<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Bancroft Convertible Fund, Inc.
------------------------------------------------------------------------
(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):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
[X] Fee paid previously with preliminary materials.
[_] 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:
Notes:
<PAGE>
BANCROFT CONVERTIBLE FUND, INC.
65 Madison Avenue, Morristown, New Jersey 07960
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 25, 1996
----------------
To The Shareholders:
A special meeting of shareholders of Bancroft Convertible Fund, Inc. (the
"Company") will be held on October 25, 1996 at 10:00 a.m. at the Morris County
Golf Club, 39 Punchbowl Road, Convent Station, New Jersey 07961, for the fol-
lowing purposes:
(1) To approve a new Investment Advisory Agreement between the Company
and Davis-Dinsmore Management Company.
(2) To transact such other business as may properly come before the meet-
ing.
Shareholders of record at the close of business on August 30, 1996 are enti-
tled to vote at the meeting and any adjournments. If you attend the special
meeting, you may vote your shares in person. If you do not expect to attend
the special meeting, please fill in, date, sign and return the proxy in the
enclosed envelope which requires no postage if mailed in the United States.
It is important that you return your signed proxy promptly so that a quorum
may be assured.
September 5, 1996
Thomas H. Dinsmore
Chairman of the Board of Directors
<PAGE>
BANCROFT CONVERTIBLE FUND, INC.
65 Madison Avenue, Morristown, New Jersey 07960
----------------
PROXY STATEMENT
----------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 25, 1996
----------------
The accompanying proxy is solicited by the Board of Directors of Bancroft
Convertible Fund, Inc. (the "Company"), in connection with a special meeting
of shareholders of the Company to be held at the Morris County Golf Club, 39
Punchbowl Road, Convent Station, New Jersey 07961 on October 25, 1996 (the
"Special Meeting"). A shareholder can revoke the proxy prior to its use by ap-
pearing at the Special Meeting and voting in person, by giving written notice
of such revocation to the Secretary of the Company, or by returning a subse-
quently dated proxy.
The Company has engaged the services of Morrow & Co., Inc. ("Morrow") to as-
sist it in the solicitation of proxies for the Special Meeting. The cost of
soliciting proxies will be borne by the Company. It is estimated that the cost
of Morrow's services will be approximately $9,000. The Company expects to so-
licit proxies principally by mail, but the company or Morrow may also solicit
proxies by telephone or personal interview. The Company may also pay persons
holding stock in their names, or those of their nominees, for their expenses
in sending proxies and proxy materials to beneficial owners or principals.
The Board of Directors has named Thomas H. Dinsmore, Chairman and Chief Ex-
ecutive Officer, Jane D. O'Keeffe, President, and Sigmund Levine, Senior Vice
President and Secretary of the Company, as proxies. Unless specific instruc-
tions are given to the contrary in the accompanying proxy, the proxies will
vote FOR the approval of the Investment Advisory Agreement. Abstentions and
broker non-votes received with respect to this proposal will be counted for
purposes of determining whether a quorum is present at the Special Meeting.
Abstentions and broker non-votes do not count as votes received but have the
same effect as casting a vote against a proposal that requires the vote of a
majority or other percentage of the shares present at the Special Meeting,
provided a quorum exists.
The Board of Directors currently knows of no other matters to be presented
to the Special Meeting. If any other matters properly come before the Special
Meeting, the proxies will vote in accordance with their best judgment. The
proxies may propose to adjourn the Special Meeting to permit further solicita-
tion of proxies. Any such adjournment will require the affirmative vote of a
majority of the shares present in person or by proxy at the Special Meeting.
The proxies will vote in favor of adjournment those proxies which instruct
them to vote in favor of any proposal to be considered at the adjourned meet-
ing, and will vote against adjournment those proxies which instruct them to
vote against or to abstain from voting on all proposals to be considered at
the adjourned meeting. Shareholders will be notified of any adjournment that
is later than November 24, 1996.
<PAGE>
Shareholders of record at the close of business on August 30, 1996 (the
"Record Date") will be entitled to one vote per share on all business of the
Special Meeting. The Company had 2,950,343 shares of its Common Stock out-
standing on the Record Date. It is expected that this proxy statement and ac-
companying proxy will be first sent to shareholders on or about September 5,
1996. Upon the request of any Shareholder, the Company will furnish, without
charge, a copy of the Company's annual report for the fiscal year ended Octo-
ber 30, 1995, together with the Company's semi-annual report for the six
months ended April 30, 1996. All such requests should be directed to Morrow &
Co. Inc., 909 Third Avenue, New York, NY 10022 at 1-800-662-5200.
The favorable vote of the holders of a "majority of the outstanding securi-
ties" of the Company, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act") is required to approve the new Investment Advisory
Agreement for the Company. The 1940 Act defines a "majority of the outstanding
voting securities" of the Company to mean the lesser of (a) the vote of hold-
ers of 67% or more of the shares of Common Stock of the Company present in
person or by proxy at the Special Meeting, if the holders of more than 50% of
the outstanding voting shares of the Company are present in person or by
proxy, or (b) the vote of the holders of more than 50% of the outstanding Com-
mon Stock of the Company.
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
INTRODUCTION
Shareholders are being asked to approve an Investment Advisory Agreement,
described below (the "New Advisory Agreement") that has no changes in terms
and conditions, no changes in fees and no changes in the way the Company is
managed, advised or operated. The necessity for obtaining shareholder approval
of the New Advisory Agreement arises because of the technical requirements of
the 1940 Act that apply to the share transfers described below under "Change
in Ownership of Davis- Dinsmore". As discussed under that caption, there have
been no changes in the operation of Davis- Dinsmore Management Company ("Da-
vis-Dinsmore"), the Company's investment advisor, which resulted from such
share transfers.
Davis-Dinsmore served as investment adviser to the Company from commencement
of the Company's operations until August 11, 1996 pursuant to an Amended In-
vestment Advisory Agreement (the "Prior Advisory Agreement") dated May 15,
1985. Public shareholders of the Company approved the Prior Advisory Agreement
on June 26, 1985. On October 26, 1995, the Board of Directors of the Company,
including a majority of the directors who are not interested persons of the
Company or Davis-Dinsmore (the "Independent Directors"), voted to continue the
Prior Advisory Agreement for an additional year. As of such date, two of the
Company's then-current directors owned shares of Davis-Dinsmore's outstanding
voting Common Stock: Mr. Ronald Dinsmore (85% of such stock); and Mr. Thomas
Dinsmore (10% of such stock).
Mr. Ronald Dinsmore passed away on August 11, 1996. Since he owned on such
date more than 25% of the outstanding voting shares of Common Stock of Davis-
Dinsmore, and such shares were automatically transferred to his estate, an
"assignment" of the Prior Advisory Agreement under the 1940 Act occurred. The
Prior Advisory Agreement terminated automatically upon its assignment as re-
quired by the 1940 Act. As described more fully below, in accordance with in-
heritance laws and the terms of
2
<PAGE>
Mr. Ronald Dinsmore's will, transfers of the outstanding shares of Davis-Dins-
more now held by Mr. Ronald Dinsmore's estate are expected to be made approxi-
mately as of the time of shareholder approval of the New Advisory Agreement.
Certain gifts of such shares are also expected to be made as of the same time.
See "Change in Ownership of Davis-Dinsmore."
At a meeting held on August 1, 1996, the Board of Directors of the Company,
including a majority of the Independent Directors, recognizing the health
problems of Mr. Ronald Dinsmore, approved an interim investment advisory
agreement (the "Interim Advisory Agreement") in accordance with Rule 15a-4 un-
der the 1940 Act, to become effective in the event of Mr. Ronald Dinsmore's
death. Such agreement became effective as of August 11, 1996. The terms of the
Interim Advisory Agreement are identical to those of the Prior Advisory Agree-
ment, although the Interim Advisory Agreement automatically terminates upon
the earlier of (1) 120 days after its effective date (or December 9, 1996) or
(2) shareholder approval of the New Advisory Agreement.
On August 1, 1996, the Board of Directors of the Company, including a major-
ity of the Independent Directors, also approved, subject to shareholder ap-
proval, the New Advisory Agreement. A copy of the New Advisory Agreement is
attached hereto as Exhibit A. In approving the New Advisory Agreement, the
Board of Directors took into account the share transfers described below under
"Change in Ownership of Davis-Dinsmore". The provisions of the Prior Advisory
Agreement and the New Advisory Agreement are identical. A description of both
such agreements (collectively, the "Advisory Agreements") is provided below
under "Terms of the Advisory Agreements." Such description is only a summary
and is qualified by reference to the attached Exhibit. The New Advisory Agree-
ment will become effective upon its approval by the Company's shareholders. In
the event shareholders do not approve the New Advisory Agreement, the Board of
Directors will be required to approve, subject to shareholder approval, an-
other advisory agreement for the Company.
CHANGE IN OWNERSHIP OF DAVIS-DINSMORE
Mr. Ronald Dinsmore and Mr. Bancroft G. Davis formed Davis-Dinsmore in 1970
to serve as the investment advisor to the Company, a closed-end management in-
vestment company whose shares are traded on the American Stock Exchange. Mr.
Ronald Dinsmore and Mr. Davis each owned 50% of Davis-Dinsmore's outstanding
voting stock until the death of Mr. Davis in 1981. Upon Mr. Davis' death, Da-
vis-Dinsmore repurchased the shares of Davis-Dinsmore then owned by Mr. Davis'
estate. From 1981 until 1993, Mr. Ronald Dinsmore was the sole owner of Davis-
Dinsmore. In each of 1993 and 1994, Mr. Ronald Dinsmore gave 5% of the out-
standing voting stock of Davis-Dinsmore to his son, Thomas H. Dinsmore. In
1995, Mr. Ronald Dinsmore gave 2.4%, and in 1996, gave 2.6%, of the outstand-
ing voting stock to Mr. Thomas Dinsmore. In 1994, Mr. Ronald Dinsmore gave 5%
of the outstanding voting stock to a daughter, Jane Dinsmore O'Keeffe. In
1995, Mr. Ronald Dinsmore gave 2.4%, and in 1996, gave 2.6%, of the outstand-
ing voting stock to Ms. O'Keeffe. Such gifts were made in recognition of past
services rendered by Mr. Thomas Dinsmore and Ms. O'Keeffe to Davis-Dinsmore
and services to be provided by such individuals to Davis-Dinsmore in the fu-
ture.
Mr. Ronald Dinsmore was Chairman of Davis-Dinsmore from August 1988 until
his death in August 1996. Mr. Thomas Dinsmore was President of Davis-Dinsmore
from August 1988 through August 1996 and now serves as its Chairman and Chief
Executive Officer. Mr. Thomas Dinsmore has been a director of Davis-Dinsmore
since April 1994. Ms. O'Keeffe was Executive Vice President of Davis-Dinsmore
from April 1994 through August 1996 and now serves as its President. Ms.
O'Keeffe has been a director of Davis-Dinsmore since July 1996.
3
<PAGE>
On June 28, 1996, the Board of Directors of Davis-Dinsmore declared and paid
a stock dividend of one share of non-voting Common Stock ("Class B Shares")
for every share of voting Common Stock ("Class A Shares") outstanding. As a
result of such stock dividend, as of June 30, 1996, Mr. Ronald Dinsmore owned
75% of the outstanding Class A Shares and 75% of the outstanding Class B
Shares, Mr. Thomas Dinsmore owned 15% of the outstanding Class A Shares and
15% of the outstanding Class B Shares, and Ms. O'Keeffe owned 10% of the out-
standing Class A Shares and 10% of the outstanding Class B Shares.
Mr. Ronald Dinsmore passed away on August 11, 1996. As of such date, Mr.
Dinsmore's estate owned 75% of the outstanding Class A shares and 75% of the
outstanding Class B Shares. Mr. Thomas Dinsmore and Ms. Jane O'Keeffe each
will receive directly from Mr. Ronald Dinsmore's estate approximately 14.4% of
the outstanding Class A Shares. Ms. Sally Dinsmore Finnican will receive di-
rectly from such estate approximately 14.4% of the outstanding Class B Shares.
Mrs. Jean Dinsmore, Mr. Ronald Dinsmore's widow, will receive the balance of
the Class A Shares and the Class B Shares, but intends to give to each of Mr.
Thomas Dinsmore and Ms. Jane O'Keeffe approximately 11.2% of the outstanding
Class A Shares.
As a result of these transfers (the "Transfers"), all of which are scheduled
to occur approximately as of the time of shareholder approval of the New Advi-
sory Agreement, Mr. Thomas Dinsmore will own 40.6% of the outstanding Class A
Shares and 15% of the outstanding Class B Shares; Ms. O'Keeffe will own 35.6%
of the outstanding Class A Shares and 10% of the outstanding Class B Shares;
Mrs. Jean Dinsmore will own 23.8% of the outstanding Class A Shares and 60.6%
of the outstanding Class B Shares and Ms. Sally Finnican will own 14.4% of the
outstanding Class B Shares.
Davis-Dinsmore has represented to the Board of Directors of the Company that
it does not contemplate any changes to the day-to-day management or operation
of Davis-Dinsmore relating to the Company, the personnel managing the Company
or other services to, or business activities with respect to, the Company as a
result of the Transfers. Davis-Dinsmore does not expect the Transfers to re-
sult in changes in the business, corporate structure, financial condition or
senior management or personnel of Davis-Dinsmore or in the manner in which Da-
vis-Dinsmore renders services to the Company, although changes in the ordinary
course of business may occur.
BOARD OF DIRECTORS EVALUATION
The Board of Directors of the Company, including a majority of the Indepen-
dent Directors, has determined that by approving the New Advisory Agreement on
behalf of the Company, the Company can best assure itself that the services
currently provided by Davis-Dinsmore will continue after the Transfers without
interruption or change. The Board of Directors has determined that, as with
the Prior Advisory Agreement, the New Advisory Agreement will enable the Com-
pany to continue to obtain services of high quality at a cost deemed appropri-
ate, reasonable and in the best interest of the Company and its shareholders.
In evaluating the New Advisory Agreement, the Board of Directors of the Com-
pany took into account that there are no differences between the terms and
conditions of the Company's Prior Advisory Agreement and the New Advisory
Agreement, including the terms relating to the services to be provided by Da-
vis-Dinsmore and the fees and expenses payable by the Company.
4
<PAGE>
The Board of Directors also considered the terms of the Transfers, including
the possible effects of the Transfers upon Davis-Dinsmore and upon the ability
of Davis-Dinsmore to provide advisory services to the Company. The Board of
Directors also considered the effect on the continuing management of Davis-
Dinsmore of its ownership in Davis-Dinsmore.
Based upon its review, the Board of Directors of the Company concluded that
the New Advisory Agreement is in the best interest of the Company and the
Company's shareholders. The Board also concluded that as a consequence of the
Transfers, the operations of Davis-Dinsmore and its ability to provide serv-
ices to the Company would not be diminished. Accordingly, after considering
the factors they deemed relevant, the Board of Directors of the Company, in-
cluding a majority of the Independent Directors, approved the New Advisory
Agreement to take effect upon the receipt of shareholder approval and voted to
recommend its approval to the shareholders of the Company.
As of the dates on which the Board of Directors evaluated the New Advisory
Agreement, three of the Company's then-current directors owned Class A Shares
of Davis-Dinsmore: Mr. Ronald Dinsmore (75% of Class A Shares); Mr. Thomas
Dinsmore (15% of Class A Shares); and Ms. O'Keeffe (10% of Class A Shares).
TERMS OF THE ADVISORY AGREEMENTS
Although the Prior Advisory Agreement has terminated and the New Advisory
Agreement has not become effective, both Advisory Agreements are described be-
low as if they are in effect. Under the Advisory Agreements, Davis-Dinsmore
furnishes the Company with investment information and advice and makes recom-
mendations with respect to the purchase and sale of investments based upon the
Company's investment policies. Although the Company's investment decisions are
based in large measure upon recommendations of Davis-Dinsmore, the Company's
officers have sole responsibility for investment decisions, subject to the
control of the Board of Directors.
Davis-Dinsmore pays for the Company's office space and facilities and the
salaries of the Company's officers. Under the Advisory Agreements, all of the
costs associated with personnel and certain non-personnel expenses of the of-
fice of the Treasurer, up to a maximum of $50,000 a year, are reimbursed by
the Company. Davis-Dinsmore is currently voluntarily waiving its right to be
reimbursed to the extent such expenses of the office of the Treasurer exceed
$25,000 a year. Such waiver may be revoked by Davis-Dinsmore at any time. The
Company pays all of its expenses not assumed by Davis-Dinsmore including ex-
penses in connection with the offering of its securities, fees and expenses of
unaffiliated directors, taxes, fees and commissions of all types, fees of its
custodian, registrar, transfer agent and dividend disbursing agent, and inter-
est, brokerage commissions, legal and accounting expenses and the like. The
Company is required to pay or reimburse Davis-Dinsmore for the direct costs of
postage, printing, copying and travel expenses attributable to the conduct of
the business of the Company. For the Company's fiscal year ended October 30,
1995, the Company paid Davis-Dinsmore $504,164 for advisory fees and reim-
bursed Davis-Dinsmore $25,000 for expenses associated with the Treasurer's of-
fice and $724 for expenses associated with postage, printing, copying and
travel expenses attributable to the conduct of the business of the Company.
The Advisory Agreements provide for a monthly fee to Davis-Dinsmore computed
at an annual rate of 3/4 of 1% of the first $100,000,000 of net assets and 1/2
of 1% of the excess over $100,000,000. The Advisory Agreements provide that
the annual fee payable by the Company to Davis-Dinsmore shall be
5
<PAGE>
reduced to the extent that the Company's ordinary expenses for the year (in-
cluding the advisory fee, but excluding extraordinary items, interest and lo-
cal, state and Federal taxes) exceed 1.5% of the first $100,000,000 of the av-
erage of the monthly net asset values for the twelve months of each year and
1% of the excess over $100,000,000 of the average of the monthly net asset
values. What constitutes an "extraordinary item" rather than an ordinary ex-
pense is conclusively determined by the independent directors of the Company
(directors who are not interested persons of the Company or Davis-Dinsmore)
and does not involve the participation of the Company's auditors. The Company
did not exceed the Expense Limitations during the last fiscal year.
The Advisory Agreements may be terminated without penalty either by the Com-
pany, by the action of the shareholders or Board of Directors, or Davis-Dins-
more on 60 days written notice and will terminate automatically in the event
of any assignment, as defined by the 1940 Act. The Advisory Agreements con-
tinue from year to year so long as their continuance is specifically approved
at least annually either (i) by the Board of Directors of the Company or (ii)
by the vote of a majority of the Company's outstanding voting securities, as
defined by the 1940 Act, provided that in either event the continuance is also
approved by the vote of a majority of the directors of the Company who are not
interested persons of the Company or of Davis-Dinsmore, cast in person at a
meeting called for the purpose of voting on such approval.
INFORMATION CONCERNING DAVIS-DINSMORE
Davis-Dinsmore was organized in 1970, and advises the Company and Ellsworth
Convertible Growth and Income Fund, Inc. ("Ellsworth"). As of August 26, 1996,
total assets of the Company were approximately , and total assets of Ells-
worth were approximately $ . The advisory agreement between Ellsworth and
Davis-Dinsmore (the "Ellsworth Advisory Agreement") provides for a monthly fee
to Davis-Dinsmore computed at an annual rate of 3/4 of 1% of the first
$100,000,000 of net assets and 1/2 of 1% of the excess over $100,000,000. An
advisory fee of .75% is higher than that paid by many other open-end and
closed-end investment companies. Of the three other comparable closed-end con-
vertible funds, the fee paid by Ellsworth is approximately the same as two and
slightly higher than the third. The Ellsworth Advisory Agreement provides that
the annual fee payable by Ellsworth to Davis-Dinsmore shall be reduced to the
extent that Ellsworth's ordinary expenses for the year (including the advisory
fee, but excluding interest, local, state and Federal taxes and extraordinary
expenses as determined by a majority of Ellsworth's directors who are not in-
terested persons of Ellsworth or Davis-Dinsmore) exceed 1.5% of the first
$100,000,000, and 1% of the excess over $100,000,000, of the average of the
monthly net asset values for the twelve months of each fiscal year. For
Ellsworth's fiscal year ended September 30, 1995, Ellsworth paid Davis-Dins-
more $474,860 for advisory fees and $25,000 for reimbursement of expenses as-
sociated with the Treasurer's Office. Ellsworth did not exceed the Expense
Limitations during the last fiscal year.
Davis-Dinsmore pays for Ellsworth's office space and facilities and the sal-
aries of Ellsworth's executive officers and furnishes clerical, bookkeeping
and statistical services to Ellsworth. Under the Ellsworth Advisory Agreement,
Ellsworth reimburses Davis-Dinsmore all of the costs associated with certain
personnel and non-personnel expenses of the office of the Treasurer, up to a
maximum of $25,000 per year. Ellsworth pays all of its expenses not assumed by
Davis-Dinsmore, including expenses in connection with the offering of its se-
curities, fees and expenses of unaffiliated directors, salaries of any employ-
ees other than executive officers, taxes, fees and commissions of all types,
fees of its
6
<PAGE>
custodian, registrar, transfer agent and dividend disbursing agent and inter-
est, brokerage commissions, legal and accounting expenses and the like. Ells-
worth is required to pay or reimburse Davis-Dinsmore for the direct costs of
postage, printing, copying and travel expenses attributable to the conduct of
the business of Ellsworth. In fiscal 1995, Ellsworth reimbursed Davis-Dinsmore
$684 for such expenses.
Davis-Dinsmore's offices are located at 65 Madison Avenue, Morristown, New
Jersey 07960. The directors of Davis-Dinsmore are Mr. Thomas H. Dinsmore, Mrs.
Jean Dinsmore and Ms. Jane D. O'Keeffe. Mr. Thomas Dinsmore is Chairman, Chief
Executive Officer and Senior Analyst of Davis-Dinsmore, and is a director,
Chairman and Chief Executive Officer of each of the Company and Ellsworth.
Mrs. Jean Dinsmore is a Republican committeewoman for the State of New Jersey.
Ms. Jane O'Keeffe is President of Davis-Dinsmore and is a director and Presi-
dent of each of the Company and Ellsworth. All of such persons can be reached
c/o Davis-Dinsmore, 65 Madison Avenue, Morristown, New Jersey 07960. Certain
officers of Davis-Dinsmore are also officers of the Company. The names, prin-
cipal occupations and affiliations of the executive officers of the Company
are shown below under "General Information--Directors and Executive Officers
of the Company".
Davis-Dinsmore is a privately held corporation. See "Change of Ownership of
Davis-Dinsmore".
RECOMMENDATION OF DIRECTORS
The Board of Directors recommends that you vote FOR the approval of the New
Investment Advisory Agreement.
7
<PAGE>
GENERAL INFORMATION
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors of the Company are elected to serve for a three year term and until
their successors are elected and qualified. Officers of the Company serve at
the pleasure of the Board and until their successors are elected and qualified.
Set forth below is certain information regarding the directors and executive
officers of the Company.
<TABLE>
<CAPTION>
(1) PRINCIPAL OCCUPATION OR
BUSINESS DURING SERVED AS
PAST FIVE YEARS AND (2) CURRENT DIRECTOR
NAME AGE DIRECTORSHIPS SINCE
---- --- ------------------------------- ---------
<C> <C> <S> <C>
Thomas H. Dinsmore* 43 (1) Since August 1996, Chairman 1985
and Chief Executive Officer
of the Company, Ellsworth
and Davis-Dinsmore. From
November 1985 to August
1996, President of the
Company. From May 1986 to
August 1996, President of
Ellsworth. Since April 1994,
Director of Davis-Dinsmore.
From August 1988 to August
1996, President of Davis-
Dinsmore. Since February
1983, Senior Analyst of
Davis-Dinsmore.
(2) Director of Ellsworth.
Jane D. O'Keeffe* 41 (1) Since August 1996, President 1995
of the Company, Ellsworth
and Davis-Dinsmore. From
February 1996 to August
1996, Executive Vice
President of the Company.
From January 1996 to August
1996, Executive Vice
President of Ellsworth. From
April 1994 to February 1996,
Vice President of the
Company. From April 1994 to
January 1996, Vice President
of Ellsworth. From April
1994 to August 1996,
Executive Vice President of
Davis-Dinsmore. From October
1988 to March 1994, Vice
President, Fiduciary Trust
International.
(2) Director of Ellsworth.
Gordon F. Ahalt 68 (1) Since January 1982, 1982
President, G.F.A. Inc.
(petroleum industry
consulting). Since 1987,
Consultant W.H. Reaves &
Co., Inc. (asset
management).
(2) Director of Ellsworth; The
Harbinger Group
(investments); Cal Dive
International (diving
service); and The Houston
Exploration Company (oil and
gas exploration).
William A. Benton 62 (1) Since January 1991, limited 1994
partner of Gavin, Benton &
Co. (New York Stock Exchange
specialist firm). Since
January 1991, Partner in BE
Partners (small options
market maker). From June
1986 to December 1990,
partner of Benton & Co. (New
York Stock Exchange
specialist firm).
(2) Director of Ellsworth.
Elizabeth C. Bogan, Ph.D. 51 (1) Since September 1992, Senior 1990
Lecturer in Economics at
Princeton University. From
September 1971 to July 1992,
Professor of Economics at
Fairleigh Dickinson
University.
(2) Director of Ellsworth.
Donald M. Halsted, Jr. 69 (1) Since October 1983, self- 1970
employed businessman.
(2) Director of Ellsworth and
Aquarian Company (water
company).
George R. Lieberman 73 (1) Retired; Prior to January 1987
1988, Chief Executive
Officer, Lieberman-Applucci
(advertising); and
President, Interspace
Airport Advertising
(advertising).
(2) Director of Ellsworth.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
(1)PRINCIPAL OCCUPATION OR BUSINESS DURING DIRECTOR
NAME AGE PAST FIVE YEARS AND (2) CURRENT DIRECTORSHIPS SINCE
---- --- --------------------------------------------- ----------
<C> <C> <S> <C>
Sigmund Levine 69 (1) Since February 1996, Senior Vice President Not
of the Company, and since January 1996, Applicable
Senior Vice President of Ellsworth. From
April 1993 to February 1996, Executive
Vice President, and since November 1982,
Secretary of the Company and Secretary and
Treasurer of Davis-Dinsmore. From November
1982 to April 1993, Treasurer of the
Company. From April 1993 to January 1996,
Executive Vice President, and since May
1986, Secretary of Ellsworth. From May
1986 to April 1993, Treasurer of
Ellsworth.
H. Tucker Lake 48 (1) Since April 1994, Vice President, Trading Not
of the Company and of Ellsworth. Prior Applicable
thereto, Sales Associate, Coldwell Banker,
Schlott Realtors.
Gary Levine 39 (1) Since April 1993, Treasurer of the Company Not
and of Ellsworth. Since June 1986, Applicable
Assistant Secretary of the Company and of
Ellsworth. Since April 1994, Assistant
Secretary and Assistant Treasurer of
Davis-Dinsmore.
</TABLE>
- --------
* Mr. Thomas Dinsmore is an "interested person" of the Company and Davis-Dins-
more, as defined by the 1940 Act because he is an officer of the Company and
an officer, director and holder of more than 5% of the issued and outstand-
ing Class A Shares of Davis-Dinsmore. Ms. O'Keeffe is an interested person
of the Company and Davis-Dinsmore because she is an officer of the Company
and an officer, director and holder of more than 5% of the issued and out-
standing Class A shares of Davis-Dinsmore.
Security Ownership of Management. The following table sets forth certain in-
formation regarding the ownership of the Company's shares of Common Stock by
the current directors, director emeritus and officers of the Company.
<TABLE>
<CAPTION>
SHARES OF
COMPANY OWNED
BENEFICIALLY
AUGUST 30, 1996*
----------------
<S> <C>
Thomas H. Dinsmore............................................. 4,395(1)
Gordon F. Ahalt................................................ 551
William A. Benton.............................................. 1,191
Elizabeth C. Bogan, Ph.D. ..................................... 1,000
Donald M. Halsted, Jr. ........................................ 1,836
George R. Lieberman............................................ 811
Jane D. O'Keeffe............................................... 3,102
Duncan O. McKee(2)............................................. 1,031(2)
Sigmund Levine................................................. 681
H. Tucker Lake................................................. 110(3)
Gary I. Levine................................................. 449
</TABLE>
- --------
* Represents for each director, director emeritus and officer less than 1% of
the outstanding shares of Common Stock of the Company. As of August 30,
1996, the directors, director emeritus and officers of the Company benefi-
cially owned in the aggregate 15,157 shares of Common Stock of the Company
representing approximately .5% of the shares outstanding. Except as other-
wise indicated, each director, director emeritus and officer possessed sole
investment and voting power with respect to shares of Common Stock benefi-
cially owned.
9
<PAGE>
(1) Mr. Thomas Dinsmore possessed sole investment and voting power with re-
spect to 1,754 shares of Common Stock beneficially owned by him and pos-
sessed shared investment and voting power with respect to 2,641 shares of
Common Stock beneficially owned by him. The number of shares of Common
Stock of the Company owned by Mr. Thomas Dinsmore does not include 1,408
shares owned by his wife, as to which shares Mr. Thomas Dinsmore disclaims
beneficial ownership.
(2) Mr. Duncan McKee has served as Director Emeritus of the Company since
1988. As Director Emeritus, Mr. McKee attends Board of Directors meetings
but does not vote on any matters before the Board. Mr. McKee, who is pres-
ently retired, was previously a partner in the law firm of Ballard Spahr
Andrews & Ingersoll.
(3) Mr. H. Tucker Lake possessed shared investment and voting power with re-
spect to 110 shares of Common Stock beneficially owned by his wife.
Principal Holders of the Company's Stock. The Company knows of no beneficial
owners of more than 5% of the Company's outstanding Common Stock.
SHAREHOLDER PROPOSALS
To be considered in the Company's proxy statement and proxy for the 1998 an-
nual meeting of shareholders, shareholder proposals must be received no later
than August 31, 1997.
OTHER BUSINESS
The management knows of no business to be presented to the Special Meeting
other than the matters set forth in this proxy statement.
By order of the Board of Directors,
Thomas H. Dinsmore
Chairman of the Board of Directors
September 5, 1996.
10
<PAGE>
EXHIBIT A
BANCROFT CONVERTIBLE FUND, INC.
INVESTMENT ADVISORY AGREEMENT
August 1, 1996
DAVIS-DINSMORE MANAGEMENT COMPANY
65 Madison Avenue
Morristown, New Jersey 07960
Gentlemen:
The undersigned, Bancroft Convertible Fund, Inc., a Delaware corporation
(the "Company"), is an investment company registered under the Investment
Company Act of 1940 (the "Act"). The Company is a diversified closed-end
investment company, and invests and reinvests its assets. The Company hereby
engages you to act as its Investment Adviser and to supervise certain of its
affairs, subject to the terms and conditions herein set forth.
Section 1. Advisory Services. The Company will from time to time furnish to
you detailed statements of its investments and resources and information as to
its investment needs, and will make available to you such financial reports,
proxy statements, legal and other information relating to its investments as
may be in the possession of the Company or available to it. You shall, at your
expense, furnish to the Company, at the regular executive offices of the
Company, continuing investment information, advice and recommendations with
respect to the purchase and sale of investments and the making of commitments
with respect thereto. In giving such advice and making such recommendations,
you shall be guided by the Company's investment policy as delineated by the
statements contained in the various documents filed with the Securities and
Exchange Commission as such documents may from time to time be amended. You
shall place at the disposal of the Company such statistical, research,
analytical and technical services, information and reports as may reasonably
be required. Your advice and recommendations with respect to the purchase and
sale of investments and the making of investment commitments shall be
submitted at the principal office of the Company to an officer or officers of
the Company designated for that purpose by the Board of Directors of the
Company. Such officer or officers shall have, subject to the control of the
Company's Board of Directors, sole responsibility for investment decisions,
and full authority to act upon your advice and recommendations and to place
orders on behalf of the Company for the purchase and sale of portfolio
securities. Reports of portfolio transactions shall be made monthly to the
Board of Directors of the Company.
Section 2. Independent Contractor. You shall, for all purposes hereof, be
deemed to be an independent contractor and shall have no authority to act for
or represent the Company unless otherwise provided. No agreement, bid, offer,
commitment, contract or other engagement entered into by you, whether on your
behalf or whether purported to have been entered into on behalf of the
Company, shall be binding upon the Company, and all acts authorized to be done
by you under this contract shall be done by you as an independent contractor
and not as agent.
<PAGE>
Section 3. Expenses. To the extent described in this Section 3, you shall
provide the Company with office space and facilities, pay the salaries of its
executive officers and furnish clerical, bookkeeping and statistical services
to the Company.
The Company will pay all expenses incurred by it and not assumed by you
including, but not by way of limitation, expenses in connection with its
organization and with the offering of its securities; fees and expenses of its
unaffiliated directors; salaries of employees other than executive officers;
the compensation and related personnel expenses of the Treasurer of the
Company and all personnel working under the Treasurer's direction and the
expenses of office space, facilities, and equipment used by the Treasurer and
such personnel in performance of their duties to the Company in an aggregate
amount not to exceed $50,000 per year; legal and accounting fees, fees of
custodian, registrar, transfer agents and dividend disbursing agents; taxes,
interest, brokerage commissions; direct costs of postage, printing, copying
and travel expenses attributable to the conduct of the business of the
Company, etc. You shall assume and pay all expenses incurred by you in
performance of this contract.
Section 4. Compensation. As compensation for these services, the Company
will pay to you on the last day of each month a fee for such month computed at
an annual rate of 3/4 of 1% of the first $100,000,000 and 1/2 of 1% of the
excess over $100,000,000 of the Company's net asset value in such month,
subject to reduction as follows: the annual fee payable shall be reduced to
the extent the Company's ordinary expenses for the year (including your fee
but excluding interest, local, state and Federal taxes on the Company and
extraordinary items) exceed 1.5% of the first $100,000,000 and 1% of the
excess over $100,000,000 of the average of the monthly net asset values of the
Company for the twelve months of such year. You will promptly refund any
amount theretofore paid in excess of the fee determined to be due for such
year. For the purpose of calculation of the fee, the net asset value for a
month will be the average of the Company's net asset values at the close of
business on the last business day on which the New York Stock Exchange is open
in each week in the month. The determination of what constitutes an
"extraordinary item" rather than an ordinary expense shall be conclusively
determined by the directors of the Company who are not "interested persons" of
either the Company or you, as defined by the Act.
If this contract shall become effective subsequent to the first day of a
month, or shall terminate before the last day of a month, your compensation
for such fraction of the monthly period shall be determined by applying the
foregoing percentage to the net asset value of the Company during such
fraction of a monthly period (which net asset value shall be determined in
such reasonable manner as the Board of the Company shall deem appropriate) and
in the proportion that such fraction of a monthly period bears to the entire
month.
Compensation under this contract will begin to accrue on its effective date.
Section 5. Approval of Contract; Termination. This contract will be
submitted to the Company's shareholders for approval. If approved by the vote
of a majority of the Company's outstanding shares of common stock as defined
in the Act, the contract will be in effect from the date of approval. Unless
terminated by either party, this contract will continue in force from year to
year so long as the continuance is specifically approved at least annually
either (i) by the Board of Directors of the Company or (ii) by the vote of a
majority of the outstanding voting securities of the Company as defined in the
Act, provided that in either event the contract is also approved by the vote
of a majority of the
A-2
<PAGE>
directors of the Company who are not interested persons, as defined in the
Act, of the Company or of you, cast in person at a meeting called for the
purpose of voting on such approval. The contract is terminable without penalty
by either party on sixty days' written notice and will terminate automatically
in the event of any assignment.
Except as specified above, this contract may not be amended, transferred,
assigned, sold or in any other manner hypothecated or pledged; provided, that
this limitation shall not prevent any minor amendments to the contract which
may be required by Federal or state regulatory bodies.
Section 6. Liability. You shall give the Company the benefit of your best
judgment and efforts in rendering the services set forth herein, and the
Company agrees as an inducement to the undertaking of these services by you
that you shall not be liable for any error of judgment or for any loss
suffered by the Company in connection with any matters to which this contract
relates except that nothing herein contained shall be construed to protect you
against any liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties or by reckless disregard of your
obligations or duties under this contract.
Section 7. Multiple Capacities. Except to the extent necessary for
performance of your obligations hereunder, nothing shall restrict your right
or any of your directors, officers or employees who may be directors, officers
or employees of the Company to engage in any other business or to devote time
and attention to the management or other aspects of any other business whether
of a similar or dissimilar nature or to render services of any kind to any
other corporation, firm, individual or association.
It is understood and agreed that the directors, officers, agents, employees
and shareholders of the Company may be interested in your company as
directors, officers, shareholders, employees, agents or otherwise, and the
directors, officers, agents, employees and shareholders of your company may be
interested in the Company as a shareholder or otherwise.
Section 8. Concerning Applicable Provisions of Law, Etc. This contract shall
be subject to all applicable provisions of law, including, but not limited to,
the applicable provisions of the Act; and, to the extent that any provisions
herein contained conflict with any such applicable provisions of law, the
latter shall control.
The laws of the State of New York shall, except to the extent that any
applicable provisions of some other law shall be controlling, govern the
construction, validity and effect of this contract.
The headings preceding the text of the several sections herein are inserted
solely for convenience of reference and shall not affect the meaning,
construction or effect of this contract.
A-3
<PAGE>
If the contract set forth herein is acceptable to you, please so indicate by
executing the enclosed copy of this letter and returning the same to the
undersigned, whereupon this letter shall constitute a binding contract between
the parties hereto, subject to approval provided for in Section 5.
Yours very truly,
BANCROFT CONVERTIBLE FUND, INC.
By /s/ Thomas H. Dinsmore
-----------------------------------
(President)
(Corporate Seal)
Attest /s/ Sigmund Levine
-------------------------------
(Secretary)
DAVIS-DINSMORE MANAGEMENT COMPANY
By /s/ Thomas H. Dinsmore
-----------------------------------
(President)
Attest /s/ Sigmund Levine
--------------------------------
(Secretary)
(Corporate Seal)
A-4
<PAGE>
- --------------------------------------------------------------------------------
BANCROFT CONVERTIBLE FUND, INC.
Special Meeting to be held October 25, 1996
This Proxy is being solicited on behalf of the Board of Directors
The undersigned appoints Thomas H. Dinsmore, Jane D. O'Keeffe and
Sigmund Levine, and each of them, attorneys and proxies, with power of
substitution in each, to vote and act on behalf of the undersigned at the
special meeting of shareholders of Bancroft Convertible Fund, Inc. (the
"Company") at the Morris County Golf Club, 39 Punchbowl Road, Convent Station,
New Jersey 07961 on October 25, 1996 at 10:00 a.m., and at all adjournments,
according to the number of shares of Common Stock 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 confers
authority to vote FOR the proposal to approve the new Investment Advisory
Agreement.
PLEASE FILL IN, DATE AND SIGN THE PROXY ON THE OTHER SIDE AND RETURN IT PROMPTLY
IN THE ACCOMPANYING ENVELOPE.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
