UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-2151
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ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
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(Exact name of registrant as specified in charter)
65 Madison Avenue, Morristown, New Jersey 07960-7308
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(Address of principal executive offices) (Zip code)
Thomas H. Dinsmore
Ellsworth Convertible Growth and Income Fund, Inc.
65 Madison Avenue
Morristown, New Jersey 07960-7308
(Name and address of agent for service)
Copy to:
Martha J. Hays, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, PA 19103-7599
Registrant's telephone number, including area code: 973-631-1177
Date of fiscal year end: September 30, 2003
Date of reporting period: September 30, 2003
Explanatory Note
The Registrant is filing this Amendment to its Certified Shareholder Report on
Form N-CSR filed with the Securities and Exchange Commission on November 26,
2003 to provide the exact form of certification required by Rule 30a-2(a) of
the Investment Company Act of 1940, as amended, and to comply with the new
exhibit requirements of Item 10 of Form N-CSR. This Form N-CSR/A does not
reflect events occurring after the filing of the original Form N-CSR, or modify
or update the disclosures therein in any way other than as required to reflect
the amendment described above.
ITEM 1. REPORTS TO STOCKHOLDERS.
Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1
under the Act (17 CFR 270.30e-1).
ELLSWORTH CONVERTIBLE
GROWTH AND INCOME FUND
[LOGO]
2003 Annual Report
September 30, 2003
2003 Annual Report
September 30, 2003
Ellsworth Convertible Growth and Income Fund, Inc. (the "Fund") operates as a
closed-end, diversified management investment company and invests primarily in
convertible securities, with the objectives of providing income and the
potential for capital appreciation -- which objectives the Fund considers to be
relatively equal, over the long-term, due to the nature of the securities in
which it invests.
Highlights
Performance through September 30, 2003 with dividends reinvested
9 Months 1 Year 5 Years 10 Years
-------- ------ ------- --------
Ellsworth market value (a) 11.00% 10.81% 50.20% 175.13%
Ellsworth net asset value (b) 10.92 14.02 33.88 133.72
Closed-end convertible fund average (b) 20.29 27.36 42.09 103.80
S&P 500 (a) 14.72 24.40 5.09 160.42
Russell 2000 (a) 28.60 36.54 44.01 92.80(c)
Lehman Aggregate Bond Total Return Index (b) 3.78 5.41 37.83 95.26
Performance data represent past results and do not reflect future performance.
(a) From Bloomberg L.P. pricing service.
(b) From Lipper, Inc. Closed-End Fund Performance Analysis, dated September 30,
2003.
(c) Simple appreciation of index.
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Quarterly History of NAV and Market Price
Net Asset Values Market Prices (AMEX, symbol ECF)
Qtr. Ended High Low Close High Low Close
---------- ---- --- ----- ---- --- -----
Dec. 02 $8.06 $7.51 $7.94 $7.90 $6.95 $7.45
Mar. 03 8.16 7.69 7.90 7.96 7.41 7.52
Jun. 03 8.71 7.95 8.58 8.42 7.52 8.31
Sep. 03 8.71 8.35 8.58 8.51 7.97 8.05
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Dividend Distributions (12 Months)
Record Payment Capital * Corporate
Date Date Income Gains Deduction
---- ---- ------ ----- ---------
10/25/02 11/27/02 $0.086 -- 20%
2/13/03 2/27/03 0.075 -- 4
5/15/03 5/29/03 0.070 -- 4
8/14/03 8/28/03 0.070 -- 4
------
$0.301
* Percentage of each ordinary income distribution qualifying for the corporate
dividend received tax deduction.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
To Our Shareholders
The economy is finally taking off. Most of the negative effects of the
bursting of the Internet bubble in 2000 have washed through the financial
markets and the economy. While we do not expect the kind of Gross Domestic
Product (GDP) growth (7.2%) reported in the third quarter to continue, we do see
GDP growth near 4% for 2004. Sustained growth at 4% would expand job creation
and increase corporate profits. It also should help the equity markets, but may
cause the bond market to falter as interest rates would be unlikely to drop and
could rise.
The Fund's strategy since 1986 has been to be an equity investment that
uses convertible securities to reduce risk and volatility. This strategy tends
to outperform in bear markets and lag in bull markets. The Fund's overall
performance for long cycles was rewarded by winning the 2002 Lipper Performance
Achievement Certificates for five and ten years within its category of
closed-end convertible funds through December 2002. The category of closed-end
convertible funds followed by Lipper, Inc. is made up of ten funds (eight for
five years and seven for ten years). For the calendar year 2003 through October
31, 2003, the Fund's performance has lagged its peers as we may have moved into
a new bull market.
The open-end mutual fund industry has been caught up in a financial scandal
involving market timing and late trading, which may adversely affect long-term
investors in the funds implicated in the scandal. The publicly-traded closed-end
fund format prevents the kind of trading activity at the center of the scandal
from affecting the assets or diluting the interests of the shareholders in
closed-end funds. Readers should note this is another positive attribute of the
closed-end fund structure.
The Fund's website (www.ellsworthfund.com) contains press releases,
dividend information and daily net asset values. The Closed-End Fund Association
(www.cefa.com), of which the Fund is a member, is another source of information
on many closed-end funds.* Based upon data through October 31, 2003,
Morningstar** has rated the Fund's performance at four stars (above average)
overall as measured on the "Quicktake Report" on their website. In addition,
shareholders who wish to obtain a copy of the most recent report on the Fund
issued by Standard and Poor's should contact us.
At its October meeting the Board of Directors declared a dividend of 10.5
cents per share. The dividend consists of undistributed net investment income.
This dividend will be payable on November 26, 2003 to shareholders of record on
October 30, 2003.
The 2004 annual meeting of shareholders will be held in Bonita Springs,
Florida on February 14, 2004. Time and location will be included in the Proxy
Statement, scheduled to be mailed to shareholders on December 29, 2003. All
shareholders are welcome to attend and we hope to see you there.
/s/ Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board
November 13, 2003
* The Closed-End Fund Association is solely responsible for the content of
its website.
** Morningstar is a mutual fund analysis and statistical reporting service
that reports on and rates most mutual funds. It is solely responsible for
the content of its website.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Largest Investment Holdings by underlying common stock
Value % Total
(Note 1) Net Assets
-------- ----------
Washington Mutual, Inc.................................................................. $ 2,401,875 2.7%
A financial services company that provides a diversified line of products and
services to consumers and small to mid-sized businesses.
Reinsurance Group of America, Inc....................................................... 2,360,000 2.6
Through its subsidiaries, provides life insurance and reinsurance of
asset-intensive products and financial reinsurance in the United States,
Canada and various international markets.
Church & Dwight Co., Inc................................................................ 2,132,240 2.4
Produces sodium bicarbonate and sodium bicarbonate-based products. The Company
sells its products primarily under the Arm & Hammer trademark, to consumers and to
industrial customers and distributors.
Ivax Corp............................................................................... 2,011,875 2.2
Researches, develops, manufactures and markets branded and generic
pharmaceuticals in the United States and international markets. The Company
also specializes in veterinary products and nutraceuticals.
Lucent Technologies, Inc................................................................ 1,898,940 2.1
Designs, builds and delivers a wide range of public and private networks,
communications systems and software, and data networking systems. The Company also
designs, builds and delivers business telephone systems and microelectronic
components.
Travelers Property Casualty Corp........................................................ 1,835,200 2.0
Provides a broad range of insurance products and services for the commercial
and consumer markets.
School Specialty, Inc................................................................... 1,834,371 2.0
Distributes non-textbook educational supplies and furniture for grades
pre-kindergarten through 12.
New York Community Bancorp, Inc......................................................... 1,618,600 1.8
A holding company for New York Community Bank, a thrift, that operates
through divisional banks in New York and New Jersey.
ChevronTexaco Corp...................................................................... 1,537,500 1.7
Operates worldwide in oil and gas exploration, production, refining and
marketing, and chemical manufacturing.
(convertible from Devon Energy Corp. 4.90% and 4.95%, due 2008)
The Interpublic Group of Companies, Inc. ............................................... 1,496,719 1.7
--------- ---
An organization of advertising agencies and marketing service companies that
operates globally in the sectors of advertising, independent media buying, direct
marketing, marketing research and public relations.
Total $19,127,320 21.2%
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ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Major Industry Exposure
% Total
Net Assets
----------
Financial & Insurance...................... 10.9%
Pharmaceuticals............................ 9.8
Banking/Savings & Loan..................... 9.7
Retail..................................... 9.4
Telecommunications......................... 7.7
Health Care................................ 7.1
Energy..................................... 6.9
Technology................................. 6.8
Aerospace & Defense........................ 5.3
Entertainment.............................. 4.6
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Total...................................... 78.2%
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Major Portfolio Changes by underlying common stock
Six months ended September 30, 2003
ADDITIONS REDUCTIONS
Church & Dwight Co., Inc. Analog Devices, Inc.
Comverse Technology, Inc. Anixter International, Inc.
Doral Financial Corp. General Mills, Inc.
General Motors Corp. Medtronic, Inc.
Level 3 Communications, Inc. Offshore Logistics, Inc.
Omnicare, Inc. Oneok, Inc.
(exchangeable from Omnicare Capital Trust I)
Provident Financial Group, Inc.
School Specialty, Inc. Prudential Financial, Inc.
(exchangeable from Prudential Financial Capital Trust I)
STMicroelectronics, N.V.
Teva Pharmaceuticals Industries Ltd. STMicroelectronics, N.V.
(exchangeable from Teva Pharm. Finance B.V.)
UTStarcom, Inc.
UTStarcom, Inc. WPP Group plc
Vishay Intertechnology, Inc. Xerox Corp.
The Williams Companies, Inc.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Portfolio of Investments September 30, 2003
Principal
Amount Identified Value
or Shares Cost (Note 1)
--------- ---- --------
ADVERTISING -- 3.8%
$1,550,000 The Interpublic Group Cos., Inc. 1.80% 2004 cv. sub. notes (NR).......... $ 1,478,068 $ 1,496,719
1,000,000 Lamar Advertising Company 2.875% 2010 cv. sub. notes (B2)................ 980,625 908,125
1,000,000 Omnicom Group, Inc. 0% 2033 zero yield cv. notes 144A * (Baa1)........... 1,000,056 983,750
--------- -------
3,458,749 3,388,594
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AEROSPACE & DEFENSE -- 5.3%
1,500,000 The Goldman Sachs Group, Inc. 1.00% 2009 exch. equity-linked
notes * (Aa3) (exch. for General Dynamics Corp. common stock).......... 1,629,062 1,394,355
750,000 L-3 Communications Holdings, Inc. 5.25% 2009 cv. sr. sub. notes
144A (Ba3)............................................................. 750,000 841,875
15,000 shs Northrop Grumman Corp. 7.25% equity units *,** (NR)...................... 1,603,732 1,467,000
20,000 shs RC Trust I 8.25% equity security units *,** (BB)
(exch. for Raytheon Co. class B common stock).......................... 1,011,831 1,059,000
--------- ---------
4,994,625 4,762,230
--------- -------
AUTOMOTIVE -- 2.5%
40,000 shs General Motors Corp. 6.25% series C cv. sr. deb. (Baa1).................. 1,000,000 1,078,000
2,500,000 Lear Corp. 0% 2022 cv. sr. notes 144A (Ba1).............................. 1,053,040 1,210,938
--------- ---------
2,053,040 2,288,938
--------- -------
BANKING/SAVINGS & LOAN -- 9.7%
15,000 shs Commerce Capital Trust II 5.95% cv. trust pfd. 144A (Baa1)
(exch. for Commerce Bancorp, Inc. common stock)........................ 750,000 857,813
5,000 shs Commerce Capital Trust II 5.95% cv. trust pfd. (Baa1)
(exch. for Commerce Bancorp, Inc. common stock)........................ 268,438 285,938
4,000 shs Doral Financial Corp. 4.75% perpetual cumulative cv. pfd. 144A (BBB-).... 1,000,000 1,009,000
40,000 shs National Australia Bank Ltd. 7.875% exch. capital units (NR)............. 1,038,700 1,440,000
25,000 shs New York Community Bancorp, Inc. 6% BONUSES units (Ba1).................. 1,246,606 1,618,600
5,000 shs State Street Corp. 6.75% treasury backed ACES ** (NR).................... 1,022,600 1,112,935
35,000 shs Washington Mutual Capital Trust PIERS units 144A (Baa1)
(exch. for Washington Mutual, Inc. common stock)....................... 1,773,125 1,868,125
10,000 shs Washington Mutual Capital Trust PIERS units (Baa1)
(exch. for Washington Mutual, Inc. common stock)....................... 520,313 533,750
--------- -------
7,619,782 8,726,161
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CONSUMER GOODS -- 3.0%
2,000,000 Church & Dwight Co., Inc. 5.25% 2033 cv. sr. deb. 144A (B1).............. 2,000,000 2,132,240
20,000 shs Constellation Brands, Inc. dep. shs. representing 5.75% series A
mandatory cv. pfd. ** (Ba2)............................................ 511,250 578,400
--------- -------
2,511,250 2,710,640
--------- -------
DATA-PROCESSING SERVICES -- 2.3%
965,000 The BISYS Group, Inc. 4% 2006 cv. sub. notes 144A (NR)................... 959,375 936,050
285,000 The BISYS Group, Inc. 4% 2006 cv. sub. notes (NR)........................ 274,500 276,450
875,000 Pegasus Solutions, Inc. 3.875% 2023 cv. sr. notes 144A (NR).............. 880,781 878,281
--------- -------
2,114,656 2,090,781
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ENERGY -- 6.9%
12,500 shs Chesapeake Energy Corp. 6% cum. cv. pfd. 144A (B3)....................... 780,869 784,238
500,000 Devon Energy Corp. 4.90% 2008 cv. sub. deb. * (Baa2)
(conv. into ChevronTexaco Corp. common stock).......................... 549,953 512,500
1,000,000 Devon Energy Corp. 4.95% 2008 cv. sub. deb. * (Baa2)
(conv. into ChevronTexaco Corp. common stock).......................... 1,123,715 1,025,000
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Portfolio of Investments September 30, 2003 (continued)
Principal
Amount Identified Value
or Shares Cost (Note 1)
--------- ---- --------
ENERGY -- continued
$1,300,000 Kerr-McGee Corp. 5.25% 2010 cv. sub. deb. (Baa3)......................... $ 1,363,688 $ 1,362,010
30,000 shs Kerr-McGee Corp. 5.50% 2004 DECS ** (Baa3)
(exch. for Devon Energy Corp. common stock)............................ 995,625 1,297,200
20,000 shs The Williams Cos., Inc. 5.50% 2033 jr. sub. cv. deb. 144A (B-)........... 1,015,000 1,205,000
--------- ---------
5,828,850 6,185,948
--------- ---------
ENTERTAINMENT -- 4.6%
500,000 Alloy, Inc. 5.375% 2023 cv. sr. deb. (NR)................................ 511,875 497,500
22,500 shs Emmis Communications Corp. 6.25% series A cum. cv. pfd. (Caa1)........... 919,590 975,938
2,500,000 News America, Inc. 0% 2021 LYONs 144A (Baa3)
(exch. for ADSs representing The News Corp. Limited common stock)...... 1,370,613 1,376,125
1,250 shs Radio One, Inc. 6.50% HIGH TIDES (B3).................................... 1,280,844 1,257,342
--------- ---------
4,082,922 4,106,905
--------- ---------
FINANCIAL & INSURANCE -- 10.9%
27,800 shs Capital One Financial Corp. 6.25% Upper DECS *,** (Baa3)................. 1,421,319 1,262,676
34,000 shs The Chubb Corp. 7% equity units *,** (A1)................................ 874,888 943,500
40,000 shs Platinum Underwriters Holdings, Ltd. 7% eq. sec. units *,** (NR)......... 1,120,250 1,179,600
40,000 shs Reinsurance Group of America, Inc. 5.75% PIERS (Baa2).................... 2,000,000 2,360,000
1,000,000 Swiss Re America Holding Corp. 3.25% 2021 euro. sub. cv. bonds
144A (Aa1) (conv. into Swiss Reinsurance Company common stock)......... 1,007,875 948,750
80,000 shs Travelers Property Casualty Corp. 4.50% 2032 cv. jr. sub. notes (A3)..... 1,965,055 1,835,200
1,500,000 XL Capital, Ltd. 0% 2021 cv. deb. 144A * (A1)............................ 1,077,859 955,905
500,000 XL Capital, Ltd. 0% 2021 cv. deb. * (A1)................................. 365,930 318,635
--------- ---------
9,833,176 9,804,266
--------- ---------
HEALTH CARE -- 7.1%
750,000 AmerisourceBergen Corp. 5% 2007 cv. sub. notes 144A (B1)................. 778,048 890,100
1,000,000 Community Health Systems, Inc. 4.25% 2008 cv. sub. notes (B3)............ 988,600 1,001,250
500,000 Health Management Associates, Inc. 1.50% 2023 cv. sr. notes * (BBB+)..... 498,401 529,375
500,000 LifePoint Hospitals, Inc. 4.50% 2009 cv. sub. notes 144A (B3)............ 500,000 476,875
500,000 LifePoint Hospitals, Inc. 4.50% 2009 cv. sub. notes (B3)................. 490,000 476,875
19,000 shs Omnicare Capital Trust I 4% PIERS * (Ba3)
(exch. for Omnicare, Inc. common stock)................................ 1,009,466 1,068,750
500,000 Province Healthcare Company 4.25% 2008 cv. sub. notes 144A (B3).......... 457,500 461,250
500,000 Province Healthcare Company 4.25% 2008 cv. sub. notes (B3)............... 450,000 461,250
600,000 Sunrise Assisted Living, Inc. 5.25% 2009 cv. sub. notes 144A (B1)........ 585,938 597,000
400,000 Sunrise Assisted Living, Inc. 5.25% 2009 cv. sub. notes (B1)............. 400,000 398,000
--------- ---------
6,157,953 6,360,725
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OFFICE EQUIPMENT -- 1.6%
1,500,000 IOS Capital, LLC 5% 2007 cv. sub. notes 144A (Ba2)
(exch. for IKON Office Solutions, Inc. common stock)................... 1,498,125 1,395,000
--------- ---------
PAPER & PAPER PRODUCTS -- 1.4%
25,000 shs Temple-Inland, Inc. 7.50% Upper DECS *,** (Baa3)......................... 1,237,808 1,221,250
--------- ---------
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Portfolio of Investments September 30, 2003 (continued)
Principal
Amount Identified Value
or Shares Cost (Note 1)
--------- ---- --------
PHARMACEUTICALS -- 9.8%
$1,000,000 Amgen, Inc. 0% 2032 LYONS * (A2)......................................... $ 783,866 $ 769,410
21,500 shs Baxter International, Inc. 7% equity units *,** (A3)..................... 962,396 1,134,125
750,000 Cephalon, Inc. 2.50% 2006 cv. sub. notes 144A (B-)....................... 739,375 709,688
250,000 Cephalon, Inc. 2.50% 2006 cv. sub. notes (B-)............................ 223,750 236,563
1,000,000 Gilead Sciences, Inc. 2% 2007 cv. sr. notes 144A (NR).................... 1,119,388 1,335,000
250,000 Guilford Pharmaceuticals, Inc. 5% 2008 cv. sub. notes 144A (NR).......... 250,000 298,278
500,000 Ivax Corp. 4.50% 2008 cv. sr. sub. notes (NR)............................ 495,000 485,625
1,500,000 Ivax Corp. 5.50% 2007 cv. sr. sub. notes (NR)............................ 1,493,125 1,526,250
18,300 shs Johnson & Johnson common stock........................................... 1,025,715 906,216
1,000,000 Teva Pharmaceutical Finance B.V. 0.75% 2021 cv. sub. deb. (BBB-)
(exch. for Teva Pharmaceuticals Industries Ltd. ADRs).................. 1,208,750 1,375,000
--------- ---------
8,301,365 8,776,155
--------- ---------
RETAIL -- 9.4%
500,000 Barnes & Noble, Inc. 5.25% 2009 cv. sub. notes (Ba3)..................... 497,975 513,125
500,000 Brinker International, Inc. 0% 2021 cv. sr. deb. (Baa2).................. 325,232 341,550
1,250,000 Charming Shoppes, Inc. 4.75% 2012 sr. cv. notes 144A (B2)................ 1,285,431 1,165,625
250,000 Charming Shoppes, Inc. 4.75% 2012 sr. cv. notes (B2)..................... 197,813 233,125
2,000,000 Costco Wholesale Corp. 0% 2017 cv. sub. notes (A3)....................... 1,707,094 1,452,280
500,000 Dave & Buster's, Inc. 5% 2008 cv. sub. notes Reg. D
with warrants attached (NR)............................................ 500,000 500,000
1,225,000 Duane Reade, Inc. 2.148% 2022 cv. sr. notes 144A (Ba3)................... 730,061 633,172
750,000 J.C. Penney, Inc. 5% 2008 cv. sub. notes (B1)............................ 752,875 768,750
550,000 School Specialty, Inc. 6% 2008 cv. sub. notes 144A (B+).................. 560,000 587,428
250,000 School Specialty, Inc. 6% 2008 cv. sub. notes (B+)....................... 258,100 267,013
1,000,000 School Specialty, Inc. 3.75% 2023 cv. sub. notes * (B+).................. 1,009,005 979,930
25,000 shs Toys "R" Us, Inc. 6.25% equity securities units *,** (NR)................ 1,090,599 982,500
--------- -------
8,914,185 8,424,498
--------- ---------
TECHNOLOGY -- 6.8%
250,000 Affiliated Computer Services, Inc. 3.50% 2006 cv. sub. notes
144A (Baa2)............................................................ 251,563 298,550
1,000,000 Affiliated Computer Services, Inc. 3.50% 2006 cv. sub. notes (Baa2)...... 1,184,125 1,194,200
750,000 Hutchinson Technology, Inc. 2.25% 2010 cv. sub. notes 144A (NR).......... 816,683 967,458
500,000 Kulicke & Soffa Industries, Inc. 4.75% 2006 cv. sub. notes (Caa2)........ 481,875 442,500
1,000,000 Mercury Interactive Corp. 4.75% 2007 cv. sub. notes (NR)................. 991,250 989,000
1,000,000 STMicroelectronics, N.V. 0% 2013 sr. cv. bonds 144A # (A-)............... 1,000,000 1,046,250
1,000,000 Vishay Intertechnology, Inc. 3.625% 2023 cv. sub. notes 144A (B2)........ 1,166,952 1,187,370
--------- ---------
5,892,448 6,125,328
--------- ---------
TELECOMMUNICATIONS -- 7.7%
550,000 Commonwealth Telephone Enterprises, Inc. 3.25% 2023
cv. notes * (NR)........................................................ 572,664 562,375
750,000 Comverse Technology, Inc. 0% 2023 ZYPS 144A # (BB-)...................... 750,000 808,125
250,000 Comverse Technology, Inc. 0% 2023 ZYPS # (BB-)........................... 285,000 269,375
27,700 The Goldman Sachs Group, Inc. 7.30% mandatory exch. notes **
(Aa3) (exch. for Verizon Communications, Inc. common stock)............ 999,970 904,488
1,000,000 Level 3 Communications, Inc. 2.875% 2010 cv. sub. notes (Caa2)........... 1,000,000 993,630
1,000,000 Lucent Technologies, Inc. 2.75% 2023 series A cv. sr. deb. (Caa1)........ 1,000,000 936,920
1,000,000 Lucent Technologies, Inc. 2.75% 2025 series B cv. sr. deb. (Caa1)........ 1,000,000 962,020
750,000 Tekelec, Inc. 2.25% 2008 cv. sub. discount notes 144A (NR)............... 756,719 825,938
20,000 shs UTStarcom, Inc. common stock............................................. 732,740 636,000
--------- ---------
7,097,093 6,898,871
--------- ---------
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Portfolio of Investments September 30, 2003 (continued)
Principal
Amount Identified Value
or Shares Cost (Note 1)
--------- ---- --------
TRANSPORTATION -- 2.1%
$ 750,000 Continental Airlines, Inc. 4.50% 2007 cv. notes (Caa2).................. $ 750,000 $ 613,950
250,000 ExpressJet Holdings, Inc. 4.25% 2023 cv. notes (NR)..................... 250,000 264,499
1,000,000 United Parcel Service, Inc. 1.75% 2007 cash-settled
cv. sr. notes (Aaa)................................................... 980,000 1,001,250
---------- -----------
1,980,000 1,879,699
---------- -----------
UTILITIES -- 2.5%
30,000 shs American Electric Power Co., Inc. 9.25% equity units *,** (Baa3)........ 1,488,361 1,336,500
35,000 shs DTE Energy Co. 8.75% equity security units *,** (BBB)................... 885,786 885,500
---------- -----------
2,374,147 2,222,000
---------- -----------
SHORT-TERM SECURITIES -- 0.0%
11,000 U.S. Treasury notes 3.375% 4/30/04 + (Aaa).............................. 11,244 11,151
Total Convertible Bonds and Notes-- 58.2%............................... 52,397,298 52,283,405
Total Convertible Preferred Stocks-- 20.3%.............................. 16,568,006 18,177,694
Total Mandatory Convertible Securities-- 17.1%.......................... 15,226,415 15,364,674
Total Common Stocks-- 1.7%.............................................. 1,758,455 1,542,216
Total Short-Term Securities-- 0.0%...................................... 11,244 11,151
---------- -----------
Total Investments-- 97.3%............................................... $85,961,418 87,379,140
=========== -----------
Other assets and liabilities, net-- 2.7%................................ 2,422,050
-----------
Total Net Assets-- 100.0%............................................... $89,801,190
===========
* Contingent payment debt instrument which accrues contingent interest. See
Note 1(b).
** Mandatory convertible. See Note 1(e).
# Non-income producing security.
+ Collateral for a letter of credit.
ACES Automatic Convertible Equity Securities.
ADR American Depositary Receipts.
ADS American Depositary Shares.
BONUSES Bifurcated Option Note Unit Securities.
DECS Debt Exchangeable for Common Stock.
HIGH TIDES Remarketable Term Income Deferrable Equity Securities.
LYONs Liquid Yield Option Notes.
PIERS Preferred Income Equity Redeemable Securities.
ZYPS Zero Yield Puttable Securities.
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's,
a division of McGraw-Hill Companies, Inc., have been obtained from sources
believed reliable but have not been examined by PricewaterhouseCoopers LLP. NR
is used whenever a rating is unavailable.
The cost of investments for federal income tax purposes is $85,961,418 resulting
in gross unrealized appreciation and depreciation of $4,191,498 and $2,773,776,
respectively, or net unrealized appreciation of $1,417,722 on a tax cost basis.
See accompanying notes to financial statements
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Statement of Assets and Liabilities
September 30, 2003
------------------
Assets:
Investments at value (cost $85,961,418) (Note 1)....................... $87,379,140
Cash................................................................... 1,329,713
Receivable for securities sold......................................... 2,259,190
Dividends and interest receivable...................................... 472,750
Other assets........................................................... 74,968
-----------
Total assets........................................................... 91,515,761
-----------
Liabilities:
Payable for securities purchased....................................... 1,672,755
Accrued management fee (Note 2)........................................ 6,414
Accrued expenses....................................................... 25,378
Other liabilities...................................................... 10,024
-----------
Total liabilities...................................................... 1,714,571
-----------
Net Assets............................................................... $89,801,190
===========
Net assets consist of:
Undistributed net investment income.................................... $ 1,001,377
Accumulated net realized loss from investment transactions............. (8,158,982)
Unrealized appreciation on investments................................. 1,417,722
Capital shares (Note 3)................................................ 104,620
Additional paid-in capital............................................. 95,436,453
-----------
Net Assets............................................................... $89,801,190
===========
Net asset value per share ($89,801,190 [divided by] 10,461,994
outstanding shares)...................................................... $ 8.58
===========
Statement of Operations
For the Year Ended September 30, 2003
Investment Income (Note 1):
Interest..................................................... $ 2,518,052
Dividends.................................................... 1,898,327
-----------
Total Income................................................. 4,416,379
-----------
Expenses (Note 2):
Management fee............................................... 642,604
Custodian.................................................... 27,841
Transfer agent............................................... 24,693
Professional fees............................................ 83,725
Directors' fees.............................................. 107,700
Reports to shareholders...................................... 41,408
Treasurer's office........................................... 25,000
Other........................................................ 88,134
-----------
Total Expenses............................................. 1,041,105
-----------
Net Investment Income.......................................... 3,375,274
-----------
Realized and Unrealized Loss on Investments:
Net realized loss from investment transactions............... (442,388)
Net unrealized appreciation of investments................... 8,367,818
-----------
Net gain on investments...................................... 7,925,430
-----------
Net Increase in Net Assets Resulting from Operations........... $11,300,704
===========
See accompanying notes to financial statements
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Statement of Changes in Net Assets
For the Years Ended September 30, 2003 and 2002
2003 2002
---- ----
Change in net assets from operations:
Net investment income.............................................. $ 3,375,274 $ 3,487,906
Net realized loss from investment transactions..................... (442,388) (6,659,001)
Net change in appreciation of investments.......................... 8,367,818 (1,273,567)
----------- -----------
Net change in net assets resulting from operations............... 11,300,704 (4,444,662)
----------- -----------
Dividends to shareholders from:
Net investment income.............................................. (3,143,201) (4,547,101)
Capital share transactions (Note 3).................................. 518,366 1,216,444
----------- -----------
Change in net assets................................................. 8,675,869 (7,775,319)
Net assets at beginning of year...................................... 81,125,321 88,900,640
----------- -----------
Net assets at end of year (including undistributed net investment
income of $1,001,377 and $800,703, respectively)..................... $89,801,190 $81,125,321
=========== ===========
Financial Highlights
Selected data for a share of common stock outstanding:
Years Ended September 30,
--------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Operating Performance:
Net asset value, beginning of year.............. $ 7.81 $ 8.67 $ 11.82 $ 11.23 $ 11.18
------- ------- ------- -------- -------
Net investment income........................... .32 .34 .47 .42 .33
Net realized and unrealized gain (loss)......... .75 (.76) (1.88) 1.71 1.40
------- ------- ------- -------- -------
Total from investment operations.............. 1.07 (.42) (1.41) 2.13 1.73
Less Distributions:
Dividends from net investment income............ (.30) (.44) (.42) (.35) (.32)
Distributions from realized gains............... -- -- (1.32) (1.23) (1.36)
------- ------- ------- -------- -------
Total distributions........................... (.30) (.44) (1.74) (1.58) (1.68)
Capital share repurchases....................... -- -- -- .04 --
------- ------- ------- -------- -------
Net asset value, end of year.................... $ 8.58 $ 7.81 $ 8.67 $ 11.82 $ 11.23
======= ======= ======= ======== =======
Market value, end of year....................... $ 8.05 $ 7.55 $ 8.35 $ 9.88 $ 9.38
Total Net Asset Value Return (%)(a)............. 14.0 (5.2) (13.3) 21.9 16.4
Total Investment Return (%)(b)................. 10.8 (4.5) 2.2 25.7 10.4
Ratios/Supplemental Data:
Net assets, end of year ($000's)................ $89,801 $81,125 $88,901 $109,180 $96,040
Ratio of expenses to average net assets (%)..... 1.2 1.2 1.2 1.2 1.1
Ratio of net investment income to
average net assets (%)........................ 3.9 3.9 5.0 3.8 3.0
Portfolio turnover rate (%)..................... 86 89 82 98 67
-------------
(a) Assumes valuation of the Fund's shares, and reinvestment of dividends, at
net asset values.
(b) Assumes valuation of the Fund's shares at market price and reinvestment of
dividends at actual reinvestment price.
See accompanying notes to financial statements
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Notes to Financial Statements
1. Significant Accounting Policies
Ellsworth Convertible Growth and Income Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, closed-end management
investment company. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements, and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements:
(a) Security Valuation
Investments in securities traded on a national securities exchange are valued at
market using the last reported sales price as of the close of regular trading.
Securities traded in the over-the-counter market and listed securities for which
no sales were reported are valued at the mean between reported bid and asked
prices as of the close of regular trading. Where no closing prices are
available, value is determined by management, with the approval of the Board of
Directors.
(b) Securities Transactions and Related Investment Income
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed) with gain or loss on the sale of securities being
determined based upon identified cost. Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis, including
accretion of discounts and amortization of non-equity premium. For certain
securities, known as "contingent payment debt instruments," Federal tax
regulations require the Fund to record non-cash, "contingent" interest income in
addition to interest income actually received. Contingent interest income
amounted to 5 cents per share for the year ended September 30, 2003. In
addition, Federal tax regulations require the Fund to reclassify realized gains
on contingent payment debt instruments to interest income. At September 30, 2003
there were unrealized losses of approximately 1 cent per share on contingent
payment debt instruments.
(c) Federal Income Taxes
It is the policy of the Fund to distribute substantially all of its taxable
income within the prescribed time and to otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no provision for federal income or excise taxes is believed
necessary.
(d) Dividends and Distributions to Shareholders
The liability for dividends and distributions payable is recorded on the
ex-dividend date.
(e) Market Risk
It is the Fund's policy to invest the majority of its assets in convertible
securities. Although convertible securities do derive part of their value from
that of the securities into which they are convertible, they are not considered
derivative financial instruments. However, certain of the Fund's investments
include features which render them more sensitive to price changes in their
underlying securities. Thus they expose the Fund to greater downside risk than
traditional convertible securities, but still less than that of the underlying
common stock. The market value of those securities was $15,364,674 at September
30, 2003, representing 17% of net assets.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
2. Management Fee and Other Transactions with Affiliates
The management fee is paid to the investment adviser, Davis-Dinsmore Management
Company (the "Adviser"). The contract provides for payment of a monthly advisory
fee, computed at an annual rate of 3/4 of 1% of the first $100,000,000 and 1/2
of 1% of the excess over $100,000,000 of the Fund's net asset value in such
month.
The Adviser furnishes investment advice, office equipment and facilities, and
pays the salaries of all executive officers of the Fund, except that the costs
associated with personnel and certain non-personnel expenses of the office of
the Treasurer, up to a maximum of $25,000 a year, are reimbursed by the Fund.
Such reimbursements amounted to $25,000 for the year ended September 30, 2003.
The officers of the Fund are also directors, officers or employees of the
Adviser, and are compensated by the Adviser.
3. Capital Stock
At September 30, 2003 there were 10,461,994 shares of $.01 par value common
stock outstanding, (20,000,000 shares authorized). During the years ended
September 30, 2003 and 2002, 68,117 shares and 137,918 shares were issued in
connection with reinvestment of dividends from net investment income, resulting
in an increase in paid-in capital of $518,366 and $1,216,444 respectively.
A distribution of $.105 per share, derived from net investment income, was
declared on October 20, 2003, payable November 26, 2003 to shareholders of
record at the close of business October 30, 2003.
The Board of Directors of the Fund has authorized the Fund to issue, to
shareholders of record October 14, 2003, non-transferable rights to acquire
additional shares of the Fund's common stock (the "Rights"). Shareholders
received one Right for each whole share of common stock held as of October 14,
2003, rounded up to the nearest number of Rights evenly divisible by six. The
Rights allow shareholders to subscribe for one share of the Fund's common stock
for each six Rights held. The subscription price of the Rights will be the
lesser of (a) 95% of the net asset value per share of the Fund's common stock on
November 20, 2003, or (b) 95% of the average of the volume-weighted average
sales prices of a share of the Fund's Common Stock on the American Stock
Exchange on the November 20, 2003 and the four preceding trading days.
Rights may be exercised at any time prior to 5:00 p.m., Eastern time, on
November 19, 2003, unless extended by the Fund.
4. Portfolio Activity
Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated $73,545,877 and $71,199,299, respectively, for the year ended
September 30, 2003.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
5. Distributions to Shareholders
Income and Capital Gain Distributions are determined in accordance with federal
income tax regulations, which may differ from those reported for financial
reporting purposes.
The tax character of distributions paid during the years ended September 30,
2003 and 2002 were as follows:
Ordinary Income $3,143,201 $4,547,101
Long-Term Capital Gain -- --
---------- ----------
3,143,201 4,547,101
========== ==========
At September 30, 2003 the components of net assets (excluding paid-in capital)
on a tax basis were as follows:
Undistributed ordinary income $ 1,001,377
Tax basis capital loss carryforward (7,719,727)
Post October loss deferral (439,255)
Unrealized (appreciation) 1,417,722
-----------
(5,739,883)
===========
The capital loss carryforward represents tax basis capital losses which may be
carried over to offset future realized capital gains. On September 30, 2003 the
Fund had a net capital loss carry forward of $7,719,727, of which $1,057,592
expires in 2009, $1,029,388 expires in 2010, and $5,632,747 expires in 2011. To
the extent that the carryforward is used, no capital gains distributions will be
made. The Fund has elected to defer realized capital losses of $439,254 arising
after October 31, 2002. Such losses are treated for tax purposes as arising on
October 1, 2003.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Report of Independent Accountants
To the Shareholders and Board of Directors of
Ellsworth Convertible Growth and Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets, and the financial highlights, present fairly, in all
material respects, the financial position of Ellsworth Convertible Growth and
Income Fund, Inc. (the "Fund") at September 30, 2003, the results of its
operations for the year then ended, and the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at September 30, 2003 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
October 20, 2003
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Miscellaneous Notes
Automatic Dividend Investment and Cash Payment Plan
The Fund has an Automatic Dividend Investment and Cash Payment Plan (the
"Plan"). Any shareholder may elect to join the Plan by sending an application to
American Stock Transfer & Trust Company, P.O. Box 922, Church Street Station, NY
10269-0560 (the "Plan Agent"). You may also obtain additional information about
the Plan by calling the Plan Agent toll free at (800) 937-5449. If your shares
are held by a broker or other nominee, you should instruct the nominee to join
the Plan on your behalf. Some brokers may require that your shares be taken out
of the broker's "street name" and re-registered in your own name. Shareholders
should also contact their broker to determine whether shares acquired through
participation in the Plan can be transferred to another broker, and thereafter,
whether the shareholder can continue to participate in the Plan.
Under the Plan, all dividends and distributions are automatically invested in
additional Fund shares. Depending on the circumstances, shares may either be
issued by the Fund or acquired through open market purchases at the current
market price or net asset value, whichever is lower (but not less than 95% of
market price). When the market price is lower, the Plan Agent will combine your
dividends with those of other Plan participants and purchase shares in the
market, thereby taking advantage of the lower commissions on larger purchases.
There is no other charge for this service.
All dividends and distributions made by the Fund (including capital gain
dividends and dividends designated as qualified dividend income, which are
eligible for taxation at lower rates) remain taxable to Plan participants,
regardless of whether such dividends and distributions are reinvested in
additional shares of the Fund through open market purchases or through the
issuance of new shares. Plan participants will be treated as receiving the cash
used to purchase shares on the open market and, in the case of any dividend or
distribution made in the form of newly issued shares, will be treated as
receiving an amount equal to the fair market value of such shares as of the
reinvestment date. Accordingly, a shareholder may incur a tax liability even
though such shareholder has not received a cash distribution with which to pay
the tax.
Plan participants may also voluntarily send cash payments of $100 to $10,000 per
month to the Plan Agent, to be combined with other Plan monies, for purchase of
additional Fund shares in the open market. You pay only a bank service charge of
$1.25 per transaction, plus your proportionate share of the brokerage
commission. All shares and fractional shares purchased will be held by the Plan
Agent in your dividend reinvestment account. You may deposit with the Plan Agent
any Ellsworth stock certificates you hold, for a one-time fee of $7.50.
At any time, a Plan participant may instruct the Plan Agent to liquidate all or
any portion of such Plan participant's account. To do so, a Plan participant
must deliver written notice to the Plan Agent prior to the record date of any
dividend or distribution requesting either liquidation or a stock certificate.
The Plan Agent will combine all liquidation requests it receives from Plan
participants on a particular day and will then sell shares of the Fund that are
subject to liquidation requests in the open market. The amount of proceeds a
Plan participant will receive shall be determined by the average sales price per
share, after deducting brokerage commissions, of all shares sold by the Plan
Agent for all Plan participants who have given the Plan Agent liquidation
requests.
The Plan Agent or the Fund may terminate the Plan for any reason at any time by
sending written notice addressed to Plan participant's address as shown on the
Plan Agent's records. Following the date of termination, the Plan Agent shall
send the Plan participant either the proceeds of liquidation, or a stock
certificate or certificates for the full shares held by Plan Agent in Plan
participant's account and a check for the value of any fractional interest in
Plan participant's account based on the market price of the Fund's Common Stock
on that date.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Miscellaneous Notes (continued)
Notice of Privacy Policy
The Fund has adopted a privacy policy in order to protect the confidentiality of
nonpublic personal information that we have about you. We receive personal
information, such as your name, address and account balances, when transactions
occur in Ellsworth shares registered in your name.
We may disclose this information to companies that perform services for the
Fund, such as the Fund's transfer agent or proxy solicitors. These companies may
only use this information in connection with the services they provide to the
Fund, and not for any other purpose. We will not otherwise disclose any
nonpublic personal information about our stockholders or former stockholders to
anyone else, except as required by law.
Access to nonpublic information about you is restricted to our employees and
service providers who need that information in order to provide services to you.
We maintain physical, electronic and procedural safeguards that comply with
federal standards to guard your nonpublic personal information.
--------------------------------------------------------------------------------
Visit us on the Internet at www.ellsworthfund.com. The site provides information
about the Fund including daily net asset values (NAV), historical dividends and
press releases, as well as information about Davis-Dinsmore Management Company,
the Fund's adviser. In addition you can email us at info@ellsworthfund.com.
--------------------------------------------------------------------------------
The Fund is a member of the Closed-End Fund Association (CEFA). Its website
address is www.cefa.com. CEFA is solely responsible for the content of its
website.
--------------------------------------------------------------------------------
The Fund's Proxy Voting Guidelines (the "Guidelines") are available without
charge, by calling the Fund collect at (973) 631-1177. The Guidelines are also
posted on the Fund's website at http://www.ellsworthfund.com and are available
on the SEC's website at http://www.sec.gov.
--------------------------------------------------------------------------------
Pursuant to Section 23 of the Investment Company Act of 1940, notice is hereby
given that the Fund may in the future, purchase shares of its own Common Stock
from time to time, at such times, and in such amounts, as may be deemed
advantageous to the Fund. Nothing herein shall be considered a commitment to
purchase such shares.
--------------------------------------------------------------------------------
A Statement of Additional Information, dated October 16, 2003, which pertains to
an offering of the Fund's Common Stock issuable upon exercise of rights that
were issued to existing shareholders of the Fund on October 14, 2003, contains
additional information about the Fund and Directors, and is available, without
charge, by calling the Fund collect at (973) 631-1177.
--------------------------------------------------------------------------------
Internet Shareholder Services and Transfer Agent
www.ellsworthfund.com American Stock Transfer & Trust Company
email: info@ellsworthfund.com 59 Maiden Lane
New York, NY 10038
Investment Adviser (800) 937-5449
Davis-Dinsmore Management Company www.amstock.com
65 Madison Avenue, Suite 550
Morristown, NJ 07960-7308 Common Stock Listing
(973) 631-1177 American Stock Exchange Symbol: ECF
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Directors
The business address of each director is 65 Madison Avenue, Suite 550,
Morristown, NJ 07960-7308. Each director is also a director of Bancroft
Convertible Fund, Inc. (Bancroft) (a closed-end management investment company).
Davis-Dinsmore Management Company (Davis-Dinsmore) is the Fund's investment
adviser and is also the investment adviser to Bancroft. Because of this
connection, the Fund and Bancroft make up a Fund Complex. Therefore, each
director oversees two investment companies in the Fund Complex.
------------------------------------------------------------------------------------------------------------------------
Term of Office
and Length of Principal Occupation(s) During Other Directorship(s)
Name and Age Time Served Past 5 Years Held by Director
------------------------------------------------------------------------------------------------------------------------
Independent Directors
Gordon F. Ahalt, 75 Term as Director Retired. Prior to 2001, CalDive International,
expires 2004. President of G.F.A. Inc. (petroleum and The Houston
Director since industry consulting company). Prior to Exploration Company
1986. 1999, Consultant with W.H. Reaves &
Co. (asset management company).
William A. Benton, 70 Term as Director Retired. Prior to 2001, Partner of BE None
expires 2004. Partners (small options market maker).
Director since Prior to 2000, Limited Partner of
1986. Gavin, Benton & Co. (NYSE specialist).
Elizabeth C. Bogan, Ph.D., 59 Term as Director Senior Lecturer in Economics at None
expires 2004. Princeton University.
Director since
1986.
Donald M. Halsted, Jr., 76 Term as Director Retired Business Executive. None
expires 2005.
Director since
1986.
George R. Lieberman, 81 Term as Director Retired Advertising Executive. None
expires 2006.
Director since
1990.
Duncan O. McKee, 72 Term as Director Retired Attorney. None
expires 2005.
Director since
1996.
Nicolas W. Platt, 50 Term as Director Since January 2003, President of None
expires 2004. CNC-US (an international consulting
Director since company). Prior to January 2003,
1997. Senior Partner of Platt & Rickenbach
(public relations firm). Prior to May
2001, with WPP Group, UK, as Exec.
Vice Pres. of Ogilvy Public Relations
Worldwide and Managing Director of
the Corporate Financial Practice at
Burson-Marsteller (public relations
firm).
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Directors (continued)
------------------------------------------------------------------------------------------------------------------------
Term of Office
and Length of Principal Occupation(s) During Other Directorship(s)
Name and Age Time Served Past 5 Years Held by Director
------------------------------------------------------------------------------------------------------------------------
Interested Directors
Thomas H. Dinsmore, 50 (1,2) Term as Director Chairman and Chief Executive Officer None
expires 2005. of the Fund, Bancroft and
Director since Davis-Dinsmore.
1986.
Jane D. O'Keeffe, 48 (1,2) Term as Director President of the Fund, Bancroft and None
expires 2005. Davis-Dinsmore.
Director since
1995.
Officers
The business address of each officer is 65 Madison Avenue, Suite 550,
Morristown, NJ 07960-7308. Officers are elected and serve at the pleasure of the
Board of Directors. Each officer holds office until the annual meeting to be
held in 2004, and thereafter until his or her respective successor is duly
elected and qualified.
------------------------------------------------------------------------------------------------------------------------
Principal Occupation(s)
Name and Age Positions with the Fund Officer Since During the Past 5 Years
------------------------------------------------------------------------------------------------------------------------
Thomas H. Dinsmore, 50 (1,2) Director, Chairman and 1986 Chairman and Chief Executive
Chief Executive Officer Officer of the Fund, Bancroft
and Davis-Dinsmore
Jane D. O'Keeffe, 48 (1,2) Director and President 1994 President of the Fund,
Bancroft and Davis-Dinsmore
H. Tucker Lake, Jr., 56 (2) Vice President 1994 Since 2002, Vice President,
and prior thereto Vice
President, Trading, of the
Fund, Bancroft and
Davis-Dinsmore
Gary I. Levine, 46 (3,4) Vice President, 1993 Since 2002, Vice President,
Treasurer and Chief Treasurer and Chief Financial
Financial Officer Officer, and prior thereto,
Treasurer and Assistant
Secretary of the Fund,
Bancroft and Davis-Dinsmore
Germaine Ortiz, 33 Vice President 1996 Since 1999, Vice President,
and prior thereto, Assistant
Vice President of the Fund,
Bancroft and Davis-Dinsmore
Sigmund Levine, 79 (3,5) Secretary 1986 Senior Vice President and
Secretary of the Fund,
Bancroft and Davis-Dinsmore
1 Mr. Dinsmore and Ms. O'Keeffe are considered interested persons because
they are officers and directors of Davis-Dinsmore. They are brother and
sister.
2 H. Tucker Lake, Jr. is the cousin of Thomas H. Dinsmore and
Jane D. O'Keeffe.
3 Sigmund Levine is the father of Gary I. Levine.
4 Gary I. Levine was elected Secretary of the Fund as of November 17, 2003.
5 Sigmund Levine retired as Secretary of the Fund as of November 17, 2003.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
65 MADISON AVENUE, SUITE 550
MORRISTOWN, NEW JERSEY 07960
www.ellsworthfund.com
[LOGO]
[LOGO] Printed on recycled paper
ITEM 2. CODE OF ETHICS.
Effective May 15, 2003, the Board of Directors of the Fund has adopted a
code of ethics that applies to the Fund's principal executive officer and
principal financial officer. See attached Exhibit EX-99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Directors of the Fund has determined that no member of the Board
serving on the Audit Committee meets the SEC definition of "audit committee
financial expert." The Fund's Audit Committee consists of four directors who
are not "interested persons" of the Fund within the meaning of the Investment
Company Act of 1940, as amended. These directors are also "independent" from
the Funds within the meaning of Section 10A of the Securities Exchange Act of
1934, as amended. Members of the Audit Committee have diverse backgrounds in
manufacturing, finance, advertising and education, and the Board believes that
such members are fully qualified to monitor the internal accounting operations
and the independent auditors of the Fund, and to monitor the disclosures of
the Fund contained in the Fund's financial statements. In addition, the Audit
Committee has the ability on its own to retain independent accountants or
other consultants whenever it deems appropriate. The Fund's Board believes
that all of the foregoing is equivalent to having an audit committee financial
expert on the Audit Committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The Fund has a designated Audit Committee in accordance with
Section 3(a)(58)(A) of the Exchange Act:
WILLIAM A. BENTON
ELIZABETH C. BOGAN, PH.D.
DONALD M. HALSTED, JR.
GEORGE R. LIEBERMAN
(b) Not applicable.
ITEM 6. [RESERVED BY SEC FOR FUTURE USE.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Bancroft Convertible Fund, Inc.
Ellsworth Convertible Growth and Income Fund, Inc.
Davis-Dinsmore Management Company
Proxy Voting Guidelines
(Adopted April 14, 2003)
These proxy voting guidelines have been adopted by the Boards of Directors of
Bancroft Convertible Fund, Inc. and Ellsworth Convertible Growth and Income
Fund, Inc. (collectively, the "Funds"), as well as by the Board of Directors of
Davis-Dinsmore Management Company ("Davis-Dinsmore").
The Boards of Directors of the Funds have delegated to Davis-Dinsmore
responsibility for voting proxies received by the Funds in their capacities as
shareholders of various companies. The Boards recognize that, due to the nature
of the Funds' investments, the Funds do not frequently receive proxies.
Davis-Dinsmore exercises its voting responsibility with the overall goal of
maximizing the value of the Funds' investments. The portfolio managers at
Davis-Dinsmore oversee the voting policies and decisions for the Funds.
In evaluating voting issues, the portfolio managers may consider information
from many sources, including management of a company presenting a proposal,
shareholder groups, research analysts, and independent proxy research services.
Set forth below are the proxy voting guidelines:
A. Matters Related to the Board of Directors
1. The Funds generally will support the election of nominees recommended
by management for election as directors. In determining whether to support a
particular nominee, Davis-Dinsmore will consider whether the election of that
nominee will cause a company to have less than a majority of independent
directors.
2. The Funds generally will support proposals to de-classify boards of
directors if fewer than 66 2/3% of the directors are independent, and will
generally vote against proposals to classify boards of directors.
3. The Funds generally will withhold a vote in favor of a director who
has served on a committee which has approved excessive compensation arrangements
or proposed equity-based compensation plans that unduly dilute the ownership
interests of stockholders.
B. Matters Related to Independent Auditors
1. The Funds generally will vote in favor of independent accountants
approved by the company. Prior to such vote, however, Davis-Dinsmore will take
into consideration whether non-audit fees make up more than 50 to 75% of the
total fees paid by the company to the independent auditors, and the nature of
the non-audit services provided.
C. Corporate Governance Matters
1. As a general rule, the Funds will vote against proposals recommended
by management of a company that are being made primarily to implement anti-
takeover measures, and will vote in favor of proposals to eliminate policies
that are primarily intended to act as anti-takeover measures.
2. Subject to the other provisions of these guidelines, including without
limitation provision C.1. above, the Funds generally will vote in accordance
with management's recommendations regarding routine matters, including the
following:
a. Fixing number of directors;
b. Stock splits; and
c. Change of state of incorporation for specific corporate purposes.
D. Matters Related to Equity-Based Compensation Plans
1. The Fund generally will vote in favor of broad-based stock option
plans for executives, employees or directors which would not increase the
aggregate number of shares of stock available for grant under all currently
active plans to over 10% of the total number of shares outstanding.
2. The Funds generally will vote in favor of employee stock purchase
plans and employee stock ownership plans permitting purchase of company stock at
85% or more of fair market value.
E. Contested Matters
1. Contested situations will be evaluated on a case by case basis by the
portfolio manager at Davis-Dinsmore principally responsible for the particular
portfolio security.
F. Miscellaneous Matters
1. The Funds may in their discretion abstain from voting shares that have
been recently sold.
2. The Funds generally will abstain from voting on issues relating to
social and/or political responsibility.
3. Proposals that are not covered by the above-stated guidelines will be
evaluated on a case by case basis by the portfolio manager at Davis-Dinsmore
principally responsible for the particular portfolio security.
G. Material Conflicts of Interest
1. Conflicts of interest may arise from time to time between Davis-
Dinsmore and the Funds. Examples of conflicts of interests include:
a. Davis-Dinsmore may manage a pension plan, administer employee
benefit plans, or provide services to a company whose management is
soliciting proxies;
b. Davis-Dinsmore or its officers or directors may have a business
or personal relationship with corporate directors, candidates for
directorships, or participants in proxy contests;
c. Davis-Dinsmore may hold a position in a security contrary to
shareholder interests.
2. If a conflict of interest arises with respect to a proxy voting
matter, the portfolio manager will promptly notify the Funds' Audit Committee
and counsel for independent directors and the proxies will be voted in
accordance with direction received from the Audit Committee.
ITEM 8. [RESERVED BY SEC FOR FUTURE USE.]
ITEM 9. CONTROLS AND PROCEDURES
Conclusions of principal officers concerning controls and procedures
(a) As of November 21, 2003, an evaluation was performed under the supervision
and with the participation of the officers of Ellsworth Convertible Growth and
Income Fund, Inc. (the "Company"), including the principal executive officer
("PEO") and principal financial officer ("PFO"), of the effectiveness of the
Company's disclosure controls and procedures. Based on that evaluation, the
Company's officers, including the PEO and PFO, concluded that, as of November
21, 2003, the Company's disclosure controls and procedures were reasonably
designed so as to ensure that material information relating to the Company is
made known to the PEO and PFO.
(b) There have been no significant changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-
year (the registrant's second fiscal half-year in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS
(a) (1) Code of Ethics
A code of ethics, effective May 15, 2003, that applies to the Fund's
principal executive officer and principal financial officer is attached
hereto.
(2) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2(a) under the Investment Company Act of 1940
are attached hereto as Exhibit 99.CERT.
(b) Certifications pursuant to Rule 30a-2(b) under the Investment Company Act
of 1940 are attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Ellsworth Convertible Growth and Income Fund, Inc.
By: /s/Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board
(Principal Executive Officer)
Date: December 18, 2003
Pursuant to the requirements of the Securities and Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board
(Principal Executive Officer)
Date: December 18, 2003
By: /s/Gary I. Levine
Gary I. Levine
Vice President and Treasurer
(Principal Financial Officer)
Date: December 18, 2003