SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ELLSWORTH CONVERTIBLE GROWTH
AND INCOME FUND, INC.
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(Name of Registrant as Specified In Its Charter)
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ELLSWORTH CONVERTIBLE
GROWTH AND INCOME FUND, INC.
65 Madison Avenue
Morristown, New Jersey 07960
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held
Friday, January 14, 2005
11:00 a.m., Eastern Time
at
65 Madison Avenue, Suite 550, Morristown, New Jersey 07960
To Shareholders of Ellsworth Convertible Growth and Income Fund, Inc.:
We cordially invite you to attend our 2005 Annual Meeting of Shareholders
to:
1. Elect four directors to serve for a term of one or three years, as the
case may be.
2. Ratify the Audit Committee's appointment of PricewaterhouseCoopers LLP
as independent auditors for fiscal year 2005.
3. Vote on an amendment to the Company's Charter to give shareholders the
right to tender their shares during fiscal year 2005.
4. Transact any other business that properly comes before the meeting.
We are holding the Annual Meeting on Friday January 14, 2005 at 11:00 a.m.,
Eastern Time, at the Company's offices located at 65 Madison Avenue, Morristown,
New Jersey 07960.
You may vote on these proposals in person or by proxy. If you cannot attend
the meeting, we urge you to complete and return the enclosed proxy promptly in
the enclosed, self-addressed, stamped envelope so that your shares will be
represented and voted at the meeting according to your instructions. If you are
the record owner of your shares on the books of the Company's transfer agent,
then you may also submit your proxy vote by telephone or via the Internet, by
following the instructions accompanying this Proxy Statement. If your broker
holds your shares in its name, you may submit your proxy vote by any other means
specified in the instructions that accompany this Proxy Statement. Of course, if
you attend the meeting, you may withdraw your proxy and vote your shares. Only
shareholders of record on November 17, 2004 will be entitled to vote at the
meeting or any adjournment of the meeting.
Thomas H. Dinsmore
Chairman of the Board of Directors
November 29, 2004
ELLSWORTH CONVERTIBLE
GROWTH AND INCOME FUND, INC.
65 Madison Avenue
Morristown, New Jersey 07960
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JANUARY 14, 2005
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Proxy Statement
We are sending you this Proxy Statement and the enclosed proxy card because
Ellsworth Convertible Growth and Income Fund, Inc.'s Board of Directors is
soliciting your proxy to vote at the 2005 Annual Meeting of Shareholders. This
Proxy Statement summarizes the information you need to know to cast an informed
vote at the Annual Meeting. However, you do not need to attend the Annual
Meeting to vote your shares. Instead, you may simply complete, sign and return
the enclosed proxy card or use any of the available alternative proxy voting
methods specified in the instructions that accompany this Proxy Statement.
If you are the record owner of your shares, the available alternative proxy
voting methods are telephone and Internet voting. If your shares are held by a
broker, the alternative proxy voting methods may include telephone, Internet and
any alternative method of voting permitted by your broker.
This Proxy Statement, the attached Notice of Annual Meeting and the
enclosed proxy card will first be sent on or about November 29, 2004 to all
shareholders entitled to vote. Shareholders who owned shares of the Company's
common stock on November 17, 2004 are entitled to vote. On this record date,
there were 12,298,127 shares outstanding. We know of no beneficial owner of more
than five percent of those shares. Each share of the Company's common stock that
you own entitles you to one vote. (A fractional share has a fractional vote.)
We are also sending along with this Proxy Statement the Company's 2004
Annual Report, which includes our financial statements.
Time and Place of Meeting
We are holding the Annual Meeting on Friday January 14, 2005 at 11:00 a.m.,
Eastern Time, at the Company's offices located at 65 Madison Avenue, Morristown,
New Jersey 07960.
Voting by Proxy
Whether you plan to attend the Annual Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. If you are the record owner of your shares on the books of
the Company's transfer agent, then you may also submit your proxy vote by
telephone or via the Internet, by following the instructions accompanying this
Proxy Statement. If your broker holds your shares in its name, you may submit
your proxy vote by any other means specified in the
instructions that accompany this Proxy Statement. Returning the proxy card or
using any of the available alternative proxy voting methods will not affect your
right to attend the Annual Meeting and vote.
If you properly fill in your proxy card and send it to us in time to vote
or use any of the available alternative proxy voting methods, your "proxy" (one
of the individuals named on your proxy card) will vote your shares as you have
directed. If you sign the proxy card or use any of the available alternative
proxy voting methods but do not make specific choices, your proxy will vote your
shares as recommended by the Board of Directors as follows:
o FOR the election of all four nominees for director.
o FOR ratification of the appointment of independent auditors for 2005.
o AGAINST the amendment to the Company's Charter.
Your proxy will have authority to vote and act on your behalf at any
adjournment of the meeting.
If you give a proxy, you may revoke it at any time before it is exercised.
You can do this in one of four ways:
o You may send in another proxy with a later date.
o If you submitted a proxy by telephone, via the Internet or via an
alternative method of voting permitted by your broker, you may submit
another proxy by telephone, via the Internet, or via such alternative
method of voting, or send in another proxy with a later date.
o You may notify the Company's Secretary in writing before the Annual
Meeting that you have revoked your proxy.
o You may vote in person at the Annual Meeting.
Voting in Person
If you do attend the Annual Meeting and wish to vote in person, we will
give you a ballot when you arrive. However, if your shares are held in the name
of your broker, bank or other nominee, you must bring a letter from the nominee
indicating that you are the beneficial owner of the shares on November 17, 2004,
the record date for voting, and authorizing you to vote.
Quorum Requirement
A quorum of shareholders is necessary to hold a valid meeting. A quorum
will exist if shareholders entitled to vote a majority of all shares outstanding
on the record date are present in person or by proxy.
Under rules applicable to broker-dealers, if your broker holds your shares
in its name, we expect that the broker will be entitled to vote your shares on
Proposals 1 and 2 even if it has not received instructions from you. However,
your broker will not be entitled to vote on Proposal 3 unless it has received
instructions from you. If your broker does not vote your shares on Proposal 3
because it has not received instructions from you, these shares will be
considered "broker non-votes."
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Broker non-votes, if any, and abstentions will count as present for
establishing a quorum.
Vote Necessary to Approve a Proposal
Proposal 1. Directors are elected by a plurality vote of shares present at
the meeting, meaning that the director nominee with the most affirmative votes
for a particular slot is elected for that slot. In an uncontested election for
directors, the plurality requirement is not a factor. Abstentions will not count
as votes cast and will have no effect on the outcome of this proposal. We expect
that brokers will be entitled to vote on this proposal, but any broker non-vote
will have no effect on the outcome of this proposal.
Proposal 2. The affirmative vote of the majority of votes cast is needed to
approve the ratification of the Audit Committee's appointment of the independent
auditors. Abstentions will not count as votes cast and will have no effect on
the outcome of this proposal. We expect that brokers will be entitled to vote on
this proposal, but any broker non-vote will have no effect on the outcome of
this proposal.
Proposal 3. The affirmative vote of two-thirds of all outstanding shares of
the Company, whether or not present at the Annual Meeting, is needed to approve
the amendment of the Company's Charter. Broker non-votes and abstentions will
not count as votes cast and will have the effect of votes against this proposal.
PROPOSAL 1
ELECTION OF DIRECTORS
Structure of the Board of Directors
The Board of Directors is divided into three classes for purposes of
election. One class is elected at each annual meeting of shareholders. Directors
in each class serve for a three-year term. Classifying the Board of Directors
for election may be regarded as an "anti-takeover provision" because it has the
effect of maintaining the continuity of the Board of Directors and requiring at
least two years to change a majority of the Board of Directors.
The Board of Directors currently consists of nine persons. Seven of the
directors are "independent," meaning they are not "interested persons" of the
Company within the meaning of the Investment Company Act of 1940, as amended
(the Investment Company Act). Two of the Company's directors are "interested
persons" because of their business and financial relationships with the Company
and Davis-Dinsmore Management Company (Davis-Dinsmore), its investment adviser.
At the 2005 Annual Meeting, the terms of three directors are expiring. The
directors approved the nomination of each of the three directors whose terms are
expiring in 2005, as set forth below, to serve for terms that expire in 2008. In
addition, the directors approved the nomination of one director, Robert J.
McMullan, for a term that expires in 2006. Mr. McMullan was appointed by the
Board of Directors as a director to fill a vacancy created by the retirement of
George R. Lieberman, a former Company director. Mr. McMullan was nominated for
election at the 2005 Annual Meeting so that shareholders may have an opportunity
to vote for him as a director. Other directors are not up for election this year
and will continue in office for the rest of their terms.
Each of the nominees is willing to serve as a director. However, if a
nominee becomes unavailable for election, proxies will vote for another nominee
proposed by the Board of Directors or, as an alternative, the Board of Directors
may keep the position vacant or reduce the number of directors.
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Nominees for Directors
The Board of Directors has approved the nomination of the following people
to serve as directors until the annual meeting of shareholders to be held in
2006 or 2008, as the case may be. The business address of each nominee and/or
director listed below is Ellsworth Convertible Growth and Income Fund, Inc., 65
Madison Avenue, Suite 550, Morristown, NJ 07960.
Nominees Who are Independent Directors and Whose Terms Will Expire in 2008
Donald M. Halsted, Jr., 77, served for four years as President and Chief
Operating Officer of Lonestar Industries, Inc. prior to retirement in 1983, and
prior to that served for twelve years as President, Chief Executive Officer and
Director of Atlantic Cement Company. Since his retirement, Mr. Halsted has
continued to serve on various boards of directors, including the board of
Aquarion Company through 1999. Mr. Halsted served in the Army Air Force in World
War II. Mr. Halsted has been a director of the Company since 1986 and is also a
director of Bancroft Convertible Fund, Inc. (Bancroft), a closed-end investment
company. Mr. Halsted received an A.B. in Economics from Princeton University.
Duncan O. McKee, 73, retired in 1988 from the practice of law as a partner
at the law firm of Ballard Spahr Andrews & Ingersoll, LLP (Ballard Spahr).
During his career at Ballard Spahr, Mr. McKee represented publicly owned
companies, including closed-end and open-end investment companies, in mergers,
acquisitions and securities offerings. Mr. McKee was Director Emeritus of the
Company and Bancroft from 1988 to 1996. Mr. McKee has been a director of the
Company since 1996 and is also a director of Bancroft. Mr. McKee received his
undergraduate degree from the College of Wooster and his law degree from Duke
University School of Law.
Nominee Who is an Independent Director and Whose Term Will Expire in 2006
Robert J. McMullan, 50, has been a trustee of AmSouth Funds since 2003 and
currently oversees 26 portfolios within the AmSouth Funds complex. From 1998 to
2004, Mr. McMullan was Senior Vice President and Chief Financial Officer of
Conexant Systems, Inc. (formerly, GlobeSpan Virata, Inc.), a semiconductor
manufacturing company. From 1989 through 1998, Mr. McMullan was an Executive
Vice President and Chief Financial Officer of The BISYS Group, Inc., a computer
services company. Mr. McMullan received a B.A. in Business Administration from
Saint Michael's College. He has been a director of the Company and Bancroft
since November 2004, at which time he was appointed to serve out the term of
retired director George R. Lieberman.
Mr. McMullan was recommended to the Company's Nominating and Administration
Committee for election as a Company director by a non-management director of the
Company.
Nominee Who is an Interested Person and Whose Term Will Expire in 2008
Thomas H. Dinsmore, 51, has been Chairman and Chief Executive Officer of
the Company, Bancroft and Davis-Dinsmore (investment adviser to the Company and
Bancroft) since August 1996. From 1986 to August 1996, Mr. Dinsmore was
President of the Company; from 1985 to 1996, he was President of Bancroft; and
from 1988 to 1996, he was President of Davis-Dinsmore. Mr. Dinsmore is a
Chartered Financial Analyst. Mr. Dinsmore has been a director of the Company
since 1986 and is also a director of Bancroft and Davis-Dinsmore. Mr. Dinsmore
received a B.S. in Economics from the Wharton School of Business at the
University of Pennsylvania, and an M.A. in Economics from Fairleigh Dickinson
University.
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Mr. Dinsmore is an interested person (within the meaning of the Investment
Company Act) of the Company and Davis-Dinsmore because he is an officer of the
Company and an officer, director and holder of more than 5% of the outstanding
shares of voting common stock of Davis-Dinsmore.
The Board of Directors recommends that you vote FOR these nominees.
Information about the Company's Other Directors
Information about the Company's other directors is presented below.
Continuing Independent Directors
Gordon F. Ahalt, 76, is currently retired. Prior to his retirement, Mr.
Ahalt was President of G.F.A. Inc., a petroleum industry consulting company,
from 1982 until 2000. From 1987 until 1998, Mr. Ahalt was a consultant with W.
H. Reaves & Co., Inc., an asset management company. Mr. Ahalt has spent his
career as an analyst of and a consultant to the petroleum industry, and has
previously served as a director or executive officer of several energy companies
and an oil and gas exploration company. Mr. Ahalt has been a director of the
Company since 1986. He is also a director of Bancroft, Cal Dive International, a
diving service company, as well as several private investment funds. Mr. Ahalt
received a B.S. in Petroleum Engineering from the University of Pittsburgh. Mr.
Ahalt's term as director expires in 2007.
William A. Benton, 71, is currently retired. Formerly, Mr. Benton was a
partner in BE Partners, a small options market maker, from 1991 until the
business was sold on November 1, 2000. From 1991 to November 1999, he was a
limited partner of Gavin, Benton, & Co., a New York Stock Exchange specialist
firm. Mr. Benton has been a member of the New York Stock Exchange for more than
45 years, and has previously been a director of a discount brokerage firm and a
brokerage firm making markets in derivative instruments. Mr. Benton has been a
director of the Company since 1986 and is also a director of Bancroft. Mr.
Benton graduated from Bucknell University with a B.S. in Commerce and Finance.
Mr. Benton's term as director expires in 2006.
Elizabeth C. Bogan, Ph.D., 60, has been a Senior Lecturer in Economics at
Princeton University since 1992. Before joining the faculty at Princeton, she
was the Chairman of the Economics and Finance Department at Fairleigh Dickinson
University and a member of the Executive Committee for the College of Business
Administration. Dr. Bogan has chaired numerous administrative and academic
committees. Dr. Bogan has been a director of the Company since 1986 and is also
a director of Bancroft. Dr. Bogan received an A.B. in Economics from Wellesley
College, an M.A. in Quantitative Economics from the University of New Hampshire,
and a Ph.D. in Economics from Columbia University. Her writings on finance have
been published in The Financial Analysts Journal and in other journals. Dr.
Bogan's term as director expires in 2007.
Nicolas W. Platt, 51, has been President of CNC-US, an international
consulting company, since January 2003. From May 2001 to January 2003, he was a
Senior Partner of Platt & Rickenbach, a New York-based financial relations firm.
From January 1995 to April 2001, he held senior executive positions with the WPP
Group, UK and its public relations subsidiaries, Ogilvy Public Relations,
Burson-Marsteller and Robinson Lehr Montgomery. He has been a director of the
Company since 1997 and is also a director of Bancroft. Mr. Platt received a B.A.
from Skidmore College and an M.A. in Economics from Columbia University. Mr.
Platt's term as director expires in 2007.
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Continuing Director Who is an Interested Person
Jane D. O'Keeffe, 49, has been President of the Company, Bancroft and
Davis-Dinsmore since August 1996. In 1996, before becoming President of the
Company and Bancroft, she was Executive Vice President of the Company and
Bancroft. From 1994 to 1996, Ms. O'Keeffe was Vice President of the Company and
Bancroft and Executive Vice President of Davis-Dinsmore. Ms. O'Keeffe has been
in the investment business since 1980. Ms. O'Keeffe has been a director of the
Company since 1995 and is also a director of Bancroft and Davis-Dinsmore. Ms.
O'Keeffe has a B.A. from the University of New Hampshire and attended the Lubin
Graduate School of Business at Pace University. Ms. O'Keeffe's term as director
expires in 2006.
Ms. O'Keeffe is an interested person (within the meaning of the Investment
Company Act) 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 outstanding
shares of voting common stock of Davis-Dinsmore.
Certain Relationships
Thomas H. Dinsmore and Jane D. O'Keeffe are brother and sister.
Committees of the Board of Directors
The Board of Directors has three committees: an Audit Committee, a
Nominating and Administration Committee and a Pricing Committee.
Audit Committee
The Company has a separately designated Audit Committee as that term is
defined in the Securities Exchange Act of 1934, as amended. The Audit Committee
is comprised entirely of independent directors (Mr. Benton, Dr. Bogan, Mr.
Halsted and Mr. McMullan, with Dr. Bogan serving as Chairperson). In addition,
all such members are independent as such term is defined by the American Stock
Exchange's Company Guide.
In accordance with its charter, attached as Appendix A to this Proxy
Statement, the Committee oversees the Company's accounting and financial
reporting policies and practices, as well as the quality and objectivity of the
Company's financial statements and the independent audit of the financial
statements. Among other duties, the Committee is responsible for: (i) the
appointment, compensation and oversight of any independent auditors employed by
the Company (including monitoring the independence qualifications and
performance of such auditors and resolution of disagreements between the
Company's management and the auditors regarding financial reporting) for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services; (ii) overseeing the accounting and financial
reporting process of the Company; (iii) monitoring the process and the resulting
financial statements prepared by management to promote accuracy and integrity of
the financial statements and asset valuation; (iv) assisting the Board of
Directors' oversight of the Company's compliance with legal and regulatory
requirements that related to the Company's accounting and financial reporting,
internal control over financial reporting and independent audits; (v) to the
extent required by Section 10A of the Securities Exchange Act of 1934 (the
"Exchange Act"), pre-approving all permissible audit and non-audit services
provided to the Company by its independent auditors; (vi) pre-approving, in
accordance with Item 2.01(c)(7)(ii) of Regulation S-X, certain non-audit
services provided by the Company's independent auditors to the Company's
investment adviser and certain other affiliated entities if the Company's
independent auditors are the same as, or affiliated with, the investment
adviser's or affiliated
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entities' auditors; and (vii) to the extent required by Regulation 14A under the
Exchange Act, preparing an audit committee report for inclusion in the Company's
annual proxy statement.
Audit Committee Report
The Audit Committee reviewed and discussed the Company's audited financial
statements with its independent auditors, PricewaterhouseCoopers LLP (PwC).
These discussions included the auditor's judgments about the quality, not just
acceptability, of the Company's accounting principles as applied in its
financial reporting. PwC, the Audit Committee and management also discussed
matters such as the clarity, consistency and completeness of the accounting
policies and disclosures, with a particular focus on critical accounting
policies.
The Audit Committee has received a letter from PwC required by Independence
Standards Board Standard No. 1 disclosing all relationships between PwC and its
related entities and the Company. The Audit Committee discussed with PwC their
independence as the Company's independent auditors. In addition, the Audit
Committee has considered whether the provision of non-audit services by PwC is
compatible with maintaining PwC's independence. The Audit Committee also
reviewed and discussed the Company's audited financial statements with
management.
Based on the review and discussions described above, the Audit Committee
has recommended to the Board of Directors that the audited financial statements
be included in the Company's annual report to shareholders for the fiscal year
ended September 30, 2004 for filing with the Securities and Exchange Commission.
Elizabeth C. Bogan, Ph.D., Chairperson
William A. Benton
Donald M. Halsted
Robert J. McMullan
Nominating and Administration Committee
The Nominating and Administration Committee is comprised entirely of
independent directors (Mr. Ahalt, Mr. Halsted and Mr. Platt, with Mr. Ahalt
serving as Chairman). In addition, all such members are independent as such term
is defined by the American Stock Exchange's Company Guide. In accordance with
its charter, the Committee, among other duties, is responsible for: (i)
nominating persons for election or appointment: (a) as additions to the Board of
Directors, (b) to fill vacancies which, from time to time, may occur in the
Board of Directors and (c) for election by shareholders of the Company at
meetings called for the election of directors; (ii) nominating persons for
appointment as members of each committee of the Board of Directors, including,
without limitation, the Audit Committee, the Nominating and Administration
Committee, and the Pricing Committee; (iii) reviewing from time to time the
compensation, if any, payable to the directors and making recommendations to the
Board of Directors regarding compensation; (iv) reviewing and evaluating from
time to time the functioning of the Board of Directors and the various
committees of the Board of Directors; (v) overseeing the selection of
independent legal counsel to the independent directors; and (vi) monitoring the
performance of independent legal counsel employed by the Company and the
independent directors.
After a determination by the Nominating and Administration Committee that a
person should be nominated as an additional director, or as soon as practical
after a vacancy occurs or it appears that a vacancy is about to occur for a
director position on the Board of Directors, the Nominating and Administration
Committee will nominate a person for appointment by a majority of the
independent directors to add to the Board of Directors or to fill the vacancy.
Prior to a meeting of the shareholders of
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the Company called for the purpose of electing directors, the Nominating and
Administration Committee will nominate one or more persons for election as
directors at such meeting.
Evaluation by the Nominating and Administration Committee of a person as a
potential nominee to serve as a director, including a person nominated by a
shareholder, should result in the following findings by the Nominating and
Administration Committee: (i) upon advice of independent legal counsel to the
independent directors, that the person will qualify as an independent director
(applicable only to the nomination of independent directors), and that the
person is otherwise not disqualified under the Investment Company Act from
serving as a director of the Company; (ii) with respect to the nomination of
independent directors only, that the person is free of any material relationship
with the Company (other than as a shareholder of the Company), that would
interfere with the exercise of independent judgment; (iii) that the person is
willing to serve, and willing and able to commit the time necessary for the
performance of the duties of a director; (iv) that the person can make a
positive contribution to the Board of Directors and the Company, with
consideration being given to the person's business experience, education and
such other factors as the Nominating and Administration Committee may consider
relevant; (v) that the person is of good character and high integrity; (vi) that
the person has desirable personality traits including independence, leadership
and the ability to work with the other members of the Board of Directors; (vii)
that the person is not an AMEX employee or floor member; and (viii) that the
composition of the Board of Directors is varied as to educational background,
business experience and occupation.
Consistent with the Investment Company Act, the Nominating and
Administration Committee can consider recommendations from management in its
evaluation process.
The Nominating and Administration Committee will consider nominees
recommended by a shareholder to serve as director, provided: (i) that such
person is a shareholder of record at the time he or she submits such names and
is entitled to vote at the meeting of shareholders at which directors will be
elected; and (ii) that the Nominating and Administration Committee, shall make
the final determination of persons to be nominated. The Nominating and
Administration Committee will evaluate nominees recommended by a shareholder to
serve as directors in the same manner as they evaluate nominees identified by
the Nominating and Administration Committee.
A shareholder may nominate an individual for election to the Board of
Directors at the 2006 Annual Meeting of shareholders if the shareholder: (1) is
a shareholder of record at the time of giving notice to the Company; (2) is a
shareholder of record at the time of the 2006 Annual Meeting; (3) is entitled to
vote at the 2006 Annual Meeting; and (4) has complied with the notice procedures
in the Company's Bylaws. The notice procedures require that a shareholder submit
the nomination in writing to the Secretary of the Company no earlier than
September 16, 2005 but no later than October 16, 2005. The notice must contain
all information relating to the nominee required for proxy solicitations by
Regulation 14A under the Securities Exchange Act of 1934, as amended, (including
the individual's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected). The notice must also contain
the shareholder's name and address as they appear on the Company's books (and
the name and address of any beneficial owner, on whose behalf the nomination is
made) and the number of shares of stock owned beneficially and of record by such
shareholder and shareholder nominee.
A current copy of the Nominating and Administration Committee Charter is
set forth in Appendix B.
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Pricing Committee
The Pricing Committee is comprised of three members, two of whom are
independent directors (Mr. Ahalt and Mr. Platt, with Mr. Ahalt serving as
Chairman) and one of whom is an interested person (Mr. Dinsmore). In accordance
with its charter, the Committee assists the Company's investment adviser,
Davis-Dinsmore, in its valuation of the Company's portfolio securities when
pricing anomalies arise and the full Board is not available to assist
Davis-Dinsmore in making a fair value determination.
It is anticipated that the Committee will meet only as pricing anomalies or
issues arise that cannot be resolved by the entire Board due to time
constraints.
Board and Committee Meeting Attendance
During the 2004 fiscal year, the Board of Directors met nine times, the
Audit Committee met four times and the Nominating and Administration Committee
met four times. The Pricing Committee did not meet. All directors attended at
least 75% of all Board and Committee meetings held during the 2004 fiscal year.
The Company's policy regarding Board member attendance at annual meetings of
shareholders is that directors are encouraged but not required to attend such
annual meetings. Each of the Company's then current directors attended the
Company's 2004 annual meeting of shareholders.
Shareholder Communications with the Board of Directors
The Company adopted Shareholder Communication Procedures (the "Procedures")
that set forth the process by which shareholders of the Company may send
communications to the Board of Directors. If a shareholder sends a
recommendation of a nominee to the Board of Directors or to an individual
director, such communication would be covered by the Procedures. Shareholder
proposals submitted pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended, and communications made in connection with such proposals are
not subject to the Procedures. The Company's Bylaws also contain provisions
requiring a shareholder to provide advance notice of his or her intention to
nominate, at the Company's annual meeting of shareholders, an individual for
election as director.
Pursuant to the Procedures, shareholders should send their communications
to the Shareholder Relations Group. Communications may be sent by regular mail
or delivery service to the following address: 65 Madison Avenue, Suite 550,
Morristown, NJ 07960. Email communications may be sent to:
info@ellsworthfund.com. All shareholder communications that are directed to the
Board of Directors or an individual director of the Company in his or her
capacity as director and received by the Shareholder Relations Group shall be
promptly forwarded to the individual director of the Company to whom they were
addressed or to the full Board, as applicable. Copies of all such shareholder
communications will also be distributed to the Chairs of each of the Company's
Audit Committee and Nominating and Administration Committee, and to counsel for
the Company and for the independent directors. Counsel for the Company and for
the independent directors, upon receipt of its copy of a shareholder
communication, shall work with such Chairs and counsel for the independent
directors to determine whether such shareholder communication should be
distributed to any directors to whom it was not sent and whether and in what
manner the directors should respond to such shareholder communication.
Responses, if any, to shareholder communications shall be coordinated by counsel
for the Company and for the independent directors, working with the Chairs.
Directors' Compensation
Mr. Dinsmore and Ms. O'Keeffe are the only officers of the Company or
Davis-Dinsmore who serve on the Board of Directors. Each director who is not an
officer of the Company or Davis-Dinsmore
9
currently receives (1) an annual fee of $5,000, (2) $1,000 plus expenses for
each Board meeting attended, (3) $1,000 for each shareholders' meeting attended,
(4) $1,000 plus expenses for each Committee meeting attended that is not held in
conjunction with a Board meeting, and (5) $500 for each Committee meeting
attended that is held in conjunction with a Board meeting. The chairperson of
each Committee receives an additional $200 per Committee meeting.
Davis-Dinsmore is the Company's investment adviser and is also the
investment adviser to Bancroft. Because of this connection, Bancroft and the
Company make up a "fund complex" (Fund Complex). The following table shows the
compensation that was paid to the directors solely by the Company as well as by
the Fund Complex as a whole during the 2004 fiscal year.
Aggregate Compensation Total Compensation
From Company From Fund Complex
---------------------- -------------------
Thomas H. Dinsmore...................... $ -0- $ -0-
Jane D. O'Keeffe........................ $ -0- $ -0-
Gordon F. Ahalt......................... $17,000 $33,000
William A. Benton....................... $16,000 $31,500
Elizabeth C. Bogan, Ph.D................ $17,800 $35,100
Donald M. Halsted, Jr................... $19,800 $39,100
George R. Lieberman (1)................. $18,500 $36,500
Duncan O. McKee......................... $14,000 $27,000
Robert J. McMullan (2).................. $-0- $-0-
Nicolas W. Platt........................ $15,000 $29,000
(1) Mr. Lieberman retired as a director as of October 18, 2004.
(2) Mr. McMullan was appointed director as of November 15, 2004.
Security Ownership of Management
The Company's directors, nominees for director and officers owned the
shares of the Company's common stock shown on the following table as of October
31, 2004 (officers of the Company are identified in the "Additional Information
- Executive Officers" section of this proxy)
10
Shares of Company
Owned Beneficially*
--------------------
Gordon F. Ahalt.................................... 2,400
William A. Benton.................................. 7,205
Elizabeth C. Bogan, Ph.D........................... 24,176
Thomas H. Dinsmore................................. 36,017(1)
Donald M. Halsted, Jr.............................. 2,489
Robert J. McMullan................................. None
Duncan O. McKee.................................... 4,273
Jane D. O'Keeffe................................... 10,446(2)
Nicolas W. Platt................................... 1,192
H. Tucker Lake, Jr................................. 14,337(3)
Gary I. Levine..................................... 2,560(4)
Germaine M. Ortiz.................................. 1,617(5)
Mercedes A. Pierre................................. 2,472(6)
Joshua P. Lake..................................... 450(7)
* Represents for each director and officer less than 1% of the outstanding
shares of the Company. As of October 31, 2004, directors and officers of the
Company beneficially owned in the aggregate 109,634 shares of the Company,
representing approximately 0.9% of the outstanding shares. Except as
otherwise indicated, each director and officer possesses sole investment and
voting power with respect to shares beneficially owned.
(1) Includes (i) 464 shares held in trust for the benefit of Mr. Dinsmore's
minor child, (ii) 4,475 shares which Mr. Dinsmore owned jointly with his
wife, and (iii) 3,138 shares owned solely by his wife, as to which shares
Mr. Dinsmore disclaims beneficial ownership.
(2) Includes (i) 1,370 shares held in trust for the benefit of Ms. O'Keeffe's
minor children, and (ii) 1,386 shares owned jointly with her husband.
(3) Includes (i) 11,415 shares owned by Mr. Lake's spouse and (ii) 177 shares
held in trust for Mr. Lake's child.
(4) Includes (i) 323 shares as to which Mr. Levine possesses shared investment
and voting power, (ii) 519 shares held in trust for the benefit of Mr.
Levine's minor children, and (iii) 1,718 shares owned by his wife.
(5) Includes 579 shares as to which Ms. Ortiz possesses shared investment and
voting power.
(6) Includes 398 shares as to which Ms. Pierre possesses shared investment and
voting power.
(7) Includes 89 shares as to which Mr. Lake possesses shared investment and
voting power.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Although not required to do so, the Board of Directors seeks your
ratification of the Audit Committee's appointment of PricewaterhouseCoopers LLP
(PwC) as the Company's independent auditors for the 2005 fiscal year. The Board
of Directors believes that the shareholders should have the opportunity to vote
on this matter. If the appointment is not ratified, the Audit Committee will
meet to select new independent auditors. We do not expect that a representative
from PwC will be present at the Annual Meeting. However, should a PwC
representative choose to attend, he or she will have an opportunity to make a
statement and to respond to appropriate questions.
11
Fees Billed by PwC Related to the Company
Set forth in the table below are the aggregate fees billed to the Company
by PwC for services rendered to the Company during the Company's last two fiscal
years ended September 30, 2003 and September 30, 2004.
Fiscal Year Ended
September 30 Audit Fees Audit-Related Fees (1) Tax Fees (2) All Other Fees
------------ ---------- ------------------ -------- --------------
2003 $32,827 $0 $2,200 $0
2004 $34,400 $9,785 $2,500 $0
(1) "Audit-Related Fees" include those fees billed to the Company by PwC in
connection with its review of the Company's Registration Statement on Form
N-2 relating to the Company's Rights Offering. All Audit-Related Fees were
pre-approved by the Company's Audit Committee and no Audit-Related Fees
were approved by the Company's Audit Committee pursuant to section
2.01(c)(7)(i)(C) of Regulation S-X, which waives the pre-approval
requirement for certain de minimus fees.
(2) "Tax Fees" include those fees billed by PwC in connection with its review
of the Company's income tax returns. All Tax Fees were pre-approved by the
Company's Audit Committee and no Tax Fees were approved by the Company's
Audit Committee pursuant to section 2.01(c)(7)(i)(C) of Regulation S-X,
which waives the pre-approval requirement for certain de minimus fees.
Non-Audit Services
During each of the last two fiscal years ended September 30, 2003 and
September 30, 2004, PwC did not provide any non-audit services to the Company or
Davis-Dinsmore or its affiliates or otherwise bill the Company or Davis-Dinsmore
or its affiliates for any such non-audit services.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee pre-approves all audit and permissible non-audit
services that are proposed to be provided to the Company by its independent
auditors before they are provided to the Company. Such pre-approval also
includes the proposed fees to be charged by the independent auditors for such
services. The Audit Committee may delegate the pre-approval of audit and
permissible non-audit services and related fees to one or more members of the
Audit Committee who are "independent," as such term is defined in Rule
10A-3(b)(1)(iii) under the Exchange Act. Any such member's decision to
pre-approve audit and/or non-audit services and related fees shall be presented
to the full Audit Committee, solely for informational purposes, at their next
scheduled meeting.
The Audit Committee also pre-approves non-audit services to be provided by
the Company's independent auditors to the Company' investment adviser if the
engagement relates directly to the operations and financial reporting of the
Company and if the Company' independent auditors are the same as, or affiliated
with, the investment adviser's auditors.
The Board of Directors recommends that you vote FOR Proposal 2.
12
PROPOSAL 3
AMENDMENT TO COMPANY'S CHARTER
Background
The Company's common stock trades on the American Stock Exchange. For the
12 weeks that ended on November 12, 2004, the average market price for each
share was approximately 9.76% less than its weekly net asset value. In this
circumstance, Article IX of the Company's Charter requires the Board of
Directors to adopt a proposal, to the extent consistent with the Investment
Company Act, to submit a Charter amendment to shareholders that would permit
shareholders to sell their shares back to the Company at their net asset value
on March 31, June 30, and September 30, 2005.
At the Annual Meeting, you will be asked to approve or disapprove the
following resolution:
RESOLVED, that the Company's Charter be and it is hereby amended by
adding a new Article XII to read in full as follows:
ARTICLE XII
Each holder of shares of common stock of the Corporation shall have
the right to tender all of such shares to the Corporation for purchase
on March 31, 2005, June 30, 2005 and September 30, 2005 (each, a
"Purchase Date") at net asset value as of the close of business on
each such Purchase Date; provided, however, that no such right shall
exist unless the Corporation receives a "no-action" letter or
interpretive or exemptive relief from the Securities and Exchange
Commission permitting such right; and provided further, however, that
the Corporation may suspend such right (a) for any period (i) during
which the New York Stock Exchange is closed other than customary
week-end and holiday closings or (ii) during which trading on the New
York Stock Exchange is restricted; (b) for any period during which an
emergency exists as a result of which (i) disposal by the Corporation
of securities owned by it is not reasonably practicable or (ii) it is
not reasonably practicable for the Corporation fairly to determine the
value of its net assets; or (c) for such other periods as the
Securities and Exchange Commission may by order permit for the
protection of security holders of the Corporation.
The Board of Directors, including all the directors who are not affiliated with
Davis- Dinsmore Management Company, recommends that you vote AGAINST Proposal 3.
Factors Considered by the Board of Directors
In opposing the adoption of the proposed amendment to the Company's
Charter, the Board of Directors considered the following factors:
Past Performance of the Company
The Company was established as a vehicle for long-term investment through
participation in a professionally managed portfolio of convertible securities.
The Company's investment objectives are to provide for income and potential for
capital appreciation (which objectives the Company considers to be
13
relatively equal, over the long term, due to the nature the securities in which
it invests). The Board of Directors believes that the Company has succeeded in
meeting its objectives. The following table illustrates the growth in the net
asset value and market price of the Company's common stock:
-------------------------------------------------------------------------------------------------------------------------
Percentage Increase in Net Asset
Value with Dividends and Capital Total Investment Return
Gains Reinvested at Net Asset Value Based on Market Price
(Annualized) (Annualized) (3)
-------------------------------------------------------------------------------------------------------------------------
Period Unadjusted for the Adjusted for the Unadjusted for the Adjusted for the
Company's 2003 Company's 2003 Company's 2003 Company's 2003
Rights Offering(1) Rights Offering(2) Rights Offering(4) Rights Offering(2)
-------------------------------------------------------------------------------------------------------------------------
Fiscal year ended
September 30, 2004 5.23% 7.34% 2.83% 5.12%
-------------------------------------------------------------------------------------------------------------------------
Five years ended
September 30, 2004 3.73% 4.19% 6.89% 7.32%
-------------------------------------------------------------------------------------------------------------------------
Ten years ended
September 30, 2004 9.48% 9.60% 11.47% 11.65%
-------------------------------------------------------------------------------------------------------------------------
June 1986 (beginning of
operations) through
September 30, 2004 8.89%(2) 9.00% 9.33%(2) 9.35%
-------------------------------------------------------------------------------------------------------------------------
1 Cumulative percentage increases based on Net Asset Value for the five year
and ten year periods, unadjusted for the 2003 rights offering, are from
Lipper, Inc. Closed-End Fund Performance Analysis, dated September 30, 2004.
These cumulative increases are 20.11% and 147.45% respectively.
2 Source: Davis-Dinsmore.
3 Assumes reinvestment of dividends and capital gains at prices obtained
pursuant to the Company's dividend reinvestment plan.
4 Cumulative percentage increases based on market price for the five year and
ten year periods, unadjusted for the 2003 rights offering, are from Bloomberg
L.P. pricing service. These cumulative increases are 39.53% and 196.10%,
respectively.
The Board of Directors also looked at the following measurements of the
Company's performance:
o During the 2004 fiscal year, the Company paid distributions of $0.315
per share from investment income. This represented approximately 3.6% of
the shares' average weekly net asset value and approximately 4.0% of
their average weekly closing market price.
o In addition, on October 18, 2004, the Company declared a distribution
payable on November 24, 2004 of $0.085 per share from investment income.
On the date it was declared, this distribution represented approximately
1.1% of the closing market price of the Company's shares.
How the Company has performed in the past is not a guarantee of how it will
perform in the future. However, the Board of Directors believes that the Company
will continue to serve as an appropriate investment vehicle for its shareholders
by providing for income and the potential for capital appreciation.
14
Market Discounts May Provide Investment Opportunities
Over the past several years, numerous closed-end funds whose shares are
traded on exchanges have seen their shares trade at a discount to net asset
value. In many instances these discounts have increased in recent years. A
number of factors can influence the size of the discount, including demand for a
fund's shares, the extent to which analysts report on a fund, and a fund's
performance.
When an investor buys shares of a closed-end fund at a price that is lower
than the fund's net asset value, the investor gets an ownership interest in an
investment portfolio valued at more per share than the investor paid for the
shares. For example, if a fund has a net asset value per share of $10.00, but a
market value per share of $9.00, an investor will earn a return on securities
with a value ($10.00) that is higher than his or her investment ($9.00). This
will result in a higher return on the investor's money than would have been the
case if the investor paid net asset value. For this reason, the Board of
Directors believes that market discounts may present investment opportunities
for investors. To the extent investors act upon this investment opportunity,
they may increase the demand for and liquidity of a closed-end fund's shares.
In making its recommendation that shareholders vote against the Charter
amendment, the Board of Directors recognized that so long as the market discount
remains stable (or is reduced), investors who sell their shares are not in a
worse position than when they purchased their shares as a result of the
discount. To understand why this is the case, it is important to understand the
difference between a fund's net asset value and its market price. The net asset
value of a fund is simply the market value of the fund's assets less the fund's
liabilities. In other words, the net asset value of a fund is the value of the
fund's assets if it were to liquidate those assets on any given day, less any
outstanding liabilities on that day. The market price of a fund is determined
independent of the net asset value and is based on the supply and demand for a
fund's shares. On days when there are more buyers than sellers of a fund's
shares, the fund's share price will tend to increase. On days when sellers
outnumber buyers, a fund's shares price will tend to decrease. A market discount
occurs where there is a difference between the fund's net asset value per share
and the price investors are willing to pay for those shares.
A fund's market price per share tends to move in tandem with its net asset
value per share. Therefore, it is possible that the Company's returns on its
underlying assets could closely approximate the returns on your investment in
the Company's shares. For example, if on a given date the Company has a net
asset value per share of $10.00 and a market value per share of $8.50, investors
who purchased shares on that date bought them at a 15% discount from net asset
value. Assume the net asset value per share later increased to $11.00. If the
market value per share concurrently increased to $9.35, the discount would have
remained at 15%. In examining the return to investors, based upon net asset
value, the shares increased in value from $10.00 to $11.00, or 10%. Based upon
market value, the shares increased in value from $8.50 to $9.35, or 10%. In this
example, investors who sold their shares on the later date were not in a worse
position because of the discount.
The Board of Directors also recognized that if the market price did not
increase to the same extent that the net asset value increased (thereby
resulting in an increase in the market discount), investors who sell their
shares would receive a lower return on their investment than if the market
discount had remained the same or had decreased. For example, assume the net
asset value per share of the Company's stock is $10.00 and its market value is
$8.50, which is a 15% discount from net asset value. If the net asset value of
the Company increases from $10.00 to $11.00 (a 10% increase), while the market
value per share increases from $8.50 to $9.00 (a 5.9% increase), the resulting
market discount would be 22% - a 7% increase. This effectively means that while
the underlying assets of the Company appreciated by 10% (investment return),
your investment in the Company's shares appreciated by only 5.9%, giving you a
lower return on your investment than would be realized had the Company's market
price kept pace with
15
its net asset value. Investors who sold their shares would still recognize a
gain on their investment, but not to the extent that the net asset value
increased. If in the example above the market price of the Company's shares was
reduced below $8.50, investors who sold their shares at the lower price would
recognize a loss upon the sale, even if the Company's net asset value had
increased.
The Board of Directors has concluded that the future of the Company should
not be tied to whether its shares have traded at a market discount. Instead, the
Company's future should be based on its success in meeting its investment
objective. In making its recommendation, the Board of Directors recognized that
it had reached the same conclusion in prior years.
Tenders Would Adversely Affect the Company's Operations and Performance
The Board of Directors believes that to require the Company to repurchase
its shares would not be in the best interests of the Company and its
shareholders as a whole because of the effect that repurchases would have on-
o The Company's expense ratio. Fewer shareholders would have to bear the
Company's fixed expenses.
o The Company's investment performance and its ability to achieve its
investment objective. The Company might have to sell some of its more
liquid and more desirable portfolio securities to raise the cash it
would need to repurchase its shares. This could leave the Company with
less desirable holdings.
o The Company's status as a regulated investment company under the
Internal Revenue Code of 1986, as amended. In order to maintain its
status as a regulated investment company under the Code, the Company
must satisfy certain quarterly diversification and annual distribution
requirements. The sale of securities to pay the purchase price for the
tendered shares might cause the Company's portfolio to lack sufficient
diversification for purposes of the Code requirement. In addition,
payment of the purchase price for the tendered shares might eliminate
cash and other liquid investments that would otherwise be available to
pay dividends in satisfaction of the distribution requirement of the
Code.
o The Company's continued existence. The Board of Directors might have to
recommend the liquidation, merger or other reorganization of the Company
if the Company were to become too small to be operated efficiently.
Value of the Company's Portfolio
The Company would have to sell securities from its portfolio to pay for
shares that it would be required to repurchase. In doing so, the Company would
have to pay transaction costs. In addition, the Company might have less
bargaining power in the sale of its securities if the purchasers knew that the
Company was required to sell its portfolio securities to raise money for shares
being repurchased. This might result in the Company selling securities at lower
prices than it otherwise would. These transaction costs and potential lower
prices might reduce the net asset value of the Company's shares and, therefore,
the amounts payable to shareholders who sell their shares back to the Company at
their net asset value.
Compliance with the Investment Company Act May Delay or Prevent
Implementation
The Company's Charter requires that, if the conditions of Article IX of the
Charter are met, the Board of Directors will adopt a proposal, to the extent
consistent with the Investment Company Act, to
16
amend the Charter to give the shareholders the right to tender their shares to
the Company. The Investment Company Act limits the ways in which a closed-end
investment company, such as the Company, can conduct a tender offer for its
shares. Therefore, the proposed Charter amendment provides that shareholders
will not have the right to tender their shares unless the Company receives a
no-action letter or interpretive or exemptive relief from the Securities and
Exchange Commission (Commission) permitting such right to tender.
Section 23(c)(2) of the Investment Company Act provides that no registered
closed-end company shall purchase any securities of any class of which it is the
issuer, except pursuant to tenders, after reasonable opportunity to submit
tenders given to all holders of securities of the class to be purchased. In a
1988 no-action letter, the Commission Staff took the position that Section
23(c)(2) applies only to tender offers in which a fund holds the right to
repurchase its shares and not tender offers where shareholders hold the right to
tender their shares to a fund. Under this interpretation, the Company would not
be able to rely on Section 23(c)(2) to permit shareholders to tender their
shares to the Company.
Alternatively, Rule 23c-3 under the Investment Company Act permits a
closed-end fund such as the Company to conduct periodic repurchases of its
shares, subject to compliance with the conditions of the Rule, without being
deemed to be an issuer of redeemable securities. One condition of the Rule is
that a fund must limit repurchases of shares from shareholders to no more than
25% of the outstanding common stock on any repurchase request date. The Company
could not rely on Rule 23c-3 to comply with its Charter provision, because under
the Charter provision shareholders have the right to tender all shares on
certain dates.
As a result of the limitations of Section 23(c)(2) and Rule 23c-3, even if
the shareholders approve the Charter amendment, shareholders will not have the
right to tender their shares to the Company until the Company takes further
action to comply with the Investment Company Act by obtaining a no-action letter
or exemptive or interpretive relief from the Commission so that it can conduct
share repurchases in accordance with the provisions of its Charter. There can be
no assurance that the Company would be able to obtain any such no-action letter
or interpretive or exemptive relief from the Commission.
Continued Listing on the American Stock Exchange
The Company's shares are listed on the American Stock Exchange. Although
unlikely, the shares could be delisted if the total market value of publicly
held shares and the Company's net assets are each less than $5 million for more
than 60 consecutive days, or less than 200,000 shares are publicly traded, or
there are less than 300 round-lot holders of the shares, or the Company ceases
to qualify as a closed-end fund under the Investment Company Act. Share
repurchases will not reduce the Company's authorized capital.
Potential Advantages to Shareholders
In making its recommendation, the Board of Directors recognized that the
Company's market discount has been greater than 5% in three of the past five
years. For example, the market price per share was 16.5% less than the Company's
net asset value per share at September 30, 2000, was 3.7% less than the net
asset value per share at September 30, 2001, was 3.3% less than net asset value
per share at September 30, 2002, was 6.2% less than net asset value per share at
September 30, 2003 and was 8.7% less than net asset value per share at September
30, 2004. The Board of Directors also recognized that the average trading volume
for the Company's shares is less than the average trading volume for companies
generally on the American Stock Exchange. The Board of Directors considered two
potential advantages for shareholders in adopting the proposed Charter
amendment:
17
o If shareholders wanted to sell shares, they would be able to do so at
their net asset value instead of at their market price, which averaged
10.1% less than their net asset value for the last fiscal year, and has
averaged 9.7% less than net asset value over the past five fiscal years.
By doing this, shareholders would maximize the return on their
investment in the near term.
o The market price for the shares may increase, thereby reducing the
market discount.
However, the effect of the Company's transaction costs and potentially reduced
bargaining power if it had to sell its portfolio securities might decrease the
net asset value of the Company's shares and, therefore, the amounts paid to
shareholders who sell their shares back to the Company.
Potential Conflicts Disclosed
Two of the directors who considered this proposal (Mr. Dinsmore and Ms.
O'Keeffe) are interested directors because they are directors, officers and
shareholders of Davis-Dinsmore Management Company, the Company's investment
adviser. If the Company repurchased its shares, the Company would become smaller
and this would result in a reduction of the fees that the Company pays to
Davis-Dinsmore. The interested directors acknowledged the effect that the
Charter amendment would have on Davis-Dinsmore, but indicated that, in
considering their recommendation, they focused on the long-term interests of the
Company and its shareholders as a whole and believed that the Charter amendment
was not in the best interests of the Company and its shareholders as a whole.
Federal Income Tax Treatment
Generally, shareholders who tender all their shares would recognize a
capital gain (or loss) for federal income tax purposes to the extent the amount
they receive is greater (or less) than the amount they paid for their shares.
This capital gain (or loss) will be taxed as long-term capital gain (or loss) if
shares tendered have been owned for more than one year. A shareholder that is
not a corporation is subject to federal income tax on long-term capital gain at
a maximum rate of 15%. However, amounts received by tendering shareholders could
be taxed as dividends in circumstances where, after application of the
constructive ownership rules of the Code, the purchase of their shares by the
Company did not constitute a complete termination of their interest, a
substantially disproportionate redemption or a distribution that was not
essentially equivalent to a dividend. Because the Company is unaware of the
number of shares constructively owned by each of its shareholders, the Company
will be unable to designate amounts paid to repurchase its shares as "qualified
dividend income." Accordingly, any such amounts that are treated as dividends
will be taxed at regular ordinary income tax rates.
Noncorporate shareholders who tender their shares may be subject to backup
withholding at a 28% rate on the cash received in exchange. Backup withholding
generally will not apply, however, to a shareholder who furnishes a correct
taxpayer identification number and certifies under penalties of perjury that
such number is correct.
How Shares Would Be Tendered
If the proposed Charter amendment is adopted and the shareholders have the
right to tender their shares, the Company will make a tender offer to
shareholders in accordance with the requirements of the Exchange Act, to the
extent applicable, and the Investment Company Act, by publication or mailing, or
both. The Company will establish procedures to make the current net asset value
of the Company's shares publicly available throughout the period of the tender
offer. If you wish to accept the tender offer, you may be required to tender all
your shares (or all shares attributed to you for federal income tax
18
purposes under Section 318 of the Code). The Company will purchase shares
tendered in accordance with the offer unless it suspends the tender offer as
described above.
If you tender your shares, you will be required to pay a fee directly to
the Company's transfer agent to help to defray processing costs. We anticipate
that the fee will be $25 but it could be higher or lower.
The Company will charge against capital, costs incurred by it in connection
with the tender offer. Shares that have been tendered and purchased by the
Company will become authorized but unissued shares.
Limitation on Tenders
If the proposed Charter amendment is adopted and the shareholders have the
right to tender their shares, the Company will be able to suspend your rights to
tender your shares during periods -
o In which the New York Stock Exchange is closed (other than customary
weekend and holiday closings) or trading on it is restricted.
o In which, because of an emergency, it is not reasonably practicable for
the Company to sell its portfolio securities or to fairly determine the
net asset value of its shares.
o In which the Securities and Exchange Commission permits the Company to
suspend rights to tender for the protection of its shareholders.
In addition, if the proposed Charter amendment is adopted and the
shareholders have the right to tender their shares, the Company intends to
follow a policy (which it may change) of suspending your rights to tender your
shares if, in the Board of Directors' judgment, at the time the tender offer
commences, or during the tender offer period-
o Legal action is begun or threatened that challenges the tender of the
Company's shares or otherwise materially adversely affects the ability
of the Company to conduct the tender offer.
o Federal, state or foreign authorities declare a banking moratorium on
banks in the United States, New York or in foreign countries in which
the Company invests, and such moratorium materially adversely affects
the ability of the Company to obtain liquid assets necessary to honor
tenders.
o Federal, state or foreign authorities limit the extension of credit by
lending institutions or the exchange of foreign currency and those
limitations materially adversely affect the ability of the Company to
obtain liquid assets necessary to honor tenders.
o War, armed hostilities, terrorist attacks or other calamity occurs that
directly or indirectly involves the United States or other countries in
which the Company invests and such calamity materially adversely affects
the ability of the Company to obtain liquid assets necessary to honor
tenders.
The Company will reinstate your rights to tender your shares once any of
the above events no longer materially adversely affects the Company's ability
either to conduct the tender offer, or obtain liquid assets necessary to honor
tenders, as applicable.
19
ADDITIONAL INFORMATION
Investment Adviser
Davis-Dinsmore Management Company, 65 Madison Avenue, Morristown, New
Jersey 07960, is the Company's investment adviser.
Executive Officers
The Company's executive officers are elected by the Board of Directors,
receive no compensation from the Company and hold office until the meeting of
the Board of Directors following the next annual meeting of stockholders and
until his or her successor shall have been duly elected and qualified, or until
his or her earlier death, resignation or removal. Information about these
officers is presented below.
Thomas H. Dinsmore is Chairman and Chief Executive Officer of the Company.
Mr. Dinsmore is also a director of the Company and information about him is
presented earlier in this proxy statement under "Proposal 1, Election of
Directors - Nominee Who is an Interested Person and Whose Term Will Expire in
2008."
Jane D. O'Keeffe is President of the Company. Ms. O'Keeffe is also a
director of the Company. Information about Ms. O'Keeffe is presented earlier in
this proxy statement under "Proposal 1, Election of Directors - Information
about the Company's Other Directors - Continuing Director Who is an Interested
Person."
H. Tucker Lake, Jr., 57, has been Vice President of the Company and of
Bancroft since 2002. From 1994 until 2002, he was Vice President, Trading of the
Company. He has been a Vice President of Davis-Dinsmore since 1997.
Joshua P. Lake, 28, has been Treasurer of the Company and Bancroft since
April 2004, and Assistant Secretary of the Company and Bancroft since February
2002. From February 2002 until April 2004, Mr. Lake was Assistant Treasurer of
the Company and Bancroft. He has also been Assistant Treasurer and Assistant
Secretary of Davis-Dinsmore since February 2002.
Gary I. Levine, 47, has been Executive Vice President and Chief Financial
Officer of the Company and Bancroft since April 2004, and Secretary of the
Company and Bancroft since November 2003. From 2002 until 2004, Mr. Levine was
Vice President and Chief Financial Officer of the Company and Bancroft, and
Treasurer of the Company and Bancroft from 1993 until 2004. He had been
Assistant Secretary of the Company and Bancroft from 1986 until 2003. He has
been Executive Vice President of Davis-Dinsmore since April 2004 and Treasurer
since 1997.
Germaine M. Ortiz, 35, has been a Vice President of the Company since 1999.
She has also been a Vice President of Davis-Dinsmore since 1999. She was
Assistant Vice President of the Company, Bancroft and Davis-Dinsmore from 1996
to 1999. From 1993 to 1996, Ms. Ortiz was an Assistant Analyst with
Davis-Dinsmore.
Mercedes A. Pierre, 43, has been Vice President of the Company and Bancroft
since April 2004, and Chief Compliance Officer of the Company and Bancroft since
July 2004. From February 1998 to the present, Ms. Pierre has been Assistant
Treasurer of the Company and Bancroft. Ms. Pierre has been Vice President and
Chief Compliance Officer of Davis-Dinsmore since June 2004.
20
Certain Relationships
H. Tucker Lake, Jr. is the cousin of Thomas H. Dinsmore and Jane D. O'Keeffe,
and the father of Joshua P. Lake.
Security Ownership of Management
Set forth below is the dollar range of equity securities beneficially owned
(1) in both the Company and Fund Complex by each director and each nominee for
election as a director of the Company as of October 31, 2004. (2)
Aggregate Dollar Range
of Equity Securities in
All Funds Overseen or to
Dollar Range of be Overseen by the
Equity Securities Director or Nominee
in the Company (3) in Fund Complex (4)
---------------------- -------------------------
Gordon F. Ahalt.................................... $10,001-$50,000 $10,001-$50,000
William A. Benton.................................. $50,001-$100,000 over $100,000
Elizabeth C. Bogan, Ph.D........................... over $100,000 over $100,000
Thomas H. Dinsmore................................. over $100,000 over $100,000
Donald M. Halsted, Jr.............................. $10,001-$50,000 $50,001-$100,000
Duncan O. McKee.................................... $10,001-$50,000 $50,001-$100,000
Robert J. McMullan (5)............................. None None
Jane D. O'Keeffe................................... $50,001-$100,000 over $100,000
Nicolas W. Platt................................... $1-$10,000 $10,001-$50,000
(1) Beneficial ownership has been determined based upon the director's or
nominee's direct or indirect pecuniary interest in the equity securities.
(2) The dollar ranges are: None, $1-$10,000, $10,001-$50,000, $50,001-$100,000,
or over $100,000.
(3) The dollar range of equity securities owned in the Company is based on the
closing price of $7.89 on October 29, 2004 on the American Stock Exchange.
(4) The dollar range of equity securities owned in the Fund Complex is based on
the closing price of $7.89 for the Company and $18.23 for Bancroft on
October 29, 2004 on the American Stock Exchange.
(5) Mr. McMullan was appointed to the Company's board of directors effective
November 15, 2004.
Proxy Solicitation
The Company expects to solicit proxies principally by mail. The Company
will pay the cost of soliciting proxies and may reimburse firms and others for
their expenses in forwarding solicitation materials to the beneficial owners of
the Company's shares. Officers of the Company may also solicit proxies by
telephone, facsimile, the Internet or personal interview, and will not receive
any additional compensation for such solicitation.
21
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act, Section 30(h) of the Investment Company
Act, and the regulations of the Securities and Exchange Commission thereunder,
require the Company's officers and directors and direct or indirect beneficial
owners of more than 10% of the Company's Common Stock, as well as
Davis-Dinsmore, its directors and officers and certain of its other affiliated
persons (collectively, Reporting Persons), to file initial reports of ownership
and changes in ownership with the Securities and Exchange Commission. Reporting
Persons are required to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on its review of the copies of such forms received by it and
written representations, the Company believes that all filing requirements
applicable to the Reporting Persons have been complied with during the fiscal
year ended September 30, 2004 except that a Form 4 report covering a 1997 gift
of 400 shares by Mrs. Jean Dinsmore (a director of Davis-Dinsmore) to her
grandson was not filed in a timely manner.
Shareholder Proposals
If you want us to consider including a shareholder proposal in the
Company's proxy statement for the 2006 annual meeting of shareholders, we must
receive it from you no later than August 1, 2005.
A shareholder may bring other business before the 2006 Annual Meeting of
shareholders if the shareholder: (1) is a shareholder of record at the time of
giving notice to the Company; (2) is a shareholder of record at the time of the
2006 Annual Meeting; (3) is entitled to vote at the 2006 Annual Meeting; and (4)
has complied with the notice procedures in the Company's Bylaws. The notice
procedures require that a shareholder submit the proposal in writing to the
Secretary of the Company no earlier than September 16, 2005 but no later than
October 16, 2005. The notice must include a brief description of the business
desired to be brought before the 2006 Annual Meeting, the reasons for conducting
such business at the 2006 Annual Meeting and any material interest the
shareholder may have in such business. The notice must also include the
shareholder's name and address as they appear on the Company's books (and the
name and address of any beneficial owner on whose behalf the proposal is made),
as well as the number of shares of stock owned beneficially and of record by
such shareholder and beneficial owner.
By order of the Board of Directors,
/s/ THOMAS H. DINSMORE
--------------------------------------
Thomas H. Dinsmore
Chairman of the Board of Directors
November 29, 2004
22
Appendix A
BANCROFT CONVERTIBLE FUND, INC.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
(THE "FUNDS")
AMENDED AND RESTATED
AUDIT COMMITTEES CHARTER
(Effective July 22, 2004)
1. Membership; Qualifications.
a. Each Audit Committee shall have at least three members. [Section
121B(2)(a) of the American Stock Exchange ("AMEX") Listing Standards.]
b. Each member of the Audit Committees shall be able to read and understand
fundamental financial statements, including a Fund's balance sheet, income
statement, and cash flow statement. [Section 121B(2)(a)(ii) of the AMEX listing
Standards.]
c. At least one member of each Audit Committee must be "financially
sophisticated" in that he or she has past employment experience in finance or
accounting, requisite professional certification in accounting or other
comparable experience or background which results in the individual's financial
sophistication, including but not limited to being or having been a chief
executive officer, chief financial officer, or other senior officer with
financial oversight responsibilities. [Section 121B(2)(a)(ii) of the AMEX
listing standards.]
d. Each member of the Audit Committees shall be free of any material
relationship with the Funds that, in the opinion of the Boards of Directors of
the Funds (the "Boards"), would interfere with his or her individual exercise of
independent judgment. [Section 121A of the AMEX listing Standards.]
e. No member of the Audit Committees shall, other than in his or her
capacity as a member of the Audit Committees, the Boards, or any other Board
committee, accept directly or indirectly any consulting, advisory, or other
compensatory fee from the Funds. Compensatory fees do not include the receipt of
fixed amounts of compensation under a retirement plan (including deferred
compensation) for prior service with the Funds (provided that such compensation
is not contingent in any way on continued service). [Rule 10A-3(b)(1)(iii)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")]
f. No member of either of the Audit Committees shall be an "interested
person" of either of the Funds as defined in section 2(a)(19) of the Investment
Company Act of 1940, as amended (the "1940 Act"). [Section 121A(g) and
121B(2)(a)(i) of the AMEX listing Standards; Rule 10A-3(b)(1)(iii) promulgated
under the Exchange Act]
2. Purposes. The purposes of the Audit Committees are:
a. in their capacity as committees of the Boards, to be directly
responsible for the appointment (subject to ratification by a majority of the
Boards who are not "interested persons" of the Funds as defined in the 1940 Act
("disinterested directors")), compensation, retention and oversight of the work
of any independent auditors employed by the Funds (including resolution of
disagreements between management and the auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work;
A-1
b. to oversee the Funds' accounting and financial reporting policies and
processes, their internal controls and, as appropriate, the internal controls of
their investment adviser; [Section 121B(1)(iii) of the AMEX Listing Standards.]
c. to oversee the quality and objectivity of the Funds' financial
statements and the independent audits thereof; [Section 121B(1)(iii) of the AMEX
Listing Standards.]
d. to the extent required by Section 10A(h) and (i) of the Exchange Act, to
preapprove all audit and permissible non-audit services that are provided to the
Funds by their independent auditors;
e. to pre-approve, in accordance with Item 2.01(c)(7)(ii) of Regulation
S-X, certain non-audit services provided by the Funds' independent auditors to
the Funds' investment adviser, if the Funds' independent auditors are the same
as, or affiliated with, the investment adviser's auditors;
f. to the extent required by Regulation 14A under the Exchange Act, to
prepare an audit committee report for inclusion in a Fund's annual proxy
statement; and
g. to serve as the Funds' qualified legal compliance committee ("QLCC")
within the meaning of Part 205 of the Commission's Rules of Practice - Standards
of Professional Conduct for Attorneys Appearing and Practicing before the
Commission in the Representation of an Issuer (the "Attorney Conduct Rules").
3. Duties and Powers. To carry out their purposes, the Audit Committees shall
have the following duties and powers:
a. to be directly responsible for the appointment (subject to ratification
by a majority of the Boards of the Funds who are not interested persons of the
Funds (the "independent directors")), compensation, retention and oversight of
the work of any independent auditors employed by the Funds, including reviewing
with such auditors the proposed audit plans and meeting with the auditors after
completion of the audit to review the work done in connection with the audit and
to discuss and resolve any disagreements between management and the auditor
regarding financial reporting. All of the foregoing shall be for the purpose of
preparing or issuing an audit report or performing other audit, review or attest
services, and each such independent auditors must report directly to the Audit
Committees; [Section 10A(m)(2) of the Exchange Act, Rule 10A-3(b)(2) adopted
thereunder, and Section 121B(4)4 of the AMEX listing standards]
b. to evaluate the independence of the Funds' independent auditors,
including whether such auditors provide any consulting services to the Funds'
investment adviser; to receive from such auditors a formal written statement
delineating all relationships between such auditors and the Funds, consistent
with Independent Standards Board Standard 1; and to actively engage in a
dialogue with the independent auditor with respect to any disclosed
relationships or services that may impact the objectivity and independence of
the auditor and for taking, or recommending that the full Board take,
appropriate action to oversee the independence of the outside independent
auditor; [Section 121B(1)(ii) of the AMEX Listing Standards]
c. to oversee the accounting and financial reporting process of the Funds
and the audits of the financial statements of the Funds, and in connection
therewith, to meet with the Funds' independent auditors, including private
meetings, as necessary (i) to review the arrangements for and scope of the
annual audit and any special audits and any audit plans prepared by the
independent auditors for the Funds; (ii) to discuss any matters of concern
relating to the Funds' financial statements, including any adjustments to such
statements recommended by the independent auditors, or other results of said
A-2
audit(s); (iii) to consider the independent auditors' comments with respect to
the Funds' financial policies, procedures and internal accounting controls and
management's responses thereto; and (iv) to review the form of opinion the
independent auditors propose to render to the Boards and shareholders; [Section
121B(iii) of the Amex Listing Standard.]
d. to receive and review the written disclosures and the letter from the
independent auditors regarding their independence that are required by Item 306
of Regulation S-K, to discuss with such auditors their independence, and to
consider whether the provision by such auditors of permissible non-audit
services to (i) the Funds, (ii) their advisor or (iii) any person that controls,
is controlled by or is under common control with such advisor that provides
services to the Funds, is compatible with maintaining such auditors'
independence; [Item 7(d)(3)(i) and Item 9(e)(8) of Schedule 14A, and Item 306 of
Regulation S-K]
e. to review and discuss audited financial statements contained in annual
and other periodic reports to shareholders with management and the independent
auditors to determine that such auditors are satisfied with the disclosure and
content of the annual financial statements and the quality of the Funds'
accounting and financial reporting policies, procedures and internal control
over financial reporting (including the Funds' critical accounting policies and
practices), and also to discuss with management and the independent auditors the
clarity, consistency and completeness of accounting policies and disclosures;
[Item 7(d)(3)(i) of Regulation 14A, and Item 306 of Regulation S-K]
f. based upon a review of the items discussed in (d) and (e) above, to
recommend to the Boards that the Funds' audited financial statements be included
in the Funds' annual reports to shareholders; [Item 7(d)(3)(i) of Regulation 14A
and Item 306 of Regulation S-K]
g. the Audit Committees shall prepare the audit committee report that SEC
rules require to be included in the Funds' annual proxy statement. [Item
7(d)(3)(i) of Regulation 14A and Item 306 of Regulation S-K]
h. to consider the effect upon the Funds of any changes in accounting
principles or practices proposed by management or the independent auditors and
to review information received from management and such auditors regarding
regulatory changes and new accounting pronouncements that affect net asset value
calculations and financial statement reporting requirements;
i. to the extent that certifications by officers of the Funds (the "signing
officers") as to the Funds' financial statements or other financial information
are required by applicable law to be included with or in the Funds' periodic
reports filed with the Securities and Exchange Commission ("SEC"), to receive
from such officers notifications if such certifications are not included for any
reason;
j. to meet as necessary with counsel to the Funds, counsel to the
disinterested directors of the Funds and, if applicable, independent counsel or
other advisers to the Audit Committees and to review information provided by all
such persons on legal issues having the possibility of impacting the financial
reporting process, including items of industry-wide importance and internal
issues such as litigation;
k. to the extent required by Section 10A(h) and (i) of the Exchange Act, to
preapprove all audit and permissible non-audit services that are proposed to be
provided to the Funds by their independent auditors before they are provided to
the Funds. Such pre-approval shall also include the proposed fees to be charged
by the independent auditors for such services. The Audit Committees may delegate
the pre-approval of audit and permissible non-audit services and related fees to
one or more members of the Audit Committees who are "independent," as such term
is defined in Rule 10A-3(b)(1)(iii) under the Exchange Act. Any such member's
decision to pre-approve audit and/or non-audit
A-3
services and related fees shall be presented to the full Audit Committees,
solely for informational purposes, at their next scheduled meeting; [Section
10A(h) and (i) of the Exchange Act]
l. to pre-approve non-audit services to be provided by the Funds'
independent auditors to the Funds' investment adviser and certain affiliated
entities that provide ongoing services to the Funds if the engagement relates
directly to the operations and financial reporting of any Fund and if the Funds'
independent auditors are the same as, or affiliated with, the investment
adviser's or certain affiliated entities' auditors; [Item 2.01(c)(7)(ii) of
Regulation S-X and Item 9(e)(8) of Schedule 14A]
m. to investigate improprieties or suspected improprieties in fund
operations, including but not limited to receiving and reviewing disclosures by
the Funds' signing officers to the Audit Committees of (i) all significant
deficiencies in the design or operation of internal controls which could
adversely affect the Funds' ability to record, process, summarize, and report
financial data and (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Funds' internal
controls;
n. to establish procedures for (i) the receipt, retention and treatment of
complaints received by the Funds regarding accounting, internal accounting
controls or auditing matters and (ii) the confidential, anonymous submission by
employees of the Funds (or the Funds' investment adviser) of concerns regarding
questionable accounting or auditing matters; [Section 10A(m)(4) of the Exchange
Act, Rule 10A-3(b)(3) adopted thereunder, and Section 121B(4) of the AMEX
listing standards]
o. to receive and review information provided by management and the
independent auditors regarding the Funds' accounting system and controls,
including but not limited to receiving from the Funds' independent auditors
information concerning (i) all critical accounting policies and practices to be
used, (ii) all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with management
officials of the Funds, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by such independent auditors, and
(iii) other material written communications between such independent auditors
and the management of the Funds such as the management letter or schedule of
unadjusted differences; [Section 10A(k) of the Exchange Act]
p. to carry out the responsibilities of a QLCC as set forth in the Attorney
Conduct Rules, and in connection therewith: (i) to adopt written procedures for
the confidential receipt, retention and consideration of any report of evidence
of a material violation of an applicable United States federal or state
securities law, a material breach of fiduciary duty arising under United States
federal or state law, or a similar material violation of any United States
federal or state law (a "Material Violation"); (ii) to report to the Fund's
chief executive officer any report of evidence of a Material Violation (iii) to
determine whether an investigation is necessary regarding any report of evidence
of a Material Violation by the Fund, its officers, directors, employees or
agents and, if it determines an investigation is necessary or appropriate, to:
(A) notify the full Board; (B) initiate an investigation, which may be conducted
by outside attorneys; and (C)retain such additional expert personnel as the
Audit Committee deems necessary; and (iv) at the conclusion of any such
investigation, to: (A) recommend, by majority vote, that the Fund implement an
appropriate response to evidence of a Material Violation; and (B) inform the
chief executive officer and the Board of the results of any such investigation
and the appropriate remedial measures to be adopted; and (v) acting by majority
vote, to take all other appropriate action, including the authority to notify
the Commission in the event that the Fund fails in any material respect to
implement an appropriate response the Audit Committee has recommended the Fund
to take; [Attorney Conduct Rules]
A-4
q. to receive reports of violations and potential violations of the Funds'
Code of Ethics for Principal Financial Officers (the "Code") from the Funds'
Compliance Officer or his/her designee, and determine whether a violation has
occurred;
r. to inform the disinterested directors of the Funds of any violation of
the Code; and
s. to report their activities to the full Boards on a regular basis and to
make such recommendations and/or decisions with respect to the above and other
matters as the Audit Committees may deem necessary or appropriate.
4. Appointment of Independent Auditors. The Audit Committees shall appoint the
Funds' independent auditors at an in-person meeting. If, at any time, the
approval by the Audit Committees of the Funds' independent auditors constitutes
an approval of such auditors by less than a majority of the disinterested
directors, such approval shall be ratified by a majority of the Funds'
disinterested directors at the next regularly scheduled in-person meeting of the
Boards; [Section 32(a)(1) of the Investment Company Act of 1940, as amended]
5. Meetings. The Audit Committees shall meet at least quarterly and are
empowered to hold special meetings as circumstances require. The Audit
Committees may meet either on their own or in conjunction with meetings of the
full Boards. Meetings of the Audit Committees may be held in person or by
conference telephone. Where appropriate, the Audit Committees may take action by
unanimous written consent in lieu of a meeting. [Section 121B(3) of the AMEX
listing standards]
The Audit Committees shall regularly meet with the Treasurer of the Funds.
6. Authority; Funding.
a. The Audit Committees shall have the resources and authority appropriate
to carry out their duties, including the authority to engage independent counsel
and other advisers, experts or consultants as they deem necessary to carry out
their duties, all at the expense of the appropriate Fund(s). [Section 10A(m)(5)
of the Exchange Act, Rule 10A-3(b)(4) adopted thereunder, and Section 121B(4) of
the AMEX listing standards]
b. The Funds shall provide for appropriate funding, as determined by the
Audit Committees, in their capacity as committees of the Boards, for payment of
compensation (i) to the independent auditors employed by the Funds for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services for the Funds and (ii) to any independent counsel or
other advisers employed by the Audit Committees. [Section 10A(m)(6) of the
Exchange Act, Rule 10A-3(b)(5) adopted thereunder, and Section 121B(4) of the
AMEX listing standards]
7. Annual Internal Performance Evaluation. Each fiscal year the Audit
Committees shall conduct an internal evaluation of the performance of the Audit
Committees.
8. Good Faith Reliance. In performing their duties under this Charter, members
of the Committee shall be entitled to rely in good faith upon the records of the
Funds and upon such information, opinions, reports and statements presented to
the Audit Committees by the officers and employees of the Funds and of
Davis-Dinsmore Management Company, and by the Funds' independent auditors.
9. Review of Charter. The Audit Committees shall review and reassess the
adequacy of this Charter at least annually and recommend any changes to the full
Boards. This Charter may be amended
A-5
only by the approval of the Boards, and a
majority of the disinterested directors. [Section 121B(1) of the AMEX listing
standards]
10. Maintenance of Charter. Each Fund shall maintain and preserve in an easily
accessible place a copy of this Charter and any modification to this Charter.
A-6
Appendix B
BANCROFT CONVERTIBLE FUND, INC.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
(THE "FUNDS")
AMENDED AND RESTATED
NOMINATING AND ADMINISTRATION COMMITTEES CHARTER
(Effective April 19, 2004)
1. Membership; Qualifications.
a. Each member of the Nominating and Administration Committees (the
"Committees") shall be free of any material relationship with the
Funds that, in the opinion of the Boards of Directors of the Funds
(the "Boards"), would interfere with his or her individual exercise of
independent judgment.
b. No member of the Committees shall, other than in his or her capacity
as a member of the Committees, the Boards, or any other Board
committee, accept directly or indirectly any consulting, advisory, or
other compensatory fee from the Funds or any subsidiary of the Funds,
provided that, unless the rules of the American Stock Exchange
("AMEX") provide otherwise, compensatory fees do not include the
receipt of fixed amounts of compensation under a retirement plan
(including deferred compensation) for prior service with the Funds
(provided that such compensation is not contingent in any way on
continued service).
c. No member of either of the Committees shall be an "interested person"
of any of the Funds as defined in section 2(a)(19) of the Investment
Company Act of 1940, as amended (the "1940 Act").
2. Purposes. The purposes of the Committees are:
a. to nominate persons for election or appointment as directors (i) to
fill vacancies which, from time to time, may occur in the Boards and
(ii) for election by shareholders of the Funds at meetings called for
the election of directors;
b. to nominate persons for appointment as members of each committee of
the Boards, including without limitation the Committees, the Audit
Committees, and the Pricing Committees;
c. to review from time to time, the compensation, if any, payable to the
directors of the Funds and to make recommendations to the Boards with
respect thereto;
d. to review and evaluate from time to time the functioning of the Boards
and the various committees of the Boards and to make recommendations
to the Boards with respect thereto;
e. to oversee the selection of independent legal counsel to the
independent directors; and
f. to monitor the performance of independent legal counsel employed by
the Funds and the independent directors.
3. Duties and Powers. To carry out their purposes, the Committees shall have
the following duties and powers:
a. to nominate persons to serve on the Boards.
i. The Committees shall make nominations for director membership on
the Boards. If members of the Committees do not unanimously agree
to nominate an incumbent director for re-election to the Boards,
the Committees shall submit the issue of nomination of such
person for re-election to the independent directors as a group.
ii. Evaluation by the Committees of a person as a potential nominee
to serve as a director, including a person nominated by a
shareholder, should result in the following findings by the
Committees:
A. upon advice of independent legal counsel to the independent
directors, that the person will qualify as a director who is
not an "interested person" of the Funds (an "independent
director")(applicable only to the nomination of independent
directors ), and that the person is otherwise qualified
under the 1940 Act to serve as a director of the Funds;
B. with respect to the nomination of independent directors
only, that the person is free of any material relationship
with the Funds (other than as a shareholder of the Funds),
that would interfere with the exercise of independent
judgment;
C. that the person is willing to serve, and willing and able to
commit the time necessary for the performance of the duties
of a director;
D. that the person can make a positive contribution to the
Boards and the Funds, with consideration being given to the
person's business experience, education and such other
factors as the Committees may consider relevant;
E. that the person is of good character and high integrity;
F. that the person has desirable personality traits including
independence, leadership and the ability to work with the
other members of the Boards;
G. that the person is not an AMEX employee or floor member; and
H. that the composition of the Boards is varied as to
educational background, business experience and occupation.
iii. The Committees shall consider nominees recommended by a
shareholder to serve as director, provided: (i) that such person
is a shareholder of record both at the time he or she submits
such names and at the time of the meeting of shareholders at
which directors will be elected; (ii) that such person is
entitled to vote at such meeting; and (iii) that the Committees
shall make the final determination of persons to be nominated.
The Committees shall evaluate nominees recommended by a
shareholder to serve as director in the same manner as they
B-2
evaluate nominees identified by the Committees. Shareholders
should provide the Committees with information regarding the
recommended nominee sufficient for the Committees to make the
findings set forth in Section 3.a.ii.
b. to nominate directors to serve on the Funds' committees.
i. The Committees shall make nominations for membership on all
committees and shall review and recommend committee assignments
at least annually.
ii. Evaluation by the Committees of a person as a potential committee
member shall include the factors set forth above under Section
3.a.ii. to the extent that such factors are applicable or
relevant, as well as any qualifications as may be set forth in
the charter of the applicable committee.
c. to review as necessary the responsibilities of any committees of the
Board, whether there is a continuing need for each committee, whether
there is a need for additional committees of the Board, and whether
committees should be combined or reorganized. The Committees shall
make recommendations for any such action to the full Board. Any
proposed changes shall be approved by the full Board as well as a
majority of the independent directors.
d. to periodically review the composition of the Boards to determine
whether it may be appropriate to add individuals with different
backgrounds or skill sets from those already on the Boards.
e. to periodically review director compensation and recommend any
appropriate changes to the independent directors as a group.
f. to consider and oversee the selection of independent legal counsel to
the independent directors and recommend such counsel to the
independent directors. In making such selection the Committees shall
examine and monitor such legal counsel's client relationships in order
to ascertain continued independence.
g. to monitor the performance of independent legal counsel employed by
the Funds and the independent directors, and supervise counsel for the
independent directors.
4. Meetings. The Committees may meet either on their own or in conjunction
with meetings of the full Boards. Meetings of the Committees may be held in
person or by conference telephone. Where appropriate, the Committees may
take action by unanimous written consent in lieu of a meeting.
5. Attendance at Annual Meetings of Shareholders. Directors are encouraged but
not required to attend annual meetings of shareholders.
6. Authority; Funding. The Committees shall have the resources and authority
appropriate to discharge their responsibilities, including authority to
retain special counsel and other experts or consultants at the expense of
the appropriate Fund(s).
7. Annual Internal Performance Evaluation. Each fiscal year the Committees
shall conduct an internal evaluation of the performance of the Committees.
B-3
8. Good Faith Reliance. In performing their duties under this Charter, members
of the Committees shall be entitled to rely in good faith upon the records
of the Funds and upon such information, opinions, reports and statements
presented to the Committees by the officers and employees of the Funds and
of Davis-Dinsmore Management Company.
9. Review of Charter. The Committees shall review this Charter at least
annually and recommend any changes to the full Boards. This Charter may be
amended only by approval of the full Boards, and a majority of the
independent directors.
10. Maintenance of Charter. Each Fund shall maintain and preserve in an easily
accessible place a copy of this Charter and any modification to this
Charter.
B-4
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
ANNUAL MEETING TO BE HELD JANUARY 14, 2005
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas H. Dinsmore, Gary I. Levine, and
Jane D. O'Keeffe, and each of them, attorneys and proxies with power of
substitution in each, to vote and act on behalf of the undersigned at the annual
meeting of stockholders of Ellsworth Convertible Growth and Income Fund, Inc.
(the "Company") at the offices of the Company, 65 Madison Avenue, Suite 550,
Morristown, New Jersey 07960 on January 14, 2005 at 11:00 a.m., and at all
adjournments, according to the number of shares of Common Stock which the
undersigned could vote if present, upon such subjects as may properly come
before the meeting, all as set forth in the notice of the meeting and the proxy
statement furnished therewith. UNLESS OTHERWISE MARKED ON THE REVERSE HEREOF,
THIS PROXY IS GIVEN WITH AUTHORITY TO VOTE FOR THE DIRECTORS LISTED, FOR THE
PROPOSAL TO RATIFY THE AUDIT COMMITTEE'S SELECTION OF AUDITORS AND AGAINST THE
PROPOSAL TO AMEND THE COMPANY'S CHARTER.
PLEASE FILL IN, DATE AND SIGN THE PROXY ON THE OTHER SIDE
AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE /X/
1. Election as directors of all nominees listed below for the terms specified in
the proxy statement.
NOMINEES:
/ / FOR ALL NOMINEES / / Thomas H. Dinsmore
/ / Donald M. Halsted, Jr.
/ / Duncan O. McKee
/ / Robert J. McMullan
/ / WITHHOLD AUTHORITY FOR ALL NOMINEES
/ / FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: /X/
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THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" PROPOSAL 2 AND "AGAINST"
PROPOSAL 3.
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FOR AGAINST ABSTAIN
2. Proposal to ratify selection of auditors. / / / / / /
FOR AGAINST ABSTAIN
3. Proposal to amend the Company's Charter. / / / / / /
YOUR VOTE IS IMPORTANT TO US. PLEASE FILL IN, DATE AND SIGN YOUR PROXY AND
RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE PROVIDED FOR YOUR CONVENIENCE.
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To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that / /
changes to the registered name(s) on the account may not be submitted via
this method.
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Signature of Stockholder Date
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Signature of Stockholder Date
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NOTE: Please sign as name appears hereon. Joint owners each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title as such.