UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4656
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ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
-------------------------------------------------------------------------------
(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, 2004
Date of reporting period: March 31, 2004
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]
2004 Semi-Annual Report
March 31, 2004
2004 Semi-Annual Report
March 31, 2004
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 3/31/04 with dividends reinvested
3 Months 1 Year 5 Years 10 Years
Ellsworth market value (a) ............................... 3.36% 13.36% 38.43% 187.29%
Ellsworth net asset value (b) ............................ 3.14 19.70 23.38 160.52
Closed-end convertible fund average (b) .................. 2.67 24.55 29.42 123.58
S&P 500 (a) .............................................. 1.69 35.12 (5.85) 201.74
Russell 2000 (a) ......................................... 6.27 63.86 59.16 135.13(c)
Lehman Aggregate Bond Total Return Index (b) ............. 2.66 5.40 42.17 106.89
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 March 31, 2004.
(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
---------- ---- --- ----- ---- --- -----
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
Dec. 03 8.92 8.58 8.91 8.22 7.80 8.00
Mar. 04 9.25 8.91 9.12 8.50 8.01 8.20
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Dividend Distributions (12 Months)
Record Payment Capital
Date Date Income Gains Total
-------- ------- ------ ------- ------
5/15/03 5/29/03 $0.070 $ -- $0.070
8/14/03 8/28/03 0.070 -- 0.070
10/30/03 11/26/03 0.105 -- 0.105
2/12/04 2/26/04 0.070 -- 0.070
------ ------ ------
$0.315 -- $0.315
====== ====== ======
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
To Our Shareholders
Many economic statistics are now pointing to a significant improvement in
economic activity. Job creation and consumer confidence have both improved
since our last report to you, so we are looking forward to a better economic
environment. However, the factors that may reduce future growth include high
energy prices and increases in interest rates.
Since there has been a global increase in economic activity and a decline in the
dollar, prices paid for oil have risen substantially and it is not apparent that
they will decline quickly even if Iraq's oil production expands. In this
environment the Fund's energy related issues have been among its best
performers.
Over the past few years, the Federal Reserve Board has acted to reduce interest
rates for the purpose of stimulating economic activity. As economic activity
picks up, the chairman of the Federal Reserve Board, Alan Greenspan, has made it
clear that interest rates are likely to rise. This would have the effect of
lowering bond prices and would also have an impact on interest rate sensitive
industries. During this period our investments in industries such as banking
and insurance have lagged the portfolio. We believe that much of the effect of
these rate rises is currently factored into equity market prices.
From Ellsworth Convertible Growth and Income Fund's founding in 1986, the Fund's
strategy has been to use convertible securities as an equity alternative to
reduce risk and volatility. This strategy tends to outperform in bear markets
and lag in bull markets. The Fund slightly outperformed the average of its
peer-group for the quarter ended March 31, 2004 but lagged the average of its
peer-group for the first half of its fiscal year 2004. Our peers consist of the
fourteen closed-end convertible funds in the Lipper Closed-End Performance
Analysis, but only four of these remain unleveraged convertible funds with
greater than 80% of their investments in convertible securities. The addition
of leverage usually makes portfolios more volatile and the addition of non-
convertible debt increases exposure to interest rate risk.
The results of the 2004 annual shareholders' meeting are shown in the
Miscellaneous Notes section of this report. We thank you for your support. The
Fund's Ten Year Lipper Performance Achievement Certificate for the ten years
ended December 31, 2003 is also listed in the Miscellaneous Notes section.
Additional information on the Fund is available on the Fund's website
(www.ellsworthfund.com). Further, 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 April meeting, the Fund's Board of Directors declared a dividend of 7
cents per share. The dividend consists of undistributed net investment income
and will be payable on May 27, 2004 to shareholders of record on May 13, 2004.
/s/ Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board
May 11, 2004
Page 1
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Largest Investment Holdings by underlying common stock
Value % of Total
(Note 1) Net Assets
----------- ----------
Teva Pharmaceutical Industries Ltd. .................................................. $ 3,191,563 2.8%
Develops, manufactures and markets generic and branded human
pharmaceuticals and active pharmaceutical ingredients.
Amerada Hess Corp. ................................................................... 3,154,000 2.8
The Company and its subsidiaries explore for, produce, purchase, trans-
port and sell crude oil and natural gas. The Company also manufactures,
purchases, transports and markets refined petroleum products.
Washington Mutual, Inc. .............................................................. 2,660,625 2.4
A financial services company that provides a diversified line of products
and services to consumers and small to mid-sized businesses.
New York Community Bancorp, Inc. ..................................................... 2,659,219 2.4
A holding company for New York Community Bank, a thrift, that operates
through divisional banks in New York and New Jersey.
Sovereign Bancorp, Inc. .............................................................. 2,475,000 2.2
A holding company for Sovereign Bank. The Bank's primary business consists
of attracting deposits from its network of banking offices, and originating
commercial, consumer and residential mortgage loans, as well as automobile
loans.
Church & Dwight Co., Inc. ............................................................ 2,450,000 2.2
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.
Lucent Technologies, Inc. ............................................................ 2,280,925 2.0
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.
Fifth Third Bancorp .................................................................. 2,135,571 1.9
A diversified financial services company. The Company's principal
businesses include retail banking, commercial banking, investment advisory
and data processing.
The TJX Companies, Inc. .............................................................. 2,124,000 1.9
Retails off-price apparel and home fashions. The Company currently operates
T.J. Maxx, Marshalls, HomeGoods, A.J. Wright, Winners and T.K. Maxx stores.
The Chubb Corp. ...................................................................... 2,065,500 1.8
A holding company, offers property, and casualty insurance, which includes ----------- ----
personal, standard commercial and specialty commercial insurance.
$25,196,403 22.4%
=========== ====
Page 2
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Major Industry Exposure
% of Total
Net Assets
----------
Banking/Savings & Loan ................................. 12.6%
Energy ................................................. 10.3
Pharmaceuticals ........................................ 10.2
Technology ............................................. 9.8
Financial & Insurance .................................. 9.6
Telecommunications ..................................... 9.1
Retail ................................................. 8.4
Health Care ............................................ 5.5
Automotive ............................................. 3.9
Consumer Goods ......................................... 3.5
----
Total .................................................. 82.9%
====
Major Portfolio Changes
Six months ended March 31, 2004
ADDITIONS REDUCTIONS
Amerada Hess Corp. Affiliated Computer Services, Inc.
Axcelis Technologies, Inc. American Electric Power Company, Inc.
Casual Male Retail Group, Inc. Barnes & Noble, Inc.
Chesapeake Energy Corp. Bisys Group, Inc.
EMC Corp. ChevronTexaco Corp.
(exchangeable from The Goldman Sachs Group, Inc.) (exchangeable from Devon Energy Corp.)
Felcor Lodging Trust, Inc. Graftech International, Ltd.
Fifth Third Bancorp The Interpublic Group of Companies, Inc.
(exchangeable from The Bear Stearns Cos., Inc.)
Ivax Corp.
Hewlett Packard Co., Inc.
News Corp, Inc.
International Rectifier Corp. (exchangeable from News America, Inc.)
Ivax Corp. Nextel Communications, Inc.
LSI Logic Corp. Raytheon Co.
(exchangeable from Lehman Brothers Holdings, Inc.) (exchangeable from RC Trust I)
Nortel Networks Corp. School Specialty Inc.
Sovereign Bancorp, Inc. Sunrise Assisted Living, Inc.
(exchangeable from Sovereign Capital Trust IV)
Teva Pharmaceuticals Industries Ltd.
The TJX Companies, Inc. (exchangeable from Teva Pharm. Finance B.V.)
Teva Pharmaceuticals Industries Ltd. Vishay Intertechnology, Inc.
(exchangeable from Teva Pharm. Finance II)
XL Capital, Ltd.
Page 3
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Statement of Assets and Liabilities (unaudited)
March 31, 2004
--------------
Assets:
Investments at value (cost $100,913,487) (Note 1) .................................... $ 109,002,811
Cash ................................................................................. 1,133,914
Receivable for securities sold ....................................................... 3,764,340
Dividends and interest receivable .................................................... 368,644
Other assets ......................................................................... 18,942
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Total assets ......................................................................... 114,288,651
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Liabilities:
Payable for securities purchased ..................................................... 2,074,900
Accrued management fee (Note 2) ...................................................... 10,243
Accrued expenses ..................................................................... 6,851
-------------
Total liabilities .................................................................... 2,091,994
-------------
Net Assets ................................................................................ $ 112,196,657
=============
Net assets consist of:
Undistributed net investment income .................................................. $ 562,504
Accumulated net realized loss from investment transactions ........................... (5,681,905)
Unrealized appreciation on investments ............................................... 8,089,324
Capital shares (Note 3) .............................................................. 122,981
Additional paid-in capital ........................................................... 109,103,753
-------------
Net Assets ................................................................................ $ 112,196,657
=============
Net asset value per share ($112,196,657 / 12,298,127 outstanding shares) .................. $ 9.12
=============
Statement of Operations (unaudited)
Six Months Ended March 31, 2004
Investment Income (Note 1):
Interest ............................................................................. $ 1,055,556
Dividends ............................................................................ 1,090,497
-------------
Total Income .................................................................... 2,146,053
-------------
Expenses (Note 2):
Management fee ....................................................................... 390,476
Custodian ............................................................................ 9,350
Transfer agent ....................................................................... 9,635
Professional fees .................................................................... 54,923
Directors' fees ...................................................................... 60,300
Reports to shareholders .............................................................. 37,344
Treasurer's office ................................................................... 12,500
Other ................................................................................ 51,018
-------------
Total Expenses .................................................................. 625,546
-------------
Net Investment Income ..................................................................... 1,520,507
-------------
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions ....................................... 2,477,076
Net unrealized appreciation of investments ........................................... 6,671,602
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Net gain on investments .............................................................. 9,148,678
-------------
Net Increase in Net Assets Resulting from Operations ................................. $ 10,669,185
=============
See accompanying notes to financial statements.
Page 4
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Statement of Changes in Net Assets
Six Months Endeed Year Ended
March 31, 2004(a) September 30, 2003
----------------- ------------------
Change in net assets from operations:
Net investment income ............................................ $ 1,520,507 $ 3,375,274
Net realized gain (loss) from investment transactions ............ 2,477,076 (442,388)
Net unrealized appreciation of investments ....................... 6,671,602 8,367,818
------------ -----------
Net increase in net assets resulting from operations ........ 10,669,185 11,300,704
------------ -----------
Dividends to shareholders from:
Net investment income ............................................ (1,959,378) (3,143,201)
Capital share transactions (Note 3)
Value of shares issued on reinvestment of distributions .......... 648,018 518,366
Net proceeds from rights offering ................................ 13,037,642 --
------------ -----------
Total capital share transactions ............................ 13,685,660 518,366
------------ -----------
Change in net assets .................................................. 22,395,467 8,675,869
Net assets at beginning of period ..................................... 89,801,190 81,125,321
------------ -----------
Net assets at end of period (including undistributed net investment
income of $562,504 and $1,001,377, respectively) ...................... $112,196,657 $89,801,190
============ ===========
Financial Highlights
Selected data for a share of common stock outstanding
Six Months
Ended Years Ended September 30,
March 31, -----------------------------------------------------
2004(a) 2003 2002 2001 2000 1999
-------- ------- ------- ------- -------- -------
Operating Performance:
Net asset value, beginning of period ........ $ 8.58 $ 7.81 $ 8.67 $ 11.82 $ 11.23 $ 11.18
-------- ------- ------- ------- -------- -------
Net investment income ....................... 0.12 0.32 0.34 0.47 0.42 0.33
Net realized and unrealized gain (loss) ..... 0.80 0.75 (0.76) (1.88) 1.71 1.40
-------- ------- ------- ------- -------- -------
Total from investment operations .......... 0.92 1.07 (0.42) (1.41) 2.13 1.73
Less Distributions:
Dividends from net investment income ........ (0.18) (0.30) (0.44) (0.42) (0.35) (0.32)
Distributions from realized gains ........... -- -- -- (1.32) (1.23) (1.36)
-------- ------- ------- ------- -------- -------
Total distributions ....................... (0.18) (0.30) (0.44) (1.74) (1.58) (1.68)
Capital Share Transactions:
Effect of rights offering ................... (0.20) -- -- -- -- --
Capital share repurchases ................... -- -- -- -- 0.04 --
-------- ------- ------- ------- -------- -------
Total capital share transactions .......... (0.20) -- -- -- 0.04 --
-------- ------- ------- ------- -------- -------
Net asset value, end of period .............. $ 9.12 $ 8.58 $ 7.81 $ 8.67 $ 11.82 $ 11.23
======== ======= ======= ======= ======== =======
Market value, end of period ................. $ 8.20 $ 8.05 $ 7.55 $ 8.35 $ 9.88 $ 9.38
Total Net Asset Value Return (%)(b) ......... 8.4 14.0 (5.2) (13.3) 21.9 16.4
Total Investment Return (%)(c) .............. 4.1 10.8 (4.5) 2.2 25.7 10.4
Ratios/Supplemental Data:
Net assets, end of period (in thousands) .... $112,197 $89,801 $81,125 $88,901 $109,180 $96,040
Ratio of expenses to average net assets (%) . 1.2(d) 1.2 1.2 1.2 1.2 1.1
Ratio of net investment income to
average net assets (%) .................... 2.9(d) 3.9 3.9 5.0 3.8 3.0
Portfolio turnover rate (%) ................. 45 86 89 82 98 67
(a) Unaudited.
(b) Assumes valuation of the Fund's shares, and reinvestment of dividends, at
net asset values.
(c) Assumes valuation of the Fund's shares at market price and reinvestment of
dividends at actual reinvestment price.
(d) Annualized.
See accompanying notes to financial statements.
Page 5
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Portfolio of Investments March 31, 2004 (unaudited)
Principal Value
Amount (Note 1)
---------- -----------
CONVERTIBLE BONDS AND NOTES -- 49.2%
Advertising -- 1.0%
$1,000,000 Lamar Advertising Company 2.875% 2010 cv. sub. notes (B2) ................ $ 1,076,875
-----------
Aerospace and Defense -- 1.3%
1,500,000 The Goldman Sachs Group, Inc. 1.00% 2009 exch. equity-linked notes (Aa3)
(exch. for General Dynamics Corp. common stock)(1)........................ 1,436,400
-----------
Automotive -- 2.6%
1,000,000 American Axle & Manufacturing Holdings, Inc. 2% 2024 cv. sr. notes 144A
(Baa3)(Acquired 02/06/04 - 02/12/04; Cost $1,042,116)(1)(2)............... 1,014,375
3,500,000 Lear Corp. 0% 2022 cv. sr. notes (Ba1) ................................... 1,865,938
-----------
2,880,313
-----------
Banking/Savings and Loan -- 1.9%
2,077,000 Bear Stearns Cos., Inc. 0.25% 2010 medium term notes (A1)
(exch. for Fifth Third Bancorp common stock)(1)........................... 2,135,571
-----------
Consumer Goods -- 2.2%
2,000,000 Church & Dwight Co., Inc. 5.25% 2033 cv. sr. deb. (B1) ................... 2,450,000
-----------
Data-Processing Services -- 1.3%
1,500,000 Pegasus Solutions, Inc. 3.875% 2023 cv. sr. notes (NR) ................... 1,421,251
-----------
Energy -- 1.4%
1,500,000 Kerr-McGee Corp. 5.25% 2010 cv. sub. deb. (Baa3) ......................... 1,616,415
-----------
Entertainment -- 1.1%
1,250,000 Citadel Broadcasting Corp. 1.875% 2011 cv. sub. notes (NR)
(Acquired 02/11/04 - 02/25/04; Cost $1,246,250)(2)........................ 1,212,500
-----------
Financial and Insurance -- 0.9%
1,000,000 Swiss Re America Holding Corp. 3.25% 2021 euro. sub. cv. bonds (Aa1)(conv.
into Swiss Reinsurance Company common stock)
(Acquired 11/15/01 - 12/05/01; Cost $1,007,875)(2) ...................... 988,500
-----------
Health Care -- 3.9%
1,000,000 AmerisourceBergen Corp. 5% 2007 cv. sub. notes (B1) ...................... 1,154,751
1,000,000 Community Health Systems, Inc. 4.25% 2008 cv. sub. notes (B3) ............ 1,103,750
1,000,000 LifePoint Hospitals, Inc. 4.50% 2009 cv. sub. notes (B3) ................. 1,042,500
875,000 Mentor Corp. 2.75% 2024 cv. deb.(NR)
(Acquired 12/17/03 - 01/30/04; Cost $941,250)(2) ......................... 1,065,859
-----------
4,366,860
-----------
Office Equipment -- 1.4%
1,500,000 IOS Capital, LLC 5% 2007 cv. sub. notes (Ba2)(exch. for IKON Office
Solutions, Inc. common stock)(Acquired 05/08/02 - 06/02/03;
Cost $1,498,125) (2) .................................................... 1,641,563
-----------
Pharmaceuticals -- 7.8%
2,000,000 Amgen, Inc. 0% 2032 LYONS (A2)(1)......................................... 1,501,540
1,250,000 Gilead Sciences, Inc. 2% 2007 cv. sr. notes (NR) ......................... 1,648,625
625,000 Impax Laboratories, Inc. 1.25% 2024 cv. sr. sub. deb. (NR)
(Acquired 03/31/04; Cost $647,500) (2) .................................. 659,375
Page 6
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Portfolio of Investments March 31, 2004 (continued)
Principal Value
Amount (Note 1)
---------- -----------
CONVERTIBLE BONDS AND NOTES -- (continued)
Pharmaceuticals -- (continued)
$ 500,000 Ivax Corp. 4.50% 2008 cv. sr. sub. notes (NR) ............................ $ 506,250
1,250,000 Ivax Corp. 1.50% 2024 cv. sr. notes (NR)(1)(Acquired 02/27/04;
Cost $1,256,339)(1)(2)................................................... 1,284,375
750,000 Teva Pharmaceutical Finance B.V. 0.75% 2021 cv. sub. deb. (BBB)
(exch. for Teva Pharmaceuticals Industries Ltd. ADR) ..................... 1,109,063
1,000,000 Teva Pharmaceutical Finance II, LLC series A 0.50% 2024 cv. sr. deb. (BBB)
(exch. for Teva Pharmaceuticals Industries Ltd. ADR) ..................... 1,033,750
1,000,000 Teva Pharmaceutical Finance II, LLC series B 0.25% 2024 cv. sr. deb. (BBB)
(exch. for Teva Pharmaceuticals Industries Ltd. ADR) ..................... 1,048,750
-----------
8,791,728
-----------
Retail -- 7.6%
1,300,000 Dick's Sporting Goods, Inc. 1.6061% 2024 sr. cv. notes (NR)
(Acquired 02/11/04 - 03/15/04; Cost $917,558)(2) ........................ 941,688
1,000,000 Casual Male Retail Group, Inc. 5% 2024 cv. sr. sub. notes (NR)
(Acquired 11/13/03 - 11/25/03; Cost $1,050545)(2) ....................... 1,205,000
1,250,000 Charming Shoppes, Inc. 4.75% 2012 sr. cv. notes (B2) ..................... 1,416,406
1,500,000 Costco Wholesale Corp. 0% 2017 cv. sub. notes (A3) ....................... 1,289,063
550,000 Saks, Inc. 2% 2024 cv. sr. notes (Ba3)
(Acquired 03/17/04 - 03/18/04; Cost $552,500)(2) ........................ 586,927
800,000 School Specialty, Inc. 6% 2008 cv. sub. notes (B+) ....................... 932,256
2,400,000 The TJX Companies, Inc. 0% 2021 LYONs (Baa1) ............................. 2,124,000
-----------
8,495,340
-----------
Technology -- 7.6%
1,500,000 Axcelis Technologies, Inc. 4.25% 2007 cv. sub. notes (NR) ................ 1,500,000
1,000,000 Conexant Systems, Inc. 5.25% 2006 cv. sub. notes (NR) .................... 1,017,500
2,379,000 Hewlett-Packard Co., Inc. 0% 2017 LYONs (Baa1) ........................... 1,356,030
1,500,000 International Rectifier Corp. 4.25% 2007 cv. sub. notes (B2) ............. 1,515,000
1,100,000 Lehman Brothers Holdings, Inc. 6% 2005 YEELDS (A)
(linked to LSI Logic Corp. common stock) ................................. 1,086,250
2,000,000 STMicroelectronics, N.V. 0% 2013 sr. cv. bonds (A3)
(Acquired 07/29/03 - 11/25/03; Cost $2,095,000)(2)(3).................... 2,050,000
-----------
8,524,780
-----------
Telecommunications -- 6.8%
1,500,000 Comverse Technology, Inc. 0% 2023 ZYPS (BB-)(3) .......................... 1,815,300
1,000,000 Level 3 Communications, Inc. 2.875% 2010 cv. sub. notes (Caa2) ........... 837,740
1,000,000 Lucent Technologies, Inc. 2.75% 2023 series A cv. sr. deb. (Caa1) ........ 1,494,290
500,000 Lucent Technologies, Inc. 2.75% 2025 series B cv. sr. deb. (Caa1) ........ 786,635
500,000 NII Holdings, Inc. 2.875% 2034 cv. sr. notes (NR)
(Acquired 01/27/04; Cost $510,313)(2).................................... 525,625
1,250,000 Nortel Networks Corp. 4.25% 2008 cv. sr. notes (B3) ...................... 1,278,906
750,000 Tekelec, Inc. 2.25% 2008 cv. sub. discount notes (NR) .................... 887,813
-----------
7,626,309
-----------
Transportation -- 0.4%
500,000 ExpressJet Holdings, Inc. 4.25% 2023 cv. notes (NR) ...................... 514,796
-----------
TOTAL CONVERTIBLE BONDS AND NOTES ........................................ 55,179,201
-----------
Shares
----------
CONVERTIBLE PREFERRED STOCKS -- 23.2%
Automotive -- 1.4%
50,000 General Motors Corp. 6.25% series C cv. sr. deb. (Baa1) .................. 1,521,875
-----------
Page 7
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Portfolio of Investments March 31, 2004 (continued)
Value
Shares (Note 1)
------- -----------
CONVERTIBLE PREFERRED STOCKS -- (continued)
Banking/Savings and Loan -- 9.6%
20,000 Commerce Capital Trust II 5.95% cv. trust pfd. (Baa1)
(exch. for Commerce Bancorp, Inc. common stock) ....................... $ 1,388,751
40,000 National Australia Bank Ltd. 7.875% exch. capital units (NR) .......... 1,572,000
30,000 New York Community Bancorp, Inc. 6% BONUSES units (Baa2) .............. 2,659,219
50,000 Sovereign Capital Trust IV 4.375% PIERS (Ba1)
(exch. for Sovereign Bancorp, Inc. common stock)(1).................... 2,475,000
45,000 Washington Mutual Capital Trust PIERS units (Baa1)
(exch. for Washington Mutual, Inc. common stock) ...................... 2,660,625
-----------
10,755,595
-----------
Energy -- 2.9%
12,500 Chesapeake Energy Corp. 6% cum. cv. pfd. (B3) ......................... 926,563
1,000 Chesapeake Energy Corp. 4.125% cum. cv. pfd. (B3)
(Acquired 03/24/04; Cost $1,000,000)(2) .............................. 1,036,250
20,000 The Williams Cos., Inc. 5.50% 2033 jr. sub. cv. deb. (Baa1) ........... 1,292,500
-----------
3,255,313
-----------
Entertainment -- 2.2%
22,500 Emmis Communications Corp. 6.25% series A cum. cv. pfd. (Caa1) ........ 1,095,469
1,250 Radio One, Inc. 6.50% HIGH TIDES (B3) ................................. 1,336,484
-----------
2,431,953
-----------
Financial and Insurance -- 3.3%
30,000 Reinsurance Group of America, Inc. 5.75% PIERS (Baa2) ................. 1,770,000
80,000 Travelers Property Casualty Corp. 4.50% 2032 cv. jr. sub. notes (A3) .. 1,945,000
-----------
3,715,000
-----------
Health Care -- 1.6%
28,000 Omnicare Capital Trust I 4% PIERS (Ba3)
(exch. for Omnicare, Inc. common stock)(1)............................. 1,834,000
-----------
Mining -- 0.9%
1,000 Freeport-McMoRan Copper and Gold, Inc. 5.50% cv. perpetual pfd. (CCC) . 1,021,250
-----------
Real Estate -- 1.3%
60,000 Felcor Lodging Trust, Inc. 7.80% cum. cv. pfd. (B3) ................... 1,437,000
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS .................................... 25,971,986
-----------
MANDATORY CONVERTIBLE SECURITIES -- 22.6% Note 1(e)
Aerospace and Defense -- 1.4%
15,000 Northrop Grumman Corp. 7.25% equity units (NR)(1)...................... 1,550,700
-----------
Banking/Savings and Loan -- 1.1%
5,000 State Street Corp. 6.75% treasury backed ACES (NR) .................... 1,233,906
-----------
Consumer Goods -- 1.4%
50,000 Constellation Brands, Inc. dep. shs. representing 5.75%
series A mandatory cv. pfd. (B) ....................................... 1,532,500
-----------
Page 8
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Portfolio of Investments March 31, 2004 (continued)
Value
Shares (Note 1)
------- -----------
MANDATORY CONVERTIBLE SECURITIES--(continued)
Energy -- 5.9%
50,000 Amerada Hess Corp.7% mandatory cv. pfd. ACES (Ba3) .................... $ 3,154,000
30,000 Kerr-McGee Corp. 5.50% 2004 DECS (Baa3)
(exch. for Devon Energy Corp. common stock) ........................... 1,500,000
25,000 Teekay Shipping Corp. 7.25% PEPS units (BB-) .......................... 1,050,000
30,000 Valero Energy Corp. 2% mandatory cv. pfd. (BB+) ....................... 933,840
-----------
6,637,840
-----------
Financial and Insurance -- 5.4%
27,800 Capital One Financial Corp. 6.25% Upper DECS (Baa3)(1)................. 1,515,100
72,000 The Chubb Corp. 7% equity units (A2)(1)................................ 2,065,500
40,000 Platinum Underwriters Holdings, Ltd. 7% equity security units (NR)(1).. 1,300,000
45,000 XL Capital, Ltd. 6.5% equity security units (A2) ...................... 1,153,125
-----------
6,033,725
-----------
Paper and Paper Products -- 1.0%
20,000 Temple-Inland, Inc. 7.50% Upper DECS (Baa3)(1)......................... 1,144,000
-----------
Pharmaceuticals -- 1.5%
31,500 Baxter International, Inc. 7% equity units (A3)(1)..................... 1,704,150
-----------
Retail -- 0.8%
18,580 Toys "R" Us, Inc. 6.25% equity securities units * (Ba2) ............... 889,610
-----------
Technology -- 2.2%
105,550 The Goldman Sachs Group, Inc. 7.50% mandatory exchangeable notes (Aa3)
(exch. for EMC Corp. common stock) .................................... 1,475,325
36,395 The Goldman Sachs Group, Inc. 5.625% mandatory exchangeable notes (Aa3)
(exch. for Intel Corp. common stock) .................................. 985,868
-----------
2,461,193
-----------
Telecommunications -- 0.9%
27,700 The Goldman Sachs Group, Inc. 7.30% mandatory exchangeable notes (Aa3)
(exch. for Verizon Communications, Inc. common stock) ................ 1,004,956
-----------
Utilities -- 1.0%
45,000 DTE Energy Co. 8.75% equity security units (BBB)(1).................... 1,163,250
-----------
TOTAL MANDATORY CONVERTIBLE SECURITIES Note 1(e) ...................... 25,355,830
-----------
COMMON STOCKS -- 2.2%
Pharmaceuticals -- 0.8%
18,300 Johnson & Johnson common stock ........................................ 928,176
-----------
Telecommunications -- 1.4%
40,000 SBC Communications, Inc. common stock ................................. 981,600
20,000 UTStarcom, Inc. common stock (3)....................................... 575,000
-----------
1,556,600
-----------
TOTAL COMMON STOCKS ................................................... 2,484,776
-----------
Page 9
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Portfolio of Investments March 31, 2004 (continued)
Principal Value
Amount (Note 1)
---------- ------------
SHORT-TERM SECURITIES -- 0.0%
$11,000 U.S. Treasury notes 3.375% 04/30/04 (Aaa)(4)........................... $ 11,024
------------
Total Investments -- 97.2% ............................................ 109,002,811
Other assets and liabilities, net -- 2.8% ............................. 3,193,846
------------
Total Net Assets -- 100.0% ............................................ $112,196,657
============
(1)Contingent payment debt instrument which accrues contingent interest
income. See Note 1(b).
(2)Security not registered under the Securities Act of 1933, as amended
(e.g., the security was purchased in a Rule 144A transaction or a Regulation
D transaction). The security may be resold only pursuant to an exemption
from registration under the 1933 Act, typically to qualified institutional
buyers. The Fund generally has no rights to demand registration of these
securities. The aggregate market value of these securities at
March 31, 2004 was $14,212,037, which represented 12.7% of the Fund's net
assets.
(3)Non-income producing security.
(4)Collateral for a letter of credit.
ACES Automatic Convertible Equity Securities. LYONs Liquid Yield Option Notes.
ADR American Depositary Receipts. PEPS Premium Equity Particpating Securities.
BONUSES Bifurcated Option Note Unit Securities. PIERS Preferred Income Equity Redeemable Securities.
DECS Debt Exchangeable for Common Stock. YEELDS Yield Enhanced Equity Linked Debt Securities.
HIGH TIDES Remarketable Term Income Deferrable ZYPS Zero Yield Puttable Securities.
Equity Securities.
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's,
a division of McGraw-Hill Companies. NR is used whenever a rating is
unavailable.
The cost of investments for federal income tax purposes is $100,913,487
resulting in gross unrealized appreciation and depreciation of $9,507,917 and
$1,418,593, respectively, or net unrealized depreciation of $8,089,324 on a tax
cost basis.
The Fund invests primarily in convertible securities. Some convertible
securities the Fund invests in may be "restricted securities." Typically,
securities are considered "restricted securities" when they are not registered
under the Securities Act of 1933, as amended (the "Securities Act") and may be
resold only pursuant to an exemption from registration under the Securities Act.
See accompanying notes to financial statements.
Notes to Financial Statements (unaudited)
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 closing reported bid and
asked prices as of the close of regular trading. Securities for which
quotations are not readily available, restricted securities and other assets are
valued at fair value as determined in good faith by management with the approval
of the Board of Directors. Short-term debt securities with initial maturities
of 60 days or less are valued at amortized cost.
Page 10
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
(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 2 cents per share for the six months ended March 31, 2004.
(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. At September 30, 2003, the net capital loss carryforward of the Fund
which may be used to offset possible future net realized gains was approximately
$7,719,727, and expires in 2009, 2010 and 2011.
(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, under normal circumstances, to invest at least 80% 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. At March 31, 2004, the market value of
those securities was $25,355,830, representing 22.6% of net assets.
2. Management Fee and Other Transactions with Affiliates
The management fee is paid to the investment adviser, Davis-Dinsmore Management
Company (the "Adviser"). The contract provides for payment of a monthly advisory
fee, computed at an annual rate of 3/4 of 1% of the first $100,000,000 and 1/2
of 1% of the excess over $100,000,000 of the Fund's net asset value in such
month.
The Adviser invests the Fund's assets, furnishes 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 $12,500 for the six months ended March
31, 2004. The officers of the Fund are also directors, officers or employees of
the Adviser, and are compensated by the Adviser.
3. Portfolio Activity
At March 31, 2004 there were 12,298,127 shares of $.01 par value common stock
outstanding (20,000,000 shares authorized). During the six months ended March
31, 2004, 81,307 shares were issued in connection with reinvestment of dividends
from net investment income, resulting in an increase in paid-in capital of
$648,018.
On November 19, 2003, the Fund completed a rights offering of Common Stock to
its stockholders at the rate of one common share for each 6 rights held by
stockholders of record on October 14, 2003. The rights offering was fully
subscribed, resulting in the issuance of 1,754,826 common shares at a price of
$7.53, and proceeds of $13,213,840 to the Fund prior to the deduction of
estimated expenses of $176,198. The net asset value per share of the Fund's
Common Stock was reduced by approximately $0.20 per share as a result of the
issuance.
Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated $58,014,301 and $45,778,318, respectively, for the six months ended
March 31, 2004.
A distribution of $0.07 per share from net investment income was declared on
April 19, 2004, payable May 27, 2004 to shareholders of record at the close of
business May 13, 2004.
Page 11
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
Miscellaneous Notes
Results of the 2004 Annual Shareholders Meeting
The results of the shareholder vote at the Annual Meeting of Shareholders held
on February 14, 2004, were:
1. All directors nominated by management were elected for terms expiring in
2007.
Shares voted for Shares withheld
---------------- ---------------
Gordon F. Ahalt 11,410,469 340,570
Elizabeth C. Bogan, Ph.D. 11,402,827 348,212
Nicolas W. Platt 11,420,426 330,613
2. The Audit Committee's appointment of PricewaterhouseCoopers LLP as
independent accountants was ratified with 11,402,144 shares voted for,
126,811 shares voted against and 222,084 shares abstaining.
3. The proposal to amend the Articles of Incorporation that would give
shareholders the right to tender their shares during the current fiscal
year did not pass, as 1,591,784 shares voted for, 3,733,521 shares voted
against, 331,834 shares abstained, and 6,093,900 shares were broker
non-votes.
--------------------------------------------------------------------------------
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 send email to us at
info@ellsworthfund.com.
--------------------------------------------------------------------------------
The Fund is a member of the Closed-End Fund Association (CEFA). The group's
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.
--------------------------------------------------------------------------------
The Fund received a Performance Achievement Certificate from Lipper, Inc. for
the 10 year period ended December 31, 2003. Lipper, Inc. awarded this
Certificate to the Fund after determining that the Fund outperformed the other
closed-end convertible funds followed by Lipper, Inc. during such ten year
period. Past performance does not guarantee future results.
[LIPPER LOGO] (C) 2004 REUTERS. All rights reserved. Any copying, republication
or redistribution of Lipper Content is expressly prohibited without the prior
written consent of Lipper.
Page 12
Board of Directors
GORDON F. AHALT Retired Petroleum Consultant
WILLIAM A. BENTON Retired Stock Exchange Specialist
ELIZABETH C. BOGAN, PH.D. Senior Lecturer in Economics at Princeton University
THOMAS H. DINSMORE, C.F.A. Chairman of the Board of the Fund
DONALD M. HALSTED, JR. Retired Business Executive
GEORGE R. LIEBERMAN Retired Advertising Executive
DUNCAN O. MCKEE Retired Attorney
JANE D. O'KEEFFE President of the Fund
NICOLAS W. PLATT Public Relations Executive
Officers
THOMAS H. DINSMORE Chief Executive Officer
JANE D. O'KEEFFE President
GARY I. LEVINE Executive Vice President, Chief Financial Officer and Secretary
H. TUCKER LAKE, JR. Vice President
GERMAINE M. ORTIZ Vice President
MERCEDES A. PIERRE Vice President and Assistant Treasurer
JOSHUA P. LAKE Treasurer and Assistant Secretary
JESSICA K. LAKE Assistant Vice President
JOANN VENEZIA Assistant Vice President
-----------------------------------------------------------------------------------------------
Internet
www.ellsworthfund.com
email: info@ellsworthfund.com
Investment Adviser
Davis-Dinsmore Management Company
65 Madison Avenue, Morristown, NJ 07960-7308
(973) 631-1177
Shareholder Services and Transfer Agent
American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
(800) 937-5449
www.amstock.com
Common Stock Listing
American Stock Exchange Symbol: ECF
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
65 MADISON AVENUE, SUITE 550
MORRISTOWN, NEW JERSEY 07960
www.ellsworthfund.com
[AMERICAN STOCK EXCHANGE LOGO]
[LOGO] Printed on recycled paper
ITEM 2. CODE OF ETHICS.
Not applicable to this semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this semi-annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this semi-annual report.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments in securities of unaffiliated issuers is included as
part of the report to shareholders, filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this semi-annual report.
ITEM 8. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
There were no purchases made by or on behalf of the registrant or any
"affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act
(17 CFR 240.10b-18(a)(3)), of shares or other units of any class of the
registrant's equity securities that is registered by the registrant pursuant to
Section 12 of the Exchange Act(15 U.S.C. 781).
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant adopted Shareholder Communication Procedures (the "Procedures")
effective April 19, 2004. The Procedures are intended to set forth the process
by which shareholders of the registrant may send communications to the Board.
If a shareholder sends a recommendation of a nominee to the Board 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 (the "1934 Act"), and communications made in
connection with such proposals are not subject to the Procedures. The
Registrant's Bylaws also contain provisions requiring a shareholder to provide
advance notice of his or her intention to nominate, at the Registrant'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. E mail communications may be sent to:
info@ellsworthfund.com. All shareholder communications received by the
Shareholder Relations Group shall be promptly forwarded to the individual
director of the registrant 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 registrant's Audit Committee, and
Nominating and Administration Committee, and to counsel for the registrant and
for the independent directors. Counsel for the registrant 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 registrant
and for the independent directors, working with the Chairs.
ITEM 10. CONTROLS AND PROCEDURES
Conclusions of principal officers concerning controls and procedures
(a) As of May 14, 2004, an evaluation was performed under the supervision and
with the participation of the officers of Ellsworth Convertible Growth and
Income Fund, Inc. (the "Registrant"), including the Principal Executive Officer
("PEO") and Principal Financial Officer ("PFO"), to assess the effectiveness of
the Registrant's disclosure controls and procedures, as that term is defined in
Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act"), as amended.
Based on that evaluation, the Registrant's officers, including the PEO and PFO,
concluded that, as of May 14, 2004, the Registrant's disclosure controls and
procedures were reasonably designed so as to ensure: (1) that information
required to be disclosed by the Registrant on Form N-CSR is recorded, processed,
summarized and reported within the time periods specified by the rules and forms
of the Securities and Exchange Commission; and (2) that material information
relating to the Registrant is made known to the PEO and PFO as appropriate to
allow timely decisions regarding required disclosure.
(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 11. EXHIBITS
(a)(1) The code of ethics disclosure required by Item 2 is not applicable to
this semi-annual report.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 are attached hereto as Exhibit 99.906CERT.
(a)(3) There were no written solicitations to purchase securities under Rule
23c-1 under the Investment Company Act of 1940 during the period covered by the
report.
(b) Certifications of the principal executive officer and the principal
financial officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
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 and
Chief Executive Officer
(Principal Executive Officer)
Date: May 27, 2004
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 and
Chief Executive Officer
(Principal Executive Officer)
Date: May 27, 2004
By: /s/Gary I. Levine
Gary I. Levine
Chief Financial Officer
(Principal Financial Officer)
Date: May 27, 2004