UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-04656
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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
Date of reporting period: September 30, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
ELLSWORTH CONVERTIBLE
GROWTH AND INCOME FUND
[LOGO]
2005 ANNUAL REPORT
SEPTEMBER 30, 2005
2005 ANNUAL REPORT
SEPTEMBER 30, 2005
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC. OPERATES AS A CLOSED-END,
DIVERSIFIED MANAGEMENT INVESTMENT COMPANY AND INVESTS PRIMARILY IN CONVERTIBLE
SECURITIES, WITH THE OBJECTIVES OF PROVIDING INCOME AND THE POTENTIAL FOR
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, 2005 - WITH DIVIDENDS REINVESTED
Calendar Cumulative
YTD 1 Year 5 Years 10 Years
-------- -------- --------- ----------
Ellsworth market price (a) ..................... (0.28)% 2.45% 14.00% 155.38%
Ellsworth net asset value (b) .................. 4.89 10.31 8.73 128.59
Closed-end convertible fund average (b) ........ 3.93 11.20 16.47 108.20
S&P 500 Index (a) .............................. 2.77 12.25 (7.22) 147.47
Russell 2000 Index (a) ......................... 3.44 18.08 37.15 146.91
Lehman Aggregate Bond Total Return Index (b) ... 1.82 2.80 37.80 88.52
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,
2005.
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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. 04 $9.07 $8.60 $9.07 $8.08 $7.80 $8.08
Mar. 05 9.02 8.70 8.77 8.11 7.47 7.63
Jun. 05 8.80 8.35 8.79 7.74 7.25 7.74
Sep. 05 9.29 8.82 9.29 7.90 7.57 7.84
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DIVIDEND DISTRIBUTIONS (12 MONTHS)
Record Payment Capital * Corporate
Date Date Income Gains Deduction
-------- ---------- ---------- --------- -----------
10/28/04 11/24/04 $0.085 -- 13%
2/11/05 2/25/05 0.070 -- 22
5/13/05 5/27/05 0.070 -- 22
8/16/05 8/30/05 0.070 -- 22
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$0.295
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* Percentage of each ordinary income distribution qualifying for the corporate
dividend received tax deduction.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
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TO OUR SHAREHOLDERS
November 4, 2005
As we approach the end of this most eventful year we find our investment
strategy to be heavily influenced by the question "Is inflation back?" The
Consumer Price Index (CPI) that had been running at a year over year rate of
under 2% in 2003 is now over 4.5% (3Q 2005). Any significant inflation can be a
very disruptive phenomenon.
In the 1970's inflation became embedded in our economy. This came about due to
stimulative fiscal policy (government spending), loose monetary policy,
imposition of substantial regulation and tax policy that included penalties on
savings and investment, and higher tax brackets for those who were simply
keeping up with price increases (bracket creep). There were also several supply
shocks in energy and mining. In that environment investing in manufacturing did
not work while investing in hard assets such as metals and oil did.
Our current economy shows some similarities to that of the 1970's: fiscal policy
has been stimulative, monetary policy was also stimulative for several years,
supply shocks created by national disasters have occurred, a form of bracket
creep has returned through a device known as the alternative minimum tax (which
includes no adjustment for inflation) and Federal regulations have expanded.
There are also differences: technology has increased productivity, Federal tax
rates of 50% to 70% in the 1970's are now 15% to 35% on savings and investment,
and globalization has expanded competition which limits price increases by
companies.
It is our opinion that a limited form of inflation is returning, which should
benefit the owners of hard assets. However, the lower tax rates, productivity
gains, tighter monetary policy and the effects of globalization should keep it
from becoming embedded.
Of the Fund's major industry exposure, energy continued to contribute positively
to performance in its fourth quarter, while exposure to the telecommunications
industry has hindered performance. The rise in energy prices has been a direct
cause of the strong performance by energy stocks, but has also reduced
expectations for growth in other sectors of the economy.
Since the founding of Ellsworth Convertible Growth and Income Fund in 1986, the
Fund's strategy has consistently 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. For the quarter, nine-month and ten-year
periods ended September 30, 2005, Ellsworth's NAV has outperformed the average
of the closed-end convertible fund category tracked by Lipper, Inc. and
published in the Lipper Closed-End Performance Analysis. However, for the one
year and five years ended September 30, 2005, the Fund underperformed the
average of the eleven funds in its category. Of these eleven funds, only four,
including the Fund, remain unleveraged convertible funds and only five,
including the Fund, have more than 65% of their assets in convertible
securities. We believe these factors contributed to the difference in
performance between Ellsworth and many of the other funds in the group.
Independent director William A. Benton is retiring from service at the end of
his term in 2006. He was one of Ellsworth's directors in our founding year of
1986. His contributions to the Fund have been many. He will be missed.
CONTINUED ON THE FOLLOWING PAGE
PAGE 1
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
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TO OUR SHAREHOLDERS (CONTINUED)
Visit our website, www.ellsworthfund.com, for additional information on the
Fund. Further, shareholders who wish to obtain a copy of the most recent report
on the Fund issued by Standard & Poor's should contact us.
At its October 17, 2005 meeting, the Board of Directors declared a dividend of
9.75 cents ($0.0975) per share. The dividend consists of undistributed net
investment income and will be payable on November 23, 2005 to shareholders of
record on October 27, 2005.
The 2006 annual meeting of shareholders will be held at our offices in
Morristown, New Jersey on January 13, 2006. Time and location will be included
in the proxy statement, scheduled to be mailed to shareholders on November 28,
2005. All shareholders are welcome to attend, we hope to see you there.
/s/ Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board
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MAJOR PORTFOLIO CHANGES - BY UNDERLYING COMMON STOCK
SIX MONTHS ENDED SEPTEMBER 30, 2005
ADDITIONS REDUCTIONS
Best Buy Co., Inc. Agilent Technologies, Inc.
Celanese Corp. The Chubb Corp.
Cephalon, Inc. Devon Energy Corp.
Echostar Communications Corp. Global Marine Corp.
FTI Consulting, Inc. Impax Laboratories, Inc.
Genworth Financial, Inc. IKON Office Solutions, Inc.
(exchangeable from Citigroup Funding, Inc.) (exchangeable from IOS Capital, LLC)
LSI Logic Corp. Ivax Corp.
Manor Care, Inc. Leucadia National Corp.
MetLife, Inc. Ocwen Financial Corp.
Nuveen Investments, Inc. Omnicare, Inc.
(exchangeable from Merrill Lynch & Co., Inc. and
Morgan Stanley, Inc.) Pegasus Solutions, Inc.
Oil States International, Inc. Valero Energy Corp.
U.S. Bancorp Weatherford International, Ltd.
PAGE 2
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
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LARGEST INVESTMENT HOLDINGS - BY UNDERLYING COMMON STOCK
Value % Total
(Note 1) Net Assets
----------- ----------
Chesapeake Energy Corp. .............................. $ 4,640,875 4.0%
PRODUCES OIL AND NATURAL GAS. THE COMPANY'S
OPERATIONS ARE FOCUSED ON DEVELOPMENTAL DRILLING
AND PRODUCING PROPERTY ACQUISITIONS IN ONSHORE
NATURAL GAS PRODUCING AREAS OF THE UNITED STATES
AND CANADA.
The Walt Disney Company .............................. 3,301,090 2.9
AN ENTERTAINMENT COMPANY WHICH CONDUCTS OPERATIONS
IN MEDIA NETWORKS, STUDIO ENTERTAINMENT, THEME
PARKS AND RESORTS, CONSUMER PRODUCTS, AND INTERNET
AND DIRECT MARKETING.
Nuveen Investments, Inc. ............................. 2,717,295 2.4
THE COMPANY'S PRINCIPAL ACTIVITIES ARE ASSET
MANAGEMENT AND RELATED RESEARCH, AND THE
DEVELOPMENT, MARKETING AND DISTRIBUTION OF
INVESTMENT PRODUCTS AND SERVICES. NUVEEN PROVIDES
ITS SERVICES THROUGH FINANCIAL ADVISORS WHO SERVE
THE AFFLUENT AND HIGH NET WORTH MARKET SEGMENTS.
(EXCH. FROM MERRILL LYNCH & Co., Inc. and Morgan
Stanley, Inc.)
The St. Paul Travelers Companies, Inc. ............... 2,406,000 2.1
PROVIDES A BROAD RANGE OF INSURANCE PRODUCTS AND
SERVICES FOR THE COMMERCIAL AND CONSUMER MARKETS.
Genworth Financial, Inc. ............................. 2,360,475 2.1
PROVIDES LIFE INSURANCE PRODUCTS, LONG-TERM CARE
INSURANCE AND MORTGAGE GUARANTEE INSURANCE COVERAGE
ON RESIDENTIAL MORTGAGE LOANS. (EXCH. FROM CITIGROUP
FUNDING, INC.)
The Williams Companies, Inc. ......................... 2,340,000 2.0
THE COMPANY EXPLORES, PRODUCES, GATHERS, PROCESSES
AND TRANSPORTS NATURAL GAS. WILLIAMS ALSO MANAGES
A WHOLESALE POWER BUSINESS.
Amerada Hess Corp. ................................... 2,332,600 2.0
TOGETHER WITH ITS SUBSIDIARIES EXPLORES FOR,
PRODUCES, PURCHASES, TRANSPORTS AND SELLS CRUDE
OIL AND NATURAL GAS. THE COMPANY ALSO MANUFACTURES,
PURCHASES, TRANSPORTS AND MARKETS REFINED PETROLEUM
PRODUCTS.
The TJX Companies, Inc. .............................. 2,309,160 2.0
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.
MetLife, Inc. ........................................ 2,263,200 2.0
PROVIDES INSURANCE AND FINANCIAL SERVICES TO A
RANGE OF INDIVIDUAL AND INSTITUTIONAL CUSTOMERS.
Freeport McMoRan Copper and Gold, Inc. ............... 2,218,420 1.9
IS INVOLVED IN MINERAL EXPLORATION AND DEVELOPMENT, ----------- ----------
MINING, AND MILLING OF COPPER, GOLD AND SILVER. THE
COMPANY IS ALSO INVOLVED IN SMELTING AND REFINING
COPPER CONCENTRATES.
Total ................................................ $26,889,115 23.4%
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PAGE 3
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
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MAJOR INDUSTRY EXPOSURE
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Banking/Savings & Loan 7.2%
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Chemicals 3.4%
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Energy 13.7%
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Entertainment 4.2%
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Financial & Insurance 15.3%
---------------------------------------------------
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Health Care 5.7%
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Pharmaceuticals 11.6%
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Retail 6.4%
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---------------------------------
Technology 8.4%
---------------------------------
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Telecommunications 6.3%
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DIVERSIFICATION OF ASSETS
% Total Net Assets
September 30,
Value -------------------
Cost (Note 1) 2005 2004
------------ ------------ -------- --------
Automotive ..................... $ 2,845,190 $ 2,644,188 2.3% 4.7%
Banking/Savings and Loan ....... 8,646,599 8,279,613 7.2 11.0
Chemicals ...................... 3,943,044 3,890,520 3.4 --
Consumer Goods ................. 2,463,795 3,207,263 2.8 3.6
Energy ......................... 10,369,642 15,757,845 13.7 10.4
Entertainment .................. 4,902,842 4,791,715 4.2 4.2
Financial and Insurance ........ 17,165,326 17,577,120 15.3 11.1
Foods .......................... 2,071,514 2,060,800 1.8 1.0
Health Care .................... 6,885,292 6,548,522 5.7 4.7
Mining ......................... 1,961,987 2,218,420 1.9 1.4
Multi-Industry ................. 1,593,172 1,438,500 1.3 --
Pharmaceuticals ................ 12,562,777 13,286,207 11.6 11.1
Retail ......................... 7,742,664 7,303,858 6.4 7.9
Technology ..................... 9,642,922 9,695,225 8.4 7.3
Telecommunications ............. 6,497,489 7,196,055 6.3 6.7
Utilities ...................... 1,500,000 1,927,500 1.7 1.1
Other .......................... 2,022,193 2,041,250 1.6 8.7
Short-Term Securities .......... 4,308,677 4,308,683 3.8 3.8
------------ ------------ -------- --------
TOTAL INVESTMENTS ............ 107,125,125 114,173,284 99.4 98.7
Other Assets, Net of
Liabilities .................. -- 650,585 0.6 1.3
------------ ------------ -------- --------
TOTAL NET ASSETS ........... $107,125,125 $114,823,869 100.0% 100.0%
============ ============ ======== ========
PAGE 4
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
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STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2005
------------------
ASSETS:
Investments at value (cost $107,125,125) (Note 1) ........................... $114,173,284
Cash ........................................................................ 156,561
Receivable for securities sold .............................................. 2,090,725
Dividends and interest receivable ........................................... 494,204
Other assets ................................................................ 32,676
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Total assets ................................................................ 116,947,450
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LIABILITIES:
Payable for securities purchased ............................................ 1,996,882
Accrued management fee (Note 2) ............................................. 68,330
Accrued expenses ............................................................ 19,935
Other liabilities ........................................................... 38,434
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Total liabilities ........................................................... 2,123,581
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NET ASSETS ..................................................................... $114,823,869
============
NET ASSETS CONSIST OF:
Undistributed net investment income ......................................... $ 747,780
Accumulated net realized loss from investment transactions .................. (2,705,037)
Unrealized appreciation on investments ...................................... 7,048,159
Capital shares (Note 3) ..................................................... 123,623
Additional paid-in capital .................................................. 109,609,344
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NET ASSETS ..................................................................... $114,823,869
============
Net asset value per share ($114,823,869 / 12,362,269 outstanding shares) ....... $ 9.29
============
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STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2005
INVESTMENT INCOME (NOTE 1):
Interest .................................................................... $ 2,709,465
Dividends ................................................................... 2,287,195
------------
Total Income .............................................................. 4,996,660
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EXPENSES (NOTE 2):
Management fee .............................................................. 785,902
Custodian ................................................................... 23,300
Transfer agent .............................................................. 22,563
Professional fees ........................................................... 154,442
Directors' fees ............................................................. 127,175
Reports to shareholders ..................................................... 51,762
Treasurer's office .......................................................... 25,000
Other ....................................................................... 96,782
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Total Expenses ............................................................ 1,286,926
------------
NET INVESTMENT INCOME .......................................................... 3,709,734
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions .............................. 1,922,040
Net unrealized appreciation of investments .................................. 5,219,341
------------
Net gain on investments ..................................................... 7,141,381
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................ $ 10,851,115
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 5
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
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STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 2005 AND 2004
2005 2004
------------ ------------
Change in net assets from operations:
Net investment income ........................................... $ 3,709,734 $ 3,647,400(a)
Adjustment for change in amortization policy .................. -- (248,111)
------------
Net investment income, as adjusted .......................... 3,399,289
------------
Net realized gain from investment transactions .................... 1,922,040 3,243,708(a)
Adjustment for change in amortization policy .................... -- 66,057
------------
Net realized gain from investment transactions, as adjusted ... 3,309,765
------------
Net unrealized appreciation of investments ........................ 5,219,341 411,096(a)
Adjustment for change in amortization policy .................... -- 182,054
------------
Net unrealized appreciation of investments, as adjusted ....... 593,150
------------ ------------
Net increase in net assets resulting from operations .............. 10,851,115 7,302,204(a)
Adjustment for change in amortization policy .................... -- --
------------ ------------
Net increase in net assets resulting from operations, as
adjusted..................................................... 10,851,115 7,302,204
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DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ........................................... (3,641,418) (3,681,116)
------------ ------------
Capital share transactions (Note 3)
Value of shares issued on reinvestment of distributions ......... 506,725 648,017
Net proceeds from rights offering ............................... -- 13,037,152
------------ ------------
Total capital share transactions .............................. 506,725 13,685,169
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CHANGE IN NET ASSETS .............................................. 7,716,422 17,306,257
Net assets at beginning of year ................................... 107,107,447 89,801,190
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NET ASSETS AT END OF YEAR ......................................... $114,823,869 $107,107,447
============ ============
Undistributed net investment income at end of year .............. $ 747,780 $ 967,661(a)
============
Adjustment for change in amortization policy .................. (288,197)
------------
Undistributed net investment income at end of year,
as adjusted ............................................... $ 679,464
============
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(a) As previously reported.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 6
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
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FINANCIAL HIGHLIGHTS - SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING:
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
2005 2004 2003 2002 2001
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OPERATING PERFORMANCE:
Net asset value, beginning of year ............. $8.71 $8.58 $7.81 $8.67 $11.82
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Net investment income .......................... 0.29 0.30(a) 0.32(a) 0.34(a) 0.47
Adjustment for change in
amortization policy .......................... -- (0.02) (0.01) -- --
------------------------------------------------
Net investment income, as adjusted ......... 0.29 0.28 0.31 0.34 0.47
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Net realized and unrealized gain (loss) ........ 0.59 0.35(a) 0.75(a) (0.76)(a) (1.88)
Adjustment for change in
amortization policy .......................... -- 0.02 0.01 -- --
------------------------------------------------
Net realized and unrealized
gain (loss), as adjusted ................... 0.59 0.37 0.76 (0.76) (1.88)
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Total from investment operations ............... 0.88 0.65 1.07 (0.42) (1.41)
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LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.30) (0.32) (0.30) (0.44) (0.42)
Distributions from realized gains .............. -- -- -- -- (1.32)
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Total distributions .......................... (0.30) (0.32) (0.30) (0.44) (1.74)
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CAPITAL SHARE TRANSACTIONS:
Effect of rights offering ...................... -- (0.20) -- -- --
Capital share repurchases ...................... -- -- -- -- --
------------------------------------------------
Total capital share transactions ............. -- (0.20) -- -- --
------------------------------------------------
Net asset value, end of year ................... $9.29 $8.71 $8.58 $7.81 $8.67
================================================
Market value, end of year ...................... $7.84 $7.95 $8.05 $7.55 $8.35
Total Net Asset Value Return (%)(b) ............ 10.3 5.2 14.0 (5.2) (13.3)
Total Investment Return (%)(c) ................. 2.5 2.8 10.8 (4.5) 2.2
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ......... $114,824 $107,107 $89,801 $81,125 $88,901
Ratio of expenses to average net assets (%) .... 1.2 1.2 1.2 1.2 1.2
Ratio of net investment income to
average net assets (%) ....................... 3.4 3.2(d) 3.8(d) 4.0(d) 5.0
Portfolio turnover rate (%) .................... 82 70 86 89 82
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(a) As previously reported.
(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) Ratios for 2004, 2003 and 2002 reflect ratios adjusted for change in
amortization policy. Ratios previously reported for 2004, 2003 and 2002 were
3.4%, 3.9% and 3.9%, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 7
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
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PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2005
Principal Identified Value
Amount Cost (Note 1)
--------- ---------- ----------
CONVERTIBLE BONDS AND NOTES -- 50.8%
AEROSPACE AND DEFENSE -- 0.9%
$1,000,000 L-3 Communications Holdings, Inc. 3% 2035 CODES (Ba3)
(Acquired 07/27/05 - 07/28/05) (1,2) ........................... $1,011,255 $1,026,250
---------- ----------
AUTOMOTIVE -- 2.3%
625,000 CSK Auto Inc. 3.375% 2025 sr. exch. notes (NR)
(conv. into CSK Auto Corp. common stock)
(Acquired 07/26/05) (2) ........................................ 637,095 593,875
4,500,000 Lear Corp. 0% 2022 cv. sr. notes (Ba2) ......................... 2,208,095 2,050,313
---------- ----------
2,845,190 2,644,188
---------- ----------
BANKING/SAVINGS AND LOAN -- 2.0%
1,000,000 The Bear Stearns Companies, Inc. 0.25% 2010 medium-term notes
(A1)(exch. for Fifth Third Bancorp common stock) (1) ........... 1,152,524 836,800
1,500,000 U.S. Bancorp floating rate 2035 cv. sr. deb. (Aa2)
(Acquired 08/10/05) (2) ........................................ 1,483,503 1,479,000
---------- ----------
2,636,027 2,315,800
---------- ----------
CONSUMER GOODS -- 1.6%
1,375,000 Church & Dwight Co., Inc. 5.25% 2033 cv. sr. deb. (Ba2) ........ 1,375,000 1,840,163
---------- ----------
ENERGY -- 2.4%
750,000 OMI Corp. 2.875% 2024 cv. sr. notes (B+) ....................... 750,000 691,875
1,500,000 Oil States International, Inc. 2.375% 2025 contingent cv. sr.
notes (B+)
(Acquired 06/16/05) (2) ........................................ 1,485,546 2,011,875
---------- ----------
2,235,546 2,703,750
---------- ----------
ENTERTAINMENT -- 4.2%
1,500,000 EchoStar Communications Corp. 5.75% 2008 cv. sub. notes (B2) ... 1,496,303 1,490,625
3,250,000 The Walt Disney Company 2.125% 2023 cv. sr. notes (Baa1) ....... 3,406,539 3,301,090
---------- ----------
4,902,842 4,791,715
---------- ----------
FINANCIAL AND INSURANCE -- 1.7%
1,000,000 FTI Consulting, Inc. 3.75% 2012 cv. sr. sub. notes (Ba3)
(Acquired 07/29/05) (2) ........................................ 1,027,541 1,066,200
1,000,000 Swiss Re America Holding Corp. 3.25% 2021 euro. sub. cv. bonds
(A1)(conv. into Swiss Reinsurance Company common stock)
(Acquired 11/15/01 - 12/05/01) (2) ............................. 1,006,361 925,950
---------- ----------
2,033,902 1,992,150
---------- ----------
FINANCIAL SERVICES -- 0.9%
1,000,000 Euronet Worldwide, Inc. 3.50% 2025 cv. deb. (NR)
(Acquired 09/28/05 - 09/29/05) (1,2) ........................... 1,010,938 1,015,000
---------- ----------
HEALTH CARE -- 4.9%
1,500,000 Community Health Systems, Inc. 4.25% 2008 cv. sub. notes (B3) .. 1,505,570 1,747,350
1,750,000 Isolagen, Inc. 3.5% 2024 cv. sub. notes (NR) ................... 1,768,669 875,000
2,000,000 Manor Care, Inc. 2.125% 2035 cv. sr. notes (Baa3)
(Acquired 07/27/05 - 09/20/05) (2) ............................. 2,044,185 2,050,000
500,000 Mentor Corp. 2.75% 2024 cv. sub. notes (NR) .................... 573,118 952,813
---------- ----------
5,891,542 5,625,163
---------- ----------
MULTI-INDUSTRY -- 0.8%
1,000,000 Lehman Brothers Holdings, Inc. 1% 2011 medium-term notes (A1)
(performance linked to Cendant Corp. common stock) (1) ......... 1,031,672 922,500
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PAGE 8
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
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PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2005 (CONTINUED)
Principal Identified Value
Amount Cost (Note 1)
---------- ----------- -----------
CONVERTIBLE BONDS AND NOTES -- (CONTINUED)
PHARMACEUTICALS -- 7.2%
$2,000,000 Amgen, Inc. 0% 2032 LYONs (A2) (1) ............................ $ 1,699,432 $1,599,170
550,000 CV Therapeutics, Inc. 3.25% 2013 sr. sub. cv. notes (NR) ...... 576,509 653,125
1,500,000 Cephalon, Inc. 2% 2015 cv. sr. sub. notes (B-) ................. 1,482,624 1,692,188
1,250,000 Encysive Pharmaceuticals, Inc. 2.5% 2012 cv. sr. notes (NR) .... 1,267,117 1,326,560
1,000,000 Ivax Corp. 4.5% 2008 cv. sr. sub. notes (NR) ................... 1,000,660 1,005,000
1,000,000 Teva Pharmaceutical Finance II, LLC series A 0.5% 2024 cv.
sr. deb.(BBB)(exch. for Teva Pharmaceutical Industries Ltd. ADR) 1,000,000 1,000,000
1,000,000 Teva Pharmaceutical Finance II, LLC series B 0.25% 2024 cv.
sr. deb.(BBB)(exch. for Teva Pharmaceutical Industries Ltd. ADR) 1,000,000 1,032,500
----------- -----------
8,026,342 8,308,543
----------- -----------
RETAIL -- 6.4%
1,000,000 Amazon.com, Inc. 4.75% 2009 cv. sub. notes (B3) ................ 977,500 982,800
2,000,000 Best Buy Co., Inc. 2.25% 2022 cv. sub. deb. (Ba1) (1) .......... 2,278,507 2,195,960
1,250,000 Casual Male Retail Group, Inc. 5% 2024 cv. sr. sub. notes (NR) . 1,292,855 1,135,938
1,000,000 Dick's Sporting Goods, Inc. 1.6061% 2024 sr. cv. notes (B) ..... 668,889 680,000
3,000,000 The TJX Companies, Inc. 0% 2021 LYONs (Baa1) ................... 2,524,913 2,309,160
----------- -----------
7,742,664 7,303,858
----------- -----------
TECHNOLOGY -- 8.4%
1,250,000 Advanced Micro Devices, Inc. 4.75% 2022 cv. sr. deb. (B3) (1) .. 1,447,925 1,421,875
2,000,000 Citigroup Funding, Inc. 1% 2010 medium-term notes (Aa1)
(exch. into cash equivalent of a basket of technology stocks)(1) 2,019,330 1,877,800
2,250,000 International Rectifier Corp. 4.25% 2007 cv. sub. notes (B2) ... 2,242,713 2,216,250
1,500,000 LSI Logic Corp. 4% 2010 cv. sub. notes (B) ..................... 1,483,048 1,588,050
1,500,000 Sybase, Inc. 1.75% 2025 cv. sub. notes (NR) .................... 1,492,164 1,631,250
1,000,000 Vishay Intertechnology, Inc. 3.625% 2023 cv. sub. notes (B3) ... 957,742 960,000
----------- -----------
9,642,922 9,695,225
----------- -----------
TELECOMMUNICATIONS -- 5.4%
1,000,000 Comverse Technology, Inc. 0% 2023 ZYPS (BB-) (3) ............... 1,149,375 1,496,750
1,000,000 Lucent Technologies, Inc. 2.75% 2023 series A cv. sr. deb. (B1). 1,000,000 1,145,240
500,000 Lucent Technologies, Inc. 2.75% 2025 series B cv. sr. deb. (B1). 500,000 599,390
1,250,000 Nortel Networks Corp. 4.25% 2008 cv. sr. notes (B3) ............ 1,274,444 1,182,750
1,500,000 Tekelec, Inc. 2.25% 2008 sr. sub. cv. notes (NR) ............... 1,510,670 1,813,125
----------- -----------
5,434,489 6,237,255
----------- -----------
UTILITIES -- 1.7%
1,500,000 CMS Energy Corp. 2.875% 2024 cv. sr. notes (B1) ................ 1,500,000 1,927,500
----------- -----------
TOTAL CONVERTIBLE BONDS AND NOTES ..............................$57,320,331 $58,349,060
----------- -----------
Shares CONVERTIBLE PREFERRED STOCKS -- 23.6%
----------
BANKING/SAVINGS AND LOAN -- 5.2%
40,000 National Australia Bank Ltd. 7.875% exch. capital units (NR) ... 1,038,700 1,640,000
20,000 New York Community Bancorp, Inc. 6% BONUSES units (Baa2) ....... 1,306,838 966,000
35,000 Sovereign Capital Trust IV 4.375% PIERS (Ba1)
(exch. for Sovereign Bancorp, Inc. common stock) (1) ........... 1,891,909 1,544,375
35,000 Washington Mutual Capital Trust 5.375% PIERS units (Baa1)
(exch. for Washington Mutual, Inc. common stock) ............... 1,773,125 1,813,438
----------- -----------
6,010,572 5,963,813
----------- -----------
CHEMICALS -- 1.8%
80,000 Celanese Corp. 4.25% cv. perp. pfd. (NR) ....................... 1,931,748 2,112,400
----------- -----------
PAGE 9
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
----------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2005 (CONTINUED)
Identified Value
Shares Cost (Note 1)
---------- ----------- -----------
CONVERTIBLE PREFERRED STOCKS -- CONTINUED
ENERGY -- 7.9%
16,500 Chesapeake Energy Corp. 5% cum. cv. pfd. (B) .................. $ 1,832,500 $ 2,739,000
17,000 Chesapeake Energy Corp. 4.5% cum. cv. pfd. (B) ................ 1,794,250 1,901,875
10,000 Semco Energy, Inc. 5% series B cv. cum. pfd. (B-) ............. 2,025,096 2,061,250
20,000 The Williams Companies, Inc. 5.5% 2033 jr. sub. cv. deb. (B-) . 1,015,000 2,340,000
----------- -----------
6,666,846 9,042,125
----------- -----------
FINANCIAL AND INSURANCE -- 6.8%
75,000 Citigroup Funding, Inc. variable rate 2008 exch. notes (Aa1)
(exch. for Genworth Financial, Inc. common stock) ............. 2,212,500 2,360,475
20 Fannie Mae 5.375% non-cumulative cv. pfd. (Aa3)
(Acquired 12/29/04 - 01/11/05) (2) ............................ 2,078,125 1,840,000
20,000 Reinsurance Group of America, Inc. 5.75% PIERS (Baa2) ......... 1,000,000 1,170,000
100,000 The St. Paul Travelers Cos., Inc. 4.5% 2032
cv. jr. sub. notes (Baa1) ..................................... 2,414,175 2,406,000
----------- -----------
7,704,800 7,776,475
----------- -----------
MINING -- 1.9%
2,000 Freeport-McMoRan Copper and Gold, Inc. 5.5% cv. perp. pfd.(B-). 1,961,987 2,218,420
----------- -----------
TOTAL CONVERTIBLE PREFERRED STOCKS ............................ $24,275,953 $27,113,233
----------- -----------
MANDATORY CONVERTIBLE SECURITIES -- 17.7% (4)
CHEMICALS -- 1.5%
40,000 Huntsman Corp. 5% mand. cv. pfd. 02/16/08 (NR) ................ 2,011,296 1,778,120
----------- -----------
CONSUMER GOODS -- 1.2%
35,000 Constellation Brands, Inc. dep. shs. representing 5.75%
series A mand. cv. pfd. 09/01/06 (B) .......................... 1,088,795 1,367,100
----------- -----------
ENERGY -- 3.5%
20,000 Amerada Hess Corp. 7% mand. cv. pfd. ACES 12/01/06 (Ba3) ...... 1,015,000 2,332,600
15,000 Valero Energy Corp. 2% mand. cv. pfd. 07/01/06 (BB) ........... 452,250 1,679,370
----------- -----------
1,467,250 4,011,970
----------- -----------
FINANCIAL AND INSURANCE -- 6.8%
25,000 The Chubb Corp. 7% equity units 08/16/06 (A2) (1) ............. 742,084 816,250
30,000 Merrill Lynch & Co., Inc. 6.75% mand. exch. sec. 10/15/07 (Aa3)
(exch. for Nuveen Investments, Inc. common stock) ............. 1,020,000 1,124,820
80,000 MetLife, Inc. 6.375% common equity units 08/15/08 (BBB+) ...... 2,084,000 2,263,200
42,500 Morgan Stanley, Inc. 5.875% mand. exch. sec. 10/15/08 (Aa3)
(exch. for Nuveen Investments, Inc. common stock) ............. 1,445,000 1,592,475
40,000 The PMI Group, Inc. 5.875% HITS units 11/15/06 (A1) (1) ....... 998,540 988,000
45,000 XL Capital, Ltd. 6.5% equity security units 05/15/07 (A2) ..... 1,137,000 1,023,750
----------- -----------
7,426,624 7,808,495
----------- -----------
FOODS -- 1.8%
40,000 Albertson's, Inc. 7.25% HITS units 05/16/07 (Baa3) (1) ........ 1,013,514 1,012,800
40,000 Lehman Brothers Holdings, Inc. 6.25% PIES 10/15/07 (A1)
(exch. for General Mills, Inc. common stock) .................. 1,058,000 1,048,000
----------- -----------
2,071,514 2,060,800
----------- -----------
PHARMACEUTICALS -- 2.9%
20,000 Baxter International, Inc. 7% equity units 02/16/06
(Baa1) (1) .................................................... 973,450 1,144,200
40,000 Schering-Plough Corp. 6% mand. cv. pfd. 09/14/07 (Baa3) ....... 2,050,150 2,169,200
----------- -----------
3,023,600 3,313,400
----------- -----------
TOTAL MANDATORY CONVERTIBLE SECURITIES (4) .................... $17,089,079 $20,339,885
----------- -----------
PAGE 10
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
----------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2005 (CONTINUED)
Principal
Amount Identified Value
or Shares Cost (Note 1)
---------- ------------ ------------
COMMON STOCKS -- 3.5%
HEALTH CARE -- 0.8%
21,115 shs LifePoint Hospitals, Inc. (3) ......................... $ 993,750 $ 923,359
------------ ------------
MULTI-INDUSTRY -- 0.5%
25,000 shs Cendant Corp. .......................................... 561,500 516,000
------------ ------------
PHARMACEUTICALS -- 1.4%
26,300 shs Johnson & Johnson ...................................... 1,512,835 1,664,264
------------ ------------
TELECOMMUNICATIONS -- 0.8%
40,000 shs SBC Communications, Inc. ............................... 1,063,000 958,800
------------ ------------
TOTAL COMMON STOCKS .................................... $ 4,131,085 $ 4,062,423
------------ ------------
SHORT-TERM SECURITIES -- 3.8%
COMMERCIAL PAPER -- 3.8%
$4,300,000 American Express Credit Corp. (P1)
(3.70% maturing 10/04/05) .............................. 4,297,790 4,297,790
------------ ------------
U.S. GOVERNMENT OBLIGATIONS -- 0.0%
11,000 U.S. Treasury notes 2.25% 04/30/06 (Aaa) (5) ........... 10,887 10,893
------------ ------------
TOTAL SHORT-TERM SECURITIES ............................ $ 4,308,677 $ 4,308,683
------------ ------------
TOTAL CONVERTIBLE BONDS AND NOTES -- 50.8% ............. 57,320,331 58,349,060
TOTAL CONVERTIBLE PREFERRED STOCKS -- 23.6% ............ 24,275,953 27,113,233
TOTAL MANDATORY CONVERTIBLE SECURITIES -- 17.7% ........ 17,089,079 20,339,885
TOTAL COMMON STOCKS -- 3.5% ............................ 4,131,085 4,062,423
TOTAL SHORT-TERM SECURITIES -- 3.8% .................... 4,308,677 4,308,683
------------ ------------
TOTAL INVESTMENTS -- 99.4% ..............................$107,125,125 114,173,284
============
OTHER ASSETS AND LIABILITIES, NET -- 0.6% .............. 650,585
------------
TOTAL NET ASSETS -- 100.0% ............................. $114,823,869
============
(1) Contingent payment debt instrument which accrues contingent interest. 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). 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 September 30, 2005 was $12,008,150 which
represented 10.5% of the Fund's net assets.
(3) Non-income producing security.
(4) These securities are required to be converted on the dates listed; they
generally may be converted prior to these dates at the option of the holder.
(5) Collateral for a letter of credit.
ACES Automatic Convertible Equity Securities. LYONs Liquid Yield Option Notes.
ADR American Depositary Receipts. PIES Premium Income Exchangeable Securities.
BONUSES Bifurcated Option Note Unit Securities. PIERS Preferred Income Equity Redeemable Securities.
CODES Convertible Contingent Debt Securities. ZYPS Zero Yield Puttable Securities.
HITS Hybrid Income Term Security.
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's.
NR is used whenever a rating is unavailable.
PAGE 11
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Ellsworth Convertible Growth and Income Fund, Inc. (the "Fund"), established in
1986, 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.
Unlisted 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.
(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, 2005. In
addition, Federal tax regulations require the Fund to reclassify realized gains
on contingent payment debt instruments to interest income. At September 30, 2005
there were unrealized gains of approximately 3 cents per share on contingent
payment debt instruments.
(C) CHANGES IN METHOD OF ACCOUNTING FOR BOND PREMIUM AND DISCOUNT AMORTIZATION
Effective October 1, 2004, the Fund began amortizing discounts and premiums on
all debt securities. Prior to October 1, 2004, the Fund amortized discounts on
original issue discount debt securities. The new method of amortization was
adopted in accordance with the provisions of the AICPA Audit and Accounting
Guide, Audits of Investment Companies and the financial highlights and statement
of changes in net assets presented herein have been restated to reflect the new
method retroactive to October 1, 2001.
The effect of this accounting change is included in the financial highlights for
the years ended September 30, 2002, 2003 and 2004, and in the statement of
changes in net assets for the year ended September 30, 2004. The cumulative
effect of this accounting change had no impact on the total net assets of the
Fund or on distributions for tax purposes, but resulted in a $79,579 increase in
the cost of securities held and a corresponding $79,579 reduction in the net
unrealized gains based on the securities held on October 1, 2001. The impact of
this change during the twelve months ended September 30, 2005 was to reduce net
investment income by $100,871, increase unrealized gains by $83,316 and increase
realized gains by $17,555. These changes had no effect on previously reported
total net assets or total returns.
PAGE 12
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED
(D) FEDERAL INCOME TAXES
The Fund's policy is 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, 2005, the Fund had a capital loss carryforward of $3,010,788
available to the extent allowed by tax law to offset future net capital gains,
if any. To the extent that the carryforward is used, no capital gains
distributions will be made. The carryforward expires in 2011. The Fund utilized
net capital loss carryforwards of $1,904,485 during the year ended September 30,
2005.
(E) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income are recorded by the
Fund on the ex-dividend date. Distributions from capital gains, if any, are
recorded on the ex-dividend date and paid annually. The amount and character of
income and capital gains to be distributed are determined in accordance with
income tax regulations, which may differ from generally accepted accounting
principles. The tax character of distributions paid during the years ended
September 30, 2005 and 2004 were $3,641,418 and $3,681,116, respectively, both
from ordinary income.
At September 30, 2005 the components of distributable net assets and the federal
tax cost were as follows:
Unrealized appreciation $ 11,163,962
Unrealized depreciation (4,199,119)
------------
Net unrealized appreciation 6,964,843
Undistributed ordinary income 1,136,847
Tax basis capital loss carryforward (3,010,788)
Cost for federal income tax purposes $107,208,441
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 0.75 of 1% of the first $100,000,000 and 0.50
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. The Fund pays all
expenses incurred by it and not assumed by the Adviser and in addition will pay
the costs and expenses of its Treasurer's office, up to a maximum of $25,000 per
year, incurred in connection with its performance of certain services for the
Fund. These services include the valuation of securities owned by the Fund, and
the preparation of financial statements and schedules of the Fund's investments
for inclusion in certain periodic reports to the Fund's Board of Directors and
to the U.S. Securities and Exchange Commission, the maintenance of files
relating to the foregoing, and rent, personnel costs and other overhead expenses
allocable to the aforementioned services.
PAGE 13
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. CAPITAL STOCK
At September 30, 2005 there were 12,362,269 shares of $.01 par value common
stock outstanding, (20,000,000 shares authorized). During the years ended
September 30, 2005 and 2004, 64,142 shares and 81,307 shares were issued in
connection with reinvestment of dividends from net investment income, resulting
in an increase in paid-in capital of $506,725 and $648,017, respectively.
4. PORTFOLIO ACTIVITY
Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated $85,284,439 and $85,383,232, respectively, for the year ended
September 30, 2005.
--------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In accordance with subchapter M of the Internal Revenue Code of 1986, as
amended, for the year ended September 30, 2005, 22.3% of the dividends paid from
ordinary income qualified for the dividends received deduction for corporations.
Certain dividends paid by the Fund for the fiscal year ended September 30, 2005
may be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate up
to a maximum amount of $810,288 as taxed at a maximum rate of 15%.
Shareholders should not use the above information to prepare their tax returns.
Since the Fund's fiscal year is not the calendar year, another notification will
be sent with respect to calendar year 2005. Such notification, which will
reflect the amount to be used by taxpayers on their federal income tax returns,
will be made in conjunction with Form 1099 DIV and will be mailed in January
2006. Shareholders are advised to consult their own tax advisers with respect to
the tax consequences of their investment in the Fund.
PAGE 14
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of the Ellsworth Convertible Growth and Income
Fund, Inc. (the "Fund"), as of September 30, 2005, and the related statement of
operations, the statement of changes in net assets, and the financial highlights
for the year then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended September 30,
2004 and the financial highlights for each of the years ended September 30,
2004, September 30, 2003, September 30, 2002 and September 30, 2001, have been
audited by other auditors, whose reports dated October 29, 2004, October 20,
2003, October 14, 2002 and October 13, 2001 express an unqualified opinion.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 2005, by correspondence with the custodian and brokers. Where
brokers have not replied to our confirmation requests, we have carried out other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly in all material respects, the financial position of the
Ellsworth Convertible Growth and Income Fund, Inc. as of September 30, 2005, the
results of its operations, the changes in its net assets, and its financial
highlights for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
November 4, 2005
PAGE 15
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 the Plan Agent in the
Plan participant's account. Additionally, a check will be sent for the value of
any fractional interest in the Plan participant's account based on the market
price of the Fund's Common Stock on that date.
PAGE 16
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.
--------------------------------------------------------------------------------
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
In addition to the semi-annual and annual reports that Ellsworth delivers to
shareholders and makes available through the Ellsworth public website, the Fund
files a complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the Fund's first and third fiscal quarters on Form N-Q.
Ellsworth does not deliver the schedule for the first and third fiscal quarters
to shareholders, however the schedule is posted to the Ellsworth public website,
www.ellsworthfund.com. You may obtain the Form N-Q filings by accessing the
SEC's website at www.sec.gov. You may also review and copy them at the SEC's
Public Reference Room in Washington, DC. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at (800)
SEC-0330.
--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES / PROXY VOTING RECORD
The Fund's policies and procedures with respect to the voting of proxies
relating to the Fund's porfolio securities are available without charge, upon
request, by calling (973) 631-1177, or at our website at www.ellsworthfund.com.
This information is also available on the SEC's website at www.sec.gov. In
addition, information on how the Fund voted such proxies relating to portfolio
securities during the most recent twelve-month period ended June 30, is
available without charge at the above sources.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
DISCLOSURE OF PORTFOLIO HOLDINGS TO BROKER-DEALERS
From time to time, brokers with whom the Fund's Adviser, Davis-Dinsmore
Management Company, has a pre-existing relationship may request that the Adviser
disclose Fund portfolio holdings to such broker in advance of the public
disclosure of such portfolio holdings. The Adviser may make such disclosure
under the following conditions: (i) the specific purpose of the disclosure is to
assist the Adviser in identifying potential investment opportunities for the
Funds; (ii) prior to the receipt of non-public portfolio holdings, the broker,
by means of e-mail or other written communication, shall agree to keep the
nonpublic portfolio holdings confidential and not to use the information for
the bro-ker's own benefit, except in connection with the above described purpose
for which it was disclosed; (iii) the Adviser shall keep written records of its
agreement with each broker to which it distributes nonpublic portfolio
holdings; and (iv) the Adviser will secure a new agreement with a broker any
time the broker directs the nonpublic portfolio holdings to be sent to a new
recipient.
PAGE 17
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
DIRECTORS
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.
--------------------------------------------------------------------------------
Personal Principal Occupation(s) During Past Five Years;
Information Other Directorship(s)
--------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
Gordon F. Ahalt Retired. Prior to 2001, President of G.F.A. Inc.
65 Madison Avenue (a petroleum industry consulting company);
Suite 550 Director of Bancroft and CalDive International
Morristown, NJ 07960 (a diving service company).
Term expires 2007
Director since 1986
Age 77
--------------------------------------------------------------------------------
William A. Benton Retired. Prior to 2001, Partner of BE Partners
65 Madison Avenue (a small options market maker); Director of
Suite 550 Bancroft.
Morristown, NJ 07960
Term expires 2006
Director since 1986
Age 72
--------------------------------------------------------------------------------
Elizabeth C. Bogan, Ph.D. Senior Lecturer in Economics at Princeton
65 Madison Avenue University; Director of Bancroft.
Suite 550
Morristown, NJ 07960
Term expires 2007
Director since 1986
Age 61
--------------------------------------------------------------------------------
Donald M. Halsted, Jr. Retired Business Executive; Director of
65 Madison Avenue Bancroft.
Suite 550
Morristown, NJ 07960
Term expires 2008
Director since 1986
Age 78
--------------------------------------------------------------------------------
Duncan O. McKee Retired Attorney; Director of Bancroft.
65 Madison Avenue
Suite 550
Morristown, NJ 07960
Term expires 2008
Director since 1996
Age 74
PAGE 18
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
DIRECTORS (CONTINUED)
Personal Principal Occupation(s) During Past Five Years;
Information Other Directorship(s)
--------------------------------------------------------------------------------
INDEPENDENT DIRECTORS (CONTINUED)
Robert J. McMullan Since 2005, Chief Executive Officer of Control
65 Madison Avenue Point Solutions, Inc. (a telecommunications
Suite 550 service provider). Prior to 2004, Senior Vice
Morristown, NJ 07960 President and Chief Financial Officer of
Term expires 2006 Conexant Systems, Inc. (a semiconductor
Director since 2004 manufacturing company); Director of Bancroft
Age 51 and Control Point Solutions, Inc.
--------------------------------------------------------------------------------
Nicolas W. Platt Since January 2003, President of CNC-US (an
65 Madison Avenue international consulting company). Prior to
Suite 550 January 2003, Senior Partner of Platt &
Morristown, NJ 07960 Rickenbach (a public relations firm). Prior to
Term expires 2007 May 2001, with WPP Group, UK and its public
Director since 1997 relations subsidiaries, Ogilvy Public Relations,
Age 52 Burson-Marsteller and Robinson Lehr Montgomery;
Director of Bancroft.
--------------------------------------------------------------------------------
INTERESTED DIRECTORS
Thomas H. Dinsmore, C.F.A. (1) Chairman and Chief Executive Officer of the
65 Madison Avenue Fund, Bancroft and Davis-Dinsmore; Director of
Suite 550 Bancroft and Davis-Dinsmore.
Morristown, NJ 07960
Term expires 2008
Director since 1986
Chairman of the Board
since 1996
Age 52
--------------------------------------------------------------------------------
Jane D. O'Keeffe (1)
65 Madison Avenue President of the Fund, Bancroft and
Suite 550 Davis-Dinsmore; Director of Bancroft and
Morristown, NJ 07960 Davis-Dinsmore.
Term expires 2006
Director since 1995
Age 50
--------------------------------------------------------------------------------
(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.
PAGE 19
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
PRINCIPAL OFFICERS
The business address of each officer is 65 Madison Avenue, Suite 550,
Morristown, NJ 07960. Officers are elected by and serve at the pleasure of the
Board of Directors. Each officer holds office until the annual meeting to be
held in 2006, and thereafter until his or her respective successor is duly
elected and qualified.
--------------------------------------------------------------------------------
Personal
Information Principal Occupation(s) During Past Five Years
--------------------------------------------------------------------------------
Thomas H. Dinsmore, C.F.A. Director, Chairman and Chief Executive Officer
(1,2,3) Director, Chairman of the Fund, Bancroft and Davis-Dinsmore.
and Chief Executive Officer
Officer since 1986
Age 52
--------------------------------------------------------------------------------
Jane D. O'Keeffe (1,2,3) Director and President of the Fund, Bancroft and
Director and President Davis-Dinsmore.
Officer since 1994
Age 50
--------------------------------------------------------------------------------
Gary I. Levine Executive Vice President and Chief Financial
Executive Vice President, Officer of the Fund, Bancroft and Davis-Dinsmore
Chief Financial Officer and since 2004. Secretary of the Fund, Bancroft and
Secretary Davis-Dinsmore since 2003. Treasurer of
Officer since 1986 Davis-Dinsmore since 1997. Vice President of the
Age 48 Fund, Bancroft and Davis-Dinsmore from 2002
until 2004. Treasurer of the Fund and Bancroft
from 1993 until 2004.
--------------------------------------------------------------------------------
H. Tucker Lake, Jr. (2,4) Vice President of the Fund and Bancroft since
Vice President 2002, and of Davis-Dinsmore since 1997. Vice
Officer since 1994 President, Trading, of the Fund and Bancroft
Age 58 from 1994 to 2002.
--------------------------------------------------------------------------------
Germaine M. Ortiz Vice President of the Fund, Bancroft and
Vice President Davis-Dinsmore.
Officer since 1996
Age 36
--------------------------------------------------------------------------------
Mercedes A. Pierre Vice President and Chief Compliance Officer
Vice President and of the Fund, Bancroft and Davis-Dinsmore since
Chief Compliance Officer 2004, and Assistant Treasurer from 1998 to 2004.
Officer since 1998
Age 44
--------------------------------------------------------------------------------
Joshua P. Lake, C.T.P. (3,4) Treasurer of the Fund and Bancroft since 2004.
Treasurer and Assistant Assistant Secretary of the Fund, Bancroft and
Secretary Davis-Dinsmore since 2002. Assistant Treasurer
Officer since 2002 of Davis-Dinsmore, also since 2002.
Age 29
--------------------------------------------------------------------------------
(1) Mr. Dinsmore and Ms. O'Keeffe are brother and sister.
(2) Mr. H. Tucker Lake, Jr. is the cousin of Mr. Dinsmore and Ms. O'Keeffe.
(3) Mr. Joshua Lake is the cousin of Mr. Dinsmore and Ms. O'Keeffe.
(4) Mr. H. Tucker Lake, Jr. is the father of Mr. Joshua Lake.
PAGE 20
BOARD OF DIRECTORS INTERNET
GORDON F. AHALT www.ellsworthfund.com
WILLIAM A. BENTON email: info@ellsworthfund.com
ELIZABETH C. BOGAN Ph.D.
THOMAS H. DINSMORE, C.F.A. INVESTMENT ADVISER
DONALD M. HALSTED, JR. Davis-Dinsmore Management Company
DUNCAN O. MCKEE 65 Madison Avenue, Suite 550
ROBERT J. MCMULLAN Morristown, NJ 07960
JANE D. O'KEEFFE (973) 631-1177
NICOLAS W. PLATT
SHAREHOLDER SERVICES AND TRANSFER AGENT
American Stock Transfer & Trust Company
OFFICERS 59 Maiden Lane
THOMAS H. DINSMORE, C.F.A. New York, NY 10038
Chairman of the Board (800) 937-5449
and Chief Executive Officer www.amstock.com
JANE D. O'KEEFFE COMMON STOCK LISTING
President American Stock Exchange Symbol: ECF
GARY I. LEVINE LEGAL COUNSEL
Executive Vice President, Chief Financial Officer Ballard Spahr Andrews & Ingersoll LLP
and Secretary
INDEPENDENT ACCOUNTANTS
H. TUCKER LAKE, JR. Tait, Weller & Baker LLP
Vice President
GERMAINE M. ORTIZ
Vice President
MERCEDES A. PIERRE
Vice President and Chief Compliance Officer
JOSHUA P. LAKE, C.T.P.
Treasurer and Assistant Secretary
JESSICA K. LAKE
Assistant Vice President
JOANN VENEZIA
Assistant Vice President and Assistant Secretary
--------------------------------------------------------------------------------
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.
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
65 MADISON AVENUE, SUITE 550
MORRISTOWN, NEW JERSEY 07960
www.ellsworthfund.com
[LOGO]
AMERICAN
STOCK EXCHANGE
--------------
LISTED
--------------
ECF(TM)
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.
Effective November 15, 2004, the Board of Directors determined that Director
Robert J. McMullan, who is "independent" as such term is used in Form N-CSR,
possesses the attributes required to be considered an audit committee financial
expert under applicable federal securities laws.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Set forth in the table below are the aggregate fees billed to the Company
by Tait, Weller & Baker LLP ("Tait Weller") for services rendered to the Company
during the Company's last fiscal year ended September 30, 2005, and
PricewaterhouseCoopers LLP ("PwC") for the fiscal year ended September 30, 2004.
Fiscal YE Audit Audit-Related All Other
September 30 Fees Fees (1) Tax Fees (4) Fees
------------- ------- ------------- ------------ ---------
2004 $34,400 $ 9,785 (2) $2,500 $0
2005 $30,000 $10,000 (3) $2,500 $0
(1) All Audit-Related Fees were pre-approved by the Company's Audit Committee
and no Audit-Related Fees were approved by the Company's Audit Committee
pursuant to section 2.01(c)(7)(i)(C) of Regulation S-X, which waives the
pre-approval requirement for certain de minimus fees.
(2) Includes fees billed to the Company by PWC in connection with its review
of the Company's Registration Statement on Form N-2 relating to the
Company's Rights Offering in fiscal year 2004.
(3) Includes fees billed to the Company by Tait Weller in connection with the
Company's change of accounting practice related to amortization of
convertible bond premiums and discounts.
(4) "Tax Fees" include those fees billed by Tait Weller and PWC in connection
with their review of the Company's income tax returns for fiscal years 2005
and 2004, respectively. All Tax Fees were pre-approved by the Company's
Audit Committee and no Tax Fees were approved by the Company's Audit
Committee pursuant to section 2.01(c)(7)(i)(C) of Regulation S-X, which
waives the pre-approval requirement for certain de minimus fees.
Non-Audit Services
During each of the last two fiscal years ended September 30, 2004 and
September 30, 2005, PwC and Tait Weller did not provide any non-audit services
to the Company or Davis-Dinsmore or its affiliates or otherwise bill the
Company or Davis-Dinsmore or its affiliates for any such non-audit services.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee pre-approves all audit and permissible non-audit
services that are proposed to be provided to the Company by its independent
auditors before they are provided to the Company. Such pre-approval also
includes the proposed fees to be charged by the independent auditors for such
services. The Audit Committee may delegate the pre-approval of audit and
permissible non-audit services and related fees to one or more members of the
Audit Committee who are "independent," as such term is used in Form N-CSR.
Any such member's decision to pre-approve audit and/or non-audit services and
related fees shall be presented to the full Audit Committee, solely for
informational purposes, at their next scheduled meeting.
The Audit Committee also pre-approves non-audit services to be provided by
the Company's independent auditors to the Company's investment adviser if the
engagement relates directly to the operations and financial reporting of the
Company and if the Company's independent auditors are the same as, or affiliated
with, the investment adviser's auditors.
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.
ROBERT J. MCMULLAN
(b) Not applicable.
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.
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not currently applicable to registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
During the period covered by this report, 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 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's board of directors since those procedures
were last disclosed in response to the requirements of Item 7(d)(2)(ii)(G) of
Schedule 14A (17 CFR 240.14a-101), or this Item 10 of Form N-CSR.
ITEM 11. CONTROLS AND PROCEDURES.
Conclusions of principal officers concerning controls and procedures
(a) As of September 26, 2005, 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 September 26, 2005, 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 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 second fiscal
quarter of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS
(a)(1) A code of ethics, effective May 15, 2003, that applies to the Fund's
principal executive officer and principal financial officer is attached
hereto.
(a)(2) Certifications of the principal executive officer and the principal
financial officer pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 are attached hereto.
(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 Rule 30a-2(b) under the Investment Company Act
of 1940 are attached hereto.
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: November 29, 2005
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: November 29, 2005
By: /s/Gary I. Levine
Gary I. Levine
Chief Financial Officer
(Principal Financial Officer)
Date: November 29, 2005