SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Filed
by the Registrant x
|
|
Filed
by a party other than the Registrant o
|
|
Check
the appropriate box:
|
|
o
|
Preliminary
Proxy Statement
|
o
|
Confidential,
for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|
x
|
Definitive
Proxy Statement
|
|
|
o
|
Definitive
Additional Materials
|
|
|
o
|
Soliciting
Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
|
BANCROFT
FUND LTD.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
|
x
|
No
fee required
|
o
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11
|
(1)
|
Title
of each class of securities to which transaction
applies:
|
|
|
(2)
|
Aggregate
number of securities to which transaction applies:
|
|
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was determined):
|
|
|
(4)
|
Proposed
maximum aggregate value of transaction:
|
|
|
(5)
|
Total
fee paid:
|
|
|
o
|
Fee
paid previously with preliminary materials.
|
o
|
Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
|
(1)
|
Amount
Previously Paid:
|
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
|
|
|
(3)
|
Filing
Party:
|
|
|
(4)
|
Date
Filed:
|
|
|
BANCROFT
FUND LTD.
65
Madison Avenue
Morristown,
New Jersey 07960
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
to
be held
Monday,
February 11, 2008
9:30
a.m., Eastern Standard Time
at
The
Madison Hotel,
One
Convent Road, Morristown, NJ 07960
To
Shareholders of Bancroft Fund Ltd.:
We
cordially invite you to attend our 2008 Annual Meeting of Shareholders to
vote
on:
|
1.
|
Electing
two trustees to three year terms;
|
|
|
|
|
2.
|
Ratifying
the Audit Committee’s appointment of Tait, Weller & Baker LLP as
independent registered public accountants for fiscal year
2008;
|
|
|
|
|
3.
|
Considering,
if properly presented at the meeting, a shareholder proposal with
respect
to a monthly managed distribution policy; and
|
|
|
|
|
4.
|
Transacting
any other business that properly comes before the Annual Meeting
or any
adjournments or postponements
thereof.
|
We
are
holding the Annual Meeting on Monday, February 11, 2008 at 9:30 a.m., Eastern
Standard Time, at The Madison Hotel, located at One Convent Road, Morristown,
New Jersey 07960.
This
meeting is extremely important in light of the announcement by a dissident
shareholder, Mr. Phillip Goldstein, who controls Opportunity Partners, L.P.
(Opportunity Partners), of his intention to solicit proxies against the nominees
of your Board of Trustees. Opportunity Partners has also made a
shareholder proposal, included in this proxy statement as Proposal 3, which
your
Board of Trustees strongly opposes.
Your
vote
is very important. Whether or not you plan to attend the meeting, and
regardless of the number of shares you own, we urge you to vote
FOR the nominees proposed by your Board of Trustees (Proposal
1), FOR ratification of the Audit Committee’s appointment of
Tait Weller & Baker LLP (Proposal 2), and AGAINST the
dissident shareholder proposal (Proposal 3) by promptly completing, signing,
dating and returning the enclosed White proxy
card. We strongly urge you NOT to sign any proxy
card sent to you by Opportunity Partners or Mr. Goldstein, even if you only
intend to vote against their nominees or proposal. If you have
previously returned any proxy card sent to you by the dissident shareholder,
you
may change any vote you may have cast in favor of his nominees or proposal,
and
vote instead for the election of the Board’s nominees and against his proposal
by completing, signing, dating, and returning the
White proxy card in the accompanying
envelope. If you hold shares in a brokerage account (in street name),
your broker cannot vote your shares unless you complete, sign and return
the
enclosed White proxy card. In addition, you
may be able to vote your shares by telephone or via the
Internet. Please consult the materials you receive from your broker
prior to voting by telephone or via the Internet.
You
may
vote on these proposals in person or by proxy. If you cannot attend
the Annual Meeting, we ask that you return the White
proxy card promptly so that your vote will be counted. Only
shareholders of record on January 11, 2008 will be entitled to vote at the
meeting or any adjournment or postponement of the meeting.
|
Thomas
H. Dinsmore
|
|
|
Chairman
of the Board of Trustees
|
|
January
12, 2008
BANCROFT
FUND LTD.
65
Madison Avenue
Morristown,
New Jersey 07960
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD ON
February
11, 2008
INFORMATION
ABOUT THE ANNUAL MEETING
Proxy
Statement
We
are
sending you this Proxy Statement and the enclosed proxy card because the
Board
of Trustees of Bancroft Fund Ltd. (the Trust) is soliciting your proxy to
vote
at the 2008 annual meeting of shareholders and at any adjournments or
postponements of the annual meeting (the Annual Meeting). This Proxy
Statement summarizes the information you need to know to cast an informed
vote
at the Annual Meeting.
This
Proxy Statement, the attached Notice of Annual Meeting, and the enclosed
proxy
card will first be sent on or about January 12, 2008 to all shareholders
entitled to vote. Shareholders who owned the Trust’s shares of
beneficial interest on January 11, 2008 are entitled to vote. On this
record date, there were 5,733,016 shares outstanding. Each share of
the Trust that you own entitles you to one vote. (A fractional share
has a fractional vote.)
The
Trust
will furnish you free of charge with its most recent annual report upon
request. Please contact Gary I. Levine in care of the Trust at 65
Madison Avenue, Morristown, NJ 07960 or call Mr. Levine at (973) 631-1177
to
receive the annual report. The annual report is also available online
at www.bancroftfund.com.
Time
and Place of Meeting
We
are
holding the Annual Meeting on Monday, February 11, 2008 at 9:30 a.m., Eastern
Standard Time, at The Madison Hotel, located at One Convent Road, Morristown,
New Jersey 07960.
THIS
IS AN ESPECIALLY IMPORTANT ANNUAL MEETING OF SHAREHOLDERS OF THE
TRUST.
The
Trust
has had an exceptionally strong year: for the twelve months ended October
31, 2007, the Trust’s market return was 18.27%, while the market return
for 2007 calendar year-to-date through October 31 was 12.81%. Moreover,
although these returns are calculated with quarterly dividends
reinvested, they do not include the very large
distribution of $2.175 declared on November 19, 2007 (the
Trust’s largest single distribution since fiscal 2000).
Despite
this continued strong performance, a dissident shareholder, Phillip
Goldstein, who controls Opportunity Partners, L.P. (Opportunity Partners),
has
advised the Trust by letter dated November 1, 2007 of his intention to solicit
proxies against the nominees of your Board of Trustees and in favor of himself
and an ally of his, Andrew Dakos. Opportunity Partners has also made a
shareholder proposal, included in this proxy statement as Proposal 3, which
your
Board of Trustees strongly opposes.
The
Board
strongly believes that its nominees are extremely well suited to continue
to
serve as your Trustees based on each nominee’s background, relevant business
experience, and past service on the Trust’s Board of Trustees. By
contrast, your Board believes that the nominees proposed by the dissident
shareholder are not qualified to serve on your Board of Trustees for the
reasons
described below. Please read the information below carefully
regarding the dissident nominees before casting your vote.
The
Board
of Trustees strongly urges you to complete, sign, date, and mail promptly
the
White proxy card accompanying this Proxy
Statement. If you have shares in a brokerage account (in street name)
your broker cannot vote your shares this year (as it has in past routine
annual
meetings) in the manner recommended by your Board unless you complete, sign,
date, and mail promptly the enclosed White proxy
card. In addition, you may be able to vote your shares by telephone
or Internet.
Proposal
Table
The
following table summarizes each proposal to be presented at the Annual Meeting
and the page number of this proxy statement where you will find a description
of
the proposal:
|
Proposal
|
Page
Number
|
|
|
|
1.
|
Electing
trustees
|
3
|
|
|
|
2.
|
Ratifying
the Audit Committee’s Appointment of Tait, Weller & Baker LLP (Tait
Weller) as independent registered public accountants
|
13
|
|
|
|
3.
|
Consideration
of shareholder proposal to implement a monthly managed distribution
policy
|
14
|
The
Board
of Trustees, including all of the independent trustees, recommends that you
vote
FOR the Board’s nominees for Trustee in Proposal 1, FOR Proposal
2, and AGAINST Proposal 3.
How
to Vote
You
do
not need to attend the Annual Meeting to vote your shares. Instead,
you may simply complete, sign, date and return the enclosed
White proxy card or use any of the available
alternative proxy voting methods specified in the instructions that accompany
this Proxy Statement.
If
you
are the record owner of your shares, the available alternative proxy voting
methods are telephone and Internet voting. If your shares are held by
a broker, the alternative proxy voting methods may include telephone and
Internet, as well as any alternative method of voting permitted by your
broker. Please see “Additional Information on Voting” on page 18
below for a further discussion of how to vote your shares.
Broker
Voting
Under
rules applicable to broker-dealers, if your broker holds your shares in its
name, we expect that the broker will be entitled to vote your shares on Proposal
2 even if it has not received instructions from you. However, your
broker will not be entitled to vote on Proposals 1 or 3 unless it receives
instructions from you. A “broker non-vote” occurs when a broker has
not received voting instructions from a shareholder and is barred from voting
the shares without shareholder instructions because the proposal is considered
to be non-routine. Because Proposal 3 is considered non-routine, your
broker will not be permitted to vote your shares on this proposal if it has
not
received instructions from you, and the shares will be considered “broker
non-votes. ” As a result, we urge you to complete and send in the
White proxy card so your vote can be
counted.
PROPOSAL
1
ELECTION
OF TRUSTEES
Structure
of the Board of Trustees
The
Board
of Trustees (the Board) is divided into three classes for purposes of
election. One class is elected at each annual meeting of
shareholders. Trustees in each class serve for a three-year
term. Classifying the Board for election may be regarded as an
“anti-takeover provision” because it has the effect of maintaining the
continuity of the Board and requiring at least two years to change a majority
of
the Board.
The
Board
currently consists of six persons. The Investment Company Act of
1940, as amended (Investment Company Act) requires that a majority of the
Board
be “independent,” meaning they are not “interested persons” of the Trust within
the meaning of the Investment Company Act. Currently, four of the six
trustees are independent and two of the trustees are “interested persons”
because of their business and financial relationships with the Trust and
Davis-Dinsmore Management Company (Davis-Dinsmore), the investment adviser
to
the Trust.
At
the
2008 Annual Meeting, the term of each of two trustees is
expiring. The Governance Committee of the Board nominated the two
incumbent trustees whose terms are expiring in 2008, as set forth below,
to
serve for new terms that expire in 2011. Other trustees do not need
to stand for election this year and will continue in office for the rest
of
their respective terms. Each of the Board’s nominees is willing to
serve as a trustee. However, if a nominee becomes unavailable for
election, proxies will vote for another nominee proposed by the Board or,
as an
alternative, the Board may keep the position vacant or reduce the number
of
trustees.
Nominees
for Trustees
The
Board
has approved the nomination of the following individuals to serve as trustees
until the annual meeting of shareholders to be held in 2011. The
business address of each nominee and/or trustee listed below is Bancroft
Fund
Ltd., 65 Madison Avenue, Suite 550, Morristown, NJ
07960. Because Davis-Dinsmore serves as investment adviser
to the Trust and to another investment company, Ellsworth Fund Ltd. (Ellsworth
Fund), Ellsworth Fund and the Trust make up a “fund complex” (Fund
Complex). If elected, each nominee would oversee the two registered
investment companies in the Fund Complex.
Nominee
Who is an Independent Trustee
Name
and Age
|
|
Trustee
Since
|
|
Principal
Occupation(s)
During
Past 5 Years and other
Business
Experience
|
|
Other
Directorship(s) Held
|
|
|
|
|
|
|
|
Daniel
D. Harding – 55
|
|
2007
|
|
Senior
Advisor with Harding Loevner Management LP (investment advisory
firm)
(since 2003).
Formerly,
Mr. Harding was co-founder and Chief Investment Officer at Harding
Loevner
Management LP (1989-2003). Mr. Harding received his
undergraduate degree from Colgate University.
|
|
Ellsworth
Fund
|
Nominee
Who is an Interested Person
Name
and Age
|
|
Trustee
Since
|
|
Principal
Occupation(s)
During
Past 5 Years and other
Business
Experience
|
|
Other
Directorship(s) Held
|
|
|
|
|
|
|
|
Thomas
H. Dinsmore (1)–
54
|
|
1985
|
|
Chairman
and Chief Executive Officer of the Trust, Ellsworth Fund and
Davis-Dinsmore (investment adviser to the Trust and Ellsworth Fund)
(since
1996).
Mr. Dinsmore
is a Chartered Financial Analyst. Mr. Dinsmore is President of
the Closed-End Fund Association. Mr. Dinsmore received a
B.S. degree in Economics from the Wharton School of Business at
the
University of Pennsylvania, and an M.A. degree in Economics
from Fairleigh Dickinson University.
|
|
Ellsworth
Fund
|
(1) Mr.
Dinsmore is an interested person (within the meaning of the Investment
Company Act) of the Trust and Davis-Dinsmore because he is an officer
of
the Trust and an officer, director and holder of more than 5% of
the
outstanding shares of voting common stock of
Davis-Dinsmore.
|
As
discussed on page 1, a dissident shareholder has announced his intention
to
solicit proxies against the two incumbent trustees who have been nominated
for
new terms by your Board of Trustees and in support of himself and his business
ally. The dissident shareholder also has submitted the shareholder
proposal discussed below (Proposal 3) (which your Board strongly opposes
for the
reasons set forth in detail below on page 15). The dissident
shareholder seeks two seats on the Board of Trustees as a way of promoting
his
ill-conceived proposal (Proposal 3) to implement a monthly managed distribution
policy “in the neighborhood of 1%” of net asset value per month. This
proposal is harmful to the interests of shareholders for all the reasons
set
forth under Proposal 3 below and therefore, election of the dissidents would
be
similarly harmful to shareholder interests.
The
Trust
believes the dissident nominees are not qualified to serve for the following
reasons:
|
·
|
The
dissident nominees have been found to have violated the Massachusetts
securities laws
|
On
October 17, 2007 the Office of the Secretary of the Commonwealth for the
Commonwealth of Massachusetts found that both dissident nominees had violated
§ 301 of the Massachusetts Uniform Securities Act (the Act) “by offering
unregistered and non-exempt securities for sale in the Commonwealth” (the
Massachusetts Order). The Massachusetts Order ordered both dissident
nominees permanently to cease and desist from committing further violations
of
the Act and to pay an administrative fine of $25,000.
|
·
|
The
dissident nominees failed and continue to fail to make required
filings
under Federal securities laws and are therefore in violation of
those
laws
|
The
dissidents and their related investment companies own approximately 6% of
the
Trust’s shares. The dissidents were required by Section 13(d) of the
Securities Exchange Act of 1934 (Exchange Act) to have filed a Schedule 13D
to
report their ownership of shares of the Trust within ten days after acquiring
more than 5% of such shares. Although the failure to do so is
punishable by civil or criminal penalties, the dissidents failed for six
weeks
to make the required filing. Moreover, the filing which was
eventually made was totally deficient because it fails to provide the required
ownership information for each member of the dissidents’ group. Worst
of all, when any material change occurs in the facts set forth in the statements
contained in a Schedule 13D, an amendment is required to be transmitted to
the
issuer and filed with the SEC promptly. The issuance of the
Massachusetts Order contradicts dissidents’ affirmative statement in their
original filing that they are not the “subject” of a “final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal
or state securities laws or finding any violation with respect to such laws” of
an “administrative body of competent jurisdiction.” Accordingly,
dissidents have failed to file an amendment to their Schedule 13D required
to
disclose the existence, content, and effect of the Massachusetts Order and
are
therefore, in violation of the Federal securities laws.
|
·
|
The
Trust believes the dissident nominees are in violation of the Investment
Company Act and therefore have sued them for such
violation
|
Section
12(d)(1) of the Investment Company Act makes it unlawful for any investment
company to purchase or acquire more than 3% of the total outstanding voting
stock of a registered investment company, such as the Trust. The
Trust believes the dissident nominees, through their use of controlled
investment companies, are violating this provision of the Investment Company
Act. Accordingly, the Trust has commenced a lawsuit against them
which seeks, among other things, a Court Order to require them to sell shares
of
the Trust until they own no more than 3% of the Trust’s shares and to prohibit
them from voting the Trust shares they own in excess of 3% of the outstanding
voting stock of the Trust at the Annual Meeting.
|
·
|
The
dissident nominees have refused to supply necessary information
to the
Trust’s Governance Committee about their
qualifications
|
Despite
several requests, the dissident nominees have refused to submit any response
to
a questionnaire requested by the Trust’s Governance Committee. (This
questionnaire is routinely requested of all nominees including those nominated
by the Board). The questionnaire seeks to determine if either of the
dissident nominees is even qualified to serve on the Board of Trustees under
the
Governance Committee’s written charter. Of paramount importance is
whether either of the dissident nominees would qualify as independent trustees,
or would be disqualified under the Investment Company Act or the rules of
the
American Stock Exchange from serving as a trustee of the
Trust. Without completion of the questionnaires, the Governance
Committee cannot make these determinations. The Board believes the
dissident nominees have declined to complete the questionnaires because of
the
recent entry of the Massachusetts Order.
The
Trust
strongly believes that public company trustees must have a deep respect for
and
must strictly comply with the law, and must comply scrupulously with applicable
securities laws, in particular. By virtue of the entry of the
Massachusetts Order against the dissident nominees, the dissident nominees’
disregard for the filing requirements of Section 13(d) of the Exchange Act,
the
dissident nominees’ asserted violation of Section 12(d)(1) of the Investment
Company Act, and the dissident nominees’ refusal to provide routine information
to determine their ability and qualifications to serve, the Board strongly
believes the two dissident nominees to be unqualified to serve as trustees,
and
in any event, that the Board’s nominees for election as trustees are better
qualified, more experienced, and will better serve the interests of shareholders
than the two dissident nominees.
Required
Vote
Trustees
are elected by a plurality vote of shares cast at the Annual Meeting, meaning
that the trustee nominee with the most affirmative votes for a particular
seat
on the Board is elected for such seat. In an uncontested election for
trustees, the plurality requirement is not a factor. Abstentions will
not count as votes cast and will have no effect on the outcome of this
proposal. We expect that brokers will be entitled to vote on this
proposal only if they receive instructions from you. Any broker
non-vote will have no effect on the outcome of this proposal.
The
Board recommends that you vote FOR the two incumbent nominees nominated by
your
Board of Trustees.
Information
about the Trust’s Other Trustees
Information
about the Trust’s other trustees whose terms continue after the Annual Meeting
is presented below. Each trustee oversees two registered investment
companies in the Fund Complex, the Trust and Ellsworth Fund.
Continuing
Independent Trustees
Name
and Age
|
|
Trustee
Since
|
|
Principal
Occupation(s)
During
Past 5 Years and Other
Business
Experience
|
|
Other
Directorship(s) Held
|
|
|
|
|
|
|
|
Gordon
F. Ahalt(1)–
79
|
|
1982
|
|
Retired.
Formerly: President
of G.F.A. Inc. (petroleum industry consulting company) (1982 until
2000);
Consultant, W. H. Reaves & Co., Inc., (an asset management company)
(1987-1998). Mr. Ahalt spent his career as an analyst of and a
consultant to the petroleum industry, and previously served as
a director
or executive officer of several energy companies and an oil and
gas
exploration company. Mr. Ahalt received a B.S. degree in
Petroleum Engineering from the University of Pittsburgh.
|
|
Ellsworth
Fund; and Helix Energy Solutions Group, Inc. (energy services
company)
|
(1) Term
as trustee will expire in 2010.
|
Name
and Age
|
|
Trustee
Since
|
|
Principal
Occupation(s)
During
Past 5 Years and Other
Business
Experience
|
|
Other
Directorship(s) Held
|
|
Elizabeth
C. Bogan, Ph.D. (1)–
63
|
|
1990
|
|
Senior
Lecturer in Economics at Princeton University (since 1992).
Formerly: Chairman
of Economics and Finance Department, Fairleigh Dickinson University,
and a
member of the Executive Committee for the College of Business
Administration. Dr. Bogan has chaired numerous
administrative and academic committees. Dr. Bogan received
an A.B. degree in Economics from Wellesley College, an M.A. degree
in
Quantitative Economics from the University of New Hampshire, and
a Ph.D.
degree in Economics from Columbia University. Her writings on
finance have been published in The Financial Analysts Journal and
in other journals.
|
|
Ellsworth
Fund
|
|
|
|
|
|
|
|
Nicolas
W. Platt (2)–
54
|
|
1997
|
|
Managing
Director, Rodman & Renshaw, LLC (investment banking firm) (since
2006).
Formerly:
President, CNC-US (international consulting company) (January 2003
to
August 2006); Senior Partner of Platt & Rickenbach (financial
relations firm) (May 2001 to January 2003); Senior Executive with
the WPP
Group, UK and its public relations subsidiaries, Ogilvy Public
Relations,
Burson-Marsteller and Robinson Lehr Montgomery (January 1995 to
April
2001). Mr. Platt received a B.A. degree from Skidmore College
and an M.A. degree in Economics from Columbia University
|
|
Ellsworth
Fund
|
(1) Term
as trustee will expire in 2009.
(2) Term
as trustee will expire in 2010.
|
Continuing
Trustee Who is an Interested Person
Name
and Age
|
|
Trustee
Since
|
|
Principal
Occupation(s)
During
Past 5 Years and Other
Business
Experience
|
|
Other
Directorship(s) Held
|
|
|
|
|
|
|
|
Jane
D. O’Keeffe(1)(2)–
52
|
|
1995
|
|
President
of the Trust, Ellsworth Fund
and Davis-Dinsmore (registered investment adviser) (since
1996).
Ms. O’Keeffe
received a B.A. degree from University of New Hampshire and attended
the
Lubin Graduate School of Pace University.
|
|
Ellsworth
Fund
|
(1) |
Ms.
O’Keeffe is an interested person (within the meaning of the Investment
Company Act) of the Trust and Davis-Dinsmore because she is an
officer of
the Trust and an officer, director and holder of more than 5% of
the
outstanding shares of voting common stock of
Davis-Dinsmore.
|
(2) |
Term
as trustee will expire in 2010.
|
Certain
Relationships
Thomas
H.
Dinsmore and Jane D. O’Keeffe are brother and sister.
Committees
of the Board of Trustees
The
Board
has three committees: an Audit Committee, a Governance Committee, and a Pricing
Committee.
Audit
Committee
The
Trust
has an Audit Committee that is separately designated and established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934,
as
amended (the Exchange Act). The Audit Committee is comprised entirely
of independent trustees (Mr. Ahalt, Dr. Bogan, and Mr. Harding, with
Dr. Bogan serving as Chairperson). In addition, all such members
are independent as such term is defined by the American Stock Exchange’s Company
Guide.
The
Audit
Committee operates pursuant to a written charter. A current copy of
Audit Committee’s charter is available at www.bancroftfund.com. In
accordance with its charter, the Audit Committee oversees the Trust’s accounting
and financial reporting policies and practices, as well as the quality and
objectivity of the Trust’s financial statements and the independent audit of the
financial statements. Among other duties, the Committee is
responsible for: (i) the appointment, compensation, retention and
oversight of any independent registered public accountants employed by the
Trust
(including monitoring the independence qualifications and performance of
such
accountants and resolution of disagreements between the Trust’s management and
the accountants regarding financial reporting) for the purpose of preparing
or
issuing an audit report or performing other audit, review or attest services;
(ii) overseeing the accounting and financial reporting process of the Trust;
(iii) monitoring management’s preparation of financial statements of the Trust
to promote accuracy and integrity of such financial statements and asset
valuation; (iv) assisting the Board in its oversight of the Trust’s compliance
with legal and regulatory requirements that related to the Trust’s accounting
and financial reporting, internal control over financial reporting and
independent audits; (v) pre-approving all permissible audit and non-audit
services provided to the Trust by its independent accountants, to the extent
required by Section 10A of the Exchange Act; (vi) pre-approving, in accordance
with Item 2.01(c)(7)(ii) of Regulation S-X, certain non-audit services provided
by the Trust’s independent registered public accountants to the Trust’s
investment adviser and certain other affiliated entities if the Trust’s
independent registered public accountants are the same as, or affiliated
with,
the investment adviser’s or affiliated entities’ accountants; and (vii) to the
extent required by Regulation 14A under the Exchange Act, preparing an audit
committee report for inclusion in the Trust’s annual proxy
statement.
Audit
Committee Report
The
Audit
Committee reviewed and discussed the Trust’s audited financial statements with
its independent registered public accountants, Tait, Weller & Baker LLP
(Tait Weller). These discussions included the accountant’s judgments
about the quality, not just acceptability, of the Trust’s accounting principles
as applied in its financial reporting. Tait Weller, the Audit
Committee, and management also discussed matters such as the clarity,
consistency and completeness of the accounting policies and disclosures,
with a
particular focus on critical accounting policies.
The
Audit
Committee has received a letter from Tait Weller required by the Public Company
Accounting Oversight Board disclosing all relationships between Tait Weller
and
its related entities and the Trust. The Audit Committee discussed
with Tait Weller its independence as the Trust’s independent registered public
accountants. In addition, the Audit Committee has considered whether
the provision by Tait Weller of non-audit services to the Trust and to the
Ellsworth Fund is compatible with the continuing independence of Tait
Weller. The Audit Committee also reviewed and discussed the Trust’s
audited financial statements with management.
Based
on
the review and discussions described above, the Audit Committee has recommended
to the Board that the audited financial statements be included in the Trust’s
annual report to shareholders for the fiscal year ended October 31, 2007
for
filing with the Securities and Exchange Commission (SEC).
|
Elizabeth
C. Bogan, Ph.D., Chairperson
|
|
|
Gordon
F. Ahalt
|
|
|
Daniel
D. Harding
|
|
Governance
Committee
The
Governance Committee is comprised entirely of independent trustees
(Mr. Ahalt, Dr. Bogan and Mr. Platt, with Mr. Ahalt serving
as Chairman). In addition, all such members are independent as such
term is defined by the American Stock Exchange’s Company Guide.
The
Governance Committee operates pursuant to a written charter. A
current copy of Governance Committee’s charter is available at
www.bancroftfund.com. In accordance with its charter, the Committee,
among other duties, is responsible for: (i) nominating persons for
election or appointment: (a) as additions to the Board, (b) to
fill vacancies which, from time to time, may occur on the Board, and (c)
by
shareholders of the Trust at meetings called for the election of trustees;
(ii)
nominating trustees as members of each committee of the Board, including,
without limitation, the Audit Committee, the Governance Committee, and the
Pricing Committee; (iii) reviewing from time to time the compensation, if
any,
payable to the trustees and making recommendations to the Board regarding
compensation; (iv) reviewing and evaluating from time to time the functioning
of
the Board and the various committees of the Board; (v) overseeing the selection
of independent legal counsel to the independent trustees; and (vi) monitoring
the performance of independent legal counsel employed by the Trust and the
independent trustees.
Prior
to
a meeting of the shareholders of the Trust called for the purpose of electing
trustees, the Governance Committee will nominate one or more persons for
election as trustees at such meeting. The Governance Committee is
also responsible for nominating trustees to fill vacancies resulting from
an
increase in the size of the Board or as a result of the resignation, death
or
removal of a trustee. The independent trustees are generally
authorized to elect nominees to fill such vacancies.
Evaluation
by the Governance Committee of a person as a potential nominee to serve as
a
trustee, including a person nominated by a shareholder, should result in
the
following findings by the Governance Committee: (i) upon advice of
independent legal counsel to the independent trustees, that the person will
qualify as an independent trustee (applicable only to the nomination of
independent trustees), and that the person is otherwise not disqualified
under
the Investment Company Act or the rules of the American Stock Exchange from
serving as a trustee of the Trust; (ii) with respect to the nomination of
independent trustees only, that the person is free of any material relationship
with the Trust (other than as a shareholder of the Trust), that would interfere
with the exercise of independent judgment; (iii) that the person is willing
to serve, and willing and able to commit the time necessary for the performance
of the duties of a trustee; (iv) that the person can make a positive
contribution to the Board and the Trust, with consideration being given to
the
person’s business experience, education and such other factors as the Governance
Committee may consider relevant; (v) that the person is of good character
and high integrity; (vi) that the person has desirable personality traits
including independence, leadership and the ability to work with the other
members of the Board; (vii) that the person is not an American Stock
Exchange employee or floor member; and (viii) that the composition of the
Board is varied as to educational background, business experience and
occupation.
Consistent
with the Investment Company Act, the Governance Committee can consider
recommendations from management in its evaluation process.
The
Governance Committee will consider potential nominees recommended by a
shareholder to serve as trustee, provided that: (i) such nominating
person is a shareholder of record at the time he or she submits the name
of such
nominee, (ii) such nominating person is a shareholder of record at the time
of
the meeting at which shareholders are elected, (iii) such nominating person
is
entitled to vote at the meeting of shareholders at which trustees will be
elected; and (iv) the Governance Committee shall make the final determination
of
persons to be nominated. The Governance Committee will evaluate
potential nominees recommended by a shareholder to serve as trustees in the
same
manner as it evaluates potential nominees identified by the Governance
Committee.
A
shareholder may, at the 2009 annual meeting of shareholders, nominate an
individual for election to the Board at such meeting if the
shareholder: (i) is a shareholder of record at the time of
giving notice to the Trust as described in (iv) below; (ii) is a shareholder
of
record at the time of the 2009 Annual Meeting, (iii) is entitled to vote
at the 2009 Annual Meeting; and (iv) has complied with the notice
procedures in the Trust’s bylaws. Such notice procedures require that
a shareholder submit the nomination in writing to the Secretary of the Trust
no
earlier than October 15, 2008 and no later than November 14,
2008. The notice must contain all information relating to the
potential nominee required for proxy solicitations by Regulation 14A under
the
Exchange Act (including the individual’s written consent to being named in the
proxy statement as a nominee and to serving as a trustee if
elected). The notice must also contain the shareholder’s name and
address as they appear on the Trust’s books (and the name and address of any
beneficial owner, on whose behalf the nomination is made) and the number
of
shares of beneficial interest owned beneficially and of record by such
shareholder and beneficial owner.
Pricing
Committee
The
Pricing Committee is comprised of three members, two of whom are independent
trustees (Mr. Harding and Mr. Platt, with Mr. Platt serving as
Chairman) and one of whom is an interested person
(Mr. Dinsmore). In accordance with its charter, the Committee
assists the Trust’s investment adviser, Davis-Dinsmore, in its valuation of the
Trust’s portfolio securities when pricing anomalies arise and the full Board is
not available to assist Davis-Dinsmore in making a fair value
determination.
It
is
anticipated that the Committee will meet only as pricing anomalies or other
issues arise that cannot be resolved by the entire Board due to time
constraints.
Board
and Committee Meeting Attendance
During
the 2007 fiscal year, the Board met eight times, the Audit Committee met
four
times, the Governance Committee met four times, and the Pricing Committee
met
one time. During the 2007 fiscal year, all trustees attended at least
75% of meetings of the Board and of each Committee on which such trustees
served. The Trust’s policy regarding trustee attendance at annual
meetings of shareholders is that trustees are encouraged but not required
to
attend such annual meetings. Each of the Trust’s then current
trustees attended the Trust’s 2007 annual meeting of shareholders.
Shareholder
Communications with the Board of Trustees
The
Trust
adopted Shareholder Communication Procedures (the Procedures) that set forth
the
process by which shareholders of the Trust may send communications to the
Board. If a shareholder sends a recommendation of a nominee to the
Board or to an individual trustee, such communication would be covered by
the
Procedures. Shareholder proposals submitted pursuant to Rule 14a-8
under the Exchange Act, and communications made in connection with such
proposals are not subject to the Procedures. The Trust’s bylaws also
contain provisions requiring a shareholder to provide advance notice of his
or
her intention to nominate, at the Trust’s annual meeting of shareholders, an
individual for election as trustee.
Pursuant
to the Procedures, shareholders should send their communications to the Trust’s
Shareholder Relations Group. Communications may be sent by regular
mail or delivery service to the following address: 65 Madison Avenue,
Suite 550, Morristown, NJ 07960. E-mail communications may be sent
to: [email protected]. All shareholder communications that are
directed to the Board or an individual trustee of the Trust in his or her
capacity as trustee and received by the Shareholder Relations Group shall
be
promptly forwarded to the individual trustee of the Trust to whom they were
addressed or to the full Board, as applicable. Copies of all such
shareholder communications will also be distributed to the Chairs of the
Trust’s
Audit Committee and Governance Committee, and to counsel for the Trust and
for
the independent trustees. Counsel for the Trust and for the
independent trustees, upon receipt of its copy of a shareholder communication,
shall work with such Chairs and counsel for the independent trustees to
determine whether such shareholder communication should be distributed to
any
trustees to whom it was not sent and whether and in what manner the trustees
should respond to such shareholder communication. Responses, if any,
to shareholder communications shall be coordinated by counsel for the Trust
and
for the independent trustees, working with the Chairs.
Trustees’
Compensation
Mr. Dinsmore
and Ms. O’Keeffe are the only trustees of the Trust who are officers of the
Trust or Davis-Dinsmore. Each trustee who is not an officer of the
Trust or Davis-Dinsmore currently receives (1) an annual fee of $7,500, (2)
$1,000 plus expenses for each Board meeting attended, (3) $1,000 for each
shareholders’ meeting attended, and (4) $500 for each Committee meeting
attended. The chairperson of each Committee receives an additional
$2,000 annual fee.
The
following table shows the compensation that was paid to the trustees solely
by
the Trust as well as by the Fund Complex as a whole (which consists of two
registered investment companies, the Trust and Ellsworth Fund) during the
2007
fiscal year.
|
|
Aggregate
Compensation
From
Trust
|
|
Total
Compensation
From
Fund Complex
|
|
|
|
|
|
Thomas
H. Dinsmore
|
|
$
-0-
|
|
$ -0-
|
Jane
D. O’Keeffe
|
|
$
-0-
|
|
$ -0-
|
Gordon
F. Ahalt
|
|
$20,500
|
|
$41,000
|
Elizabeth
C. Bogan, Ph.D.
|
|
$20,000
|
|
$40,000
|
Donald
M. Halsted (1)
|
|
$ 2,000
|
|
$ 5,875
|
Daniel
D. Harding.
|
|
$17,500
|
|
$33,125
|
Duncan
O. McKee (2)
|
|
$12,500
|
|
$25,000
|
Robert
J. McMullan (3)
|
|
$16,125
|
|
$32,750
|
Nicolas
W.
Platt
|
|
$19,000
|
|
$38,000
|
(1)
|
Mr.
Halsted retired as a trustee effective as of December 31,
2006.
|
(2)
|
Mr.
McKee retired as a trustee effective as of October 31,
2007.
|
(3)
|
Mr.
McMullan resigned as a trustee effective as of October 1,
2007.
|
Security
Ownership of Management
The
Trust’s trustees, nominees for trustee and officers owned the Trust’s shares as
shown on the following table as of October 31, 2007 (officers of the Trust
are
identified in the “Additional Information – Executive Officers” section of this
proxy).
|
|
Shares
of Trust
Owned
Beneficially*
|
|
|
|
Gordon
F. Ahalt
|
|
1,200 (1)
|
Elizabeth
C. Bogan, Ph.D.
|
|
2,610
|
Thomas
H. Dinsmore
|
|
15,256
(2)
|
Daniel
D. Harding
|
|
1,000
|
Jane
D. O’Keeffe
|
|
12,006
(3)
|
Nicolas
W. Platt
|
|
250
|
H.
Tucker Lake, Jr.
|
|
384
(4)
|
Gary
I. Levine
|
|
1,901
|
Germaine
M. Ortiz
|
|
252
|
Mercedes
A. Pierre
|
|
191
(5)
|
Joshua
P. Lake
|
|
216
|
_________________________________
* Represents
for each trustee and officer less than 1% of the outstanding shares of the
Trust. As of October 31, 2007, trustees and officers of the Trust
beneficially owned in the aggregate 35,266 shares of the Trust, representing
approximately 0.6% of the outstanding shares. Except as otherwise
indicated, each trustee and officer possesses sole investment and voting
power
with respect to shares beneficially owned.
(1) Mr.
Ahalt possesses shared investment and voting power with his wife.
(2) Includes
(i) 2,928 shares held in trust for the benefit of Mr. Dinsmore’s minor child,
(ii) 1,804 shares which Mr. Dinsmore owned jointly with his wife, and (iii)
4,027 shares owned solely by his wife, as to which shares Mr. Dinsmore
disclaims beneficial ownership.
(3) Includes
(i) 5,965 shares held in trust for the benefit of Ms. O’Keeffe’s minor children,
and (ii) 2,543 shares owned jointly with her husband.
(4) Includes
239 shares owned by Mr. Lake’s spouse.
(5) Ms.
Pierre owns these shares jointly with her husband.
PROPOSAL
2
RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
The
Board
seeks your ratification of the Audit Committee’s appointment of Tait Weller as
the Trust’s independent registered public accountants for the 2008 fiscal
year. The Board believes that the shareholders should have the
opportunity to vote on this matter. If the appointment is not
ratified, the Audit Committee will meet to select new independent registered
public accountants for the Trust’s 2008 fiscal year. We do not expect
that a representative from Tait Weller will be present at the Annual
Meeting. However, if a Tait Weller representative chooses to attend,
he or she will have an opportunity to make a statement and to respond to
appropriate questions.
Fees
Billed by Tait Weller Related to the Trust
Set
forth
in the table below are the aggregate fees billed to the Trust by Tait Weller
for
services rendered to the Trust during the Trust’s last two fiscal years ended
October 31, 2006 and October 31, 2007.
Fiscal
Year
Ended
October
31
|
|
Audit
Fees
|
|
Audit-Related
Fees(1)
|
|
Tax
Fees(2)
|
|
All
Other Fees
|
2006
|
|
$31,000
|
|
$0
|
|
$2,600
|
|
$0
|
2007
|
|
$32,000
|
|
$0
|
|
$2,700
|
|
$0
|
Tait
Weller billed the Trust aggregate non-audit fees of $2,700 for the fiscal
year
ended 2007, and $2,600 for the fiscal year ended 2006, for non-audit services
rendered to the Trust.
____________________________________
(1)
|
All
Audit-Related Fees were pre-approved by the Trust’s Audit
Committee. No Audit-Related Fees were approved by the Trust’s
Audit Committee pursuant to section 2.01(c)(7)(i)(C) of Regulation
S-X,
which waives the pre-approval requirement for certain de minimus
fees.
|
(2)
|
“Tax
Fees” include those fees billed by Tait Weller in connection with their
review of the Trust’s income tax returns for fiscal years 2006 and
2007. All Tax Fees were pre-approved by the Trust’s Audit
Committee. No Tax Fees were approved by the Trust’s Audit
Committee pursuant to section 2.01(c)(7)(i)(C) of Regulation S-X,
which
waives the pre-approval requirement for certain de minimus
fees.
|
Non-Audit
Services Billed to Davis-Dinsmore
During
each of the last two fiscal years ended October 31, 2007 and October 31,
2006,
Tait Weller did not provide any non-audit services to the Trust’s investment
adviser, Davis-Dinsmore, or its affiliates or otherwise bill Davis-Dinsmore
or
its affiliates for any non-audit services.
Audit
Committee Pre-Approval Policies and Procedures
The
Audit
Committee pre-approves all audit and permissible non-audit services that
are
proposed to be provided to the Trust by its independent registered public
accountants before they are provided to the Trust. Such pre-approval
also includes the proposed fees to be charged by the independent registered
public accountants for such services. The Audit Committee may
delegate the pre-approval of audit and permissible non-audit services and
related fees to one or more members of the Audit Committee who are
“independent,” as such term is defined in Rule 10A-3(b)(1)(iii) promulgated
under the Exchange Act. Any such member’s decision to pre-approve
audit and/or non-audit services and related fees shall be presented to the
full
Audit Committee, solely for informational purposes, at its next scheduled
meeting.
The
Audit
Committee also pre-approves non-audit services to be provided by the Trust’s
independent registered public accountants to the Trust’s investment adviser if
the engagement relates directly to the operations and financial reporting
of the
Trust and if the Trust’s independent registered public accountants are the same
as, or affiliated with, the investment adviser’s registered public
accountants.
Required
Vote
The
affirmative vote of the majority of votes cast is needed to approve the
ratification of the Audit Committee’s appointment of the independent registered
public accountants. Abstentions will not count as votes cast and will
have no effect on the outcome of this proposal. We expect that
brokers will be entitled to vote on this proposal, but any broker non-vote
will
have no effect on the outcome of this proposal.
The
Board recommends that you vote FOR Proposal 2.
PROPOSAL
3
SHAREHOLDER
PROPOSAL REGARDING A MONTHLY MANAGED
DISTRIBUTION
POLICY
We
received notice that a shareholder intends to present the following proposal
at
the Annual Meeting. The proposal was submitted by Phillip Goldstein,
Opportunity Partners L.P., Park 80 West --Plaza Two, Suite C04, Saddle Brook,
NJ 07663. Opportunity Partners and its affiliates
collectively claim to have owned an aggregate of 359,006 shares of beneficial
interest as of December 10, 2007.
Your
Board of Trustees strongly opposes adoption of the resolution proposed below
and
asks shareholders to consider carefully the Board of Trustees’ response, which
follows the shareholder proposal.
Shareholder
Proposal and Supporting Statement
“
‘RESOLVED: The shareholders of Bancroft Fund request that the board
implement a monthly managed distribution policy with the goal of eliminating
the
discount.’
“Bancroft’s
shares have traded at an unacceptably wide discount to net asset value for
a
long time. For example, on May 11, 2007, Bancroft’s NAV was $23.67
per share but its stock price was only $20.80, representing a discount of
more
than 12%.
“Recently,
a number closed-end funds have instituted a managed distribution plan as
a means
to address a persistent trading discount. These plans have generally
been quite successful in narrowing or eliminating the discount. In
fact, they have often had an immediate and lasting effect.
“For
example, on February 2, 2007 LMP Real Estate Income Fund announced a monthly
managed distribution policy that increased its distribution from 10.9 cents
per
month to 19 cents. LMP’s stock price quickly responded to the news,
rising from $23.11 to $25.14 (more than 8%) over the next three
days. More important, LMP’s discount, which like Bancroft’s was
languishing in double digits, continued to narrow and has now virtually
disappeared. On May 11th, its
NAV was
$24.28 and its stock price closed at $24.25.”
The
Board of Trustees’ Statement in Opposition to Proposal 3
Adoption
of a monthly managed distribution policy would be extremely disadvantageous
to
Trust shareholders, and consequently, your Board of Trustees strongly opposes
Proposal 3. The reasons why the proposal would be so harmful to your
investment are as follows:
|
·
|
A
monthly managed distribution policy would adversely affect investment
results in the Trust.
|
Currently,
the Trust is able to keep your assets fully invested and to choose investments
which can and do benefit the Trust’s performance. For the fiscal year
ended October 31, 2007 the Trust’s net asset value performance was
14.53%. For the calendar year-to-date through October 31, 2007, the
performance was 11.72%. By contrast, a managed distribution
policy would negatively affect your Trust’s performance because it would require
the Trust to keep assets in low-yielding cash accounts or to liquidate assets
at
inopportune times solely to have the cash necessary to meet the demands of
a
managed distribution policy. This requirement would completely
undermine the structural advantage of a closed-end Fund such as the Trust,
which
is the retention of assets allowing the Trust to remain fully
invested.
|
·
|
A
monthly managed distribution policy of the magnitude demanded by
the
dissident would almost certainly require the return of your capital
and
the ultimate liquidation of the
Trust.
|
Although
the dissident’s proposal does not specify a particular percentage of net asset
value to be distributed each month, on October 2, 2007 he left a message
in
which he said that the percentage “would have to be significant. I am
thinking in the neighborhood of 1% [of net asset value] per month,” regardless
of the amount the Trust actually earns from investment income or realizes
from
capital gains.
In
the
ten years ended October 31, 2007, the Trust returned 6.43% per year on a
compounded basis (which was a slightly better return than the return of the
Merrill Lynch All Convertibles Index Average when adjusted for expenses and
the
Trust’s 2003 rights offering). If a monthly managed distribution
policy in the amount demanded by the dissident shareholder had been implemented
at the beginning of such ten-year period, the amount distributed to shareholders
would have far exceeded the actual investment returns of the
Trust. The excess distributions, therefore, would have merely been a
return of shareholders’ own capital. Davis-Dinsmore estimates that
during this ten-year time period, such a policy would have led to a 46%
liquidation of the Trust. Because the Board believes the Trust is
very unlikely to return more than 12% per year in the future, if the Trust
adopts a monthly managed distribution policy at the level demanded by the
dissident shareholder, the Trust will similarly be forced to return your
invested capital to you. During this phased liquidation, the net
asset value of the Trust would decline and the amount of the monthly
distribution, therefore, would similarly decline with the decreasing asset
base.
Your
Board strongly believes that distributions of such a magnitude would not
be in
the interests of shareholders.
|
·
|
A
monthly managed distribution policy would increase the Trust’s expenses
and administrative
burdens.
|
If
the
Trust adopts a monthly managed distribution policy at an unsustainable level
--
i.e., a level such as the one suggested by the dissident shareholder which
is
significantly in excess of the Trust’s long-term return -- the Trust will be
forced to distribute shareholders’ capital to make up the difference between
Trust investment income and capital gains on the one hand and the required
distribution on the other hand. Such a distribution, in turn, will
cause the Trust’s expense ratio to increase because the required distributions
will cause the Trust’s net asset value to decrease while Trust expenses would
increase for the reasons set forth in the next paragraph. In a speech
to the 2007 ICI Closed End Trust Workshop on October 11, 2007, Andrew J.
Donohue, Director, Division of Investment Management, U.S. Securities and
Exchange Commission (SEC), noted the importance for “closed-end fund managers
and directors [to] carefully consider whether a managed distribution plan
is in
the best interests of investors,” particularly where the distribution rate is
not “sustainable.” Mr. Donohue asked: “If, for example,
the distribution rate is higher than the total return that the fund can
reasonably expect to generate, what will the long-term consequences to
shareholders be? If the fund assets are being depleted, will the
expense ratio rise, impairing the fund’s long-term performance?”
In
addition, a managed monthly distribution policy would place an increased
administrative burden on the Trust. Not only would the Trust be
required to pay each shareholder twelve times per year rather than four,
but the
Investment Company Act also requires strict and careful disclosure to
shareholders regarding the sources (e.g., investment income, capital gains,
or
return of capital) and amounts of money distributed to shareholders under
a
managed distribution policy. Complying with this requirement would
increase the Trust’s expenses and thus reduce the Trust’s
performance.
|
·
|
Distribution
of long term capital gains on a monthly basis is unlawful unless
the Trust
receives an exemptive order from the
SEC.
|
Section
19(b) of The Investment Company Act makes it unlawful to distribute long-term
capital gains more than once every twelve months. Except in the rare
cases where short-term capital gains and ordinary income for a month exceeds
the
monthly distribution requirement of the managed plan, the Trust would be
required to return capital (resulting in a liquidation of the Trust as explained
above) or to distribute long-term capital gains to make up the monthly
shortfall. To be able to make level monthly distributions, a fund
needs to be able to distribute long-term capital gains more than once every
twelve months because otherwise the amount of the single long-term capital
gain
distribution would be different from all other monthly amounts. To
distribute long-term capital gains more than once every twelve months, the
Trust
would need to obtain an exemptive order from the SEC under Section
19(b). Many other closed-end funds seeking to implement a managed
distribution policy have submitted applications for such exemptive relief
to the
SEC (some of which date back to 2004). The SEC staff has issued a
series of conditions and required representations for such applicants and
requested resubmission of all applications. The Trust believes this
action sends the message that distribution policies should be geared only
towards providing a steady pay out of the actual portfolio appreciation rather
than an arbitrary rate set by the fund which may be misleading to
investors. For these reasons, the Trust believes it would be
difficult to receive an SEC exemptive order necessary to distribute capital
gains more than once every 12 months for a managed distribution policy “in the
neighborhood of 1% per month” as demanded by the dissident.
|
·
|
Adoption
of a monthly managed distribution policy will not eliminate the
trading
discount between net asset value and share
price.
|
The
dissidents assert that adoption of a monthly arranged distribution policy
at a
level “in the neighborhood of 1%” per month will narrow or eliminate the trading
discount. The Board strongly disagrees.
Shares
of
closed-end funds, such as the Trust, trade on stock exchanges like those
of any
other listed company. Market forces and perceptions of the Trust’s
prospects drive price movements. The market price of the Trust’s
shares is often lower than the value of the Trust’s portfolio, its net asset
value, just as the market value of any company’s stock could be below the value
of its assets.
Your
Board of Trustees recognizes that the Trust’s shares have traded at a discount
to their net asset value, although that discount decreased from approximately
16% in July, 2006 to approximately 10% as of November 23, 2007. Your
Board believes there may be some misunderstandings about the market discount
of
closed-end funds such as Bancroft Fund Ltd.
The
discount is a function of the net asset value per share and the market price
per
share, each of which may be influenced by different factors. There is
debate about whether the discount is the cause of market price movements
or is
merely the effect. The discount is considered by many to be the
result of market supply and demand factors for shares, although analysts
are
uncertain whether the dominant factors are fund-specific, such as performance,
or external, such as macroeconomic factors. If, as the Trust believes
to be the case, the discount is the effect and not the cause, adoption of
a
managed distribution policy will not have a long-term effect, and perhaps
not
any effect, on the discount.
In
any
event, shareholders experience gain or loss based only on market price changes
in the Trust’s shares and on dividends received on Trust shares. The
Board does not believe there are any widely accepted economic theories for
explaining the discount phenomenon. However, the discount does not
represent value that the Board has a duty to distribute to
shareholders.
By
contrast to the slow decline in the Trust’s trading discount since 2006, Mr.
Goldstein conducted a successful proxy contest seven years ago to join the
Board
of the Mexico Equity and Income Trust for the express purpose of reducing
the
trading discount which was then about 19% As of November 23, 2007,
the trading discount of that fund, which he and his allies now control, is
still
over 15%, a very modest improvement after seven years, and well in excess
of the
Trust’s current trading discount about which the dissidents are
complaining.
In
short,
Mr. Goldstein’s track record in reducing trading discounts is one of failure,
not success.
|
·
|
LMP
Real Estate Income Trust (LMP) cited by the dissident shareholder
is again
trading at a discount to net asset
value
|
Dissidents’
statement in support of Proposal 3 cites LMP as an example of a recent
successful managed distribution policy. In March, 2007, LMP started
distributing $0.19 per share per month to its shareholders. This
distribution level represented an approximate 10% annual distribution rate
based
on LMP’s net asset value in March 2007, and currently represents an approximate
13.3% annual distribution rate based on net asset value on December 13, 2007
(as
a result of the 30% decline in LMP’s net asset value in the
interim). Because LMP’s net investment income and other gains in 2007
have been insufficient to cover the distribution amounts required by its
plan, a
large portion of the distributions made to shareholders pursuant to the plan
have represented prior years’ earnings or a return of shareholder capital rather
than current income or real yield.
Not
surprisingly, the relationship between LMP’s trading price and net asset value
declined from a premium of about +3% immediately after implementation of
the
plan to a discount of about -2% as of December 13, 2007, a decline of
5%. The Trust believes this trading pattern is typical of funds which
implement a managed distribution policy: an initial reduction of
trading discount followed by a slow erosion of the gain. An analysis
of the 41 closed-end funds with managed distribution plans listed on the
website
of the Closed-End Fund Association demonstrates to the Trust that there is
no
statistical correlation between the distribution rate and the trading discount
of a fund, and thus dissidents’ reliance on LMP’s example is
misplaced.
Required
Vote
The
affirmative vote of the majority of votes cast is needed to approve the proposal
with respect to a managed distribution policy. Abstentions and broker
non-votes are counted as present but are not considered as votes
cast. As a result, they have the same effect as a vote against the
proposal. The Trust does not expect that brokers will be
entitled to vote on this proposal unless they receive instructions from
underlying beneficial owners.
The
Board carefully considered the dissident proposal at several meetings in
2007
and concluded that adoption of a managed distribution policy at any level
would
be disadvantageous to and not in the best interests of
shareholders. Accordingly, the Board strongly recommends that you
vote AGAINST the implementation of a managed distribution
policy.
ADDITIONAL
INFORMATION ON VOTING
Voting
by Proxy
Whether
you plan to attend the Annual Meeting or not, we urge you to complete, sign
and
date the enclosed White proxy card and to return it
promptly in the envelope provided. If you are the record owner of
your shares on the books of the Trust’s transfer agent, then you may also submit
your proxy vote by telephone or via the Internet, by following the instructions
accompanying this Proxy Statement. If your broker holds your shares
in its name, you may submit your proxy vote by any other means specified
in the
instructions that accompany this Proxy Statement. Returning the proxy
card or using any of the available alternative proxy voting methods will
not
affect your right to attend the Annual Meeting and vote.
If
you
properly fill in your White proxy card and send it to
us in time to vote or use any of the available alternative proxy voting methods,
your “proxy” (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the
White proxy card or use any of the available
alternative proxy voting methods but do not make specific choices, your proxy
will vote your shares as recommended by the Board as follows and in accordance
with management’s recommendation on other matters:
|
·
|
FOR
the election of all Board nominees for
trustees.
|
|
|
|
|
·
|
FOR
ratification of the appointment of independent registered
public
accountants for 2008.
|
|
|
|
|
·
|
AGAINST
the shareholder proposal.
|
Your
proxy will also have authority to vote and act on your behalf at any adjournment
of the meeting.
If
you
authorize a proxy to vote for you, you may revoke the authorization at any
time
before it is exercised. You can do this in one of four
ways:
|
·
|
You
may send in another proxy with a later
date.
|
|
·
|
If
you submitted a proxy by telephone, via the Internet or via an
alternative
method of voting permitted by your broker, you may submit another
proxy by
telephone, via the Internet, or via such alternative method of
voting, or
send in another proxy with a later date.
|
|
|
|
|
·
|
You
may notify the Trust’s Secretary in writing before the Annual Meeting that
you have revoked your proxy.
|
|
|
|
|
·
|
You
may vote in person at the Annual Meeting if you were the record
owner of
your shares on the record date.
|
Voting
in Person
If
you do
attend the Annual Meeting, were the record owner of your shares on the record
date, and wish to vote in person, we will give you a ballot when you
arrive. However, if your shares were held in the name of your
broker, bank or other nominee on the record date, you must bring a letter
from
the nominee indicating that you were the beneficial owner of the shares on
the
record date for voting, and authorizing you to vote. The letter must
also state whether before the Annual Meeting you authorized a proxy to vote for
you and if so, how you instructed such proxy to vote.
Quorum
Requirement
A
quorum
of shareholders is necessary to hold a valid meeting. A quorum will
exist if shareholders entitled to vote a majority of all shares outstanding
on
the record date are present in person or by proxy. Broker non-votes,
if any, and abstentions will count as present for establishing a
quorum.
Adjournments
If
a
quorum is not present at the Annual Meeting or a quorum is present but
sufficient votes to approve a proposal are not received, the persons named
as
proxies may propose one or more adjournments of the Annual Meeting to permit
further solicitation of proxies. Any such adjournment will require
the affirmative vote of a majority of the votes cast at the Annual Meeting
in
person or by proxy. The persons named as proxies will vote those
proxies they are entitled to vote “for” a proposal in favor of such an
adjournment and will vote those proxies required to be voted “against” such
proposal against such an adjournment. A shareholder vote may be taken
on a proposal in this Proxy Statement prior to any such adjournment if
sufficient votes have been received and it is otherwise
appropriate.
ADDITIONAL
INFORMATION
Investment
Adviser and Administrator
Davis-Dinsmore
Management Company, 65 Madison Avenue, Morristown, New Jersey 07960, is the
Trust’s investment adviser and administrator.
Executive
Officers
The
Trust’s executive officers are elected by the Board, receive no compensation
from the Trust and hold office until the meeting of the Board following the
next
annual meeting of shareholders and until his or her successor shall have
been
duly elected and qualified, or until his or her earlier death, resignation
or
removal. Information about these officers is presented
below.
Name,
Age and Position(s) Held
with
the Trust
|
|
|
|
Principal
Occupation(s) During Past 5 Years
and
Business Experience
|
|
|
|
|
|
Thomas
H. Dinsmore – 54
Trustee,
Chairman and Chief Executive Officer
|
|
1984
|
|
Information
about Mr. Dinsmore is presented earlier in this proxy statement under
“Proposal 1, Election of Trustees – Nominees for Trustees - Nominee Who is
an Interested Person.”
|
|
|
|
|
|
Jane
D. O’Keeffe – 52
Trustee
and President
|
|
1994
|
|
Information
about Ms. O’Keeffe is presented earlier in this proxy statement under
“Proposal 1, Election of Trustees – Information About the Trust’s Other
Trustees - Continuing Trustee Who is an Interested
Person.”
|
|
|
|
|
|
H.
Tucker Lake, Jr. – 60
Vice
President
|
|
1994
|
|
Vice
President of the Trust, Ellsworth Fund (since 2002) and Davis-Dinsmore
(since 1997).
Formerly: Vice
President, Trading of the Trust (1994-2002).
|
|
|
|
|
|
Joshua
P. Lake, C.T.P. – 31
Treasurer
and Assistant Secretary
|
|
2002
|
|
Treasurer
of the Trust and Ellsworth Fund (since April 2004), Assistant Secretary
of
the Trust and Ellsworth Fund (since February 2002) and Assistant
Treasurer
and Assistant Secretary of Davis-Dinsmore (since February
2002).
Formerly: Assistant
Treasurer of the Trust and Ellsworth Fund (from 2002 to
2004).
|
|
|
|
|
|
Gary
I. Levine – 50
Executive
Vice President, Chief Financial Officer and Secretary
|
|
1986
|
|
Executive
Vice President and Chief Financial Officer of the Trust, Ellsworth
Fund
and Davis-Dinsmore (since April 2004); Secretary of the Trust,
Ellsworth
Fund and Davis-Dinsmore (since November 2003); Treasurer of Davis-Dinsmore
(since 1997).
Formerly: Vice
President of the Trust, Ellsworth Fund and Davis-Dinsmore (January
2002 –
April 2004); Treasurer of the Trust and Ellsworth Fund (April 1993
– April
2004).
|
|
|
|
|
|
Germaine
M. Ortiz – 38
Vice
President
|
|
1996
|
|
Vice
President of the Trust, Ellsworth Fund and Davis-Dinsmore (since
1999).
|
|
|
|
|
|
Mercedes
A. Pierre – 46
Vice
President and Chief Compliance Officer
|
|
1998
|
|
Vice
President of the Trust and Ellsworth Fund (since April 2004); Chief
Compliance Officer of the Trust and Ellsworth Fund (since July
2004); and
Vice President and Chief Compliance Officer of Davis-Dinsmore (since
2004).
Formerly: Assistant
Treasurer of the Trust and Ellsworth Fund (January 1998 - February
2005).
|
Certain
Relationships
H.
Tucker
Lake, Jr. is the cousin of Thomas H. Dinsmore and Jane D. O’Keeffe and the
father of Joshua P. Lake. Gary I. Levine’s wife is Germaine M.
Ortiz’s first cousin.
Security
Ownership of Certain Beneficial Owners
Based
solely on a review of filings with the SEC, the following table provides
information about those shareholders that beneficially own more than 5% of
the
outstanding shares of the Trust.
Name
|
|
Number
of Shares
Owned
|
|
Percent
of Outstanding
Shares
|
Relative
Value Partners, LLC
|
|
432,103
|
|
7.5%
|
1033
Skokie Boulevard
|
|
|
|
|
Suite
150
|
|
|
|
|
Northbrook,
IL 60062 (1)
|
|
|
|
|
|
|
|
|
|
Bulldog
Investors, Phillip Goldstein and Andres Dakos
|
|
347,506
|
|
6.1%
|
60
Heritage Drive
|
|
|
|
|
Pleasantville,
NY 10570 (2)
|
|
|
|
|
(1) Based
upon information disclosed in a Form 13F dated November 13, 2007.
(2) Based
upon information disclosed in a Schedule 13D/A dated October 19,
2007.
Dollar
Range of Securities Held by Trustees and Nominees
Set
forth
below is the dollar range of equity securities beneficially owned (1) in both
the Trust
and Fund Complex by each trustee and each nominee for election as a trustee
of
the Trust as of October 31, 2007.(2)
|
Dollar
Range of
Equity
Securities
in
the Trust
(3).
|
|
Aggregate
Dollar Range
of
Equity Securities in
All
Funds Overseen or to
be
Overseen by the
Trustee
or Nominee
in
Fund Complex
(4).
|
|
|
|
|
Gordon
F. Ahalt
|
$10,001-$50,000
|
|
$10,001-$50,000
|
Elizabeth
C. Bogan, Ph.D.
|
$50,001-$100,000
|
|
over
$100,000
|
Thomas
H. Dinsmore
|
over
$100,000
|
|
over
$100,000
|
Daniel
D. Harding.
|
$10,001-$50,000
|
|
$10,001-$50,000
|
Jane
D. O’Keeffe
|
over
$100,000
|
|
over
$100,000
|
Nicolas
W. Platt
|
$10,001-$50,000
|
|
$10,001-$50,000
|
_______________________________
|
|
|
|
(1)
|
Beneficial
ownership has been determined based upon the trustee’s or nominee’s direct
or indirect pecuniary interest in the equity
securities.
|
(2)
|
The
dollar ranges are: None, $1-$10,000, $10,001-$50,000, $50,001-$100,000,
or
over $100,000.
|
(3)
|
The
dollar range of equity securities owned in the Trust is based on
the
closing price of $21.35 on October 31, 2007 on the American
Stock Exchange.
|
(4)
|
The
dollar range of equity securities owned in the Fund Complex is
based on
the closing price of $21.35 for the Trust and $8.52 for Ellsworth
Fund on
October 31, 2007 on the American Stock
Exchange.
|
Proxy
Solicitation
The
Trust
has engaged the services of The Altman Group (Solicitor) to assist in the
solicitation of proxies for the Annual Meeting. The Solicitor’s costs
are estimated to be in the aggregate approximately $40,000. The Trust
expects to solicit proxies principally by mail, but the Trust or the Solicitor
may also solicit proxies by telephone, facsimile or personal
interview. The Trust’s officers will not receive any additional or
special compensation for any such solicitation. The
Trust will pay the cost of soliciting proxies, the
printing and mailing of this Proxy Statement, the attached Notice of Annual
Meeting of Shareholders, the enclosed proxy card, and any further
solicitation.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act, Section 30(h) of the Investment Company Act, and
the regulations of the SEC thereunder, require the Trust’s officers and trustees
and direct or indirect beneficial owners of more than 10% of the Trust’s shares,
as well as Davis-Dinsmore, its directors and officers and certain of its
other
affiliated persons (collectively, Reporting Persons), to file initial reports
of
ownership and changes in ownership with the SEC. Reporting Persons
are required to furnish the Trust with copies of all Section 16(a) forms
they
file.
Based
solely on its review of the copies of such forms received by it and written
representations, the Trust believes that all filing requirements applicable
to
the Reporting Persons have been complied with during the fiscal year ended
October 31, 2007 except that a Form 4 covering a 2007 purchase of 250 shares
by
Germaine Ortiz (an officer of the Trust) was not filed in a timely
manner.
Shareholder
Proposals
If
you
want us to consider including a shareholder proposal in the Trust’s proxy
statement for the 2009 annual meeting of shareholders, we must receive it
from
you no later than August 29, 2008. To be eligible to submit a
proposal, you must demonstrate satisfaction of the requirements for making
shareholder proposals set forth in the proxy rules promulgated by the
SEC.
A
shareholder may bring other business before the 2009 Annual Meeting of
shareholders if: (1) the shareholder is a shareholder of record at the time
of
giving notice to the Trust; (2) the shareholder is entitled to vote at the
2009 Annual Meeting; (3) the shareholder has complied with the notice procedures
in the Trust’s bylaws, and (4) such other business is otherwise a proper matter
for action by shareholders. The notice procedures require that a
shareholder submit the proposal in writing to the Secretary of the Trust
no
earlier than October 15, 2008 and no later than November 14,
2008. The notice must include a brief description of the business
desired to be brought before the 2009 Annual Meeting, the reasons for conducting
such business at the 2009 Annual Meeting, and any material interest the
shareholder and any beneficial owners on whose behalf the proposal is made
may
have in such business. The notice must also include the shareholder’s
name and address as they appear on the Trust’s books (and the name and address
of any beneficial owner on whose behalf the proposal is made), as well as
the
number of shares owned of record and beneficially by such shareholder and
beneficial owner.
|
|
By
order of the Board of Trustees,
|
|
|
|
|
|
|
|
/s/ THOMAS
H. DINSMORE
|
|
|
|
Thomas
H. Dinsmore
|
|
|
|
Chairman
of the Board of Trustees
|
|
January
12, 2008
■
BANCROFT
FUND LTD
Annual
Meeting to be held February 11, 2008
This
Proxy is being solicited on behalf of the Board of
Trustees
The
undersigned hereby appoints Thomas H. Dinsmore, Gary I. Levine, and Jane
D.
O'Keeffe, and any one of them separately, attorneys and proxies, with full
power
of substitution in each, to vote and act on behalf of the undersigned at
the
annual meeting of shareholders of Bancroft Fund Ltd. (the "Trust") at The
Madison Hotel, located at One Convent Road in Morristown, New Jersey
07960 on February 11, 2008 at 9:30 a.m., and at all adjournments or
postponements thereof, with respect to the number of beneficial shares
which the
undersigned could vote if present, upon such subjects as may properly come
before the meeting, all as set forth in the notice of the meeting and the
proxy
statement furnished therewith. Unless otherwise marked on the
reverse hereof, this proxy is given WITH authority to vote FOR the trustees
listed on the reverse of this card, FOR the proposal to ratify the Audit
Committee's selection of independent accountants, and AGAINST the shareholder
proposal with respect to a monthly managed distribution policy. This proxy
also
delegates discretionary authority to vote with respect to any other business
that may properly come before the meeting or any adjournments or postponements
thereof.
PLEASE
FILLIN, DATE AND SIGN THE PROXYON THE OTHER SIDE
AND
RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE