BANCROFT CONVERTIBLE FUND INC, N-2/A, 1997-02-28

BANCROFT CONVERTIBLE FUND INC
N-2/A, 1997-02-28

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<PAGE> 1
As filed with the Securities and Exchange Commission on February 28, 1997
-------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

Amendment No. 18
to
FORM N-2
File No. 811-2151

REGISTRATION STATEMENT
Dated February 28, 1997,

Pursuant to Section 8 of the Investment Company Act of 1940
Bancroft Convertible Fund, Inc.
-------------------------------
(Exact Name of Registrant as Specified in Charter)

65 Madison Avenue, Morristown, New Jersey 07960
-----------------------------------------------
(Address of Principal Executive Offices, including Number, Street, City,
State, Zip Code)

(201) 631-1177
--------------
(Registrant's Telephone Number, including Area Code)

Thomas H. Dinsmore
Chief Executive Officer
Bancroft Convertible Fund, Inc.
65 Madison Avenue
Morristown, NJ 07960
--------------------
(Name and Address of Agent for Service)

Copies to:

Martha J. Hays, Esquire
Ballard Spahr Andrews & Ingersoll
1735 Market Street
Philadelphia, PA 19103-7599
(215) 665-8500

If appropriate, check the following box:

___ This amendment designates a new effective date for a previously filed
registration statement.

___ This Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is _________.

<PAGE> 2
BANCROFT CONVERTIBLE FUND, INC.

FORM N-2 CROSS REFERENCE SHEET
(as required by Rule 495)

<TABLE>
<CAPTION>
PART A:
N-2 Item Number Prospectus Location
- --------------- -------------------
<S> <C> <C>
Item 1. Outside Front Cover......................................... Not Applicable

Item 2. Inside Front and Outside Back Cover......................... Not Applicable

Item 3. Fee Table and Synopsis...................................... Introduction; Table
of Fees and Expenses

Item 4. Financial Highlights........................................ Not Applicable

Item 5. Plan of Distribution........................................ Not Applicable

Item 6. Selling Shareholders........................................ Not Applicable

Item 7. Use of Proceeds............................................. Not Applicable

Item 8. General Description of the Registrant....................... General Descrip-tion
of Registrant; Share
Price Data; Open
Market Purchases

Item 9. Management.................................................. Management

Item 10. Capital Stock, Long-Term Debt, and
Other Securities.......................................... Description of
Capital Stock; Tax
Matters
Item 11. Defaults and Arrears on
Senior Securities......................................... Not Applicable

Item 12. Legal Proceedings........................................... Legal Proceedings

Item 13. Table of Contents of the Statement
of Additional Information................................. Contents of the
Statement of
Additional
Information
</TABLE>

<PAGE> 3
<TABLE>
<CAPTION>
PART B:
N-2 Item Number SAI Location
- --------------- ------------
<S> <C> <C>
Item 14. Cover Page.................................................. Cover Page

Item 15. Table of Contents........................................... Table of Contents

Item 16. General Information and History............................. General Informa-tion
and History

Item 17. Investment Objective and Policies........................... Investment Objective
and Policies;
Repurchase
Agreements; Trading
and Portfolio
Turnover

Item 18. Management.................................................. Management

Item 19. Control Persons and Principal
Holders of Securities..................................... Control Persons and
Principal Holders of
Securities

Item 20. Investment Advisory and Other Services...................... Investment Advisory
and Other Services;
Custody of Assets;
Transfer Agent;
Independent Auditors

Item 21. Brokerage Allocation and Other Practices.................... Brokerage Allocation
and Other Practices

Item 22. Tax Status.................................................. Tax Status

Item 23. Financial Statements........................................ Financial
Statements
</TABLE>

PART C:
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.

<PAGE> 4
BANCROFT CONVERTIBLE FUND, INC.

PROSPECTUS DATED FEBRUARY 28, 1997

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Introduction....................................................... A-1
Table of Fees and Expenses......................................... A-2
General Description of Registrant.................................. A-3
General.................................................. A-3
Investment Objectives and Policies....................... A-3
Discussion of Convertible Securities..................... A-5
Risk Factors............................................. A-6
Share Price Data; Open Market Purchases............................ A-7
Share Price Data......................................... A-7
Open Market Purchases.................................... A-7
Management......................................................... A-8
Board of Directors....................................... A-8
Investment Adviser....................................... A-8
Custodian; Transfer Agent................................ A-9
Control Persons.......................................... A-9
Description of Capital Stock....................................... A-9
Common Stock............................................. A-9
Anti-Takeover Provisions................................. A-10
Dividend Reinvestment and Cash Purchase Plans............ A-11
Long-Term Debt........................................... A-12
Tax Matters........................................................ A-12
Qualification as a Regulated Investment Company.......... A-12
Distributions............................................ A-12
Share Repurchases ....................................... A-12
Legal Proceedings.................................................. A-12
Contents of the Statement of Additional Information................ A-13
</TABLE>

INTRODUCTION

Bancroft Convertible Fund, Inc. ("Bancroft") is a closed-end,
diversified investment management company. Bancroft was incorporated under the
laws of the State of Delaware on September 10, 1970. Its principal offices are
located at 65 Madison Avenue, Suite 550, Morristown, New Jersey 07960.

Bancroft invests primarily in convertible securities with the
objectives of providing income and

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the potential for capital appreciation (which objectives Bancroft considers to
be relatively equal due to the nature of the securities in which it invests).
These objectives may be changed without stockholder approval.

Bancroft intends to seek its objectives by investing at least 80% of
the market value of its total assets, excluding cash and government securities,
in debt securities and preferred stocks which are convertible into, or carry the
right to purchase, common stock or other equity securities. The debt security or
preferred stock may itself be convertible into or exchangeable for equity
securities, or the conversion privilege may be evidenced by warrants attached to
the security or acquired as part of a unit with the security. The convertible
security may be structured so that it is convertible at the option of the holder
or of the issuer, or subject to mandatory conversion. The remainder of
Bancroft's total assets may be invested in other securities, including
non-convertible preferred stocks and investment grade debt securities, common
stock received upon conversion or exchange of securities, options, warrants,
securities of the U.S. Government, its agencies and instrumentalities or
repurchase agreements, or they may be held as cash. Bancroft is not required to
sell securities for the purpose of assuring that 80% of its total assets are
invested in convertible securities.

TABLE OF FEES AND EXPENSES

<TABLE>
<S> <C>
Shareholder Transaction Expenses
Cash Purchase Plan Fees..................................... $3.00 (1)

Annual Expenses
(as a percentage of net assets attributable to common shares)

Management Fees............................................. .75%
Other Expenses ............................................. .49%
-----
Total Annual Expenses....................................... 1.24%
-----
</TABLE>

- ----------
(1) Represents the maximum service charge per transaction.

Example:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor in Bancroft
would pay the following expenses
on a $1,000 investment,
assuming a 5% annual return: $ 12.71 $ 40.06 $ 70.22 $ 159.86
</TABLE>

The purpose of the foregoing Table of Fees and Expenses is to assist
investors in understanding the various costs and expenses that an investor in
Bancroft will bear directly or indirectly. The information in the foregoing
Table of Fees and Expenses should be read in conjunction with the information
appearing elsewhere in this Prospectus.

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As listed in an foregoing Table of Fees and Expenses, "Other Expenses"
are based upon estimated amounts for the current fiscal year. For a more
complete description of the management fees, see "Management". The Example
assumes that the rates listed under "Annual Expenses" remain the same each year.
The Example also assumes reinvestment of all dividends and distributions at net
asset value.

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

GENERAL DESCRIPTION OF REGISTRANT

General

Bancroft is a closed-end, diversified investment management company.
Bancroft was incorporated under the laws of the State of Delaware on September
10, 1970. Its principal offices are located at 65 Madison Avenue, Suite 550,
Morristown, New Jersey 07960.

Investment Objectives and Policies

Bancroft invests primarily in convertible securities with the
objectives of providing income and the potential for capital appreciation (which
objectives Bancroft considers to be relatively equal due to the nature of the
securities in which it invests). These objectives may be changed without
stockholder approval.

Although Bancroft invests primarily in convertible securities, in
periods of unusual market conditions Bancroft reserves the right to maintain all
or part of its assets in cash, governmental securities and other debt securities
and preferred stocks whether convertible or not.

Bancroft has adopted the following policy restrictions which it deems
to be fundamental and which cannot be changed without the approval of a majority
of Bancroft's outstanding voting securities (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")). Bancroft will not:

(1) have less than 80% of the market value of its total assets
(excluding cash and government securities) invested in (a) securities
of companies which at the time of purchase (i) had shares of

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their common stock listed on the New York Stock Exchange, the American
Stock Exchange or Nasdaq National Market (each, an "Exchange"), (ii)
met the then prevailing earnings requirements for listing on the New
York Stock Exchange, or (iii) had pre-tax earnings of at least
$2,000,000 in three of the five preceding fiscal years, and (b) in
American Depositary Receipts that at the time of purchase (i) are
listed on an Exchange, or (ii) met the then prevailing earnings
requirements for listing on the New York Stock Exchange. The fact that
any or all of these standards is met is no assurance of investment
quality.

(2) invest more than 25% of the market value of its total assets in any
one industry.

(3) (a) purchase securities (i) of companies which, with their
predecessors, or (ii) which are guaranteed by companies which, with
their predecessors, have a record of less than three years' continuous
operations, if such purchase would cause more than 5% of the market
value of Bancroft's total assets to be invested in the securities of
such companies, or (b) invest in more than 10% of the outstanding
voting securities of any one issuer.

(4) with respect to 85% of its total assets, invest more than 5% of the
market value of its total assets in the securities of any one issuer
(other than the United States government or its agencies) or purchase
additional securities of any one issuer (other than the United States
government or its agencies) if after giving effect to such purchase the
cost of all securities of such issuer then held by it would exceed 5%
of the market value of its total assets.

(5) issue senior securities.

(6) borrow money, except for temporary or emergency purposes to the
extent of 5% of the market value of its total assets determined at the
time of borrowing, or pledge, mortgage or hypothecate its assets to
secure such borrowings except securities in an amount taken at market
value not exceeding 15% of its total assets taken at cost.

(7) underwrite securities of other issuers, except that it may acquire
convertible securities the subsequent disposition of which (or of the
underlying equity security) would cause Bancroft to be deemed an
underwriter within the meaning of the Securities Act of 1933, as
amended.

(8) purchase or sell interests in real estate or real estate investment
trusts, except that Bancroft may purchase and sell securities of
corporations which hold interests in real estate.

(9) purchase or sell commodities or commodity contracts.

(10) make loans to other persons, (a) except that (i) Bancroft may lend
its portfolio securities provided the value of such loaned securities
does not exceed 10% of its total assets and (ii) the purchase of debt
securities in accordance with Bancroft's investment policies shall not
be considered the making of a loan, and (b) provided that Bancroft may
make temporary purchases of securities issued or guaranteed by the
United States, its agencies or instrumentalities; bank certificates of
deposit; or high-grade commercial paper, which are subject to
repurchase agreements.

(11) make short sales of securities unless at the time of sale it owns
or has the right to acquire,

A-4
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with or without payment of further consideration through its ownership
of convertible or exchangeable securities or warrants or rights, an
equal amount of such securities.

(12) invest in securities of corporations for the purpose of exercising
control or management.

(13) purchase securities issued by other investment companies except in
connection with a merger, consolidation or acquisition.

(14) purchase securities on margin, except that it may obtain such
short-term credits as may be necessary for the clearance of purchases
or sales of securities.

(15) invest in puts, calls, or combinations thereof; provided that,
notwithstanding the foregoing, Bancroft may invest up to 2% of its net
assets in put options on common stock or market indices and may write
covered call options and may purchase call options to close out written
covered call options.

(16) participate on a joint or a joint-and-several basis in any
securities trading account.

(17) purchase or hold the securities of a company if, to Bancroft's
knowledge, one or more officers or directors of Bancroft or the Adviser
individually own beneficially more than 1/2 of 1% and together own
beneficially more than 5% of the securities of such other company.

The percentage restrictions on investments set forth above apply only
at the time an investment is made.

Discussion of Convertible Securities

Convertible securities are securities that may be exchanged or
converted into a predetermined number of the issuer's underlying common stock
during a specified time period. Prior to their conversion, convertible
securities have the same overall characteristics as non-convertible debt
securities insofar as they generally provide a stable stream of income with
generally higher yields than those of equity securities of the same or similar
issuers. Convertible securities rank senior to common stock in an issuer's
capital structure. They are of a higher credit quality and entail less risk than
an issuer's common stock, although the extent to which such risk is reduced
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed income security.

The market value of a convertible security may be viewed as comprised
of two components: its "investment value," which is its value based on its yield
without regard to its conversion feature; and its "conversion value," which is
its value attributable to the underlying common stock obtainable on conversion.
The investment value of a convertible security is influenced by changes in
interest rates and the yield of similar non-convertible securities, with
investment value declining as interest rates increase and increasing as interest
rates decrease. The conversion value of a convertible security is influenced by
changes in the market price of the underlying common stock. If, because of a low
price of the underlying common stock, the conversion value is low relative to
the investment value, the price of the convertible security is governed
principally by its investment value. To the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the
convertible security will be increasingly influenced by its conversion value,
and the convertible security may sell at

A-5
<PAGE> 9
a premium over its conversion value to the extent investors place value on the
right to acquire the underlying common stock while holding a fixed income
security. Securities that are convertible into equity securities generally have
a yield that is lower than the yield on securities of comparable quality which
are not convertible.

Accordingly, convertible securities have unique investment
characteristics because (i) they have relatively high yields as compared to
common stocks, (ii) they have defensive characteristics because they provide a
fixed return even if the market price of the underlying common stock declines,
and (iii) they provide the potential for capital appreciation if the market
price of the underlying common stock increases.

Risk Factors

Generally, risk is inherent in any investment in securities and
therefore there can be no assurance that Bancroft will attain its objectives of
income and capital appreciation. Some of the most significant risks associated
with Bancroft's operations are discussed below.

Debt Securities and Preferred Stocks. Bancroft invests primarily in
convertible debt securities and preferred stocks. Debt securities and preferred
stocks are senior to the common stock in the capital structure of a corporation
and in that sense entail less risk than the common stock of the same
corporation. Such investments do not, however, eliminate risk. Debt securities
and preferred stocks may depreciate in value if the market value of the
underlying equity security declines or if rates of interest increase. In
addition, although debt securities are liabilities of a corporation which the
corporation is generally obligated to repay at a specified time, debt
securities, particularly convertible debt securities, are often subordinated to
the claims of some or all of the other creditors of the corporation. Preferred
stocks are equity securities in the sense that they do not represent a liability
of the corporation. In the event of liquidation of the corporation, and after
its creditors have been paid or provided for, holders of preferred stock are
generally entitled to a preference as to the assets of the corporation before
any distribution may be made to the holders of common stock. Debt securities
normally do not have voting rights. Preferred stocks may have no voting rights
or may have voting rights only under certain circumstances.

Investment in American Depositary Receipts. Bancroft may invest in
American Depositary Receipts ("ADRs"). Such investment may entail certain risks.
ADRs are certificates representing an ownership interest in a security or a pool
of securities issued by a foreign issuer and deposited with the depositary,
typically a bank, and held in trust for the investor. The economies of many of
the countries in which the issuer of a security underlying an ADR principally
engages in business may not be as developed as the United States' economy and
may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could adversely affect the value of Bancroft's
investments in such securities. The value of the securities underlying ADRs
could fluctuate as exchange rates change between U.S. dollars and the currency
of the country in which the foreign company is located. In addition, foreign
companies are not registered with the Securities and Exchange Commission and are
generally not subject to the regulatory controls imposed on United States
issuers and, as a consequence, there is generally less publicly available
information about foreign companies than is available about domestic companies.
Foreign companies are not subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to domestic companies.

A-6
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Illiquid Securities. Bancroft may invest up to 20% of its net assets in
securities that are illiquid. Illiquid securities include securities that have
no readily available market quotations and cannot be disposed of promptly
(within seven days) in the normal course of business at a price at which they
are valued. Illiquid securities may include securities that are subject to
restrictions on resale ("restricted securities") because they have not been
registered under the Securities Act of 1933 (the "Securities Act"). Restricted
securities may, in certain circumstances, be resold pursuant to Rule 144A of the
Securities Act, and thus may or may not constitute illiquid securities.
Bancroft's Board of Directors is responsible for determining the liquidity of a
restricted security. Limitations on the resale of restricted securities may have
an adverse effect on their marketability, which may prevent Bancroft from
disposing of them promptly at reasonable prices. Bancroft may have to bear the
expense of registering such securities for resale, and bear the risk of
substantial delays in effecting such registrations.

SHARE PRICE DATA; OPEN MARKET PURCHASES

Share Price Data

Bancroft's shares of Common Stock are traded on the American Stock
Exchange under the symbol "BCV" and have generally traded at a discount to net
asset value. The following is a history of recent trading:

<TABLE>
<CAPTION>
Percentage Discount
of Market Value
Quarter Market Price to Net Asset Value(1)
Ended High Low Maximum Minimum
------- ---- --- ------- -------
<S> <C> <C> <C> <C>
01/31/97 $ 23 5/8 $ 22 1/4 15.15% 10.85%
10/31/96 23 7/8 21 7/8 16.36 14.17
07/31/96 23 3/8 21 3/8 16.26 13.35
04/30/96 23 3/4 22 3/8 14.75 10.17
01/31/96 23 5/8 21 3/8 14.50 7.63
10/31/95 22 5/8 20 5/8 15.32 10.36
07/31/95 21 3/4 19 7/8 13.76 10.94
04/30/95 20 5/8 19 3/8 14.87 10.00
01/31/95 20 3/8 18 3/8 14.19 7.90
</TABLE>

- ----------
(1) Bancroft calculates its net asset value, and compares such value to its
market value, on a weekly basis.

The closing market price, and corresponding net asset value and
discount on February 21, 1997 were $ 23.25, $ 27.09 and 14.17%, respectively.

Open Market Purchases

The Board of Directors of Bancroft has authorized Management to engage
in open market purchases from time to time of Bancroft's Common Stock, up to a
maximum of 5% of its outstanding

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shares in any calendar year. Such open market purchases ("share repurchases")
will be funded through uninvested cash and cash received upon the maturity,
redemption or sale of Bancroft's portfolio securities. Management does not
intend to borrow funds to finance share repurchases. Management of Bancroft does
not believe that share repurchases would likely result in an increase in
Bancroft's expense ratio or in any material change to Bancroft's portfolio
turnover rate or investment objectives because of the overall limit on the
number of shares that may be repurchased. Management of Bancroft currently
intends to engage in share repurchases to provide a source of shares for
Bancroft's capital gains distributions. Share repurchases may result in a
reduction of the market discount. Management of Bancroft does not intend to
engage in share repurchases if the market price of Bancroft's shares exceeds
such shares' net asset value or if the sale of Bancroft's portfolio securities
would jeopardize the qualification of Bancroft as a "regulated investment
company" under Subchapter M of the Internal Revenue Code, as amended (the
"Code") in any taxable year.

MANAGEMENT

Board of Directors

Bancroft's Board of Directors has responsibility for managing the
business and affairs of the Company. In so doing, the Directors are required to
use sound business judgment and to act in good faith for the benefit of Bancroft
and its stockholders.

Investment Adviser

Davis-Dinsmore Management Company, 65 Madison Avenue, Morristown, New
Jersey (the "Adviser") serves as Bancroft's sole investment adviser pursuant to
an investment advisory agreement dated August 1, 1996 and effective October 25,
1996 (the "Advisory Agreement"). The Adviser has served in this capacity since
inception of Bancroft's business in 1971. The Adviser also serves as the sole
investment adviser to Ellsworth Convertible Growth and Income Fund, Inc.
("Ellsworth"), a closed-end investment management company whose shares have
traded on the American Stock Exchange since 1986. Each of Thomas H. Dinsmore and
Jane D. O'Keeffe, Bancroft's Chairman and President, respectively, owns more
than 25% of the outstanding voting stock of the Adviser and is deemed to be a
control person of the Adviser.

Pursuant to the Advisory Agreement, the Adviser furnishes Bancroft with
investment information and advice and makes recommendations with respect to the
purchase and sale of investments based upon Bancroft's investment objectives and
policies. Although Bancroft's investment decisions are based in large measure
upon recommendations of the Adviser, Bancroft's officers have sole
responsibility for investment decisions, subject to the control of Bancroft's
Board of Directors.

As compensation for its services under the Advisory Agreement, the
Adviser receives an annual fee of 3/4 of 1% of the first $100 million, and 1/2
of 1% of the excess over $100 million, of Bancroft's average net assets.
Bancroft's net assets have never exceeded $100 million.

The Adviser pays for Bancroft's office space and facilities and the
salaries of Bancroft's executive officers and furnishes clerical, bookkeeping
and statistical services to Bancroft. The costs associated with personnel and
certain non-personnel expenses of the office of Bancroft's Treasurer, up to a
maximum of $50,000 a year, are reimbursed by Bancroft. The Adviser is currently
voluntarily

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waiving its right to be reimbursed to the extent such expenses of
the office of the Treasurer exceed $25,000. Such waiver may be revoked by the
Adviser at any time. Bancroft pays all of its expenses not assumed by the
Adviser including expenses in connection with the offering of its securities,
fees and expenses of unaffiliated directors, salaries of employees other than
executive officers, taxes, fees and commissions of all types, fees of its
custodian, registrar, transfer agents and dividend disbursing agents, and
interest, brokerage commissions, legal and accounting expenses and the like.
Bancroft pays or reimburses the Adviser for the direct costs of postage,
printing, copying and travel expenses attributable to the conduct of the
business of Bancroft.

The persons primarily responsible for the day-to-day management of
Bancroft's portfolio are Thomas H. Dinsmore (since 1985), and Jane D. O'Keeffe
(since 1994), its Chairman and President, respectively.

Mr. Dinsmore has served as the Senior Analyst of the Adviser since
February 1983, as President from August 1988 to August 1996, and as Chairman and
Chief Executive Officer since August 1996. In addition, Mr. Dinsmore served as
President of Bancroft from November 1985 to August 1996, and has served as its
Chairman and Chief Executive Officer since August 1996. Mr. Dinsmore also served
as President of Ellsworth from November 1985 to August 1996, and has served as
its Chairman and Chief Executive Officer since August 1996.

Ms. O'Keeffe served as Vice President of Fiduciary Trust International
from October 1988 to March 1994. From April 1994 to August 1996, Ms. O'Keeffe
served as Executive Vice President of the Adviser, and since August 1996, she
has served as its President. Ms. O'Keeffe served as Vice President of Bancroft
and of Ellsworth from April 1994 to January 1996, and has served as the
Executive Vice President of each of Bancroft and Ellsworth from January 1996 to
August 1996, and as President since August 1996.

Custodian; Transfer Agent

Bancroft's custodian is the Bank of New York, 90 Washington Street, New
York, NY 10006.

Bancroft's transfer agent and dividend disbursing agent is ChaseMellon
Shareholder Services, 450 West 33rd Street, New York, NY 10001.

Control Persons

No person owns or controls more than 25% of the outstanding voting
securities of Bancroft.

DESCRIPTION OF CAPITAL STOCK

Common Stock

Bancroft has authorized capital consisting of 9,000,000 shares of
Common Stock, par value $.01 per share. As of December 31, 1996, 3,156,263
shares were outstanding, none of which was held by Bancroft or for its account.
Each share has equal dividend, voting and liquidation rights. The shares are
fully paid and non-assessable when issued. The shares are not redeemable and
have no pre-emptive or conversion rights. There is no sinking fund provision.
Rights of holders of Common

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Stock may not be modified otherwise than by a vote of at least a majority of the
shares outstanding. There are no restrictions on the repurchase or redemption of
Bancroft's Common Stock.

Anti-Takeover Provisions

Bancroft has provisions in its Certificate of Incorporation, as amended
(the "Amended Certificate"), which could have the effect of limiting the ability
of other entities or persons to acquire control of Bancroft, to cause it to
engage in certain transactions or to modify its structure. The Amended
Certificate provides for three classes of directors. Directors in each class
serve for a term of three years, with one class expiring each year. In addition,
directors may be removed only for cause and only by the affirmative vote of at
least two-thirds of the outstanding shares of Bancroft's stock. This percentage
is greater than the minimum requirements under Delaware law, pursuant to which
the stockholders of a corporation may remove a director, with or without cause,
by the affirmative vote of a majority of the outstanding shares entitled to vote
for the election of directors except that, unless the certificate of
incorporation otherwise provides, in the case of a corporation whose board is
classified, stockholders may effect such removal only for cause.

The Amended Certificate also provides that the affirmative vote of
two-thirds of the outstanding shares of Bancroft is necessary to authorize any
of the following actions: (i) a merger or consolidation with any other company,
(ii) the dissolution of Bancroft, (iii) the sale of all or substantially all of
the assets of Bancroft, (iv) a change in the classification of Bancroft from a
diversified to a non-diversified management investment company as defined under
the 1940 Act, (v) a change in the nature of the business of Bancroft so that it
would cease to be an investment company registered under the 1940 Act, and (vi)
any amendment to the certificate of incorporation of Bancroft which makes the
Common Stock a redeemable security (as such term is defined in the 1940 Act) or
reduces the two-thirds vote required to authorize any of the actions in this
paragraph or amends this subparagraph (vi).

The foregoing provisions (the "Amendment") were proposed by the Board
of Directors in 1987 as an anti-takeover measure. The percentage of votes
required to authorize the actions enumerated in the Amendment is greater than
the minimum requirements under Delaware law and the 1940 Act, as applicable. In
the years preceding the adoption of the Amendment, the Board had observed that
various individuals and entities had made a number of attempts to acquire
significant majority positions in certain companies with the intent of obtaining
actual control of the companies by electing their own slate of directors or of
achieving some other goal, such as the repurchase of their shares at a premium
by threatening to obtain such control. These individuals and entities had, in
some instances, been able to elect a company's entire board of directors through
a proxy contest or otherwise, even though they did not own a majority of its
outstanding shares entitled to vote. Such dissident shareholders frequently
interrupted the general business of the company solely for the purpose of
causing the company to engage in a merger or other corporate transaction which
may not have been in the best interest of all shareholders.

Accordingly, the Board of Directors proposed the adoption of the
Amendment because it believed that the Amendment would enhance the likelihood of
continuity and stability in the composition of Bancroft's Board of Directors and
in the policies formulated by the Board. The Board also believed that, given
this continuity and stability, the Board would be permitted to represent more
effectively the interests of all shareholders in a variety of situations
including, in particular, responding to circumstances created by demands or
actions by a minority shareholder or group of shareholders.

A-10
<PAGE> 14
The Board of Directors recognized, however, that a potential disadvantage to the
adoption of the Amendment was that it could have the effect of depriving
stockholders of an opportunity to sell their shares at a premium over prevailing
market prices by discouraging a third party from seeking to obtain control of
Bancroft in a tender offer or similar transaction.

After thoroughly considering each of the advantages and disadvantages
of adopting the Amendment, the Board determined that its adoption was in the
best interests of the Bancroft and its stockholders. Stockholders of Bancroft
approved the Amendment at a Special Meeting held on February 23, 1987.

Dividend Reinvestment and Cash Purchase Plans

Bancroft has a dividend reinvestment plan (the "Plan"). Any stockholder
may elect to join the Plan by sending an application to the Plan Agent,
ChaseMellon Shareholder Services, P.O. Box 750, Pittsburgh, PA 15230-0750,
telephone number (800) 851-9677, from whom information about the Plan may be
obtained.

The Plan Agent, on behalf of the participants in the Plan, will have
the option to reinvest all dividends and distributions declared by Bancroft,
other than Annual Distributions (hereinafter described), in additional shares,
including fractional shares, issued by Bancroft. Such option will be exercised
only if the net asset value as of the close of business on the last trading day
preceding the date of payment is lower than the market price plus brokerage
commission on that trading day. If market price is lower than net asset value,
the Plan Agent will take the distribution in cash and use such cash to buy
shares on the American Stock Exchange for the stockholder's account. Market
price for this purpose will be the closing market price of the shares on the
American Stock Exchange. Because shares will be purchased in the market rather
than from Bancroft when market price is lower than net asset value, the net
asset value per share will not be diluted. Annual Distributions declared by
Bancroft will be received by the Plan Agent, on behalf of the participants in
the Plan, in shares issued by Bancroft at net asset value or market price,
whichever is lower (subject to the limitation discussed below). Annual
Distributions are dividends and distributions of long and /or short-term capital
gains and /or net investment income that are payable in cash or at the option of
all stockholders of Bancroft (including non-plan participants) in shares of
Bancroft's Common Stock.

The Plan Agent will maintain the stockholder's account, hold the
additional shares acquired through the Plan in safekeeping and furnish each
stockholder with written confirmation of all transactions in the account,
including information for personal tax records. The Plan Agent will vote shares
in the stockholder's account in accordance with any proxy given to Bancroft for
shares held of record by such stockholder.

Participants in the Plan receive all dividend distributions in
additional stock and fractional interests, as determined as follows: dividends
paid in cash are applied to the purchase of shares in the open market and other
distributions are distributed at the lower of net asset value or market price,
provided that distributions at net asset value may not be made at less than 95%
of market value on the date of distribution. All dividends and distributions are
subject to income tax, whether or not received in cash. The only charge to
participants is their proportionate share of commissions on stock purchases.
Participants in the Plan should check with their brokers as to whether they may
continue to

A-11
<PAGE> 15
participate in the Plan if they transfer shares to another broker. Participants
may withdraw part, or all, of their shares in the Plan at any time, and
participation in the Plan may be terminated by written notice to the Plan Agent.

Plan participants may also join a cash purchase plan which accepts cash
payments of between $25 and $5,000 per month. The only costs are fees of 5% of
the amount invested, with a $3 maximum, and the proportionate share of
commissions.

Long-Term Debt

Bancroft has no outstanding long term debt.

TAX MATTERS

Qualification as a Regulated Investment Company

Bancroft has qualified and elected to be taxed as a "regulated
investment company" under Subchapter M of the Internal Revenue Code and intends
to maintain such status.

Distributions

Bancroft distributes to its shareholders substantially all its
investment net income and its entire net capital gains. Bancroft is not subject
to federal income tax on the income and gains so distributed. Distributions of
investment net income and the excess of net short-term capital gain over net
long-term capital loss are taxable to Bancroft's shareholders as ordinary income
and distributions of the excess of net long-term capital gains over net
short-term capital losses are taxable to them as long-term capital gains. The
foregoing tax treatment applies to all distributions to Bancroft's shareholders,
whether received in stock or cash and regardless of the length of time the
shares of Bancroft have been held by the shareholder. However, stockholders that
are exempt from Federal income taxation will not be subject to tax on the
amounts distributed to them.

Bancroft will inform shareholders annually as to the amount of ordinary
income dividends or capital gain dividends paid for each fiscal year.

Share Repurchases

It is anticipated that stockholders that hold shares of Bancroft Common
Stock as capital assets and have such shares repurchased by Bancroft will
generally recognize capital gain or loss. Stockholders should, however, consult
with their tax advisers to determine the tax consequences of such share
repurchases in their particular circumstances.

Any capital gain or loss recognized by a stockholder with respect to a
share repurchase by Bancroft will be long-term capital gain or loss if the
shares repurchased have been held for more than one year.

LEGAL PROCEEDINGS

A-12
<PAGE> 16

There are no material pending legal proceedings to which Bancroft or
the Adviser is a party.

CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION

The Statement of Additional Information of Bancroft ("SAI"), dated the
date of this Prospectus, contains the following Table of Contents:

<TABLE>
<CAPTION>
Page Number
-----------

<S> <C>
General Information and History. .................................. 2
Investment Objective and Policies. ................................ 2
Repurchase Agreements.............................................. 2
Trading and Portfolio Turnover..................................... 2
Brokerage Allocation and Other Practices........................... 3
Management......................................................... 3
Control Persons and Principal Holders of Securities................ 3
Investment Advisory and Other Services............................. 4
Custody of Assets; Transfer Agent.................................. 5
Independent Auditors............................................... 5
Tax Status......................................................... 5
Financial Statements............................................... 6
</TABLE>

The SAI is available without charge and can be obtained by calling
Sigmund Levine, Secretary, (800) 914-1177, or by writing to Mr. Levine at
Bancroft, 65 Madison Avenue, Morristown, NJ 07960.

A-13
<PAGE> 17
BANCROFT CONVERTIBLE FUND, INC.

Statement of Additional Information
(dated February 28, 1997)

This Statement of Additional Information is not a prospectus. It should
be read in conjunction with Bancroft's Prospectus dated February 28,
1997. Copies of the Prospectus may be obtained without charge from
Bancroft's Corporate Secretary at 1-800-914-1177, or by written request
to:

Corporate Secretary
Bancroft Convertible Fund, Inc.
65 Madison Avenue-Suite 550
Morristown, NJ 07960

Table of Contents

<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
General Information and History. ............................... 2
Investment Objective and Policies. ............................. 2
Repurchase Agreements .......................................... 2
Trading and Portfolio Turnover.................................. 2
Brokerage Allocation and Other Practices........................ 3
Management .............................................. 3
Control Persons and Principal Holders of Securities............. 3
Investment Advisory and Other Services.......................... 4
Custody of Assets; Transfer Agent............................... 5
Independent Auditors............................................ 5
Tax Status .............................................. 5
Financial Statements............................................ 6
</TABLE>

SAI-1
<PAGE> 18
GENERAL INFORMATION AND HISTORY

Bancroft has been engaged in business as a closed-end, diversified
management investment company since 1971. It invests primarily in convertible
securities with the objectives of providing income and the potential for capital
appreciation. Bancroft has not engaged in any other business. Bancroft's shares
are traded on the American Stock Exchange under the symbol "BCV".

In 1988, Bancroft changed its fiscal year-end from March 31 to October
31.

INVESTMENT OBJECTIVE AND POLICIES

All of Bancroft's policies, which it deems to be fundamental or that
may not be changed without the approval of a majority of Bancroft's outstanding
voting securities, are listed in the Prospectus under the heading "Investment
Objectives and Policies".

Bancroft has a nonfundamental investment policy which provides that it
may not invest more than 20% of its net assets in illiquid securities. Within
the last fiscal year, Bancroft has had less than 5% of its assets invested in
illiquid securities.

REPURCHASE AGREEMENTS

Bancroft may enter into repurchase agreements (commonly called "repos")
with banks and with dealers in U.S. Government securities. Under a repurchase
agreement, Bancroft may acquire an underlying debt instrument for a relatively
short period, subject to an obligation of the seller to repurchase, and Bancroft
to resell, the instrument at a fixed price and time. The seller under a
repurchase agreement would be required to maintain the value of the securities
subject to the repurchase agreement at not less than the repurchase price. Such
collateral would be U.S. Government obligations, bank certificates of deposit,
or high-grade commercial paper and would be in the actual or constructive
possession of Bancroft. If the seller defaults on the repurchase agreement,
Bancroft would retain possession of the underlying securities. In the event of a
default by a seller, Bancroft may incur certain costs in liquidating the
collateral, and could also incur a loss if the proceeds realized upon sale of
the underlying obligations are less than the repurchase price. In addition, if
bankruptcy proceedings are commenced with respect to the seller, the ability of
Bancroft to realize on the collateral may be delayed or limited and Bancroft may
incur additional costs. In such a case, Bancroft will be subject to risks
associated with changes in the market value of the collateral securities. In
order to limit the risks associated with entry into repurchase agreements, the
Board of Directors has adopted procedures to monitor and evaluate the
creditworthiness of institutions with which it proposes to engage in repurchase
agreements. Under the 1940 Act, repurchase agreements are considered loans by
Bancroft.

TRADING AND PORTFOLIO TURNOVER

Bancroft does not intend to engage in trading for short-term profits,
however, there is no minimum period for which any security must be held. If a
particular security rises sharply in price subsequent to purchase, it may be
sold even though a short-term profit may result which would be taxable to the
shareholders as ordinary income. While the rate of portfolio turnover will not
be a limiting factor when management believes that portfolio changes are
appropriate and will depend upon market and other conditions, the annual rate of
portfolio turnover is not expected to exceed and generally has not exceeded 75%.

Bancroft's portfolio turnover rates for its fiscal years ended October
31, 1995 and 1996 were

SAI-2
<PAGE> 19
43% and 70%, respectively. During fiscal 1996, a significant increase in the
number of convertible securities held by Bancroft were called for redemption by
their issuers. The redemptions, and subsequent reinvestment of the funds
provided by the redemptions, gave rise to greater than normal investment
activity and turnover rate.

BROKERAGE ALLOCATION AND OTHER PRACTICES

In selecting brokers for the purchase and sale of securities,
Bancroft's policy is to obtain the best net price and the best execution of the
order. In connection therewith, Bancroft takes into account such factors as
price (including any applicable brokerage commission), size of order, difficulty
of execution and operational facilities of the firm involved and the firm's risk
in positioning a block of securities.

In the case of securities that are not traded on a national securities
exchange, purchases and sales are made through firms that regularly make a
market in such securities, unless, in Bancroft's opinion, another firm can
obtain the best price and make the best execution of the order. Portfolio
transactions placed through dealers serving as primary market makers are
effected at net prices, without commissions as such, but which include
compensation in the form of mark up or mark down. In certain instances, Bancroft
purchases underwritten issues at prices which include underwriting fees.

Brokerage commissions paid by Bancroft during its fiscal years ended
October 31, 1994, 1995 and 1996 were $23,776, $18,240, and $35,559,
respectively.

As discussed above under "Trading and Portfolio Turnover", redemptions
of Bancroft's convertible securities increased during the fiscal year ended
October 31, 1996. Reinvestment of the funds provided by the redemptions gave
rise to greater investment activity, compared to the previous two years,
resulting in an increase in brokerage commissions paid.

During the fiscal year ended October 31, 1996, Bancroft purchased
securities issued by Morgan Stanley Group, Inc., the parent company of Morgan
Stanley & Co., Inc., one of Bancroft's regular brokers. The aggregate value of
the securities of this issuer held at October 31, 1996, was $3,797,000.

MANAGEMENT

Reference is made to pages 2, 3, 4, 5, 6 and 7 of Bancroft's proxy
statement for the annual meeting of stockholders dated December 30, 1996, which
pages are hereby incorporated by reference to this Statement of Additional
Information. All of Bancroft's directors and officers can be reached c/o
Bancroft Convertible Fund, Inc., 65 Madison Avenue, Suite 550, Morristown, New
Jersey 07960. Bancroft will furnish, without charge, a copy of such pages upon
request made to Sigmund Levine, Secretary, Bancroft Convertible Fund, Inc., 65
Madison Avenue, Suite 550, Morristown, NJ 07960, (800) 914-1177.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

There is no control person of Bancroft.

As of February 24, 1997, directors and officers of Bancroft owned in
the aggregate less than 1% of the outstanding shares of the Common Stock of
Bancroft. Bancroft knows of no record or beneficial owners of more than 5% of
Bancroft's outstanding Common Stock.

SAI-3
<PAGE> 20
INVESTMENT ADVISORY AND OTHER SERVICES

Advisory Agreement

Davis-Dinsmore Management Company, 65 Madison Avenue, Morristown, NJ,
(the "Adviser") serves as Bancroft's investment adviser and administrator
pursuant to an investment advisory agreement dated August 1, 1996 and effective
October 25, 1996 (the "Advisory Agreement").

Pursuant to the Advisory Agreement, the Adviser furnishes Bancroft with
investment information and advice and makes recommendations with respect to the
purchase and sale of investments based upon Bancroft's investment policy. The
Adviser pays for Bancroft's office space and facilities and the salaries of
Bancroft's executive officers and furnishes clerical, bookkeeping and
statistical services to Bancroft. The costs associated with personnel and
certain non-personnel expenses of the office of the Treasurer, up to a maximum
of $50,000 a year, are to be reimbursed by Bancroft. The Adviser is currently
voluntarily waiving its right to be reimbursed to the extent such expenses of
the office of the Treasurer exceed $25,000. Such waiver may be revoked by the
Adviser at any time. Bancroft pays all of its expenses not assumed by the
Adviser.

As compensation for its services pursuant to the Advisory Agreement,
the Adviser receives from Bancroft a monthly fee, computed at an annual rate of
3/4 of 1% of the first $100,000,000 and 1/2 of 1% of the excess over
$100,000,000 of Bancroft's net asset value in such month. Net asset value for
this purpose is the average of Bancroft'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 aggregate annual fee paid to the Adviser is subject to reduction to
the extent that the ordinary business expenses of Bancroft, including the
Adviser's fee but excluding interest and taxes, 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 Bancroft for the twelve months of such year. The
ordinary business expenses of Bancroft have not to date exceeded these
percentages. Under the Advisory Agreement, the determination of what constitutes
an "extraordinary item" rather than an ordinary expense is to be conclusively
determined by the directors of Bancroft who are not "interested persons" of
either Bancroft or the Adviser, as defined by the Investment Company Act of 1940
(the "1940 Act").

The Adviser received advisory fees under the Advisory Agreement and
predecessor advisory agreements of $490,885, $504,164 and $583,368 during the
fiscal years ended October 31, 1994, 1995 and 1996, respectively, and was also
reimbursed and additional $25,000 annually for expenses associated with
Bancroft's Treasurer's office.

Information Regarding the Adviser

Thomas H. Dinsmore and Jane D. O'Keeffe, Bancroft's Chairman and
President, respectively, each owns more than 25% of the outstanding voting stock
of the Adviser and therefore controls the Adviser.

The following table sets forth affiliated persons of Bancroft who are
also affiliated persons of the Adviser:

SAI-4
<PAGE> 21
<TABLE>
<CAPTION>
Capacities in which Capacities in which
Name Affiliated with Bancroft Affiliated with the Adviser
- ---- ------------------------ ---------------------------
<S> <C> <C>
Thomas H. Dinsmore Chairman of the Board, Chairman of the Board, Director,
Director and Chief Chief Executive Officer, and owner of
Executive Officer a controlling interest.

Jane D. O'Keeffe President and Director President, Director, and owner
of a controlling interest.

Sigmund Levine Senior Vice President Treasurer and Secretary
and Secretary

Gary Levine Treasurer and Assistant Assistant Treasurer and
Secretary Assistant Secretary
</TABLE>

CUSTODY OF ASSETS; TRANSFER AGENT

Bancroft's portfolio securities are maintained in the custody of The
Bank of New York, 90 Washington Street, New York, NY 10006.

Pursuant to Rule 17f-4 of the 1940 Act, The Bank of New York has
deposited eligible portfolio securities with The Depository Trust Company, 7
Hanover Square, New York, NY, a registered depository.

Pursuant to Rule 17f-5 of the 1940 Act, The Bank of New York is
authorized to deposit any of Bancroft's portfolio securities issued by foreign
issuers in the Cedel S. A. system of Luxemburg, a clearing agency and security
depository of foreign securities.

ChaseMellon Shareholders Services, 450 West 33rd Street, New York, NY
10001, acts as transfer agent, registrar and dividend disbursing agent for
Bancroft.

INDEPENDENT AUDITORS

Coopers & Lybrand L.L.P., 1301 Avenue of the Americas, New York, NY
10019, Bancroft's independent accountants, performs an annual audit of the books
and records and renders an opinion as to the financial position of Bancroft.

TAX STATUS

Bancroft intends to make sufficient distributions or deemed
distributions of its investment net income and net capital gains prior to the
end of each calendar year to avoid liability for federal excise tax.

Bancroft will advise stockholders annually of the portion of dividends
paid that are attributable to corporate dividends paid to Bancroft. The amounts
so designated may, in the case of corporate stockholders, qualify for the
deduction for dividends received to the extent provided by the Internal Revenue
Code. Dividends and distributions to shareholders may be subject to state and
local taxes.

SAI-5
<PAGE> 22

FINANCIAL STATEMENTS

SAI-6

<PAGE> 23
BANCROFT CONVERTIBLE FUND, INC.

PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
- --------- ---------- -----------
<S> <C> <C>
ADVERTISING -- 3.0%
28,243 shs Omnicom Group, Inc. common stock............................................. $ 807,425 $ 1,405,089
$1,025,000 Interpublic Group Cos., Inc. 3 3/4% 2002 Euro. cv. sub. deb.................. 889,780 1,090,343
---------- -----------
1,697,205 2,495,432
---------- -----------
AEROSPACE -- 3.8%
44,104 shs Orbital Sciences Corp. common stock.......................................... 823,024 926,184
2,000,000 Morgan Stanley Group, Inc. 0% 2000 medium-term exch. notes................... 1,852,306 2,205,000
(exch. for Boeing Company common stock) ---------- -----------
2,675,330 3,131,184
---------- -----------
AUTOMOTIVE -- 3.1%
48,981 shs Ford Motor Co. common stock.................................................. 751,931 1,530,656
1,000,000 Pep Boys 4% 1999 cv. sub. notes.............................................. 1,035,000 1,060,000
---------- -----------
1,786,931 2,590,656
---------- -----------
BANKING -- 13.4%
32,472 shs Barnett Banks, Inc. common stock............................................. 511,502 1,237,995
32,500 shs Boatmens Bancshares, Inc. depositary shares.................................. 1,087,588 1,694,063
(representing 7% cum. cv. A pfd.)
15,375 shs Chase Manhattan Corp. common stock........................................... 663,097 1,318,406
25,000 shs First Commerce Corp. 7 1/4% cum. cv. pfd..................................... 671,250 1,034,375
30,530 shs National City Corp. common stock............................................. 769,153 1,324,239
15,000 shs ONBANCorp, Inc. 6 3/4% cv. B pfd............................................. 379,375 431,250
10,000 shs Washington Mutual Savings Bank $6.00 cv. perpetual D pfd..................... 967,500 1,672,500
1,000,000 BankAtlantic Bancorp 6 3/4% 2006 cv. sub. deb................................ 1,000,000 1,100,000
15,000 Jefferson-Pilot Corp. 7 1/4% 2000 Automatic Common Exchange Securities....... 1,090,250 1,331,250
---------- -----------
7,139,715 11,144,078
---------- -----------
CAPITAL GOODS -- 9.2%
70,000 shs Westinghouse Electric Corp. depositary shares................................ 981,950 1,146,250
(representing $1.30 cv. C pfd.)
1,067,000 Cooper Industries, Inc. 7.05% 2015 cv. sub. deb.............................. 1,150,559 1,131,020
1,000,000 CS First Boston, Inc. 3 1/2% 2001 sr. medium-term exch. notes*............... 1,000,000 1,077,500
(exch. for General Electric Corp. common stock)
2,250,000 General Signal Corp. 5 3/4% 2002 cv. sub. notes.............................. 2,304,375 2,480,625
1,750,000 Robbins & Myers, Inc. 6 1/2% 2003 cv. sub. notes............................. 1,750,000 1,820,000
---------- -----------
7,186,884 7,655,395
---------- -----------
COMMUNICATIONS -- 3.7%
336 shs MFS Communications Co., Inc. common stock.................................... 13,860 16,842
15,000 shs MFS Communications Co., Inc. depositary shares............................... 502,500 1,301,250
(representing 8% cum. cv. A pfd.)
1,200,000 Comcast Cellular Corp. 0% 2000 senior participating zero coupon
redeemable series A notes.................................................... 812,440 846,000
25,000 Sprint Corp. 8 1/4% 2000 FCENS#.............................................. 815,788 887,500
(exch. for Southern New England Telecommunications Corp. common stock) ---------- -----------
2,144,588 3,051,592
---------- -----------
DATA-PROCESSING SERVICES -- 4.0%
1,000,000 CS First Boston, Inc. 3% 2001 sr. medium-term exch. notes*................... 1,000,000 932,500
(exch. for Electronic Data Systems Corp. common stock)
1,000,000 First Financial Management Corp. 5% 1999 cv. sub. deb........................ 1,000,000 1,880,000
(exch. for First Data Corp. common stock)
500,000 National Data Corp. 5% 2003 cv. sub. notes.................................... 500,000 500,000
---------- -----------
2,500,000 3,312,500
---------- -----------
ENERGY -- 9.1%
30,389 shs AES Corp. common stock....................................................... 871,265 1,333,317
41,000 shs Chieftain International Funding Corp. 7 1/4% cv. red. pfd.................... 1,107,270 1,224,875
10,000 shs Devon Financing Trust 6 1/2% trust cv. pfd.*................................. 507,500 653,750
(conv. into Devon Energy Corp. common stock)
12,500 shs Unocal Capital Trust 6 1/4% trust cv. pfd.................................... 679,688 668,750
1,375,000 Nabors Industries, Inc. 5% 2006 cv. sub. notes............................... 1,429,250 1,564,063
1,000,000 Pennzoil Company 4 3/4% 2003 exch. sr. deb................................... 1,032,500 1,165,000
(exch. for Chevron Corp. common stock)
600,000 Pennzoil Company 6 1/2% 2003 exch. sr. deb................................... 668,719 942,000
(exch. for Chevron Corp. common stock) ---------- -----------
6,296,192 7,551,755
---------- -----------
</TABLE>

See accompanying notes to financial statements.

SAI-7

<PAGE> 24
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
- --------- ---------- -----------
<S> <C> <C>
ENTERTAINMENT -- 6.2%
7,500 shs American Radio Systems Corp. depositary shares................................. $ 375,000 $ 367,500
(representing 7% cv. exch. pfd.)*
50,000 shs Hollinger International, Inc. depositary shares................................ 489,813 600,000
(representing 9 3/4% cv. B pfd.)
8,000 shs SFX Broadcasting, Inc. 6 1/2% cum. cv. exch. D pfd*............................ 406,750 443,000
50,000 shs Triathlon Broadcasting Co. depositary shares................................... 525,000 500,000
(representing 9% mandatory cv. pfd.)
$1,000,000 Credit Suisse 3% 2001 equity linked certificates............................... 1,000,000 1,012,500
(exch. for the cash equivalent of Walt Disney Co. common stock)
1,000,000 Imax Corp. 5 3/4% 2003 cv. sub. notes*......................................... 1,000,000 982,500
750,000 International CableTel, Inc. 7% 2008 cv. sub. notes*........................... 750,000 663,750
600,000 International CableTel, Inc. 7 1/4% 2005 cv. sub. notes*....................... 600,000 622,500
---------- -----------
5,146,563 5,191,750
---------- -----------
ENVIRONMENTAL SERVICES -- 0.7%
500,000 United Waste Systems, Inc. 4 1/2% 2001 cv. sub. notes*......................... 500,000 606,250
---------- -----------
FINANCIAL & INSURANCE -- 11.4%
15,000 shs American Bankers Insurance Group, Inc. series B cum. cv. pfd................... 751,250 860,625
30,000 shs American General Delaware, LLC 6% cv. A monthly income preferred securities.... 1,515,875 1,567,500
12,500 shs Frontier Financing Trust 6 1/4% cv. trust originated pfd.*..................... 631,250 668,750
(conv. into Frontier Insurance Group, Inc. common stock)
250,000 American Travellers Corp. 6 1/2% 2005 cv. sub. deb............................. 250,000 576,250
1,300,000 Chubb Capital Corp. 6% 1998 Euro. cv. sub. deb................................. 1,324,500 1,506,375
851,000 First Central Financial Corp. 9% 2000 cv. sub. deb............................. 862,625 825,470
1,800,000 Pioneer Financial Services, Inc. 6 1/2% 2003 cv. sub. notes.................... 1,813,563 1,872,000
500,000 RLI Corp. 6% 2003 cv. sub. deb................................................. 527,500 560,000
35,000 US West, Inc. 7 5/8% 1998 FCENS#............................................... 840,000 1,080,625
(exch. for Enhance Financial Services Group, Inc. common stock) ---------- -----------
8,516,563 9,517,595
---------- -----------
FOODS -- 2.0%
10,000 shs Wendy's Financing, Inc. 5% cv. A pfd........................................... 508,888 508,750
(conv. into Wendy's International, Inc. common stock)
1,000,000 Grand Metropolitan Public Limited Co. 6 1/2% 2000 cv. sub. deb.*............... 1,000,000 1,170,000
---------- -----------
1,508,888 1,678,750
---------- -----------
HEALTH CARE & DRUGS -- 9.2%
1,550,000 Ciba Geigy Corp. 6 1/4% 2016 exch. sub. deb.*.................................. 1,550,500 1,565,500
(exch. for ALZA Corp. common stock)
500,000 Complete Management, Inc. 8% 2003 cv. sub. deb................................. 500,000 577,500
1,000,000 Medco Containment Service, Inc. 6% 2001 cv. sub. deb........................... 1,324,063 2,362,500
1,200,000 Morgan Stanley Group, Inc. 0% 2001 medium-term exchangeable notes.............. 1,029,913 1,048,500
(exch. for ADR's representing SmithKline Beecham plc common stock)
3,500,000 Roche Holdings, Inc. 0% 2010 liquid yield option notes*........................ 1,432,831 1,566,250
500,000 Sandoz Capital BVI Ltd. 2% 2002 cv. sub. notes*................................ 526,250 553,125
---------- -----------
6,363,557 7,673,375
---------- -----------
HOTEL SERVICES -- 2.4%
250,000 HFS, Inc. 4 3/4% 2003 cv. senior notes......................................... 250,000 323,125
1,500,000 Hilton Hotels Corp. 5% 2006 cv. sub. notes..................................... 1,522,500 1,668,750
---------- -----------
1,772,500 1,991,875
---------- -----------
INDUSTRIAL SERVICES -- 0.8%
750,000 Quantum Health Resources, Inc. 4 3/4% 2000 cv. sub. deb........................ 684,375 691,875
(conv. into Olsten Corp. common stock) ---------- -----------

OFFICE EQUIPMENT -- 1.1%
10,000 shs Alco Standard Corp. depositary shares (representing 6 1/2% cv. BB pfd.)........ 805,513 867,500
---------- -----------
RETAIL -- 3.0%
2,000,000 Home Depot, Inc. 3 1/4% 2001 cv. sub. notes.................................... 2,003,125 2,007,500
500,000 Pier 1 Imports, Inc. 5 3/4% 2003 cv. sub. notes................................ 500,000 502,500
---------- -----------
2,503,125 2,510,000
---------- -----------
</TABLE>

See accompanying notes to financial statements.

SAI-8
<PAGE> 25
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
- --------- ----------- -----------
<S> <C> <C>
TECHNOLOGY -- 8.5%
$ 600,000 Conner Peripherals, Inc. 6 1/2% 2002 cv. sub. deb.............................. $ 659,000 $ 738,000
475,000 Conner Peripherals, Inc. 6 3/4% 2001 cv. sub. deb.............................. 521,313 532,000
500,000 Emerson Radio Corp. 8 1/2% 2002 sr. cv. sub. deb.*............................. 500,000 350,000
1,000,000 Morgan Stanley Group, Inc. 0% 2001 exch. note trust certificates*.............. 914,290 890,000
(exch. for a basket of common stocks+)
600,000 Motorola, Inc. 0% 2013 liquid yield option notes............................... 512,574 408,000
1,625,000 Thermo Electron Corp. 4 1/4% 2003 cv. sub. deb.*............................... 1,992,800 1,828,125
125,000 Thermo Instruments Corp. 4 1/2% 2003 cv. sub. deb.*............................ 125,000 125,625
200,000 Thermo Optek Corp. 5% 2000 cv. sub. deb.*...................................... 200,000 206,000
125,000 Thermo Quest Corp. 5% 2000 cv. sub. deb.*...................................... 125,000 126,250
250,000 Thermo Terratech, Inc. 4 5/8% 2003 cv. sub. deb.*.............................. 263,750 235,000
500,000 3Com Corp. 10 1/4% 2001 cv. sub. notes*........................................ 692,813 1,037,500
600,000 VLSI Technology, Inc. 8 1/4% 2005 cv. sub. notes............................... 613,750 571,500
----------- -----------
7,120,290 7,048,000
----------- -----------
TRANSPORTATION -- 0.6%
500,000 Mercury Air Group, Inc. 7 3/4% 2006 cv. sub. deb............................... 500,000 511,875
----------- -----------
U.S. TREASURY NOTES -- 0.0%
25,000 6 5/8% 3/31/97**............................................................... 24,980 25,141
----------- -----------
SHORT-TERM NOTES -- 2.8%
1,400,000 American Express Credit Corp. 5 1/4% 11/4/96................................... 1,398,979 1,398,979
1,000,000 U.S. Treasury Bill 5.27% 11/14/96.............................................. 974,318 974,318
----------- -----------
2,373,297 2,373,297
----------- -----------
TOTAL BONDS AND NOTES -- 64.8%................................................................ $48,767,985 $53,943,162
TOTAL PREFERRED STOCKS -- 19.5%............................................................... 12,893,957 16,210,688
TOTAL COMMON STOCKS -- 10.9%.................................................................. 5,211,257 9,092,728
TOTAL CORPORATE SHORT-TERM NOTES -- 2.8%...................................................... 2,373,297 2,373,297
----------- -----------
TOTAL INVESTMENTS -- 98.0%.................................................................... $69,246,496 81,619,875
===========
OTHER ASSETS AND LIABILITIES, NET -- 2.0%..................................................... 1,682,439
-----------
TOTAL NET ASSETS -- 100.0%.................................................................... $83,302,314
===========
</TABLE>

* Rule 144A security, may be sold only to qualified institutional buyers.

# Forced Conversion Exchangeable Notes.

+ Ticker symbols: CSCO, EDS, HWP, INTC, MSFT & ORCL.

** Collateral for a letter of credit.

The cost of investments for federal income tax purposes is $69,246,496 resulting
in gross unrealized appreciation and depreciation of $13,159,438 and $786,059,
respectively, or net unrealized appreciation of $12,373,379 on a tax cost basis.

See accompanying notes to financial statements.

SAI-9
<PAGE> 26
BANCROFT CONVERTIBLE FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31,
1996
-----------
<S> <C>
ASSETS:
Investments at value (Identified cost $69,246,496) (Note A) ............. $81,619,875
Cash .................................................................... 61,703
Receivable for securities sold .......................................... 1,542,596
Dividends and interest receivable ....................................... 614,425
Other assets ............................................................ 12,640
-----------
Total assets ....................................................... 83,851,239
-----------
LIABILITIES:
Payable for securities purchased ........................................ 500,000
Accrued management fee (Note B) ......................................... 8,925
Accrued expenses ........................................................ 40,000
-----------
Total liabilities ....................................................... 548,925
-----------
NET ASSETS .......................................................... $83,302,314
===========

NET ASSETS CONSIST OF:
Undistributed net investment income ..................................... $ 524,001
Undistributed net realized gain from investment transactions ............ 6,786,172
Unrealized appreciation on investments .................................. 12,373,379
Capital shares (Note D) ................................................. 29,503
Additional paid-in capital .............................................. 63,589,259
-----------
NET ASSETS .............................................................. $83,302,314
===========
Net asset value per share ($83,302,314 / 2,950,343 outstanding shares) .. $ 28.23
===========
</TABLE>

See accompanying notes to financial statements.

================================================================================

STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1996

<TABLE>
<S> <C>
INVESTMENT INCOME (Note A):
Interest ........................................................ $ 2,601,759
Dividends ....................................................... 1,352,481
-----------
Total Income .................................................... 3,954,240
-----------
EXPENSES (Note B):
Management fee .................................................. 583,368
Custodian fees .................................................. 27,899
Transfer agent fees ............................................. 49,798
Professional fees ............................................... 68,616
Directors' fees ................................................. 37,800
Printing and shareholder relations .............................. 106,086
Treasurer's office .............................................. 25,000
Other ........................................................... 59,018
-----------
Total Expenses .............................................. 957,585
-----------
NET INVESTMENT INCOME ........................................... 2,996,655
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions .................. 6,807,244
Net increase in unrealized appreciation of investments .......... 5,451,699
-----------
Net gain on investments ......................................... 12,258,943
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $15,255,598
===========
</TABLE>

See accompanying notes to financial statements.

SAI-10

<PAGE> 27
BANCROFT CONVERTIBLE FUND, INC.

FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
----------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .................... $ 24.84 $ 23.11 $ 25.00 $ 22.75 $ 21.02
-------- -------- -------- -------- --------
Net investment income ................................. .96 1.14 1.20 1.26 1.35
Net realized and unrealized gain (loss) ............... 4.19 2.30 (1.18) 3.07 1.70
-------- -------- -------- -------- --------
Total from investment operations .................. 5.15 3.44 .02 4.33 3.05
Less distributions:
Dividends from net investment income .................. (1.11) (1.17) (1.24) (1.24) (1.32)
Distributions from realized gains ..................... (.65) (.54) (.67) (.84) --
-------- -------- -------- -------- --------
Total distributions ............................... (1.76) (1.71) (1.91) (2.08) (1.32)
-------- -------- -------- -------- --------
Net asset value, end of year .......................... $ 28.23 $ 24.84 $ 23.11 $ 25.00 $ 22.75
======== ======== ======== ======== ========
Market value, end of year ............................. $ 23.88 $ 22.25 $ 20.13 $ 23.00 $ 20.63
Total investment return:
Based on market value* ............................ 15.65% 20.17% (4.88)% 22.90% 18.35%
Based on net asset value# ......................... 21.55% 15.79% .18% 20.12% 14.87%

Ratios/Supplemental Data:
Net assets, end of year (000's) ....................... $ 83,302 $ 71,425 $ 64,551 $ 67,829 $ 59,436
Ratio of expenses to average net assets ............... 1.2% 1.2% 1.2% 1.2% 1.2%
Ratio of net investment income to average net assets .. 3.9% 4.9% 5.2% 5.4% 6.1%
Portfolio turnover rate ............................... 70% 43% 39% 102% 71%
Average commission rate paid+ ......................... $ 0.07 -- -- -- --
</TABLE>

* Assumes valuation of the Fund's shares at market price, and reinvestment of
dividends at actual reinvestment price.
# Assumes valuation of the Fund's shares, and reinvestment of dividends, at net
asset values.
+ Disclosure required for fiscal years beginning after September 1, 1995.

See accompanying notes to financial statements.

================================================================================

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 2,996,655 $ 3,285,250
Net realized gain from investment transactions 6,807,244 1,869,444
Net unrealized appreciation of investments 5,451,699 5,012,325
------------ ------------
Net increase in net assets resulting from operations 15,255,598
10,167,019

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (3,251,738) (3,350,427)
Net realized gain on investments (1,871,807) (1,497,574)
------------ ------------
Total dividends (5,123,545) (4,848,001)
------------ ------------
CAPITAL SHARE TRANSACTIONS (Note D) 1,745,225 1,554,561
------------ ------------

Increase in net assets 11,877,278 6,873,579
NET ASSETS AT BEGINNING OF YEAR 71,425,036 64,551,457
------------ ------------

NET ASSETS AT END OF YEAR (including undistributed net
investment income of $524,001 and $779,084, respectively) $ 83,302,314 $ 71,425,036
============ ============
</TABLE>

See accompanying notes to financial statements.

SAI-11

<PAGE> 28
BANCROFT CONVERTIBLE FUND, INC.

NOTES TO FINANCIAL STATEMENTS

(A) The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements:

1. Security Valuation
Investments in securities traded on a national securities exchange are valued at
market using the last reported sales price. Securities traded in the
over-the-counter market and listed securities for which no sales were reported
are valued at the mean between reported closing bid and asked prices. Where no
closing prices are available, value is determined by management, with the
approval of the Board of Directors.

2. Securities Transactions and Related Investment Income
Security transactions are accounted for on the trade date with gain or loss on
the sale of securities being determined based upon identified cost. Dividend
income is recorded on the ex-dividend date and interest income is recorded on
the accrual basis. Interest of $15,417 was earned on cash balances held by the
custodian of the Fund's assets during the year ended October 31, 1996.

3. Federal Taxes
It is the policy of the Fund to distribute substantially all of its taxable
income within the prescribed time and to otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no provision for federal income or excise taxes are believed
necessary.

4. Dividends and Distributions to Shareholders
The liability for dividends and distributions payable is recorded on the
ex-dividend date.

(B) The management fee is paid to Davis-Dinsmore Management Company, investment
adviser. The contract provides for payment of a monthly advisory fee, computed
at an annual rate of 3/4 of 1% of the first $100,000,000 and 1/2 of 1% of the
excess over $100,000,000 of the Fund's net asset value in such month. The annual
fee is subject to reduction to the extent that the ordinary expenses of the Fund
(excluding taxes and interest) exceed 1.5% of the first $100,000,000 and 1% of
the excess over $100,000,000 of the average of the monthly net asset values of
the Fund for the year.

The adviser's organization furnishes investment advice, office equipment and
facilities, and pays the salaries of all executive officers of the Fund, except
that the costs associated with personnel and certain non-personnel expenses of
the office of the Treasurer up to a maximum of $50,000 a year are reimbursed by
the Fund. Such reimbursements amounted to $25,000 for the year ended October 31,
1996. The officers of the Fund are also directors, officers or employees of the
investment adviser, and are compensated by the investment adviser.

(C) Purchases and sales of investments, exclusive of corporate short-term notes
and government securities, aggregated $51,756,925 and $50,436,939 respectively,
for the year ended October 31, 1996. Sales of government securities aggregated
$950,499 for the year then ended.

(D) At October 31, 1996 there were 2,950,343 shares of $.01 par value common
stock outstanding (9,000,000 shares authorized). During the year ended October
31, 1996, 75,063 shares were issued in connection with reinvestment of dividends
from net investment income and capital gains, resulting in an increase in
paid-in capital of $1,745,225. During the year ended October 31, 1995, 81,819
shares were issued.

(E) Distributions of 18 cents per share from net investment income and $2.31 per
share from realized gains on investments were declared November 25, 1996 to
shareholders of record at the close of business December 5, 1996, payable
December 30, 1996.

SAI-12

<PAGE> 29
BANCROFT CONVERTIBLE FUND, INC.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of
Bancroft Convertible Fund, Inc.

We have audited the accompanying statement of assets and liabilities of
Bancroft Convertible Fund, Inc. (the "Fund"), including the portfolio of
investments, as of October 31, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Bancroft Convertible Fund, Inc. as of October 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.

New York, New York
November 19, 1996

SAI-13
<PAGE> 30
PART C. OTHER INFORMATION

Item 24. Financial Statement and Exhibits

1. The following audited financial statements of Bancroft have
been included in Part B of the Statement of Additional
Information:

(a) Statement of Assets and Liabilities as of October 31, 1996
(b) Statement of Operations for the year ended October 31, 1996
(c) Statement of Changes in Net Assets for the years ended October
31, 1996 and October 31, 1995
(d) Financial Highlights for the years ended October 31, 1992,
1993, 1994, 1995 and 1996
(e) Schedule of Investments as of October 31, 1996
(f) Notes to Financial Statements
(g) Report of Independent Accountants

2. Exhibits:

(a)(i) Reference is made to Exhibit 3 to Amendment No. 11 to
Bancroft's Statement on Form N-2 (File No. 811- 215) dated
October 7, 1986, for a copy of Bancroft's Certificate of
Incorporation, as amended, which is hereby incorporated by
reference.

(ii) Reference is made to Exhibits 2 and 3 to Amendment No. 12 t
Bancroft's Registration Statement on Form N-2, dated and filed
on July 29, 1987, for copies of two amendments to the
Certificate of Incorporation as amended, dated February 23,
1987 and July 1, 1987, respectively, which are hereby
incorporated by reference.

(b) A copy of Bancroft's By-Laws, as amended, is attached hereto
as Exhibit 1.

(d) Instruments Defining the Rights of Holders of Securities Being
Registered -- Not Applicable

(e) A copy of Bancroft's Dividend Reinvestment Plan is attached
hereto as Exhibit 2.

(f) Instruments Defining the Rights of Holders of Long-Term Debt
-- Not Applicable

(g) A copy of Investment Advisory Agreement between Bancroft and
Davis-Dinsmore Management Company is attached hereto as
Exhibit 3.

(h) Underwriting or Distribution Contracts between Bancroft and a
Principal Underwriter -- Not Applicable

C-1
<PAGE> 31

(i) Bonus, Profit-Sharing, Pension or Other Similar Contracts for
the Benefit of Officers or Directors of Bancroft -- Not
Applicable

(j) Reference is made to Exhibit 5 of Amendment No. 15 of
Bancroft's Registration Statement on Form N-2, dated and filed
on February 23, 1990, for a copy of the Custodian Agreement
with The Bank of New York, which is hereby incorporated by
reference.

(k) Material Contracts -- Not Applicable

(l) Opinion of Counsel and Consent to its Use as to the Legality
of the Securities Being Offered -- Not Applicable

(m) Consent to Service of Process -- Not Applicable

(n) Consent of Accountants -- Not Applicable

(o) Financial Statements Omitted from Items 8.6 or 23 -- Not
Applicable

(p) Agreements concerning initial capitalization -- Not Applicable

(q) Model Plan -- Not Applicable

(r) A Financial Data Schedule is attached hereto as Exhibit 4.

(s) Pages 2 through 7 of Bancroft's proxy statement dated
December 30, 1996 are attached hereto as Exhibit 5.

Item 25. Marketing Arrangements
Not applicable

Item 26. Other Expenses of Issuance and Distribution
Not applicable

Item 27. Persons Controlled by or Under Common Control
Not applicable

Item 28. Number of Holders of Securities
(as of January 31, 1997)

<TABLE>
<CAPTION>
(1) (2)
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Common Stock 2,688
</TABLE>

Item 29. Indemnification

Bancroft's Certificate of Incorporation, as amended, contains the
following provision:

No director of the corporation shall be liable to the corporation or
its stockholders for

C-2
<PAGE> 32
monetary damages for breach of fiduciary duty as a director,
provided that the foregoing shall not eliminate or limit
liability of a director (i) for any breach of such director's
duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve
intentional misconduct, gross negligence or reckless disregard
of the duties involved in the conduct of such director's
office, or a knowing violation of law, (iii) under Section 174
of Title 8 of the Delaware Code, or (iv) for any transaction
from which such director derived an improper personal benefit.

Bancroft's by-laws provide that it shall indemnify its
officers and directors to the extent permitted by Delaware law
as amended from time to time, provided, however, that no
officer or director of Bancroft shall be protected against any
liability to Bancroft or its security holders to which he
would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.

Section 145 of the Delaware Corporation Law gives Bancroft the
power to indemnify its directors and officers against
expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred by them in connection with
any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of
Bancroft), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best
interests of Bancroft and with respect to any criminal action
or proceeding, had no reasonable cause to believe their
conduct was unlawful. In addition, under that section Bancroft
has the power to indemnify any such officer or director
against expenses actually and reasonably incurred in
connection with the defense or settlement of any threatened,
pending or completed action or suit by or in the right of
Bancroft to procure a judgment in its favor by reason of the
fact that he/she is or was a director or officer if he/she
acted in good faith and in a manner he/she reasonably believed
to be in or not opposed to the best interests of Bancroft,
except that no indemnification can be made in respect of any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to
the extent that it shall have been determined by an
appropriate court that in view of all the circumstances he/she
is fairly and reasonably entitled to an indemnity. Bancroft
may make indemnification of its officers and directors as
described above (unless ordered by a court) only upon
appropriate determination (i) by a majority vote of the
directors who are not parties to such action, suit, or
proceeding, even though less than a quorum, or (ii) if there
are no such directors, or if such directors so direct, by
independent legal counsel, or (iii) by the stockholders.
However, under Section 145 of the Delaware Corporation Law
Bancroft must indemnify any officer or director against
expenses actually and reasonably incurred in the successful
defense of any action, suit or proceeding referred to above.

Bancroft has obtained for its directors and officers errors
and omissions insurance in the amount of $1,000,000. The
effect of such insurance is to insure against liability for
any act, error, omission, misstatement, misleading statement,
neglect or certain breaches of duty by the insureds as
directors and/or officers of Bancroft.

Item 30. Business and Other Connections of the Adviser

The Adviser is also the investment adviser to Ellsworth, a
closed-end investment

C-3
<PAGE> 33
management company. During the past two fiscal years, neither
the Adviser nor any of its directors or officers engaged in
any other business, profession, vocation or employment of a
substantial nature.

Item 31. Location of Accounts and Records

The persons maintaining possession of accounts and records
required by Section 31 (a) of the 1940 Act and the rules
promulgated thereunder are as follows:

With respect to Rule 31a-1(b)(2)(A):

The Bank of New York
90 Washington Street
New York, NY 10006

With respect to Rule 31a-1(b)(2)(D):

ChaseMellon Shareholders Services, L.L.C.
450 West 33rd Street
New York, NY 10001

With respect to all other records:

Bancroft Convertible Fund, Inc.
65 Madison Avenue- Suite 550
Morristown, NJ 07960

Item 32. Management Services
Not applicable

Item 33. Undertakings
Not applicable

C-4
<PAGE> 34
SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940,
Bancroft Convertible Fund, Inc. has duly caused this Registration Statement to
be signed on its behalf by the undersigned, hereunto duly authorized, in the
City of Morristown, and State of New Jersey, on the twenty-eighth day of
February, 1997.

Registrant: Bancroft Convertible Fund, Inc.

By: /s/ Sigmund Levine
-----------------------------------
Sigmund Levine
Senior Vice President and Secretary

C-5
<PAGE> 35
INDEX TO EXHIBITS

Exhibit
Number

1 Bylaws of Bancroft Convertible Fund, Inc.

2 Dividend Reinvestment Plan

3 Investment Advisory Agreement between Bancroft and
Davis-Dinsmore Management Company dated August 1, 1996

4 Financial Data Schedule

5 Pages 2 through 7 of Bancroft's Proxy Statement Dated December 30, 1996

C-6

<PAGE> 1

Exhibit.1

BY-LAWS

BANCROFT CONVERTIBLE FUND, INC.

(as amended through November 25, 1996)

-----------------------------------

ARTICLE I

OFFICES

Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.

Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. All meetings of the stockholders shall be held at such time
and place, within or without the State of Delaware, as may be fixed from time to
time by the board of directors and stated in the notice of the meeting or in a
duly executed waiver of notice thereof.

Section 2. Annual meetings of stockholders shall be held on the fourth
Wednesday in February, or any other day as may be fixed by the board of
directors, at which they shall elect, by a plurality vote, Directors and shall
transact such other business as may properly be brought before the meeting.

Section 3. Written notice of the annual meeting shall be given to each
stockholder entitled to vote thereat at least ten days before the date of the
meeting.

Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, during ordinary business hours, for a period
of at least ten days

<PAGE> 2
prior to the election, either at a place within the city, town or village where
the election is to be held and which place shall be specified in the notice of
the meeting, or, if not specified, at the place where said meeting is to be
held, and the list shall be produced and kept at the time and place of election
during the whole time thereof, and subject to the inspection of any stockholder
who may be present.

Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the Chairman of the Board of Directors or the
President and shall be called by the Chairman of the Board or President at the
request in writing of a majority of the Board of Directors, or at the request in
writing of the stockholders owning a majority in amount of the entire capital
stock of the Corporation issued and outstanding and entitled to vote.
Such request shall state the purpose and purposes of the proposed meeting.

Section 6. Written notice of a special meeting of stockholders, stating
the time, place and object thereof, shall be given to each stockholder entitled
to vote thereat, at least ten days before the date fixed for the meeting,
provided, however, that the first meeting of stockholders may be held on two
days notice given to each stockholder.

Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.

Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.

Section 9. When a quorum is present at any meeting, in all matters
other than the election of directors, the affirmative vote of the majority of
shares present in person or represented by proxy at such meeting and entitled to
vote on the subject matter shall be the act of the stockholders, unless the
question is one upon which, by express provision of the statutes or of the
certificate of incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors.

Section 10. Each stockholder shall at every meeting of the stockholders
be entitled to one vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but no proxy shall be voted
on after one year from its date, unless the proxy provides for a longer period.
A proxy may be given to the Corporation by the stockholder or by his duly
authorized attorney in fact. A proxy may be given to the Corporation through
written, electronic, computerized, telegram, cablegram, facsimile,
telecommunication or telex communication. A stockholder may duly authorize an
attorney in fact through written, electronic, telephonic,

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computerized, telegram, cablegram, facsimile, telecommunication, telex or oral
communication or by any other form of communication.

Section 11. Whenever the vote of the stockholders at a meeting thereof
is required or permitted to be taken in connection with any corporate action by
any provisions of the statutes or of the certificate of incorporation, the
meeting and vote of stockholders may be dispensed with, if all the stockholders
who would have been entitled to vote upon the action if such meeting were held
shall consent in writing to such corporate action being taken.

ARTICLE III

DIRECTORS

Section 1. The number of directors which shall constitute the whole Board
shall be determined from time to time by the Board of Directors, but shall not
be less than five. Beginning in 1972 the directors shall be elected at the
annual meeting of the stockholders, except that any vacancy in the Board of
Directors resulting from death, resignation, increase in the authorized number
of directors or otherwise, may be filled for the unexpired term by a majority
vote of the remaining directors in office, though less than a quorum; provided,
that after the filling of any such vacancy at least two-thirds of the Board of
Directors then holding office shall have been elected by the stockholders; and
provided, further, that if at any time less than a majority of the directors
then holding office were elected by the stockholders, a stockholders' meeting
shall forthwith be called, to be held as promptly as possible, and in any event
within sixty days, for the purpose of electing an entire new Board of Directors.
Each director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.

Section 2. The business of the Corporation shall be managed by its Board
of Directors which may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by statute or by the certificate of
incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.

MEETING OF THE BOARD OF DIRECTORS

Section 3. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.

Section 4. The first meeting of each newly elected Board of Directors
shall be held as soon as practicable following and at the same place as the
Annual Meeting of Shareholders and no notice of such meeting shall be necessary
to the newly elected directors in order legally to constitute the meeting,
provided a quorum shall be present. In the event such meeting is not held at the
said time and place, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.

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Section 5. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.

Section 6. Special meetings of the Board may be called by the Chairman
of the Board or the President on one day's notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
Chairman of the Board or the President in like manner and on like notice on the
written request of two directors. Personal notice shall include notice given
orally or by telephone.

Section 7. At all meetings of the Board a majority of the total number
of directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time without
notice other than announcement at the meeting, until a quorum shall be present.

COMMITTEES OF DIRECTORS

Section 8. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the directors of the Corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors. In the absence or disqualification of any member of such a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.

Section 9. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.

COMPENSATION OF DIRECTORS

Section 10. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors. A director may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director, or both such fixed sum and stated salary. No such payment
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.

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ARTICLE IV

NOTICES

Section 1. Notices to stockholders shall be in writing and delivered
personally or mailed to stockholders at their addresses appearing on the books
of the Corporation. Notices to directors shall be oral or by telephone or
telegram, or in writing delivered personally or mailed to the directors at their
addresses appearing on the books of the Corporation. Notice by mail to
stockholders or directors shall be deemed to be given at the time when the same
shall be mailed.

Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.

ARTICLE V

OFFICERS

Section 1. The officers of the Corporation shall include the Chairman of
the Board, the President, one or more vice-presidents (one of whom may be
designated an executive vice-president), the treasurer and the secretary. Any
two or more offices may be held by the same person. Such officers shall be
elected by the Board of Directors each year at the organization meeting held
after the annual meeting of stockholders, each to hold office until the meeting
of the Board following the next annual meeting of the stockholders and until his
successor shall have been duly elected and shall have qualified, or until his
death, or until he shall have resigned, or have been removed, as hereinafter
provided in these By-Laws. The Board may from time to time elect, or delegate to
the Chairman of the Board or the President the power to appoint, such officers
(including one or more assistant vice-presidents, one or more assistant
treasurers and one or more assistant secretaries) and such agents, as may be
necessary or desirable for the business of the Corporation.

Section 2. Any officer of the Corporation may resign at any time by giving
written notice of his resignation to the Board, the Chairman of the Board, the
President or the secretary. Any such resignation shall take effect at the time
specified therein, or, if the time when it shall become effective shall not be
specified therein, immediately upon its receipt; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.

Section 3. Any officer or agent of the Corporation may be removed, either
with or without cause, at any time, by the vote of the majority of the entire
Board at any meeting of the Board or, except in the case of an officer or agent
elected or appointed by the Board, by the Chairman of the Board or by the
President.

Section 4. A vacancy in any office, whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office which shall be vacant, in the manner prescribed in
these By-Laws for the regular election or appointment to such office.

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<PAGE> 6
THE CHAIRMAN

Section 5. The Chairman of the Board shall be the chief executive officer
of the Corporation and shall have the general and active management of the
business of the Corporation and general and active supervision and direction
over the other officers, agents and employees and shall see that their duties
are properly performed. He shall, if present, preside at each meeting of the
stockholders and of the Board and shall be an ex officio member of all
committees of the Board. He shall perform all duties incident to the office of
Chairman of the Board and chief executive officer and such other duties as may
from time to time be assigned to him by the Board. In the case of the absence of
the President or his inability to act, the Chairman of the Board shall perform
the duties of the President and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the President. He shall perform all the
duties incident to the office of president and such other duties as from time to
time may be assigned to him by the Board or these By-Laws.

THE PRESIDENT

Section 6. The President shall be the chief administrative officer of the
Corporation and shall have general and active supervision and direction over the
business and affairs of the Corporation and over its several officers, subject,
however, to the direction of the Chairman of the Board and the control of the
Board. At the request of the Chairman of the Board, or in the case of his
absence or inability to act, the President shall perform the duties of the
Chairman of the Board and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chairman of the Board. He shall
perform all duties incident to the office of Chairman of the Board and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the Chairman of the Board. He shall perform all duties incident to the
office of the Chairman of the Board and such other duties as from time to time
may be assigned to him by the Board, the Chairman of the Board or these By-Laws.

VICE-PRESIDENTS

Section 7. Each vice-president shall perform all such duties as from time
to time may be assigned to him by the Board, the Chairman of the Board or the
President.

THE TREASURER

Section 8. The treasurer shall

(a) have charge and custody of, and be responsible for, all
the funds and securities of the Corporation, except those
which the Corporation has placed in the custody of a bank
or trust company pursuant to a written agreement

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designating such bank or trust company as custodian of the
property of the Corporation;

(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation,
except that such functions may be delegated to the
Custodian of the property of the Corporation pursuant to a
written agreement;

(d) receive, and give receipts for, moneys due and payable to
the Corporation from any source whatsoever;

(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the
Board, taking proper vouchers therefor; and

(f) in general, perform all the duties incident to the office
of treasurer and such other duties as from time to time
may be assigned to him by the Board, the President, or the
Chairman of the Board.

THE SECRETARY

Section 9. The secretary shall

(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board, the
committees of the Board and the stockholders;

(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;

(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock
certificates of the Corporation (unless the seal of the
Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the
Corporation under its seal;

(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and
filed are properly kept and filed; and

(e) in general, perform all the duties incident to the office
of secretary and such other duties as from time to time
may be assigned to him by the Board, the President, or the
Chairman of the Board.

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ARTICLE VI

CERTIFICATES OF STOCK

Section 1. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by, or in the name of the Corporation by, the
Chairman of the Board, the President or a vice-president and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
Corporation, and sealed with the manual or facsimile seal of the Corporation,
certifying the number of shares owned by him in the Corporation.

Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) by a transfer clerk acting on behalf of the
Corporation and a registrar, the signature of any such President,
vice-president, treasurer, assistant treasurer, secretary or assistant secretary
may be facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates, shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the Corporation.

LOST CERTIFICATES

Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed, or upon receipt of other
satisfactory evidence of such loss or destruction. When authorizing such issue
of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.

TRANSFERS OF STOCK

Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.

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CLOSING OF TRANSFER BOOKS

Section 5. The Board of Directors may close the stock transfer books of
the Corporation for a period not exceeding sixty days preceding the date of any
meeting of stockholders or the date for payment of any dividend or the date for
the allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect or for a period not exceeding sixty days in
connection with obtaining the consent of stockholders for any purpose. In lieu
of closing the stock transfer books as aforesaid, the Board of Directors may fix
in advance a date, not exceeding sixty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, or to give such consent, and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as aforesaid. Unless a
record date is fixed by the Board of Directors for the determination of
stockholders entitled to receive notice of, or to vote at, a stockholders'
meeting, transferees of shares which are transferred on the books of the
Corporation within twenty days next preceding the date of such meeting shall not
be entitled to receive notice of, or to vote at, such meeting.

REGISTERED STOCKHOLDERS

Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.

ARTICLE VII

GENERAL PROVISIONS

FISCAL YEAR

Section 1. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.

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SEAL

Section 2. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.

REPORTS

Section 3. The Corporation shall transmit to its shareholders
semi-annual unaudited or audited reports of its financial condition and annual
reports audited by independent public accountants.

ARTICLE VIII

INDEMNIFICATION

The Corporation shall indemnify its officers and directors to the
extent permitted by Delaware law as amended from time to time, provided,
however, that no officer or director shall be protected against any liability to
the corporation or its stockholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.

ARTICLE IX

AMENDMENTS

These By-Laws may be amended or repealed, or new By-Laws may be adopted
by the Board of Directors at any meeting thereof; provided, however, that notice
of such meeting shall have been given as provided in these By-Laws, which notice
shall mention that amendment or repeal of the By-Laws, or the adoption of new
By-Laws, is one of the purposes of such meeting. Any such By-Laws adopted by the
Board may be amended or repealed, or new By-Laws may be adopted, by vote of the
stockholders of the Corporation, at any annual or special meeting thereof;
provided, however, that the notice of such meeting shall have been given as
provided in these By-Laws, which notice shall mention that amendment or repeal
of these By-Laws, or the adoption of new By-Laws, is one of the purposes of such
meeting.

# # #

<PAGE> 1
Exhibit 2

BANCROFT CONVERTIBLE FUND, INC.

AUTOMATIC DIVIDEND INVESTMENT PLAN
AUTHORIZATION FORM

c/o ChaseMellon Shareholder Services
Shareholder Investment Services
P.O. Box 750
Pittsburgh, PA 15230-0750

Dear Sirs:

I hold stock certificates, registered in my name, for . . . . . . . . . .
shares of Common Stock of Bancroft Convertible Fund, Inc. (the "Company").

I wish to invest all the dividends and distributions paid by the Company on my
shares automatically in additional shares from the date hereof until this
arrangement is terminated as stated below.

AUTHORIZATION

You are authorized to act as my agent as follows:

A. Establish an Account in my name.

B. Take into my Account all dividends and distributions paid by the Company on
all its Common Stock held in my name now or in the future and on all additional
shares of the Company (including fractions) held by you in my Account.

C. Whenever the Company declares a dividend or distribution payable in cash
or, at the option all its shareholders, in Common Stock of the Company at market
price or net asset value, whichever is lower, take the dividend or distribution
in Common Stock.

D. Whenever the Company declares a dividend or distribution payable in cash
or, at the option of the shareholders for whom you act as agent under the Plan,
in the Company's Common Stock at net asset value, take the dividend or
distribution in Common Stock if the net asset value as determined by the Company
as of the close of business on the last trading day preceding the date of
payment is lower then (1) the asked price of the Company's Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau, if the
Common Stock is not listed on a national securities exchange, or (2) the closing
market price of the Common Stock on a national securities exchange, on that
trading day, plus brokerage commissions, if the Company's Common Stock is listed
on such exchange. If the market price is lower, take the dividend or
distribution in cash and add it to my Account.

E. As soon as practicable after each cash payment is made to my Account, use
the funds in my Account to buy in the over-the-counter market or on a national
securities exchange, as the case may be, as many additional full shares of the
Company's Common Stock as possible, plus a fractional interest in one share
computed to four decimal places.

F. You may mingle the cash in my Account with similar funds of other
shareholders of the Company for whom you act as agent under the Plan. The cost
of the shares and fractional interest you buy for my Account in connection with
a particular dividend or distribution shall be determined by the average cost
per share, including brokerage commission, of all shares bought by you for all
shareholders for whom you act under the Plan in connection with that dividend or
distribution.

G. Whenever you receive or purchase shares or fractional interests for my
Account, you will send me confirmation of the transaction as soon as
practicable. You will hold such shares and fractional interests as my agent in
your name or the name of your nominee. Do not send me stock certificates for
full shares until I so request in writing or until my Account is terminated as
stated below. You will vote any shares so held for me in accordance with any
proxy returned to the Company by me in respect of the shares of which I am a
record owner.

H. I understand that there is presently no service charge for your serving as
my agent and maintaining my Account. You may, however, charge me for extra
services performed at my request. I further understand that the Company reserves
the right to amend the Plan in the future to impose a service charge. You will
be liable only for willful misconduct or gross negligence in acting as my agent
under the Plan.

<PAGE> 2
BANCROFT CONVERTIBLE FUND, INC.

NAME AND ADDRESS

My name as shown on my Common Stock certificate or certificates (including all
names if more than one) and my address, are as follows:

PLEASE PRINT:

NAME OR NAMES ...............................................................

NUMBER AND STREET ...........................................................

CITY, STATE AND ZIP CODE ....................................................

STOCK CERTIFICATES

I understand that if I hold more than one Common Stock certificate registered
in similar but not identical names or if more than one address is shown for me
on the Company's Common Stock records, all my shares of Common Stock must be put
into the same name and address prior to signing this authorization if all of
them are to be covered by one Account. I understand that additional shares
subsequently acquired by me otherwise than through the Plan will be covered by
my Account if and when they are registered in the same name and address as the
shares in my Account.

INCOME TAX

I understand that participation in the Plan for automatic investment of
dividends and distributions does not relieve me of any income tax which may be
payable by me on such dividends and distributions.

AMENDMENTS AND CHANGE OF AGENT

I understand that the Company may amend the terms of the Plan and reserves the
right to change the agent which acts for all participants in the Plan at any
time by giving written notice thereof to each participant at his address as
shown on your records. Any such change shall be effective as to all dividends
and distributions payable to shareholders of record on any date more than 30
days after mailing of such notice. Further, I understand that the Company in
connection with any dividend or distribution will change the price at which
shares of its Common Stock are issued to participants in the Plan if the net
asset value of the shares is less than 95% of the fair market value of such
shares on the last trading day preceding the payment date of any distribution of
net investment income or net capital gain, unless the Board obtains a legal
opinion from independent counsel that the purchase of shares at net asset value
under these circumstances will not have a material adverse effect upon the
federal income tax liability of the Company. The Board may not authorize
issuance of shares offered to Plan participants only, if such issuance is at a
price less than net asset value, without the prior specific approval of the
Company's stockholders or of the Securities and Exchange Commission.

TERMINATION

I may terminate this authorization and my Account at any time by delivering
written notice to you, such termination to be effective as to all dividends and
distributions payable to shareholders of record on any date more than 15 days
after receipt of such notice by you. I understand that you or the Company may
terminate all authorizations for any reason at any time by sending written
notice addressed to participants at their addresses as shown on your records,
such termination to be effective as to all dividends and distributions payable
to shareholders of record on any date more than 30 days after mailing of such
notice. I understand you will terminate my Account if you are informed of the
transfer of all shares of the Company's Common Stock registered in my name.
Following the date of termination, you shall send me at my address shown on your
records a stock certificate or certificates for the full shares held by you in
my Account and a check for the value of any fractional interest in my Account
based on the market price of the Company's Common Stock on that date.

Date: .................................................................

Signature: ............................................................

Note: If shares are in more than one name, all must sign.

<PAGE> 1
Exhibit 3

BANCROFT CONVERTIBLE FUND, INC.

Investment Advisory Agreement
August 1, 1996

(Finalized October 25, 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.

Section 3. Expenses. To the extent described in this Section 3, you
shall provide the Company with office space and facilities, pay
<PAGE> 2
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
<PAGE> 3
Act, provided that in either event the contract is also approved by the vote of
a majority of the 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.

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.
<PAGE> 4
Yours very truly,

BANCROFT CONVERTIBLE FUND, INC.

By: /s/ Thomas H. Dinsmore
Thomas H. Dinsmore
(President)
(Corporate Seal)

Attest: /s/ Sigmund Levine
Sigmund Levine
(Secretary)

DAVIS-DINSMORE MANAGEMENT
COMPANY

By: /s/ Thomas H. Dinsmore
Thomas H. Dinsmore
(President)

Attest: /s/ Sigmund Levine
Sigmund Levine
(Secretary)

(Corporate Seal)

<PAGE> 1
Exhibit 4

[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 69,246,496
[INVESTMENTS-AT-VALUE] 81,619,875
[RECEIVABLES] 2,157,021
[ASSETS-OTHER] 74,343
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 83,851,239
[PAYABLE-FOR-SECURITIES] 500,000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 48,925
[TOTAL-LIABILITIES] 548,925
[SENIOR-EQUITY] 29,503
[PAID-IN-CAPITAL-COMMON] 63,589,259
[SHARES-COMMON-STOCK] 2,950,343
[SHARES-COMMON-PRIOR] 2,875,280
[ACCUMULATED-NII-CURRENT] 524,001
[OVERDISTRIBUTION-NII] 13,293
[ACCUMULATED-NET-GAINS] 6,786,172
[OVERDISTRIBUTION-GAINS] 8,048
[ACCUM-APPREC-OR-DEPREC] 12,373,379
[NET-ASSETS] 83,302,314
[DIVIDEND-INCOME] 1,352,481
[INTEREST-INCOME] 2,601,759
[OTHER-INCOME] 0
[EXPENSES-NET] 957,585
[NET-INVESTMENT-INCOME] 2,996,655
[REALIZED-GAINS-CURRENT] 6,807,244
[APPREC-INCREASE-CURRENT] 5,451,699
[NET-CHANGE-FROM-OPS] 15,255,598
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (3,251,738)
[DISTRIBUTIONS-OF-GAINS] (1,871,807)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 75,063
[NET-CHANGE-IN-ASSETS] 11,877,278
[ACCUMULATED-NII-PRIOR] 779,084
[ACCUMULATED-GAINS-PRIOR] 1,850,735
[OVERDISTRIB-NII-PRIOR] (1,574)
[OVERDIST-NET-GAINS-PRIOR] 2,363
[GROSS-ADVISORY-FEES] 583,368
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 957,585
[AVERAGE-NET-ASSETS] 77,522,679
[PER-SHARE-NAV-BEGIN] 24.84
[PER-SHARE-NII] .96
[PER-SHARE-GAIN-APPREC] 4.19
[PER-SHARE-DIVIDEND] (1.11)
[PER-SHARE-DISTRIBUTIONS] (.65)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 28.23
[EXPENSE-RATIO] 1.24
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit 5

Stockholders of record at the close of business on December 26, 1996 (the
"Record Date") will be entitled to one vote per share on all business of the
Annual Meeting. The Company had 2,950,343 shares of its Common Stock outstanding
on the Record Date.

ELECTION OF DIRECTORS

The Company's amended Certificate of Incorporation provides for three classes
of directors to serve staggered terms, with each class as nearly equal in number
as possible. The authorized number of directors is currently fixed at eight,
with two of the three classes having three directors and one of the classes
having two directors. At each annual meeting of stockholders, directors are
elected to succeed those directors whose terms expired and each newly elected
director will serve for a three year term.

For election as directors at the Annual Meeting to be held on February 3,
1997, the Board of Directors has approved the nomination of William A. Benton,
Elizabeth C. Bogan and George R. Lieberman to serve as directors until the
annual meeting of stockholders to be held in 2000. All nominees are currently
directors of the Company. A nominee must receive favorable votes from a
plurality of the shares voting at a meeting at which a quorum is present to be
elected. Cumulative voting in the election of directors is not permitted.

The proxies will vote for the election of the nominees named below unless
authority to vote for any or all of the nominees is withheld in the proxy. All
nominees have indicated that they are willing to serve as directors. If any of
the nominees should become unavailable for election due to events not now known
or anticipated, the proxies will vote for such other nominee or nominees as the
Board of Directors may recommend, unless the Board reduces the number of
directors.

Information regarding each nominee for director is provided below:

<TABLE>
<CAPTION>
(1) PRINCIPAL OCCUPATION OR BUSINESS DURING SERVED AS
NOMINEE AGE PAST FIVE YEARS AND (2) CURRENT DIRECTORSHIPS DIRECTOR SINCE
------- --- --------------------------------------------- ------------------
<S> <C> <C> <C>
TERMS EXPIRING IN 2000
William A. Benton 63 (1) Since January 1991, limited February 17, 1994
partner of Gavin, Benton & Co.
(New York Stock Exchange spe-
cialist 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 Convert-
ible Growth and Income Fund,
Inc. ("Ellsworth").
</TABLE>

2
<PAGE> 2
<TABLE>
<CAPTION>
(1) PRINCIPAL OCCUPATION OR BUSINESS DURING SERVED AS
NOMINEE AGE PAST FIVE YEARS AND (2) CURRENT DIRECTORSHIPS DIRECTOR SINCE
------- --- --------------------------------------------- ------------------
<S> <C> <C> <C>
Elizabeth C. Bogan, 52 (1) Since September 1992, Senior Lec- April 1, 1990
Ph.D. turer in Economics at Princeton
University. From September 1971 to
July 1992, Professor of Economics
at Fairleigh Dickinson University.
(2) Director of Ellsworth.
George R. Lieberman 74 (1) Retired. Prior to January 1988, July 1, 1987
Chief Executive Officer, Lieber-
man-Appalucci (advertising); and
President, Interspace Airport Ad-
vertising (advertising).
(2) Director of Ellsworth.

Information regarding the remaining directors of the Company is provided
below:

<CAPTION>
(1) PRINCIPAL OCCUPATION OR BUSINESS DURING SERVED AS
DIRECTOR AGE PAST FIVE YEARS AND (2) CURRENT DIRECTORSHIPS DIRECTOR SINCE
-------- --- --------------------------------------------- ------------------
<S> <C> <C> <C>
TERMS EXPIRING IN 1999
Thomas H. Dinsmore* 43 (1) Since August 1996, Chairman and November 21, 1985
Chief Executive Officer of the
Company, Ellsworth, and Davis-
Dinsmore Management Company ("Da-
vis-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 Da-
vis-Dinsmore. From August 1988 to
August 1996, President of Davis-
Dinsmore. Since February 1983, Se-
nior Analyst of Davis-Dinsmore.
(2) Director of Ellsworth.
Donald M. Halsted, Jr. 69 (1) Since October 1983, self-employed December 18, 1970
businessman.
(2) Director of Ellsworth and Aquarion
Company (water company).
Duncan O. McKee 65 (1) Retired. From April 1988 to Novem- November 25, 1996
ber 1996, Director Emeritus of the
Company and Ellsworth. Prior to
1988, Partner, Ballard Spahr An-
drews & Ingersoll (law firm).
(2) Director of Ellsworth.
</TABLE>

3
<PAGE> 3
<TABLE>
<CAPTION>
(1) PRINCIPAL OCCUPATION OR BUSINESS DURING SERVED AS
DIRECTOR AGE PAST FIVE YEARS AND (2) CURRENT DIRECTORSHIPS DIRECTOR SINCE
-------- --- --------------------------------------------- ------------------
<S> <C> <C> <C>
TERMS EXPIRING IN 1998
Gordon F. Ahalt 68 (1) Since January 1982, President, April 19, 1982
G.F.A. Inc. (petroleum industry
consulting). Since 1987, Consul-
tant, W.H. Reaves & Co., Inc. (as-
set management).
(2) Director of Ellsworth, The Harbin-
ger Group (investments) and Cal
Dive International (diving serv-
ice).
Jane D. O'Keeffe* 41 (1) Since August 1996, President of November 18, 1995
the Company, Ellsworth, and Davis-
Dinsmore. From February 1996 to
August 1996, Executive Vice Presi-
dent 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.
</TABLE>
- ------------
* Mr. Dinsmore is an "interested person" of the Company and Davis-Dinsmore,
as defined by the Investment Company Act of 1940, as amended (the "Invest-
ment Company Act"), because he is an officer of the Company and an officer,
director and holder of more than 5% of the issued and outstanding shares of
voting Common Stock of Davis-Dinsmore (the "Class A Stock"). 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 outstanding shares of the Class A Stock of Davis-Dins-
more.

Directors of the Company, as well as Duncan O. McKee, who served as Director
Emeritus of the Company during the past fiscal year, other than affiliated
persons of the Company, as a group received aggregate compensation of $45,300
from the Company during its fiscal year ended October 31, 1996. Directors of the
Company, other than affiliated persons of the Company, currently receive an
annual fee of $2,500, plus $1,000 per board meeting attended plus expenses of
attending board meetings and a fee of $100 per meeting of committees of the
Board plus expenses for attending committee meetings. Directors do not receive
pension or retirement benefits from the Company.

4
<PAGE> 4
Set forth below is information regarding the compensation paid during the
fiscal year ended October 31, 1996 for each director of the Company:

<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE COMPENSATION FROM COMPANY AND
FROM COMPANY(1) ELLSWORTH(2)
---------------------- ------------------
<S> <C> <C>
Thomas H. Dinsmore.................... $ -0- $ -0-
Jane D. O'Keeffe...................... $ -0- $ -0-
Gordon F. Ahalt....................... $7,500 $15,000
William A. Benton..................... $7,500 $15,100
Elizabeth C. Bogan, Ph.D. ............ $7,600 $15,200
Donald M. Halsted, Jr. ............... $7,600 $15,200
George R. Lieberman................... $7,600 $15,100
Duncan O. McKee(3).................... $7,500 $15,000
</TABLE>
- --------
(1) Two of the Company's Directors, Mr. Ronald Dinsmore and Dr. C.O.
Chichester, passed away during the Company's most recently completed
fiscal year. Neither Mr. Dinsmore nor Dr. Chichester received any fees
from either the Company or Ellsworth.
(2) Ellsworth is a closed-end investment company that is also advised by Da-
vis-Dinsmore.
(3) Mr. McKee received such fees for serving as Director Emeritus of the Com-
pany and Ellsworth.

During the fiscal year ended October 31, 1996, the Board of Directors held
seven meetings. At present, the only committees of the Board are the audit
committee and the nominating committee. The functions of those committees, their
current members and the number of meetings held during the fiscal year ended
October 31, 1996 are set forth below. All of the incumbent directors attended
more than 75% of meetings of the Board and committee meetings held during such
fiscal year.

Audit Committee. The Board of Directors has an audit committee currently
consisting of Messrs. Halsted, Jr. and Lieberman and Dr. Bogan. The audit com-
mittee periodically meets with the Company's independent accountants to review
the scope of audit examinations of the Company, the Company's accounting poli-
cies and procedures and new developments in financial accounting standards ap-
plicable to investment companies. The audit committee also reviews the quality
and performance of the Company's accounting and financial staff. During the
fiscal year ended October 31, 1996, the audit committee met once.

Nominating Committee. The Board of Directors has a nominating committee
currently consisting of Messrs. Halsted, Jr. and Lieberman. This committee was
created to recommend individuals for nomination for election at each annual
meeting of stockholders. The nominating committee considers and recommends
individuals for nomination as directors. The names of potential director
candidates are drawn from a number of sources, including recommendations from
members of the Board, management and stockholders. Stockholders wishing to
recommend Board nominees should submit their recommendations in writing to the
Secretary at the Company's executive offices, with the submitting stockholder's
name and address and pertinent information about the proposed nominee similar to
that set forth in this proxy statement for Board nominees, including current
principal occupation and employment, principal positions held during the last
five years and a list of all companies for which the individual serves as a
director. During the fiscal year ended October 31, 1996, the nominating
committee met once.

5
<PAGE> 5
INVESTMENT ADVISER

Davis-Dinsmore, 65 Madison Avenue, Morristown, New Jersey 07960, serves as the
Company's adviser pursuant to an Investment Advisory Agreement dated as of
August 1, 1996, which became effective on October 25, 1996. For the Company's
fiscal year ended October 31, 1996, pursuant to predecessor Investment Advisory
Agreements in effect during such period, the Company paid Davis- Dinsmore
$583,368 for advisory fees and reimbursed Davis-Dinsmore an additional $25,000
for expenses associated with the Treasurer's office. Davis-Dinsmore also serves
as the Company's administrator.

Thomas H. Dinsmore, Chairman and Chief Executive Officer of the Company, is
also Chairman and Chief Executive Officer of and Senior Analyst for Davis-
Dinsmore. Mr. Dinsmore owns 40.6% of Davis-Dinsmore's Class A Stock. Jane D.
O'Keeffe, President of the Company and Davis-Dinsmore, is the sister of Thomas
H. Dinsmore. Ms. O'Keeffe owns 35.6% of Davis-Dinsmore's Class A Stock.
Sigmund Levine, Senior Vice President and Secretary of the Company, is also
Treasurer and Secretary of Davis-Dinsmore. H. Tucker Lake, Vice President,
Trading of the Company, is the first cousin of Thomas H. Dinsmore and Jane D.
O'Keeffe. Gary Levine, Treasurer and Assistant Secretary of the Company, is
the son of Sigmund Levine.

RATIFICATION OR REJECTION OF SELECTION OF ACCOUNTANTS

The Board of Directors, including a majority of the directors who are not
interested persons of the Company or Davis-Dinsmore, has selected Coopers &
Lybrand L.L.P. as independent accountants to examine and verify the accounts and
securities of the Company for its fiscal year ending October 31, 1997, and to
report thereon to the Board and the stockholders. This selection will be
submitted for ratification or rejection at the Annual Meeting. It is expected
that a representative of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting to respond to appropriate questions of shareholders and to make such
statement as may be desired.

The Board of Directors recommends that you vote FOR ratification of selection
of the accountants.

6
<PAGE> 6
ADDITIONAL INFORMATION

EXECUTIVE OFFICERS

Executive officers of the Company are elected by the Board of Directors and
serve at the pleasure of the Board. Such officers do not receive any
compensation from the Company for their services. The following table sets forth
certain information about executive officers of the Company.

<TABLE>
<CAPTION>
OFFICER POSITION WITH BUSINESS EXPERIENCE DURING
NAME AGE SINCE THE COMPANY PAST FIVE YEARS
---- --- ------- ------------- --------------------------
<S> <C> <C> <C> <C>
Thomas H. Dinsmore 43 1983 Chairman and Chief See page 3 of this proxy state-
Executive Officer ment.
Jane D. O'Keeffe 41 1994 President See page 4 of this proxy state-
ment.
Sigmund Levine 72 1982 Senior Vice Since February 1996, Senior Vice
President and President of the Company, and
Secretary since January 1996, Senior Vice
President of Ellsworth. From
April 1993 to February 1996, Ex-
ecutive 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 Ells-
worth.
H. Tucker Lake 49 1994 Vice President, Since April 1994, Vice Presi-
Trading dent, Trading of the Company and
of Ellsworth. Prior thereto,
Sales Associate, Coldwell Bank-
er, Schlott Realtors.
Gary Levine 39 1993 Treasurer Since April 1993, Treasurer of
the Company and of Ellsworth.
Since June 1986, Assistant Sec-
retary of the Company and Ells-
worth. Since April 1994, Assis-
tant Secretary and Assistant
Treasurer of Davis-Dinsmore.
</TABLE>