2)........................... 1,192,750
20,000 shs Frontier Financing Trust 6 1/4% cv. trust originated pfd. 144A (Baa3)
(conv. into Frontier Insurance Group, Inc. common stock)...................... 850,000
500,000 American International Group 2 1/4% 2004 cv. notes (Aaa)....................... 707,500
375,000 Penn Treaty American Corp. 6 1/4% 2003 cv. sub. notes (BB+).................... 417,188
1,375,000 Penn Treaty American Corp. 6 1/4% 2003 cv. sub. notes 144A (BB+)............... 1,529,688
----------
4,697,126
----------
FOODS -- 1.9%
5,000 shs Avado Financing I 7% cv. A pfd. (B2)
(conv. into Avado Brands, Inc. common stock).................................. 172,500
10,000 shs Avado Financing I 7% cv. A pfd. 144A (B2)
(conv. into Avado Brands, Inc. common stock).................................. 345,000
30,000 Ralston Purina Co. 7% 2000 SAILS * (Baa1)
(exch. for Interstate Bakeries Corp. common stock)............................ 1,395,000
----------
1,912,500
----------
HEALTH CARE & DRUGS -- 10.6%
10,000 shs Monsanto Co., Inc. 6 1/2% 2001 adj. conv. rate equity security units * (A3).... 460,625
2,000,000 The Bear Stearns Cos., Inc. 1% 2006 medium term notes (A2)
(conv. into an index comprised of Merck & Co., Inc. and Pfizer, Inc.
common stocks)............................................................... 1,757,500
3,000,000 Elan Finance Corp. 0% 2018 LYON 144A (Baa3)
(exch. for ADR's representing Elan Corp., plc common stock)................... 1,500,000
500,000 Genzyme Corp. 5 1/4% 2005 cv. sub. notes 144A (NR)............................. 580,000
250,000 HealthSouth Corp. 3 1/4% 2003 cv. sub. notes (Ba2)............................. 213,750
1,000,000 HealthSouth Corp. 3 1/4% 2003 cv. sub. notes 144A (Ba2)........................ 855,000
900,000 Merrill Lynch Pierce Fenner & Smith 1% 2003 euro medium term notes (Aaa)
(cv. into Novartis AG common stock)........................................... 839,250
1,000,000 Republic National Bank of NY 1 7/8% 2002 sr. exch. notes (Aa3)
(exch. for the cash equivalent of Merck & Co., Inc. common stock)............. 1,105,000
</TABLE>
<PAGE> 8
PORTFOLIO OF INVESTMENTS APRIL 30, 1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
or Shares (Note 1)
- ---------- ----------
<S> <C>
$ HEALTH CARE & DRUGS -- continued
2,500,000 Roche Holdings, Inc. 0% 2010 LYON 144A (NR)....................................$1,506,250
1,000,000 Sepracor, Inc. 7% 2005 cv. notes 144A (NR)..................................... 1,010,000
1,000,000 Swiss Life Financial Ltd. 2% 2003 GEMMS 144A (NR)
(exch. for Glaxo Wellcome PLC common stock).................................... 1,058,750
----------
10,886,125
----------
MANUFACTURED HOUSING -- 1.6%
40,000 shs Fleetwood Capital Trust 6% cv. trust pfd. 144A (Baa3)
(conv. into Fleetwood Enterprises, Inc. common stock)......................... 1,637,500
----------
OFFICE EQUIPMENT -- 0.9%
750,000 Xerox Credit 2 7/8% 2002 medium-term notes (A2)................................ 937,500
----------
RETAIL -- 8.6%
32,500 shs Dollar General Trust 8 1/2% STRYPES * (NR)
(conv. into Dollar General Corp. common stock)................................ 1,332,500
8,700 shs Estee Lauder Trust 6 1/4% TRACES II * (NR)
(conv. into Estee Lauder Companies, Inc. common stock)........................ 843,900
500,000 Amazon.com, Inc. 4 3/4% 2009 cv. sub. notes 144A (Caa3)........................ 640,000
500,000 Costco Companies, Inc. 0% 2017 cv. sub. notes (A3)............................. 478,438
1,000,000 Costco Companies, Inc. 0% 2017 cv. sub. notes 144A (A3)........................ 956,875
1,500,000 The Home Depot, Inc. 3 1/4% 2001 cv. sub. notes (A1)........................... 3,912,188
650,000 Rite Aid Corp. 5 1/4% 2002 cv. sub. notes 144A (Baa2).......................... 650,813
----------
8,814,714
----------
STAFFING SERVICES -- 0.8%
1,000,000 Interim Services, Inc. 4 1/2% 2005 cv. sub. deb. (Ba3)......................... 808,750
----------
TECHNOLOGY -- 10.9%
7,500 shs PSINet, Inc. 6 3/4% cv. pfd. C (NR)............................................ 386,250
1,000,000 Citrix Systems, Inc. 0% 2006 cv. sub. deb. 144A (NR)........................... 382,500
1,500,000 CS First Boston, Inc. 1% 2006 medium-term exch. notes (AA)
(exch. for Microsoft Corp. common stock)...................................... 1,419,375
250,000 DoubleClick, Inc. 4 3/4% 2006 cv. sub. notes 144A (NR)......................... 458,125
3,500,000 Hewlett-Packard Co. 0% 2017 LYON 144A (Aa3).................................... 2,027,813
250,000 LSI Logic Corp. 4 1/4% 2004 cv. sub. notes 144A (NR)........................... 325,000
250,000 MindSpring Enterprises, Inc. 5% 2006 cv. sub. notes (B3)....................... 262,031
1,000,000 Morgan Stanley Dean Witter Discover & Co. 0% 2001 technology exch. note
trust certificates 144A (A1) (exch. for specific technology common stocks @).. 1,950,000
500,000 Sanmina Corp. 4 1/4% 2004 cv. sub. notes 144A (NR)............................. 516,875
11,000 Times Mirror Company 4 1/4% 2001 PEPS * (A1)
(exch. for America Online, Inc. common stock)................................. 1,243,000
37,500 Tribune Co. 6 1/4% 2001 DECS * (A2)
(exch. for The Learning Company, Inc. common stock)........................... 1,068,750
1,250,000 VLSI Technology, Inc. 8 1/4% 2005 cv. sub. notes (B)........................... 1,225,000
----------
11,264,719
----------
U.S. TREASURY NOTES -- 0.0%
17,000 4 7/8% 3/31/01 ** ............................................................. 16,942
----------
</TABLE>
<PAGE> 9
PORTFOLIO OF INVESTMENTS APRIL 30, 1999 (continued)
<TABLE>
<CAPTION>
Principal
Amount Value
or Shares (Note 1)
- ---------- ----------
<S> <C>
$ CORPORATE SHORT-TERM NOTES -- 4.5%
4,600,000 American Express Credit Corp. (P1)
(4.85% maturing 5/4)......................................................... 4,596,901
----------
Total Convertible Bonds and Notes -- 73.5%................................... 75,731,010
Total Convertible Preferred Stocks -- 21.7%.................................. 22,397,088
Total Corporate Short-Term Notes -- 4.5%..................................... 4,596,901
------------
Total Investments -- 99.7%................................................... 102,724,999
------------
Other assets and liabilities, net -- 0.3%.................................... 333,436
Total Net Assets -- 100.0%...................................................$103,058,435
============
* See Note 1(e)
+ Guaranteed by National Westminster Bank PLC
@ Ticker symbols: CSCO, EDS, HWP, INTC, MSFT & ORCL
** Collateral for a letter of credit
ACES Automatic Common Exchange Securities
ADR American Depositary Receipts
ADS American Depositary Shares
DECS Debt Exchangeable for Common Stock
FELINE Family of Equity-Linked Income Securities
GEMMS Guaranteed Exchangeable Monetisation of Multiple Shares
LYON Liquid Yield Option Note
MIPS Monthly Income Preferred Securities
PEPS Premium Equity Participating Securities
PIES-a Premium Income Exchangeable Securities
PIES-b Premium Income Equity Securities
PRIDES Preferred Redeemable Increased Dividend Equity Securities
QUIPS Quarterly Income Preferred Securities
SAILS Stock Appreciation Income Linked Securities
SPuRS Shared Preference Redeemable Securities
STRYPES Structured Yield Product Exchangeable for Stock
TRACES Trust Automatic Common Exchange Securities
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's, a division of McGraw-Hill Companies, Inc.
The cost of investments for federal income tax purposes is $90,103,720 resulting in gross unrealized appreciation and depreci-
ation of $16,253,471 and $3,632,192, respectively, or net unrealized appreciation of $12,621,279 on a tax cost basis.
See accompanying notes to financial statements.
</TABLE>
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITES (unaudited)
<TABLE>
<CAPTION>
April 30, 1999
--------------
<S> <C>
ASSETS
Investments at value (cost $90,103,720) (Note 1).............. $102,724,999
Cash.......................................................... 593,839
Receivable for securities sold................................ 2,533,379
Dividends and interest receivable............................. 659,418
Other assets.................................................. 15,877
------------
Total assets................................................ 106,527,512
------------
LIABILITIES:
Payable for securities purchased.............................. 3,516,973
Accrued management fee (Note 2)............................... 64,038
Accrued expenses and other liabilities........................ 30,039
------------
Total liabilities........................................... 3,469,077
------------
NET ASSETS $103,058,435
============
NET ASSETS CONSIST OF:
Undistributed net investment income........................... $ 680,356
Undistributed net realized gain from investment transactions.. 6,357,170
Unrealized appreciation on investments........................ 12,621,279
Capital shares (Note 3)....................................... 37,948
Additional paid-in capital.................................... 83,361,682
------------
NET ASSETS...................................................... $103,058,435
============
Net asset value per share ($103,058,435 / 3,794,777 outstanding). $ 27.16
============
</TABLE>
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME (Note 1):
<S> <C>
Interest...................................................... $ 1,357,543
Dividends..................................................... 664,426
-----------
Total Income................................................ 2,021,969
-----------
EXPENSES (Note 2):
Management fee................................................ 365,917
Custodian..................................................... 14,254
Transfer agent................................................ 30,878
Professional fees............................................. 30,788
Directors' fees............................................... 37,050
Reports to shareholders....................................... 25,795
Treasurer's office............................................ 12,500
Other......................................................... 60,003
-----------
Total Expenses.............................................. 577,185
-----------
NET INVESTMENT INCOME........................................... 1,444,784
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions................ 6,370,210
Net increase in unrealized appreciation of investments........ 6,121,180
-----------
Net gain on investments....................................... 12,491,390
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $13,936,174
===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1999 October 31, 1998
---------------- ----------------
INCREASE IN NET ASSETS FROM OPERATIONS:
<S> <C> <C>
Net investment income................................. $ 1,444,784 $ 3,031,193
Net realized gain from investment
transactions........................................ 6,370,210 10,224,916
Net change in unrealized appreciation
of investments...................................... 6,121,180 (9,493,576)
-------------- -------------
Net change in net assets resulting from operations. 13,936,174 3,762,533
-------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income............................... (1,394,934) (2,981,861)
Net realized gain on investments.................... (10,224,306) (11,271,015)
-------------- -------------
Total dividends.................................... (11,616,240) (14,252,876)
-------------- -------------
CAPITAL SHARE TRANSACTIONS (Note 3)................... 7,308,248 7,736,436
-------------- -------------
CHANGE IN NET ASSETS.................................. 9,625,182 (2,753,907)
-------------- -------------
Net assets at beginning of period..................... 93,433,253 96,187,160
-------------- -------------
NET ASSETS AT END OF PERIOD
(including undistributed net investment income of
$685,829 and $630,505, respectively.................. $103,058,435 $93,433,253
============== =============
</TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding:
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED OCTOBER 31,
ENDED ------------------------------------------
PER SHARE OPERATING PERFORMANCE: APRIL 30, 1999* 1998 1997 1996 1995 1994
--------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $26.89 $30.48 $28.23 $24.84 $23.11 $25.00
Net investment income.................. .38 .87 .94 .46 1.14 1.20
Net realized and unrealized gain (loss) 3.21 (.01) 4.55 4.19 2.30 (1.18)
--------------- ------ ------ ------ ------ ------
Total from investment operations..... 3.59 .86 5.49 5.15 3.44 0.02
Less Distributions:
Dividends from net investment income... (.38) (.88) (.93) (1.11) (1.17) (1.24)
Distributions from realized gains...... (2.94) (3.57) (2.31) (.65) (.54) (.67)
--------------- ------ ------ ------ ------ ------
Total distributions.................. (3.32) (4.45) (3.24) (1.76) (1.71) (1.91)
--------------- ------ ------ ------ ------ ------
Net asset value, end of period......... $27.16 $26.89 $30.48 $28.23 $24.84 $23.11
=============== ====== ====== ====== ====== ======
Market value, end of period............ $22.81 $26.75 $26.81 $23.88 $22.25 $20.13
Net assets, end of period ($000's)..... 103,058 93,433 96,187 83,302 71,425 64,551
Total Investment Return:
Based on net asset value**......... 13.80% 3.16% 21.18% 21.55% 15.79% 0.18%
Based on market value#............. (2.21)% 18.17% 28.19% 15.65% 20.17% (4.88)%
Ratios/Supplemental Data:
Ratio of expenses to average net
assets............................... 1.2%## 1.1% 1.2% 1.2% 1.2% 1.2%
Ratio of net investment income to
average net assets................... 2.9%## 3.1% 3.3% 3.9% 4.9% 5.2%
Portfolio turnover rate................ 22% 55% 71% 70% 43% 39%
</TABLE>
* Unaudited
** Assumes valuation of the Fund's shares, and reinvestment of
dividends, at net asset values.
# Assumes valuation of the Fund's shares at market price and
reinvestment of dividends at actual reinvestment price.
## Annualized
See accompanying notes to financial statements
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Bancroft Convertible Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, closed-end
management investment company. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements, and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements:
(a) Security Valuation
Investments in securities traded on a national securities exchange are valued
at market using the last reported sales price. Securities traded in the over-
the-counter market and listed securities for which no sales were reported are
valued at the mean between closing reported bid and asked prices. Where no
closing prices are available, value is determined by management, with the
approval of the Board of Directors.
(b) Securities Transactions and Related Investment Income
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed) with gain or loss on the sale of securities being
determined based upon identified cost. Dividend income is recorded on the ex-
dividend date and interest income is recorded on the accrual basis. Interest
of $4,632 was earned on cash balances held by the custodian of the Fund's
assets during the six months ended April 30, 1999.
(c) Federal Income 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 is believed
necessary.
(d) Dividends and Distributions to Shareholders
The liability for dividends and distributions payable is recorded on the ex-
dividend date.
(e) Market Risk
It is the Fund's policy to invest the majority of its assets in convertible
securities. Although convertible securities do derive part of their value from
that of the securities into which they are convertible, they are not considered
derivative financial instruments. However, certain of the Fund's investments
include features which render them more sensitive to price changes in their
underlying security. Thus they expose the Fund to greater downside risk than
traditional convertible securities, but still less than that of the underlying
common stock. The market value of those securities was $15,497,838 at
April 30, 1999, representing 15.0% of net assets.
2. Management Fee and Other Transactions with Affiliates
The management fee is paid to investment adviser Davis-Dinsmore Management
Company (the "Adviser"). The contract provides for payment of a monthly
advisory fee, computed at an annual rate of 3/4 of 1% of the first $100,000,000
and 1/2 of 1% of the excess over $100,000,000 of the Fund's net asset value
in such month. The 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 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 $25,000 a year are reimbursed by the Fund.
Such reimbursements amounted to $12,500 for the six months ended April 30, 1999.
The officers of the Fund are also directors, officers or employees of the
Adviser, and are compensated by the Adviser.
The Fund has adopted a Director deferred compensation arrangement, which allows
the Directors to defer the receipt of all or a portion of Director Fees payable
on or after October 31, 1998. The amount of these fees will remain an asset of
the Fund. The Fund will be obligated to pay these fees, with interest, to the
Directors who have elected to defer receipt of their fees on a future date or
dates specified by the Directors, or as determined under the terms of the
arrangement.
<PAGE> 13
3. Portfolio Activity
At April 30, 1999 there were 3,794,777 shares of $.01 par value common stock
outstanding (9,000,000 shares authorized). During the six months ended
April 30, 1999, 319,486 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 $7,308,248.
Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated $25,386,941 and $20,552,344, respectively, for the six months ended
April 30, 1999.
A distribution of $0.20 per share from net investment income was declared on
May 17, 1999, payable June 29, 1999 to shareholders of record at the close of
business June 15, 1999.
4. Year 2000 Readiness Disclosure
Background. Like other investment companies as well as financial and business
organizations around the world, the Fund could be adversely affected if the
computer systems and embedded technology used by the Adviser and other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000.
Programs and Systems. The Adviser assessed and tested its internal computer
programs and systems last year to ensure these programs and systems will be
Year 2000 compliant. The computers used for trading and pricing are
entium II desktop systems, certified to be Year 2000 compliant by the
manufacturer, Dell Computer. The vendors whose accounting software the Adviser
uses, Microsoft Corp. and Advent Software, have also supplied it with
statements certifying that their products are now compliant.
In its daily operations, the Adviser relies on electrical power and telephone
service to operate its copier, telefax and telephone systems. The power and
telephone providers have stated, on their respective websites, that they
expect all mission-critical systems to be compliant by mid-1999. Based on
statements made by the Adviser's landlord, it is expected that access to the
Adviser's offices and the use of its facilities will continue without incident.
Second and Third Party Issues. The Bank of New York, the Fund's custodian,
and ChaseMellon Shareholder Services, transfer agent and registrar, have
publicly announced (in website statements dated January, 1999), that Year
2000 renovation and testing of mission-critical systems was completed by
December 31, 1998, in compliance with requirements set forth by the
Federal Financial Institutions Examination Council. In addition, the
Banks also have programs in place to monitor the status of third party
vendors and service providers.
Bloomberg, the Adviser's securities pricing service provider, has not yet
released to the public the audit results of its testing, due to the pro-
prietary nature of their systems.
The Adviser continues to receive updates from each of these and its other
outside vendors as they become available.
Investments. Since the Fund has investments in securities whose issuers may
be materially adversely impacted by the Year 2000 issue, the Fund could also
be adversely affected. For this reason, since 1998 the Adviser has been
reviewing public filings and web page disclosures of each issuer and
assessing each with respect to Year 2000 compliance. Some of the criteria
the Adviser looks at are: costs incurred and estimates of system repair and
replacement, whether or not there is a contingency plan prepared, and the
status of second and third party issues. The Adviser continues to monitor
these disclosures and uses them concurrently with its other methods of
evaluating a security's value as an investment vehicle.
The Fund has not incurred any costs to date in the matter of the Year 2000
problem, nor do we expect the Fund to have any in the future.
<PAGE> 14
Most Reasonably Likely Worst Case Year 2000 Scenario for the Fund. Since
the Fund has investments in securities whose issuers may be materially
adversely impacted by the Year 2000 issue, the Fund could also be
adversely affected. The failure to correct a material Year 2000 problem
is perhaps most likely to occur with respect to The Bank of New York,
the Fund's custodian, or ChaseMellon Shareholder Services, the Fund's
transfer agent and registrar. Although the Banks have made assurances
that mission-critical systems are compliant as of 1998 year-end as
stated above, the Banks cannot ensure that all the vendors they rely
upon are also completely compliant. The effects might include difficulty
in the settlement of trades in a timely manner and dividend distribution
delays. There is also the possibility that the Fund's fees to the Banks
might be increased due to the Banks' increased cost of doing business.
For the Adviser the problems that might be faced include the lack of
telephone and power service needed to perform daily pricing and trading.
Such failures and others could materially and adversely affect the Fund's
results of operations, liquidity and financial condition. Due to the
general uncertainty inherent in the Year 2000 problem, resulting in part
from the uncertainty of the Year 2000 readiness of third parties, the Fund
is unable to determine at this time whether the consequences of Year 2000
failures will have a material impact on the Fund's results of operations,
liquidity or financial condition.
Contingency Plan. Based on the representations made by The Bank of New
York and ChaseMellon, the Fund has not made any contingency plans relating
to the receipt of services the Banks provide. However, the Adviser is
investigating an alternate site which would be used in the event that
electric and/or telephone service is lost at its office. In addition, the
staff members who are responsible for pricing the portfolio and trading
own cellular telephones which would be used as backup to contact brokers
if the main telephone systems and the Bloomberg pricing service were not
available. The Adviser has purchased a laptop computer and a small
generator to charge both the cell phones and the laptop computer's
batteries. The Adviser will bear the cost of this equipment and intends
to review these plans periodically and to update them as circumstances
change.
- -------------------------------------------------------------------------
Results of the 1999 Annual Shareholders Meeting:
The results of the shareholder vote at the Annual Meeting of Shareholders
held on January 11, 1999, were:
1. All directors nominated by management were elected for terms
expiring in 2002.
<TABLE>
<CAPTION>
Votes for Votes withheld
--------- --------------
<S> <C> <C>
Thomas H. Dinsmore 2,516,925 40,676
Donald M. Halsted, Jr. 2,507,342 50,259
Duncan O. McKee 2,505,090 52,511
</TABLE>
2. The selection of PricewaterhouseCoopers LLP as independent
accountants was ratified with 2,504,080 shares voted for,
23,270 shares voted against, and 30,251 abstained.
- -----------------------------------------------------------------------
Important Factors Regarding Forward-Looking Statements
The letter to Shareholders and Year 2000 Statement contain forward-
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements which reflect the intent,
belief or expectations of the Company and its management regarding the
anticipated effect of events, circumstances and trends should be
considered forward-looking statements. These forward-looking
statements are not guarantees of future performance and there are a
number of meaningful factors which could cause the Company's results
to vary materially from those indicated by any such statements.
Factors which could cause actual results to differ from expectations
include, among others, changes in individuals' savings rates, a
decline in productivity or new products, changes in the Federal
Reserve Board's monetary policy, changes in the Medicare program,
an increase in interest rates, inflation or taxes, changes to
foreign and domestic markets and economies in general, changes to
the market for convertible securities or the inability of the Company's
service providers and the companies whose securities the Company buys
to resolve any Year 2000 issues.
<PAGE> 15
BOARD OF DIRECTORS
GORDON F. AHALT Petroleum Consultant
WILLIAM A. BENTON Retired Stock Exchange Specialist
ELIZABETH C. BOGAN Senior Lecturer in Economics at
Princeton University
THOMAS H. DINSMORE, C.F.A. Chairman of the Board of Bancroft
DONALD M. HALSTED, JR. Investor
GEORGE R. LIEBERMAN Retired Advertising Executive
DUNCAN O. MCKEE Retired Attorney
JANE D. O'KEEFFE President of Bancroft
NICOLAS W. PLATT Public Relations Executive
OFFICERS
THOMAS H. DINSMORE Chairman of the Board
JANE D. O'KEEFFE President
SIGMUND LEVINE Senior Vice President and Secretary
H. TUCKER LAKE Vice President, Trading
GERMAINE M. ORTIZ Assistant Vice President
GARY I. LEVINE Treasurer and Assistant Secretary
MERCEDES A. PIERRE Assistant Treasurer
- --------------------------------------------------------------------
Investment Advisor
Davis-Dinsmore Management Company
65 Madison Avenue, Morristown, NJ 07960-7308
(973) 631-1177
http://www.bcvecf.com
email: [email protected]
Shareholder Services and Transfer Agent
ChaseMellon Shareholder Services, L.L.C.
Shareholder Relations Department
P.O Box 3322, South Hackensack, NJ 07606-9980
(800) 526-0801
http://www.cmssonline.com
Common Stock Listing
American Stock Exchange Symbol: BCV
- --------------------------------------------------------------------
Pursuant to Section 23 of the Investment Company Act of 1940, notice
is hereby given that the Fund may in the future purchase shares of
Bancroft Convertible Fund, Inc. Common Stock from time to time,
at such times, and in such amounts, as may be deemed advantageous
to the Fund. Nothing herein shall be considered a commitment to
purchase such shares.
