-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RcU17I7Yo5U9CGSEMDYRNrTYzZMBUBJepoNkhRtl0z+CZdt5FwmivPrwLrG/kP6c ue/EarlZA7j7Lok0xqfYsQ== 0000009521-99-000014.txt : 19991229 0000009521-99-000014.hdr.sgml : 19991229 ACCESSION NUMBER: 0000009521-99-000014 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELLSWORTH CONVERTIBLE GROWTH & INCOME FUND INC CENTRAL INDEX KEY: 0000793040 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04656 FILM NUMBER: 99781436 BUSINESS ADDRESS: STREET 1: 65 MADISON AVENUE STREET 2: SUITE 550 CITY: MORRISTOWN STATE: NJ ZIP: 07960 BUSINESS PHONE: (973) 631-1177 MAIL ADDRESS: STREET 1: 65 MADISON AVE STREET 2: SUITE 550 CITY: MORRISTOWN STATE: NJ ZIP: 07960 N-30D 1 ANNUAL REPORT RE:BANCROFT CONVERTIBLE FUND 1 Bancroft Convertible Fund, Inc. (LOGO) 1999 Annual Report October 31, 1999 2 Bancroft Convertible Fund, Inc. operates as a closed-end, diversified management investment company and invests primarily in convertible securities, with the objectives of providing income and the potential for capi- tal appreciation--which objectives the Company considers to be relatively equal, over the long-term, due to the nature of the securities in which it invests. HIGHLIGHTS Performance thru 10/31/99 (with dividends reinvested) 10Months 1 Year 5 Year 10 Year -------- ------ ------- ------- Bancroft market value............. 0.39% (3.73)% 102.23% 241.22% Bancroft net asset value *........ 7.19 16.91 106.31 228.87 Closed-end convertible fund average 10.57 15.37 81.72 209.56 S&P 500 +.......................... 12.03 25.66 217.63 414.43 Russell 2000 +..................... 2.76 14.94 68.08# 155.95#
Performance data represent past results and do not reflect future performance. * From Lipper, Inc. Closed-End Fund Performance Analysis. + From Bloomberg L.P. pricing service. # Simple appreciation of index. - ------------------------------------------------------------------------------
Quarterly History of NAV and Market Price Net Asset Values Market Prices (AMEX, symbol BCV) Qtr Ended High Low Close High Low Close - --------- ------ ------ ------ ------ ----- ----- Dec 1998 $11.39 $10.04 $11.11 $10.63 $8.88 $9.63 Mar 1999 11.50 10.99 11.44 10.00 9.38 9.75 Jun 1999 11.84 11.15 11.69 9.94 9.19 9.63 Sep 1999 12.18 11.18 11.23 10.00 9.06 9.38
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Dividend Distributions (12 Months) Record Payment Capital *Corporate Date Date Income Gains Total Deduction - -------- -------- ------ ------- ------ ---------- 12/1/98 12/30/98 $0.183 $2.942 $3.125 45% 3/16/99 3/30/99 0.200 --- 0.200 35 6/15/99 6/29/99 0.200 --- 0.200 35 9/15/99 9/29/99 0.200 --- 0.200 35 ------ ------ ------ $0.783 $2.942 $3.725
* Percentage of each ordinary income distribution qualifying for the dividend received tax deduction by corporate shareholders. 3 TO OUR SHAREHOLDERS We are at the end of the year, the decade and the century. It is a good time to reflect on the more important events and trends carrying us forward. The past century saw the continuing decline of authoritarianism and centralized control. It has seen the beginning of the ascendancy of the individual. The Information Age's maturation combined with the largest demographic segment of our population moving into their most productive years has tremendously aided productivity. Some of this productivity increase has occurred in the home and in the underground economy, hence the Bureau of Labor Statistics does not measure it. This productivity growth, along with the explosion in investments by pension money (through 401Ks, IRAs and others), combined further with the end of the Cold War and the widening of trade with the rest of the world, has made the stellar stock market returns possible. While it is likely that a serious bear market will happen at some time in the future, the above are good solid reasons why the stock market is behaving as it is. There are fireworks in the NASDAQ, but boring low- growth stocks are falling as shown by returns in the other averages. This divergence has created a huge disparity in valuation. The market is not out of control because there are many investment opportunities that have been providing above average returns. But we must ask: are these stocks getting ahead of themselves and discounting growth that they cannot achieve? The signs are visible of a frothy top, but the money flowing into the market is quite substantial and the growth of companies like America Online and Amazon.com has not disappointed, so far. In its December 1999 edition of the Principia Pro for Closed-End Funds, Morningstar* continued to rate Bancroft at four stars (above average). Shareholders who wish a copy of the Standard & Poor's December 4th stock report on Bancroft, or a copy of the Morningstar October 1999 report, should contact us. At the November meeting the Board of Directors declared a dividend totaling $3.08 consisting of 18.3 cents per share from undistributed net investment income, 61.3 cents per share of short-term capital gain on investments and $2.284 per share of long-term capital gain on investments realized in fiscal year 1999. This dividend is payable on December 28, 1999 to shareholders of record November 24, 1999. The 2000 Annual Meeting of Shareholders will be held in our offices in Morristown, NJ on February 16, 2000. Particulars will be included in the proxy statement. All shareholders are welcome to attend and we hope to see you there. May the New Year bring you continued peace and prosperity. /s/ Thomas H. Dinsmore Chairman of the Board December 14, 1999 * Morningstar is a mutual fund analysis and statistical reporting service that reports on and rates most mutual funds. See Important Factors Regarding Forward-Looking Statements on page 14 of this report. 4 LARGEST INVESTMENT HOLDINGS by underlying common stock Principal Amount Value % Total or Shares (Note 1) Net Assets - --------- ---------- ---------- 2,015,000 Time Warner, Inc. $3,671,250 3.5% A media company with operations in entertainment, cable networks and publishing. (exchangeable from Houston Industries 7% due 2000 and Merrill Lynch 0.25% due 2004) 1,000,000 Lucent Technologies, Inc. 3,272,500 3.2 Designer, developer and manufacturer of communications systems, software and products. (exchangeable from NatWest Markets 0% due 2003) 3,000,000 Cable and Wireless Communications plc 3,153,750 3.0 An integrated telecommunications company operating throughout the United Kingdom, as well as a provider of television and Internet services. (exchangeable from Bell Atlantic Financial 4 1/4% due 2005) 3,000,000 Telecom Corp. of New Zealand 3,043,125 2.9 The principal supplier of telecommunications in New Zealand. (exchangeable from Bell Atlantic Financial 5 3/4% due 2003) 2,200,000 General Electric Corp. 2,690,750 2.6 Develops and manufactures products for the utilization of electricity. GE also offers financial services through GE Capital Services, Inc. and owns the National Broadcasting Company. (exchangeable from CS First Boston 21/4% due 2003 and Exch. Certificate 1 1/4% due 2004) 20,000 BankAmerica Corp. 2,140,000 2.1 Provides retail banking and financial services throughout the United States. (exchangeable from Jefferson-Pilot 7 1/4% due 2000) 31,500 Vodafone AirTouch plc 2,109,750 2.0 International provider of mobile telecommunications, cellular telephone, paging and personal communications services. (exchangeable from MediaOne Group, Inc. 6 1/4% due 2001 and 7% due 2002) 1,500,000 Clear Channel Communications, Inc. 2,099,063 2.0 A diversified media company with operations in broadcasting and outdoor advertising. 895,000 AES Corp. 2,047,188 2.0 Owns or has an interest in ninety-four power facilities through- out the world. 3,500,000 Hewlett-Packard Company 2,016,875 1.9 Designs, manufactures and services products for measurement, ----------- ----------- computation and communications. The Company's products include computers, workstations and printers. Total $26,244,251 25.2% =========== ===========
5
MAJOR INDUSTRY EXPOSURE % Total Net Assets ---------- Technology....................................... 13.27% Telecommunications............................... 13.27 Energy........................................... 11.31 Entertainment.................................... 9.08 Health Care & Drugs.............................. 8.44 Banking.......................................... 7.10 Retail........................................... 6.84 Financial & Insurance............................ 5.21 Cable............................................ 4.23 Data-Processing Services......................... 2.80 ---------- Total............................................ 81.55%
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MAJOR PORTFOLIO CHANGES by underlying common stock Three months ended October 31, 1999 Principal Amount or Shares ---------- ADDITIONS AES Corp....................................... 20,000 (convertible from AES Trust III) Amgen, Inc..................................... 196,469 (exchangeable from TARGETS Trust IV) Cable and Wireless Communications plc.......... 2,000,000 (exchangeable from Bell Atlantic Financial) Caremark Rx, Inc............................... 20,000 (exchangeable from Caremark Rx Capital Trust) Chevron Corp................................... 1,000,000 Cox Communications, Inc........................ 20,000 EOG Resources, Inc............................. 70,000 (convertible from Enron Corp.) Level 3 Communications, Inc.................... 1,500,000 Office Depot, Inc.............................. 2,000,000 Siebel Systems, Inc............................ 1,000,000 STMicroelectronics, N.V........................ 1,200,000 Vodafone AirTouch plc.......................... 20,000 (exchangeable from MediaOne Group, Inc.) REDUCTIONS AES Corp....................................... 875,000 Allstate Corp.................................. 1,000,000 (exchangeable from Credit Suisse First Boston Corp.) Boeing Company................................. 33,474 Fleetwood Enterprises, Inc..................... 40,000 (convertible from Fleetwood Capital Trust) HealthSouth Corp............................... 1,250,000 Interstate Bakeries Corp....................... 20,000 (exchangeable from Ralston Purina Company) Merck & Co., Inc............................... 1,000,000 (exchangeable from Republic National Bank of NY) Morgan Stanley Dean Witter technology note..... 1,000,000 (CSCO, EDS, HWP, INTC, MSFT & ORCL) NTL Communications Corp........................ 1,750,000 Robbins & Myers, Inc........................... 1,160,000 VLSI Technology, Inc........................... 1,250,000
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Principal Amount Identified Value or Shares Cost (Note 1) - ----------- ----------- ----------- ADVERTISING--1.4% $1,500,000 Interpublic Group Cos., Inc. 1.87% 2006 cv. sub. deb. 144A(NR)................. $1,301,480 $1,404,375 ----------- ----------- AEROSPACE--1.5% 350,000 Orbital Sciences Corp. 5% 2002 cv. sub. notes 144A (Caa1)...................... 350,000 278,250 125,000 Orbital Sciences Corp. 5% 2002 cv. sub. notes (Caa1)........................... 122,656 99,375 925,000 Simula, Inc. 8% 2004 sr. cv. sub. notes (NR)................................... 936,875 638,250 705,000 SPACEHAB, Inc. 8% 2007 cv. sub. notes 144A (NR)................................ 706,450 521,700 ----------- ----------- 2,115,981 1,537,575 ----------- ----------- AUTOMOTIVE--0.6% 750,000 Standard Motor Products, Inc. 6 3/4% 2009 cv. sub. deb. (B1)................... 750,000 605,625 ----------- ----------- BANKING--7.1% 50,000 shs CNB Capital Trust I 6% SPuRS (Baa2) (exch. for CNB Bancshares, Inc. common stock)................................. 1,253,063 1,725,000 40,000 shs National Australia Bank Ltd. 7 7/8% exch. capital units (A1)................... 1,038,700 1,127,500 40,000 shs WBK Trust 10% STRYPES * (NR) (exch. for Westpac Banking Corp., Ltd. common stock).......................... 1,163,133 1,200,000 1,665,000 BankAtlantic Bancorp 5 5/8% 2007 cv. sub. deb. (NR)............................ 1,898,313 1,177,988 20,000 Jefferson-Pilot Corp. 7 1/4% 2000 ACES-a * (A1) (exch. for BankAmerica Corp. common stock).................................... 1,720,850 2,140,000 ----------- ----------- 7,074,059 7,370,488 ----------- ----------- CABLE--4.2% 20,000 shs Cox Communications, Inc. 7% FELINE PRIDES * (Baa2)............................. 1,000,000 1,240,000 1,000,000 Bell Atlantic Financial Services, Inc. 4 1/4% 2005 cv. sub. deb. 144A (A1) (exch. for cash equiv. of Cable & Wireless Communications plc common stock)................................................................. 1,024,332 1,051,250 2,000,000 Bell Atlantic Financial Services, Inc. 4 1/4% 2005 euro. cv. sub. deb. (A1) (exch. for cash equiv. of Cable & Wireless Communications plc common stock)................................................................. 2,235,080 2,102,500 ----------- ----------- 4,259,412 4,393,750 ----------- ----------- CAPITAL GOODS--2.6% 1,700,000 CS First Boston, Inc. 2 1/4% 2003 sr. medium-term exch. notes (A1) (exch. for General Electric Corp. common stock)............................... 1,700,000 2,184,500 500,000 Exchangeable Certificate Corp. 1 1/4% 2004 sr. medium-term exch. notes 144A (AAA)(exch. for General Electric Corp. common stock)......................... 482,242 506,250 ----------- ----------- 2,182,242 2,690,750 ----------- ----------- CONSUMER GOODS--0.7% 17,500 shs Newell Financial Trust I 5 1/4% QUIPS 144A (A3) (conv. into Newell Rubbermaid, Inc. common stock)............................. 878,750 760,150 ----------- ----------- DATA-PROCESSING SERVICES--2.8% 1,100,000 American Express Credit Corp. 1 1/8% 2003 cash exch. notes (Aa3)............... 1,056,759 1,456,125 1,750,000 National Data Corp. 5% 2003 cv. sub. notes (Ba3)............................... 1,746,875 1,454,688 ----------- ----------- 2,803,634 2,910,813 ----------- ----------- ELECTRIC UTILITIES--1.8% 20,000 shs NiSource, Inc. 7 3/4% PIES-b * (Baa1).......................................... 1,000,000 822,500 20,000 shs Texas Utilities Co. 9 1/4% FELINE PRIDES * (Baa2).............................. 1,029,788 1,016,250 ----------- ----------- 2,029,788 1,838,750 ----------- ----------- ENERGY--11.3% 20,000 shs AES Trust III $3.375 trust cv. pfd. securities (Ba3) (conv. into AES Corp. common stock)........................................... 1,000,000 1,012,500 27,500 shs Apache Corp. $2.015 dep. shs. repstg. series C ACES-b pfd. *(Baa2)............. 906,078 983,125 25,000 shs CMS Energy Corp. 8 3/4% adj. cv. trust securities * (B2)....................... 1,037,500 962,500 40,000 shs The Coastal Corp. 6 5/8% FELINE PRIDES * (Baa2)................................ 1,000,000 1,060,000
7 Portfolio of Investments October 31, 1999 (continued)
Principal Amount Identified Value or Shares Cost (Note 1) - ----------- ----------- ----------- ENERGY--continued $875,000 AES Corp. 4 1/2% 2005 cv. jr. sub. deb. (B1)................................... $875,000 $1,034,688 1,000,000 Devon Energy Corp. 4.95% 2008 cv. sub. deb. (Baa2) (conv. into Chevron Corp. common stock)....................................... 995,000 1,013,750 1,450,000 Diamond Offshore Drilling, Inc. 3 3/4% 2007 cv. sub. notes (Baa1).............. 1,489,875 1,482,625 70,000 Enron Corp. 7% 2002 exch. notes * (Baa) (conv. into EOG Resources, Inc. common stock)................................. 1,546,940 1,505,000 45,000 Kerr-McGee Corp. 5 1/2% 2004 DECS * (Baa1) (exch. for Devon Energy Corp. common stock)................................... 1,493,438 1,693,125 1,000,000 Swiss Life Financial Ltd. 2% 2005 GEMMS 144A (NR) (exch. for Royal Dutch Petroleum common stock)................................ 1,024,309 991,250 ----------- ----------- 11,368,140 11,738,563 ----------- ----------- ENTERTAINMENT--9.1% 15,000 shs Houston Industries, Inc. 7% 2000 ACES-a * (Baa1) (exch. for Time Warner, Inc. common stock).................................... 863,042 1,721,250 20,000 shs UnitedGlobalCom dep. shs. repstg. 7% series C sr. cum. cv. pfd. 144A (NR)...... 1,006,250 1,205,000 500,000 At Home Corp. 0.5246% 2018 cv. sub. deb. 144A (NR)............................. 410,770 294,375 100,000 At Home Corp. 0.5246% 2018 cv. sub. deb. (NR).................................. 65,831 58,875 1,500,000 Clear Channel Communications, Inc. 2 5/8% 2003 sr. cv. notes (Baa3)............ 1,500,000 2,099,063 1,000,000 Imax Corp. 5 3/4% 2003 cv. sub. notes 144A (B1)................................ 1,000,000 1,108,125 2,000,000 Merrill Lynch & Co., Inc. 0.25% 2006 series B medium-term notes (Aa3) (exch. for Time Warner, Inc. common stock)............................... 2,000,000 1,950,000 20,000 The Seagram Co. Ltd. 7 1/2% 2002 adj. cv.-rate equity security units * (Ba2).................................................................. 1,002,500 988,750 ----------- ----------- 7,848,393 9,425,438 ----------- ----------- FINANCIAL & INSURANCE--5.2% 13,000 shs American General Delaware, L.L.C. 6% cv. A MIPS (A2)........................... 658,455 1,197,625 20,000 shs Frontier Financing Trust 6 1/4% cv. trust originated pfd. 144A (Ba2) (conv. into Frontier Insurance Group, Inc. common stock)...................... 1,046,875 630,000 1,000,000 American International Group 2 1/4% 2004 cv. notes (Aaa)....................... 1,163,750 1,512,500 625,000 Penn Treaty American Corp. 6 1/4% 2003 cv. sub. notes (BB+).................... 605,938 540,625 1,375,000 Penn Treaty American Corp. 6 1/4% 2003 cv. sub. notes 144A (BB+)............... 1,406,875 1,189,375 10,730 Southwest Securities Group, Inc. 5% 2004 DARTS * (NR) (exch. for Knight/Trimark Group, Inc. Class A common stock)................... 608,257 332,630 ----------- ----------- 5,490,150 5,402,755 ----------- ----------- HEALTH CARE & DRUGS--8.4% 378,000 Athena Neurosciences, Inc. 4 3/4% 2004 cv. sub. notes (Baa3) (exch. for ADR's representing Elan Corp., plc common stock)................... 366,188 372,330 2,000,000 The Bear Stearns Cos., Inc. 1% 2006 medium-term notes (A2) (conv. into an index comprised of Merck & Co., Inc. and Pfizer, Inc. common stocks)................................................................ 2,000,000 1,760,000 2,250,000 Elan Finance Corp. 0% 2018 LYON 144A (Baa3) (exch. for ADR's representing Elan Corp., plc common stock)................... 1,218,939 1,122,188 900,000 Merrill Lynch & Co., Inc. 1% 2003 euro medium-term notes (Aa3) (cv. into Novartis AG common stock)........................................... 898,875 776,250 2,500,000 Roche Holdings, Inc. 0% 2010 LYON 144A (NR).................................... 1,326,581 1,521,875 1,000,000 Sepracor, Inc. 7% 2005 cv. notes 144A (CCC+)................................... 1,000,000 963,750 250,000 Sepracor, Inc. 7% 2005 cv. notes (CCC+)........................................ 228,750 240,938 1,000,000 Swiss Life Financial Ltd. 2% 2003 GEMMS 144A (NR) (exch. for Glaxo Wellcome plc common stock)................................... 1,038,474 1,006,250 98,469 TARGETS Trust IV 5% exch. notes * (NR) (exch. for Amgen, Inc. common stock).......................................... 1,002,384 996,999 ----------- ----------- 9,080,191 8,760,580 ----------- -----------
Portfolio of Investments October 31, 1999 (continued)
Principal Amount Identified Value or Shares Cost (Note 1) - ----------- ----------- ----------- PAPER & PAPER PRODUCTS--1.3% $30,000 Georgia-Pacific Corp. 7 1/2% 2002 PEPS * (Baa2)............................... $1,436,750 $1,297,500 ----------- ----------- RETAIL--6.8% 32,500 shs Dollar General Trust 8 1/2% STRYPES * (NR) (conv. into Dollar General Corp. common stock)................................ 1,152,806 1,247,188 12,300 shs Estee Lauder Trust 61/4% TRACES II * (NR) (conv. into Estee Lauder Companies, Inc. common stock)........................ 1,037,700 1,103,541 21,699 shs The Home Depot, Inc. common stock.............................................. 504,235 1,638,275 500,000 Amazon.com, Inc. 4 3/4% 2009 cv. sub. notes 144A (Caa3)........................ 500,000 532,500 1,000,000 Costco Companies, Inc. 0% 2017 cv. sub. notes 144A (A3)........................ 551,176 950,000 1,000,000 Costco Companies, Inc. 0% 2017 cv. sub. notes (A3)............................. 811,942 950,000 1,000,000 Office Depot, Inc. 0% 2007 LYON (Baa2)......................................... 661,101 675,000 ----------- ----------- 5,218,960 7,096,504 ----------- ----------- STAFFING SERVICES--1.1% 1,500,000 Interim Services, Inc. 4 1/2% 2005 cv. sub. deb. (Ba3)......................... 1,422,500 1,185,000 ----------- ----------- TECHNOLOGY--13.3% 7,500 shs PSINet, Inc. 6 3/4% cv. pfd. C (Caa)........................................... 375,000 302,813 1,000,000 Citrix Systems, Inc. 0% 2019 cv. sub. deb. 144A (NR)........................... 367,208 505,000 1,500,000 CS First Boston, Inc. 1% 2006 medium-term exch. notes (A1) (exch. for Microsoft Corp. common stock)...................................... 1,500,000 1,456,875 3,500,000 Hewlett-Packard Co. 0% 2017 LYON 144A (Aa3).................................... 2,008,135 2,016,875 250,000 Lattice Semiconductor Corp. 4 3/4% 2006 cv. sub. notes. 144A (NR).............. 250,000 270,938 250,000 MindSpring Enterprises, Inc. 5% 2006 cv. sub. notes (B3)....................... 250,000 241,094 1,000,000 NatWest Markets 0% 2003 exch. trust securities 144A + (NR) (exch. for Lucent Technologies, Inc. common stock)............................ 970,300 3,272,500 1,000,000 Sanmina Corp. 4 1/4% 2004 cv. sub. notes 144A (B+)............................. 1,073,750 1,228,750 1,000,000 Siebel Systems, Inc. 5 1/2% 2006 cv. sub. notes. 144A (NR)..................... 1,002,813 1,380,625 1,200,000 STMicroelectronics, N.V. 0% 2009 LYON (Baa1)................................... 979,710 1,089,000 1,000,000 Tekelec 3 1/4% 2004 cv. sub. discount notes 144A (NR).......................... 853,540 877,500 11,000 Times Mirror Company 4 1/4% 2001 PEPS * (A1) (exch. for America Online, Inc. common stock)................................. 393,910 1,133,000 ----------- ----------- 10,024,366 13,774,970 ----------- ----------- TELECOMMUNICATIONS--13.3% 20,000 shs Globalstar Communications, Ltd. 8% cv. pfd. 144A (Caa2)........................ 1,000,000 1,060,000 3,000,000 Bell Atlantic Financial Services, Inc. 5 3/4% 2003 sr. exch. notes 144A (A1) (exch. for cash equiv. Telecom Corp. of New Zealand common stock)............. 3,164,441 3,043,125 500,000 CoreComm, Ltd. 6% 2006 cv. sub. notes 144A (NR)................................ 500,000 568,750 1,000,000 Exchangeable Certificate Corp. 0.25% 2006 medium-term exch. notes 144A (AAA) (exch. for specific telephone and cable common stocks) ++...................... 1,000,000 1,021,250 1,500,000 Level 3 Communications, Inc. 6% 2009 cv. sr. notes (Caa1)...................... 1,500,000 1,832,813 11,500 MediaOne Group, Inc. 6 1/4% 2001 PIES-a * (BBB) (exch. for ADR's representing Vodafone AirTouch plc common stock)............. 668,438 1,196,000 20,000 MediaOne Group, Inc. 7% 2001 PIES-a * (BBB) (exch. for ADR's representing Vodafone AirTouch plc common stock)............. 868,750 913,750 1,000,000 Nextel Communications, Inc. 4 3/4% 2007 cv. sr. notes 144A (B1)................ 1,000,000 1,936,250 1,000,000 Telefonos De Mexico, S.A. 4 1/4% cv. sr. deb. (BB)............................. 1,000,000 1,052,500 1,250,000 UBS AG 1 1/2% 2006 exch. notes (Aa1) (exch. for AT&T Corp. common stock)........................................... 1,250,000 1,146,875 ----------- ----------- 11,951,629 13,771,313 ----------- -----------
Portfolio of Investments October 31, 1999 (continued)
Principal Identified Value Amount Cost (Note 1) - ----------- ----------- ----------- $17,000 U.S. TREASURY NOTES--0.0% 4 7/8% 3/31/01 **.............................................................. $16,971 $16,809 ----------- ----------- CORPORATE SHORT-TERM NOTES--1.5% 8,600,000 American Express Credit Corp. (P1) (5.22% maturing 11/1/99)....................................................... 8,596,259 8,596,259 ----------- ----------- Total Convertible Bonds and Notes--71.3%....................................... 68,302,021 73,966,491 Total Convertible Preferred Stocks--19.6%...................................... 18,447,140 20,376,942 Total Common Stocks--1.6%...................................................... 504,235 20,376,942 Total Corporate Short-Term Notes--8.3%......................................... 8,596,259 8,596,259 ----------- ------------ Total Investments--100.8%......................................................$95,849,655 104,577,967 =========== ------------ Other assets and liabilities, net--(0.8)%...................................... (787,154) ------------ Total Net Assets--100.0%....................................................... $103,790,813 ============
* See Note 1(e) + Guaranteed by National Westminster Bank plc ++ Ticker symbols: CSCO, CMCSK, TWX, IBM, LMGa and WCOM ** Collateral for a letter of credit ACES-a Automatic Common Exchange Securities ACES-b Automatically Convertible Equity Securities ADR American Depositary Receipts DARTS Derivative Adjustable Ratio Securities DECS Debt Exchangeable for Common Stock FELINE Family of Equity-Linked Income Securities GEMMS Guaranteed Exchangeable Monetisation of Multiple Shares LYON Liquid Yield Option Note MIPS Monthly Income Preferred Securities PEPS Premium Equity Participating Securities PIES-a Premium Income Exchangeable Securities PIES-b Premium Income Equity Securities PRIDES Preferred Redeemable Increased Dividend Equity Securities QUIPS Quarterly Income Preferred Securities SPuRS Shared Preference Redeemable Securities STRYPES Structured Yield Product Exchangeable for Stock TARGETS Targeted Growth Enhanced Terms Securities TRACES Trust Automatic Common Exchange Securities
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's, a division of McGraw-Hill Companies, Inc., have been obtained from sources believed to be reliable but have not been audited by PricewaterhouseCoopers LLP. The cost of investments for federal income tax purposes is $95,849,655 resulting in gross unrealized appreciation and depreciation of $13,484,294 and $4,755,982, respectively, or net unrealized appreciation of $8,728,312 on a tax cost basis. See accompanying notes to financial statements 10
STATEMENT OF ASSETS AND LIABILITIES October 31, 1999 ---------------- ASSETS: Investments at value (cost $95,849,655) (Note 1)......... $104,577,967 Cash..................................................... 386,086 Receivable for securities sold........................... 1,177,698 Dividends and interest receivable........................ 619,444 Other assets............................................. 23,116 ------------ Total assets............................................. 106,784,311 ------------ LIABILITIES: Payable for securities purchased......................... 2,892,447 Accrued management fee (Note 2).......................... 63,133 Accrued expenses ........................................ 37,918 ------------ Total liabilities ....................................... 2,993,498 ------------ NET ASSETS ................................................. $103,790,813 ============ NET ASSETS CONSIST OF: Undistributed net investment income ..................... $ 682,203 Undistributed net realized gain from investment transactions ......................................... 10,980,668 Unrealized appreciation on investments .................. 8,728,312 Capital shares (Note 3).................................. 37,948 Additional paid-in capital .............................. 83,361,682 ------------ NET ASSETS ................................................. $103,790,813 ============ Net asset value per share ($103,790,813 / 3,794,777 outstanding shares $ 27.35 ============
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STATEMENT OF OPERATIONS For the Year Ended October 31, 1999 INVESTMENT INCOME (NOTE 1): Interest ................................................ $ 2,764,922 Dividends ............................................... 1,314,681 ----------- Total Income ......................................... 4,079,603 ----------- EXPENSES (NOTE 2): Management fee .......................................... 749,024 Custodian ............................................... 36,578 Transfer agent .......................................... 52,705 Professional fees ....................................... 66,780 Directors' fees ......................................... 71,550 Reports to shareholders ................................. 34,111 Treasurer's office ...................................... 25,000 Other ................................................... 79,313 ----------- Total Expenses ....................................... 1,115,061 ----------- NET INVESTMENT INCOME ...................................... 2,964,542 ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain from investment transactions .......... 10,993,709 Net increase in unrealized appreciation of investments .. 2,228,213 ----------- Net gain on investments ................................. 13,221,922 ----------- Net Increase in Net Assets Resulting from Operations .... $16,186,464 ===========
See accompanying notes to financial statements 11
STATEMENT OF CHANGES IN NET ASSETS For the Years Ended October 31, 1999 and 1998 1999 1998 ------------ ------------ INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income ......................................... $ 2,964,542 $ 3,031,193 Net realized gain from investment transactions ................ 10,993,709 10,224,916 Net change in unrealized appreciation of investments .......... 2,228,213 (9,493,576) ------------ ------------ Net change in net assets resulting from operations ......... 16,186,464 3,762,533 ------------ ------------ DIVIDENDS TO SHAREHOLDERS FROM: Net investment income ......................................... (2,912,846) (2,981,861) Net realized gain on investments .............................. (10,224,306) (11,271,015) ------------ ------------ Total dividends ............................................ (13,137,152) (14,252,876) ------------ ------------ CAPITAL SHARE TRANSACTIONS (NOTE 3) ............................. 7,308,248 7,736,436 ------------ ------------ CHANGE IN NET ASSETS ............................................ 10,357,560 (2,753,907) Net assets at beginning of year ................................. 93,433,253 96,187,160 ------------ ------------ NET ASSETS AT END OF YEAR (including undistributed net investment income of $682,203 and $630,505, respectively)................... $103,790,813 $ 93,433,253 ============ ============
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FINANCIAL HIGHLIGHTS Selected data for a share of common stock outstanding: YEARS ENDED October 31, -------------------------------------------------------- Per Share Operating Performance: 1999 1998 1997 1996 1995 1994 ------ ------ ------ ------ ------ ------ Net asset value, beginning of period . $26.89 $30.48 $28.23 $24.84 $23.11 $25.00 ------ ------ ------ ------ ------ ------ Net investment income 0.78 0.87 0.94 0.96 1.14 1.20 Net realized and unrealized gain (loss) 3.40 (0.01) 4.55 4.19 2.30 (1.18) ------ ------ ------ ------ ------ ------ Total from investment operations ... 4.18 (0.86) 5.49 5.15 3.44 (0.02) Less Distributions: Dividends from net investment income . (0.78) (0.88) (0.93) (1.11) (1.17) (1.24) Distributions from realized gains .... (2.94) (3.57) (2.31) (0.65) (0.54) (0.67) ------ ------ ------ ------ ------ ------ Total distributions ................ (3.72) (4.45) (3.24) (1.76) (1.71) (1.91) ------ ------ ------ ------ ------ ------ Net asset value, end of period ....... $27.35 $26.89 $30.48 $28.23 $24.84 $23.11 ====== ====== ====== ====== ====== ====== Market value, end of period ......... $22.25 $26.75 $26.81 $23.88 $22.25 $20.13 Net assets, end of period ($000's) .. 103,791 93,433 96,187 83,302 71,425 64,551 Total Investment Return: Based on net asset value* ......... 16.36% 3.16% 21.18% 21.55% 15.79% 0.18% Based on market value+ (2.96)% 18.17% 28.19% 15.65% 20.17% (4.88)% Ratios/Supplemental Data: Ratio of expenses to average net assets ........................ 1.1% 1.1% 1.2% 1.2% 1.2% 1.2% Ratio of net investment income to average net assets ................ 3.0% 3.1% 3.3% 3.9% 4.9% 5.2% Portfolio turnover rate ............. 72% 55% 71% 70% 43% 39%
* Assumes valuation of the Fund's shares, and reinvestment of dividends, at net asset values. + Assumes valuation of the Fund's shares at market price and reinvestment of dividends at actual reinvestment price. 12 NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies Bancroft Convertible Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, closed-end management investment company. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements: (a) Security Valuation Investments in securities traded on a national securities exchange are valued at market using the last reported sales price. Securities traded in the over- the-counter market and listed securities for which no sales were reported are valued at the mean between closing reported bid and asked prices. Where no closing prices are available, value is determined by management, with the approval of the Board of Directors. (b) Securities Transactions and Related Investment Income Security transactions are accounted for on the trade date (date the order to buy or sell is executed) with gain or loss on the sale of securities being determined based upon identified cost. Dividend income is recorded on the ex- dividend date and interest income is recorded on the accrual basis. Interest of $18,990 was earned on cash balances held by the custodian of the Fund's assets during the year ended October 31, 1999. (c) Federal Income Taxes It is the policy of the Fund to distribute substantially all of its taxable income within the prescribed time and to otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provision for federal income or excise taxes is believed necessary. (d) Dividends and Distributions to Shareholders The liability for dividends and distributions payable is recorded on the ex- dividend date. (e) Market Risk It is the Fund's policy to invest the majority of its assets in convertible securities. Although convertible securities do derive part of their value from that of the securities into which they are convertible, they are not considered derivative financial instruments. However, certain of the Fund's investments include features which render them more sensitive to price changes in their underlying securities. Thus they expose the Fund to greater downside risk than traditional convertible securities, but still less than that of the underlying common stock. The market value of those securities was $23,553,107 at October 31, 1999, representing 22.7% of net assets. 2. Management Fee and Other Transactions with Affiliates The management fee is paid to the investment adviser, Davis-Dinsmore Management Company (the "Adviser"). The contract provides for payment of a monthly advisory fee, computed at an annual rate of 3/4 of 1% of the first $100,000,000 and 1/2 of 1% of the excess over $100,000,000 of the Fund's net asset value in such month. The annual fee is subject to reduction to the extent that the ordinary expenses of the Fund (excluding taxes and interest) exceed 1.5% of the first $100,000,000 and 1% of the excess over $100,000,000 of the average of the monthly net asset values of the Fund for the year. The Adviser furnishes investment advice, office equipment and facilities, and pays the salaries of all executive officers of the Fund, except that the costs associated with personnel and certain non-personnel expenses of the office of the Treasurer up to a maximum of $25,000 a year are reimbursed by the Fund. Such reimbursements amounted to $25,000 for the year ended October 31, 1999. The officers of the Fund are also directors, officers or employees of the Adviser, and are compensated by the Adviser. 13 NOTES TO FINANCIAL STATEMENTS (continued) The Fund has adopted a Director deferred compensation arrangement, which allows the Directors to defer the receipt of all or a portion of Director Fees payable on or after October 31, 1998. The amount of these fees will remain an asset of the Fund. The Fund will be obligated to pay these fees, with interest, to the Directors who have elected to defer receipt of their fees on a future date or dates specified by the Directors, or as determined under the terms of the arrangement. 3. Portfolio Activity At October 31, 1999 there were 3,794,777 shares of $.01 par value common stock outstanding (9,000,000 shares authorized). During the year ended October 31, 1999, 319,486 shares were issued in connection with reinvestment of dividends from net investment income and capital gains, resulting in an increase in paid-in capital of $7,308,248. Purchases and sales of investments, exclusive of corporate short-term notes, aggregated $68,711,549 and $66,912,658, respectively, for the year ended October 31, 1999. A distribution of $3.080 per share, derived from net investment income of 18.3 cents, short-term realized capital gains on investments of 61.3 cents and long-term realized capital gains on investments of $2.284, was declared on November 8, 1999, payable December 28, 1999 to shareholders of record at the close of business November 24, 1999. 14 To the Shareholders and Board of Directors of Bancroft Convertible Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets, and the financial highlights, present fairly, in all material respects, the financial position of Bancroft Convertible Growth and Income Fund, Inc. (the "Fund") at October 31, 1999, 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 six years in the period then ended, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities owned at October 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP New York, New York November 19, 1999 15 MISCELLANEOUS NOTES THE YEAR 2000 ISSUE BACKGROUND. Like other investment companies as well as financial and business organizations around the world, the Fund could be adversely affected if the computer systems and embedded technology used by the Adviser and other service providers do not properly process and calculate date-related information and data from and after January 1, 2000. PROGRAMS AND SYSTEMS. The Adviser assessed and tested its internal computer programs and systems in 1998 to ensure these programs and systems will be Year 2000 compliant. The computers used for trading and pricing are Pentium II desktop systems, certified to be Year 2000 compliant by the manufacturer, Dell Computer. The vendors whose accounting software the Adviser uses, Microsoft Corp. and Advent Software, have also supplied the Adviser with statements certifying that their products are now compliant. In its daily operations, the Adviser relies on electrical power and telephone service to operate its copier, telefax and telephone systems. The power and telephone providers have stated, on their respective websites, that their mission-critical systems were compliant as of mid- 1999. Based on statements made by the Adviser's landlord, it is expected that access to the Adviser's offices and the use of its facilities will continue without incident. SECOND AND THIRD PARTY ISSUES. The Bank of New York, the Fund's custodian, and ChaseMellon Shareholder Services, transfer agent and registrar, have publicly announced (in website statements dated January, 1999), that Year 2000 renovation and testing of mission- critical systems was completed by December 31, 1998, in compliance with requirements set forth by the Federal Financial Institutions Examination Council. In addition, these institutions have programs in place to monitor the status of third party vendors and service providers. Bloomberg, the Adviser's securities pricing service provider, has not released to the public the audit results of its testing, due to the proprietary nature of their systems. The Adviser continues to receive updates from each of these and its other outside vendors as they become available. INVESTMENTS. Since the Fund has investments in securities whose issuers may be materially adversely impacted by the Year 2000 issue, the Fund could also be adversely affected. For this reason, since 1998 the Adviser has been reviewing public filings and web page disclosures of each issuer and assessing each with respect to Year 2000 compliance. Some of the criteria the Adviser looks at are: costs incurred and estimates of system repair and replacement, whether or not there is a contingency plan prepared, and the status of second and third party issues. The Adviser continues to monitor these disclosures and uses them concurrently with its other methods of evaluating a security's value as an investment vehicle. The Fund has not incurred any costs to date in the matter of the Year 2000 problem, nor do we expect the Fund to have any in the future. MOST REASONABLY LIKELY WORST CASE YEAR 2000 SCENARIO FOR THE FUND. Since the Fund has investments in securities whose issuers may be materially adversely impacted by the Year 2000 issue, the Fund could also be adversely affected. The failure to correct a material Year 2000 problem is perhaps most likely to occur with respect to The Bank of New York, the Fund's custodian, or ChaseMellon Shareholder Services, the Fund's transfer agent and registrar. Although these institutions have made assurances that mission-critical systems are compliant as of 1998 year-end as stated above, they cannot ensure that all the vendors they rely upon are also completely compliant. The effects might include difficulty in the settlement of trades in a timely manner and dividend distribution delays. There is also the possibility that the Fund's fees to these institutions might be increased due to their increased cost of doing business. For the Adviser the problems that might be faced include the lack of telephone and power service needed to perform daily pricing and trading. 16 MISCELLANEOUS NOTES (continued) THE YEAR 2000 ISSUE (continued) Such failures and others could materially and adversely affect the Fund's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third parties, the Fund is unable to determine at this time whether the consequences of Year 2000 failures will have a material impact on the Fund's results of operations, liquidity or financial condition. CONTINGENCY PLAN. Based on the representations made by The Bank of New York and ChaseMellon, the Fund has not made any contingency plans relating to the receipt of services these institutions provide. The staff members who are responsible for pricing the portfolio and trading own cellular telephones which would be used as backup to contact brokers if the main telephone systems and the Bloomberg pricing service were not available. The Adviser has purchased a laptop computer and a small generator to charge both the cell phone and laptop computer's batteries. The Adviser has borne the cost of this equipment and intends to review these plans periodically and to update them as circumstances change. - ------------------------------------------------------------------------------- IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS The letter to Shareholders contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements which reflect the intent, belief or expectations of the Company, its management, the Adviser and other service providers regarding the anticipated effect of events, circumstances and trends should be considered forward-looking statements. These forward-looking statements are not guarantees of future performance and there are a number of meaningful factors which could cause the Company's results to vary materially from those indicated by any such statements. Factors which could cause actual results to differ from expectations include, among others, a decline in productivity, a decline in global trading, changes in individuals' savings rates, a decline in productivity or new products, changes in the Federal Reserve Board's monetary policy, an increase in interest rates, inflation or taxes, changes to foreign and domestic markets in general, changes to the market for convertible securities or the inability of the Company's service providers and the companies whose securities the Company buys to resolve any Year 2000 issues. - ------------------------------------------------------------------------------- Additional Services Available to Shareholders of Bancroft Convertible Fund, Inc. AUTOMATIC DIVIDEND INVESTMENT PLAN. You may wish to participate in our Automatic Dividend Investment Plan whereby all of the dividends and distributions on your Bancroft shares are automatically invested in additional shares of the Company's stock at the then current market price or net asset value, whichever is lower. When the market price is lower than net asset value, Mellon Securities Trust Company (the "Bank") will take your dividends or distributions in cash, combine them with those of other Plan participants, and purchase shares in the market and thereby take advantage of the lower commissions on larger purchases. When the net asset value is lower than the market price, the participant will receive shares issued by the Company at net asset value. When the Company makes dividends and distributions payable in cash or at the option of all stockholders in common stock, a participant will receive shares of common stock issued by the Company. There is no other charge for this service. To join the Plan, fill out and mail the authorization form on the next page. CASH PAYMENT PLAN. Members of the Dividend Investment Plan may also wish to participate in our Cash Payment Plan which provides a convenient and economical means to increase your investment in the Company's shares. The Cash Payment Plan permits you to send cash payments of between $25 to $5,000 per month to the Bank, which will be aggregated with the funds of other participants, to purchase additional Bancroft shares. You pay only a service charge (5% of the amount to be invested with a maximum of $3.00 per transaction) plus your proportionate share of the brokerage commission which is typically at a savings because your funds are combined with others to take advantage of the reduced commission on larger purchases. - -------------------------------------------------------------------- Pursuant to Section 23 of the Investment Company Act of 1940, notice is hereby given that the Fund may in the future purchase shares of Bancroft Convertible Fund, Inc. Common Stock from time to time, at such times, and in such amounts, as may be deemed advantageous to the Fund. Nothing herein shall be considered a commitment to purchase such shares. 17 Bancroft Convertible Fund, Inc. Automatic Dividend Investment Plan Authorization Form c/o ChaseMellon Shareholder Services Investment Services P.O. Box 3316, South Hackensack, NJ 07606 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 of 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. (over) 18 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. Signature(s)..................................... Date................ ..................................... Note: If shares are in more than one name, all must sign. (over) 19 BOARD OF DIRECTORS GORDON F. AHALT Petroleum Consultant WILLIAM A. BENTON Retired Stock Exchange Specialist ELIZABETH C. BOGAN Senior Lecturer in Economics at Princeton University THOMAS H. DINSMORE, C.F.A. Chairman of the Board of Bancroft DONALD M. HALSTED, JR. Investor GEORGE R. LIEBERMAN Retired Advertising Executive DUNCAN O. MCKEE Retired Attorney JANE D. O'KEEFFE President of Bancroft NICOLAS W. PLATT Public Relations Executive OFFICERS THOMAS H. DINSMORE Chairman of the Board JANE D. O'KEEFFE President SIGMUND LEVINE Senior Vice President and Secretary H. TUCKER LAKE Vice President, Trading GERMAINE M. ORTIZ Assistant Vice President GARY I. LEVINE Treasurer and Assistant Secretary MERCEDES A. PIERRE Assistant Treasurer - -------------------------------------------------------------------- Investment Advisor Davis-Dinsmore Management Company 65 Madison Avenue, Morristown, NJ 07960-7308 (973) 631-1177 http://www.bcvecf.com email: info@bcvecf.com Shareholder Services and Transfer Agent ChaseMellon Shareholder Services, L.L.C. 85 Challenger Road, Ridgefield Park, NJ 07660 (800) 851-9677 http://www.cmssonline.com Common Stock Listing American Stock Exchange Symbol: BCV Bancroft Convertible Fund, Inc. 65 MADISON AVENUE MORRISTOWN, NEW JERSEY 07960 [LOGO] Printed on recycled paper -----END PRIVACY-ENHANCED MESSAGE-----