UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
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:
Steven B. King, Esq.
Ballard Spahr LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Registrant's telephone number, including area code: 973-631-1177
Date of fiscal year end: October 31, 2011
Date of reporting period: January 31, 2011
ITEM 1. SCHEDULE OF INVESTMENTS.
Bancroft Fund Ltd. - Schedule of Investments - unaudited |
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|
|
Principal |
|
Value |
|
||
|
|
|
|
|
|
|
|
|
|
Convertible Bonds and Notes - 67.8% |
|
|
| ||||
| Aerospace and Defense - 1.7% |
|
|
| ||||
| Alliant Techsystems, Inc., 2.75%, Due 9/15/11, (BB) |
|
$ | 1,000,000 |
|
$ | 1,015,000 |
|
| Kaman Corp., 3.25%, Due 11/15/17, (BBB) (1) |
|
| 750,000 |
|
| 807,188 |
|
|
|
|
|
|
|
| 1,822,188 |
|
| Automotive - 1.5% |
|
|
| ||||
| Titan International, Inc., 5.625%, Due 1/15/17, (B) |
|
| 750,000 |
|
| 1,590,938 |
|
| Computer Hardware - 3.3% |
|
|
| ||||
| EMC Corp., 1.75%, Due 12/1/13, (A) |
|
| 1,900,000 |
|
| 3,087,500 |
|
| Netapp, Inc., 1.75%, Due 6/1/13, (A) |
|
| 250,000 |
|
| 444,062 |
|
|
|
|
|
|
|
| 3,531,562 |
|
| Computer Software - 6.8% |
|
|
| ||||
| Digital River, Inc., 2.00%, Due 11/1/30, (BBB) (1) |
|
| 1,000,000 |
|
| 972,500 |
|
| GSI Commerce, Inc., 2.50%, Due 6/1/27, (BBB) |
|
| 500,000 |
|
| 545,000 |
|
| Microsoft Corp., 0.00%, Due 6/15/13, (AAA) (1,2) |
|
| 500,000 |
|
| 539,375 |
|
| Nuance Communications, Inc., 2.75%, Due 8/15/27, (BB) |
|
| 2,000,000 |
|
| 2,495,000 |
|
| RightNow Technologies, Inc., 2.50%, Due 11/15/30, (NR) (1) |
|
| 500,000 |
|
| 540,625 |
|
| Rovi Corp., 2.625%, Due 2/15/40, (BBB) |
|
| 750,000 |
|
| 1,095,000 |
|
| WebMD Health Corp., 2.50%, Due 1/31/18, (NR) (1) |
|
| 1,000,000 |
|
| 1,011,250 |
|
|
|
|
|
|
|
| 7,198,750 |
|
| Construction Material - 1.0% |
|
|
| ||||
| CEMEX, S.A.B. de C.V., 4.875%, Due 3/15/15, (NR) |
|
| 1,000,000 |
|
| 1,050,000 |
|
| Consumer Goods - 0.3% |
|
|
| ||||
| Regis Corp., 5.00%, Due 7/15/14, (BB) |
|
| 250,000 |
|
| 325,312 |
|
| Containers - 0.5% |
|
|
| ||||
| Owens-Brockway Glass Container, 3.00%, Due 6/1/15, (BB) |
|
| 500,000 |
|
| 512,500 |
|
| Data Processing - 0.5% |
|
|
| ||||
| CSG Systems International, Inc., 3.00%, Due 3/1/17, (BBB) |
|
| 500,000 |
|
| 515,625 |
|
| Energy - 6.8% |
|
|
| ||||
| Goodrich Petroleum Corp., 5.00%, Due 10/1/29, (CCC) |
|
| 1,000,000 |
|
| 1,015,000 |
|
| McMoRan Exploration Co., 5.25%, Due 10/6/11, (B) |
|
| 587,000 |
|
| 681,654 |
|
| Oil States International, Inc., 2.375%, Due 7/1/25, (A) |
|
| 500,000 |
|
| 1,080,625 |
|
| SunPower Corp., 1.25%, Due 2/15/27, (BBB) |
|
| 1,500,000 |
|
| 1,458,750 |
|
| SunPower Corp., 4.50%, Due 3/15/15, (BBB) |
|
| 750,000 |
|
| 720,600 |
|
| Transocean, Inc., 1.50%, Due 12/15/37, (BBB) |
|
| 1,000,000 |
|
| 981,250 |
|
| Trina Solar Ltd., 4.00%, Due 7/15/13, (NR) |
|
| 750,000 |
|
| 1,262,812 |
|
|
|
|
|
|
|
| 7,200,691 |
|
| Financial Services - 5.5% |
|
|
| ||||
| Ares Capital Corp., 5.75%, Due 2/1/16, (BBB) (1) |
|
| 250,000 |
|
| 258,125 |
|
| Euronet Worldwide, Inc., 3.50%, Due 10/15/25, (B) (3) |
|
| 1,000,000 |
|
| 1,000,000 |
|
| Knight Capital Group, Inc., 3.50%, Due 3/15/15, (NR) |
|
| 1,000,000 |
|
| 972,500 |
|
| National Financial Partners Corp., 4.00%, Due 6/15/17, (NR) |
|
| 750,000 |
|
| 900,000 |
|
| Old Republic International Corp., 8.00%, Due 5/15/12, (BBB) |
|
| 1,500,000 |
|
| 1,779,375 |
|
| Tower Group, Inc., 5.00%, Due 9/15/14, (BBB) (1) |
|
| 765,000 |
|
| 878,794 |
|
|
|
|
|
|
|
| 5,788,794 |
|
See accompanying notes
Bancroft Fund Ltd. - Schedule of Investments - continued |
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|
Principal |
|
Value |
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|
Convertible Bonds and Notes - continued |
|
|
| ||||
| Foods - 0.9% |
|
|
| ||||
| Central European Distribution Corp., 3.00%, Due 3/15/13, (B) |
|
$ | 500,000 |
|
$ | 474,375 |
|
| Chiquita Brands International, Inc., 4.25%, Due 8/15/16, (B) |
|
| 500,000 |
|
| 520,625 |
|
|
|
|
|
|
|
| 995,000 |
|
| Healthcare - 7.7% |
|
|
| ||||
| Chemed Corp., 1.875%, Due 5/15/14, (AA) |
|
| 890,000 |
|
| 903,350 |
|
| China Medical Technologies, Inc., 4.00%, Due 8/15/13, (NR) |
|
| 1,000,000 |
|
| 877,500 |
|
| Integra Lifesciences Holdings Corp., 2.375%, Due 6/1/12, (BBB) |
|
| 1,067,000 |
|
| 1,072,335 |
|
| Kinetic Concepts, Inc., 3.25%, Due 4/15/15, (BB) |
|
| 1,250,000 |
|
| 1,406,250 |
|
| Lifepoint Hospitals, Inc., 3.50%, Due 5/15/14, (B) |
|
| 1,000,000 |
|
| 1,012,500 |
|
| Mylan, Inc., 1.25%, Due 3/15/12, (BB) |
|
| 1,500,000 |
|
| 1,708,125 |
|
| Sonosite, Inc., 3.75%, Due 7/15/14, (BBB) |
|
| 1,000,000 |
|
| 1,136,250 |
|
|
|
|
|
|
|
| 8,116,310 |
|
| Metals and Mining - 3.6% |
|
|
| ||||
| Jaguar Mining, Inc., 4.50%, Due 11/1/14, (B) |
|
| 1,050,000 |
|
| 933,188 |
|
| Kaiser Aluminum Corp., 4.50%, Due 4/1/15, (BBB) |
|
| 1,000,000 |
|
| 1,191,200 |
|
| Northgate Minerals Corp., 3.50%, Due 10/1/16, (BB) |
|
| 500,000 |
|
| 493,750 |
|
| RTI International Metals, Inc., 3.00%, Due 12/1/15, (BB) |
|
| 375,000 |
|
| 406,875 |
|
| United States Steel Corp., 4.00%, Due 5/15/14, (BB) |
|
| 375,000 |
|
| 726,094 |
|
|
|
|
|
|
|
| 3,751,107 |
|
| Multi-Industry - 0.8% |
|
|
| ||||
| LSB Industrials, Inc., 5.50%, Due 7/1/12, (A) |
|
| 750,000 |
|
| 854,062 |
|
| Pharmaceuticals - 8.1% |
|
|
| ||||
| Amgen, Inc., 0.375%, Due 2/1/13, (A) |
|
| 1,000,000 |
|
| 1,008,750 |
|
| Amylin Pharmaceuticals, Inc., 3.00%, Due 6/15/14, (CCC) |
|
| 500,000 |
|
| 451,875 |
|
| Cephalon, Inc., 2.50%, Due 5/1/14, (A) |
|
| 1,000,000 |
|
| 1,116,250 |
|
| Cubist Pharmaceuticals, Inc., 2.25%, Due 6/15/13, (A) |
|
| 750,000 |
|
| 774,375 |
|
| Endo Pharmaceuticals Holdings, 1.75%, Due 4/15/15, (A) |
|
| 750,000 |
|
| 955,312 |
|
| Gilead Sciences, Inc., 0.50%, Due 5/1/11, (A) |
|
| 750,000 |
|
| 779,062 |
|
| Gilead Sciences, Inc., 1.00%, Due 5/1/14, (A) (1) |
|
| 500,000 |
|
| 534,375 |
|
| Gilead Sciences, Inc., 1.625%, Due 5/1/16, (A) (1) |
|
| 375,000 |
|
| 405,000 |
|
| Millipore Corp. (Merck KGAa), 3.75%, Due 6/1/26, (BB) (3,5) |
|
| 750,000 |
|
| 926,700 |
|
| Onyx Pharmaceuticals, Inc., 4.00%, Due 8/15/16, (BBB) |
|
| 750,000 |
|
| 877,500 |
|
| Teva Pharmaceutical Finance Co. B.V., 1.75%, Due 2/1/26, (A) |
|
| 625,000 |
|
| 675,000 |
|
|
|
|
|
|
|
| 8,504,199 |
|
| Real Estate - 3.1% |
|
|
| ||||
| Annaly Capital Management, Inc., 4.00%, Due 2/15/15, (NR) |
|
| 1,250,000 |
|
| 1,467,188 |
|
| Corporate Office Properties L.P., 4.25%, Due 4/15/30, (NR) |
|
| 500,000 |
|
| 518,750 |
|
| Lexington Realty Trust, 6.00%, Due 1/15/30, (NR) |
|
| 1,000,000 |
|
| 1,277,500 |
|
|
|
|
|
|
|
| 3,263,438 |
|
| Semiconductors - 4.3% |
|
|
| ||||
| Intel Corp., 2.95%, Due 12/15/35, (A) (3) |
|
| 1,000,000 |
|
| 1,026,250 |
|
| Intel Corp., 3.25%, Due 8/1/39, (A) |
|
| 900,000 |
|
| 1,096,875 |
|
| Micron Technology, Inc., 1.875%, Due 6/1/14, (B) |
|
| 1,000,000 |
|
| 1,036,250 |
|
| Sandisk Corp., 1.50%, Due 8/15/17, (BB) |
|
| 1,000,000 |
|
| 1,093,750 |
|
| Xilinx, Inc., 2.625%, Due 6/15/17, (BBB) |
|
| 250,000 |
|
| 312,812 |
|
|
|
|
|
|
|
| 4,565,937 |
|
See accompanying notes
Bancroft Fund Ltd. - Schedule of Investments - continued |
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Principal |
|
Value |
|
||
|
|
|
|
|
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|
|
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|
Convertible Bonds and Notes - continued |
|
|
| ||||
| Telecommunications - 7.4% |
|
|
| ||||
| Anixter International, Inc., 1.00%, Due 2/15/13, (B) |
|
$ | 1,250,000 |
|
$ | 1,462,500 |
|
| Clearwire Communications Llc, 8.25%, Due 12/1/40, (CCC) (1) |
|
| 500,000 |
|
| 536,875 |
|
| Comtech Telecommunications Corp., 3.00%, Due 5/1/29, (BBB) |
|
| 500,000 |
|
| 528,125 |
|
| Equinix, Inc., 3.00%, Due 10/15/14, (B) |
|
| 1,500,000 |
|
| 1,584,375 |
|
| Equinix, Inc., 4.75%, Due 6/15/16, (B) |
|
| 500,000 |
|
| 656,875 |
|
| Finisar Corp., 5.00%, Due 10/15/29, (NR) |
|
| 125,000 |
|
| 400,000 |
|
| NII Holdings, Inc., 3.125%, Due 6/15/12, (B) |
|
| 1,000,000 |
|
| 990,000 |
|
| SBA Communications Corp., 1.875%, Due 5/1/13, (BBB) |
|
| 1,000,000 |
|
| 1,136,250 |
|
| Telecommunication Systems, Inc., 4.50%, Due 11/1/14, (B) (1) |
|
| 500,000 |
|
| 476,875 |
|
|
|
|
|
|
|
| 7,771,875 |
|
| Transportation - 1.9% |
|
|
| ||||
| DryShips, Inc., 5.00%, Due 12/1/14, (NR) |
|
| 750,000 |
|
| 734,062 |
|
| United Continental Holdings, 4.50%, Due 6/30/21, (CCC) |
|
| 1,000,000 |
|
| 1,043,000 |
|
| Ultrapetrol (Bahamas) Ltd., 7.25%, Due 1/15/17, (NR) (1) |
|
| 250,000 |
|
| 251,250 |
|
|
|
|
|
|
|
| 2,028,312 |
|
| Travel and Leisure - 2.1% |
|
|
| ||||
| Home Inns & Motels Management, 2.00%, Due 12/15/15, (NR) (1) |
|
| 500,000 |
|
| 473,750 |
|
| MGM Resorts International, 4.25%, Due 4/15/15, (CCC) |
|
| 750,000 |
|
| 833,438 |
|
| Morgans Hotel Group Co., 2.375%, Due 10/15/14, (BBB) |
|
| 1,000,000 |
|
| 867,500 |
|
|
|
|
|
|
|
| 2,174,688 |
|
| Total Convertible Bonds and Notes |
|
|
|
|
| 71,561,288 |
|
| Corporate Bonds - 0.4% |
|
|
| ||||
| Financial Services - 0.4% |
|
|
| ||||
| Lehman Brothers Holdings, Inc., 1.00%, Due 3/23/09, (NR) (4) |
|
| 1,500,000 |
|
| 236,250 |
|
| Lehman Brothers Holdings, Inc., 6.00%, Due 10/12/10, (NR) (4) |
|
| 50,000 |
|
| 196,500 |
|
|
|
|
|
|
|
| 432,750 |
|
| Total Corporate Bonds |
|
|
| 432,750 |
|
||
|
|
|
| Shares |
|
|
|
|
| Convertible Preferred Stocks - 14.4% |
|
|
| ||||
| Automotive - 2.2% |
|
|
| ||||
| Ford Motor Co. Capital Trust II, 6.50%, (B) |
|
| 45,000 |
|
| 2,352,600 |
|
| Banking/Savings and Loan - 6.0% |
|
|
| ||||
| Bank of America Corp., 7.25%, (BB) |
|
| 1,600 |
|
| 1,584,800 |
|
| Fifth Third Bancorp., 8.50%, (BB) |
|
| 9,750 |
|
| 1,475,370 |
|
| New York Community Capital Trust V, 6.00%, (BBB) |
|
| 24,000 |
|
| 1,209,120 |
|
| Wells Fargo & Co., 7.50%, (BBB) |
|
| 2,000 |
|
| 2,085,000 |
|
|
|
|
|
|
|
| 6,354,290 |
|
| Energy - 2.3% |
|
|
| ||||
| ATP Oil & Gas Corp., 8.00%, (NR) |
|
| 5,000 |
|
| 483,750 |
|
| Chesapeake Energy Corp., 5.00%, (B) |
|
| 20,000 |
|
| 1,990,000 |
|
| Whiting Petroleum Corp., 6.25%, (B) |
|
| 131 |
|
| 39,333 |
|
|
|
|
|
|
|
| 2,513,083 |
|
See accompanying notes
Bancroft Fund Ltd. - Schedule of Investments - continued |
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Shares |
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Value |
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||
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|
Convertible Preferred Stocks - continued |
|
|
| ||||
| Financial Services - 0.5% |
|
|
| ||||
| The Hartford Financial Services Group, Inc., 7.25%, (BB) |
|
| 20,000 |
|
$ | 527,000 |
|
| Foods - 0.7% |
|
|
| ||||
| Bunge Ltd., 4.875%, (BB) |
|
| 7,500 |
|
| 738,750 |
|
| Retail - 0.7% |
|
|
| ||||
| Amerivon Holdings LLC Series A, 4.00%, (NR) |
|
|
| ||||
| (Acquired 4/1/10; Cost $1,500,000) (1,5,6) |
|
| 567,810 |
|
| 756,793 |
|
| Telecommunications - 0.9% |
|
|
| ||||
| Crown Castle International Corp., 6.25%, (NR) |
|
| 16,000 |
|
| 967,360 |
|
| Tools - 0.9% |
|
|
| ||||
| Stanley Black & Decker, Inc., 4.75%, (BBB) |
|
| 8,000 |
|
| 933,840 |
|
| Total Convertible Preferred Stocks |
|
|
|
|
| 15,143,716 |
|
| Mandatory Convertible Securities - 13.1% (7) |
|
|
| ||||
| Automotive - 1.0% |
|
|
| ||||
| General Motors Co., 4.75%, Due 12/1/13, (B) |
|
| 20,000 |
|
| 1,086,200 |
|
| Energy - 4.3% |
|
|
| ||||
| Apache Corp., 6.00%, Due 8/1/13, (A) |
|
| 23,000 |
|
| 1,505,120 |
|
| Great Plains Energy, Inc., 12.00%, Due 6/15/12, (NR) (3) |
|
| 20,000 |
|
| 1,296,000 |
|
| UBS AG Exchangeable Note (GT Solar International, Inc.), 6.75%, |
|
|
| ||||
| Due 9/15/13, (NR) |
|
| 40,000 |
|
| 1,400,000 |
|
| UBS AG Exchangeable Note (Stillwater Mining Co.), 9.375%, |
|
|
| ||||
| Due 6/15/12, (NR) |
|
| 12,000 |
|
| 333,360 |
|
|
|
|
|
|
|
| 4,534,480 |
|
| Financial Services - 1.5% |
|
|
| ||||
| Citigroup, Inc. T-DECS, 7.50%, Due 7/15/12, (NR) |
|
| 11,500 |
|
| 1,582,630 |
|
| Foods - 1.5% |
|
|
| ||||
| 2009 Dole Food ACES Trust, 7.00%, Due 11/1/12, (CCC) |
|
| 120,000 |
|
| 1,597,500 |
|
| Home Building - 0.4% |
|
|
| ||||
| Beazer Homes USA, Inc., 7.25%, Due 8/15/13, (NR) |
|
| 17,500 |
|
| 415,100 |
|
| Media and Entertainment - 0.1% |
|
|
| ||||
| Nielsen Holdings B.V., 6.25%, Due 2/1/13, (CCC) |
|
| 2,000 |
|
| 110,100 |
|
| Metals And Mining - 2.7% |
|
|
| ||||
| AngloGold Ashanti Ltd., 6.00%, Due 9/15/13, (NR) |
|
| 5,900 |
|
| 302,670 |
|
| Vale Capital II (Vale S.A.), 6.75%, Due 6/15/12, (BBB) |
|
| 25,700 |
|
| 2,518,852 |
|
|
|
|
|
|
|
| 2,821,522 |
|
| Transportation - 0.7% |
|
|
| ||||
| 2010 Swift Mandatory Common Exchange Trust, 6.00%, |
|
|
| ||||
| Due 12/31/13, (NR) (1) |
|
| 50,000 |
|
| 680,500 |
|
See accompanying notes
Bancroft Fund Ltd. - Schedule of Investments - continued |
|
|
|
Shares |
|
Value |
|
||
|
|
|
|
|
|
|
|
|
|
Mandatory Convertible Securities - continued |
|
|
| ||||
| Utilities - 0.9% |
|
|
| ||||
| Nextera Energy, Inc., 7.00%, Due 9/1/13, (A) |
|
| 20,000 |
|
$ | 990,200 |
|
| Total Mandatory Convertible Securities |
|
|
|
|
| 13,818,232 |
|
| Common Stocks - 0.4% |
|
|
| ||||
| Energy - 0.4% |
|
|
| ||||
| ConocoPhillips |
|
| 5,641 |
|
| 403,106 |
|
| Total Common Stocks |
|
|
|
|
| 403,106 |
|
| Total Convertible Bonds and Notes - 67.8% |
|
|
|
|
| 71,561,288 |
|
| Total Corporate Bonds - 0.4% |
|
|
|
|
| 432,750 |
|
| Total Convertible Preferred Stocks - 14.4% |
|
|
|
|
| 15,143,716 |
|
| Total Mandatory Convertible Securities - 13.1% |
|
|
|
|
| 13,818,232 |
|
| Total Common Stocks - 0.4% |
|
|
|
|
| 403,106 |
|
| Total Investements - 96.1% |
|
|
|
|
| 101,359,092 |
|
| Other Assets, Net of Liabilites - 3.9% |
|
|
|
|
| 4,123,812 |
|
| Total Net Assets - 100.0% |
|
|
|
|
$ | 105,482,904 |
|
See accompanying notes
Bancroft Fund Ltd. - Schedule of Investments - continued January 31, 2011 |
(1) Security not registered under the Securities Act of 1933, as amended (the “Securities Act”) (i.e., the security was purchased in a Rule 144A or a Regulation D transaction). The security may be resold only pursuant to an exemption from registration under the Securities Act, typically to qualified institutional buyers. The Fund generally has no rights to demand registration of such securities. The aggregate market value of these unregistered securities at January 31, 2011 was $8,583,899 which represented 8.1% of the Fund's net assets. |
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(2) Non-income producing security. |
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(3) Contingent payment debt instrument which accrues contingent interest. |
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(4) Security is in default. |
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(5) Investment is valued at fair value as determined in good faith pursuant to procedures adopted by the Board of Trustees. It is possible that the estimated value may differ from the amount that might ultimately be realized in the near term, and the difference could be material. The fair value of these securities amounted to $1,683,493 at January 31, 2011, which represented 1.6% of the Fund's net assets. |
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(6) Restricted securities include securities that have not been registered under the Securities Act and securities that are subject to restrictions on resale. The Fund may invest in restricted securities that are consistent with the Fund’s investment objective and investment strategies. As of January 31, 2011, the Fund was invested in the following restricted securities: |
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Amerivon Holdings LLC units containing series A cv. pfd. shares and common equity units, acquired April 1, 2010. |
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(7) Mandatory Convertible 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. |
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PORTFOLIO RATINGS: Ratings are derived by management from various sources. Where a security is rated by Standard & Poor’s, such rating appears in parentheses next to such security (but without any applicable + or - that might apply). Where a security is rated by Standard & Poor’s and at least one other rating agency and the Fund believes the ratings to be functionally equivalent to one another, the Standard & Poor’s rating appears in parentheses next to such security (but without any applicable + or - that might apply). Where a security is rated by Standard & Poor’s and at least one other rating agency and the Fund believes the ratings not to be functionally equivalent to one another, the Fund puts in parentheses next to such security the Standard & Poor’s rating which it believes approximates the average of all such ratings (but without any applicable + or - that might apply). Where a security is not rated by Standard & Poor’s, the Fund puts in parentheses next to such security the Standard & Poor’s rating which it believes approximates the average of all such ratings (but without any applicable + or - that might apply). |
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SUMMARY OF PORTFOLIO RATINGS * | ||
AAA | 1% |
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AA | 1% |
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A | 16% |
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BBB | 24% |
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BB | 15% |
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B | 18% |
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CCC & below | 5% |
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Not Rated | 20% |
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* Excludes equity securities and cash. | ||
Bancroft Fund Ltd. - Selected Notes to Financial Statements - unaudited
Bancroft Fund Ltd. (the “Fund”), is registered under the Investment Company Act of 1940, as amended, (the “Act”) as a diversified, closed-end management investment company.
Security Valuation - Investments in securities traded on a national securities exchange are valued at market using the last reported sales price, supplied by an independent pricing service, 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 quotation provided by the independent pricing service, or, if an evaluated quotation is unavailable, such securities are valued using prices received from dealers, provided that if the dealer supplies both bid and asked prices, the price to be used is the mean of the bid and asked prices. The independent pricing service derives an evaluated quotation by obtaining dealer quotations, analyzing the listed markets, reviewing trade execution data, evaluating the price of the underlying common stock and employing sensitivity analysis. Evaluated quotations may also reflect appropriate factors such as individual characteristics of the issue, broker/dealer quotations, and additional inputs such as benchmark yields, reported trades, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Securities for which quotations are not readily available, restricted securities and other assets are valued at fair value as determined in good faith 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.
The Fund has adopted authoritative fair valuation accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion in changes in valuation techniques and related inputs during the period. These inputs are summarized in the three broad levels listed below:
Level 1 - Quoted unadjusted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-driven valuation in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers, and those received from an independent pricing service.
Level 3 - Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price an asset or liability based on the best available information.
The following is a summary of the inputs used to value the investments of the Fund as of January 31, 2011:
| Level 1 | Level 2 | Level 3 |
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Investments in Securities: |
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Convertible Bonds and Notes | $ --- | $70,634,588 | $ 926,700 |
Convertible Preferred Stocks | --- | 14,386,923 | 756,793 |
Mandatory Convertible Securities | --- | 13,818,232 | --- |
Corporate Bonds and Notes | --- | 432,750 | --- |
Common Stock | 403,106 | --- | --- |
Total Investments | $403,106 | $99,272,493 | $1,683,493 |
Bancroft Fund Ltd. - Selected Notes to Financial Statements - continued
Security Valuation continued – The following is a reconciliation of assets for which level 3 inputs were used in determining value:
| Convertible Bonds and Notes | Corporate Bonds and Notes | Convertible Preferred Stocks | Total |
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Beginning balance | $935,400 | $--- | $756,793 | $1,692,193 |
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Change in unrealized appreciation (depreciation) | (8,700) | --- | --- | (8,700) |
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Net transfers in/out of level 3 | --- | --- | --- | --- |
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Ending balance | $926,700 | $--- | $756,793 | $1,683,493 |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of the markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.
In January 2010, the FASB issued Accounting Standards Update “Improving Disclosures about Fair Value Measurements” (“ASU”). The ASU requires enhanced disclosures about a) transfers into and out of Levels 1 and 2, and b) purchases, sales, issuances, and settlements on a gross basis relating to Level 3 measurements. The first disclosure was effective for the first reporting period beginning after December 15, 2009, and for interim periods within those fiscal years. There were no significant transfers into and out of Levels 1 and 2 during the current period presented. The second disclosure will become effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Management is currently evaluating the impact this disclosure may have on the Fund’s financial statements.
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 on 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 approximately one cent per share for the three months ended January 31, 2011. In addition, Federal tax regulations require the Fund to reclassify realized gains on contingent payment debt instruments to interest income. At January 31, 2011, there were unrealized losses of approximately four cents per share on contingent payment debt instruments.
Federal Income Tax Cost - At January 31, 2011, the cost basis of investments for federal income tax purposes, as well as the gross unrealized appreciation from investments for those securities having an excess of value over cost, gross unrealized depreciation from investments for those securities having an excess of cost over value and the net unrealized appreciation from investments were $93,130,208, $12,847,923, $(4,619,039) and $8,228,884, respectively.
ITEM 2. CONTROLS AND PROCEDURES.
Conclusions of principal officers concerning controls and procedures.
(a) The Fund’s principal executive officer and principal financial officer have concluded that the Fund’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c)) are effective as of March 1, 2011 based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 17 CFR 240.15d-15(b)).
(b) There have been no changes in the Fund’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 Fund’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.
ITEM 3. EXHIBITS.
Certifications of the principal executive officer and the principal financial officer of the Fund, as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)), are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Bancroft Fund Ltd.
By: /s/Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities 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: April 1, 2011
By: /s/Gary I. Levine
Gary I. Levine
Chief Financial Officer
(Principal Financial Officer)
Date: April 1, 2011