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 FUND LTD.
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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 FUND LTD.
65 Madison Avenue
Morristown, New Jersey 07960-7308
(Name and address of agent for service)
Copy to:
Steven King, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 49th Floor
Philadelphia, PA 19103-7599
Registrant's telephone number, including area code: (973)631-1177
Date of fiscal year end: September 30, 2007
Date of reporting period: September 30, 2007
ITEM 1. REPORTS TO STOCKHOLDERS.
ELLSWORTH FUND LTD.
2007 ANNUAL REPORT
SEPTEMBER 30, 2007
Ellsworth Fund Ltd. 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 apprectiation; 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, 2007
WITH DIVIDENDS REINVESTED
Calendar Annualized 10 Year
YTD 1 Year 5 Years 10 Years Volatility (c)
-------- ------ ------- -------- --------------
Ellsworth market price...................... 10.75% 19.61% 8.67% 7.97% 8.80%
Ellsworth net asset value................... 9.80 14.38 10.08 6.26 10.67
Merrill Lynch All Convertibles Index (a).... 8.04 13.45 13.29 7.35 16.85
S&P 500 Index (a)........................... 9.13 16.44 15.45 6.57 17.74
Lehman Aggregate Bond Total Return Index (b) 3.85 5.14 4.14 5.97 4.07
(a) From Bloomberg L.P. pricing service.
(b) From Lipper, Inc. Closed-End Fund Performance Analysis, dated
September 30, 2007.
(c) Volatility is a measure of risk based on the standard deviation of the
return. The greater the volatility, the greater the chance of a profit or
risk of a loss.
Ellsworth's performance in the table above has not been adjusted for the fiscal
2004 rights offering; net asset value dilution was 2.21%. Performance data
represent past results and do not reflect future performance.
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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. 06 $ 9.72 $9.29 $ 9.60 $8.46 $8.06 $8.45
Mar. 07 9.89 9.53 9.73 8.68 8.39 8.58
Jun. 07 10.28 9.73 10.24 9.18 8.56 9.14
Sept.07 10.46 9.62 10.27 9.45 8.04 9.09
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DIVIDEND DISTRIBUTIONS (12 MONTHS)
Record Payment Capital *Corporate
Date Date Income Gains Total Deduction
-------- -------- ------ ------- ------ ----------
10/27/06 11/22/06 $0.13 $0.265 $0.395 24%
2/13/07 2/27/07 0.08 -- 0.080 9
5/16/07 5/30/07 0.08 -- 0.080 9
8/16/07 8/30/07 0.10 -- 0.100 9
------ ------- ------
$0.39 $0.265 $0.655
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* Percentage of each ordinary income distribution qualifying for the corporate
dividend received tax deduction.
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To Our Shareholders ------------------------------------------------------------
November 14, 2007
As the financial markets continue to see the fallout from the dramatic rise in
home mortgage defaults, we think several useful observations can be made.
First, there is plenty of blame to go around; from those who insisted on making
mortgages available to all, the banks who found creative ways to accommodate
them, the investment banking firms who bought them and packaged them, and
finally to the ratings agencies who apparently misjudged the default risk of
these packages. Second, many homeowners have come to view the equity in their
homes as if it were a deposit of money available for spending. As financing
options are reduced, homeowners have less ability to use this equity (assuming
it is still there) for consumption. Such contractions sometimes cause
recessions but can also reduce inflationary pressures. Third, once the effects
of mortgage defaults work their way through the system, there will be
opportunities and bargains available just as there were after the savings and
loan crisis nearly two decades ago. Unfortunately, it may take months or even
years for us to get to that point.
The convertible securities market continues to grow and provide opportunities
for investment. The Citigroup Convertible Index grew to $336.8 billion from
under $300 billion on December 31, 2006. While some hedge fund models suggest
that the convertible market is fairly valued when compared to the stock market,
we still see an asset class that provides us with investments that we believe
will help us meet our investment objectives.
Fiscal year performance of the Fund was enhanced by its exposure to the metals
and mining, telecommunications and chemicals industries. Among the better
performing issues in the portfolio were Equinix, Inc. (telecommunications), LSB
Industries, Inc. (multi-industry) and Celanese Corp. (chemicals). Performance
was held back by exposure to the financial services, retail and pharmaceutical
industries.
For the calendar year-to-date, one- and ten-year periods ended September 30,
2007, Ellsworth's market return outperformed the Merrill Lynch All Convertibles
Index (the "Index") while underperforming for the five-year period. The Fund's
net asset value (NAV) outperformed over the calendar year-to-date, one- and
ten-year periods, and was in-line for the five-year period (this is the case
when you adjust for the fiscal 2004 rights offering and the fact that the Index
does not include expenses). For that ten-year period, the Fund's NAV and
market volatility, as measured by standard deviation, were lower than that of
the Index. Many market professionals consider the volatility of past returns
to be a useful approximation of the past levels of risk. A higher volatility
level equates to a higher measure of risk. This measure of historic results
may not reflect future performance but we believe that it is informative. The
Fund has sought to provide total returns to shareholders that compare
favorably to the equity markets with less volatility. We think the Fund has
achieved that.
On September 30, 2007 board member Duncan O. McKee retired. Mr. McKee has been
with the Fund from its formation in 1986. He had been one of the top
investment company lawyers for many decades and his contributions to the Fund
are too many to recount here. We will miss his presence.
Effective October 1, 2007, board member Robert J. McMullan resigned as trustee
due to personal and professional time commitments. The Board thanks Mr.
McMullan for his contributions to the Fund and wishes him success in his other
business endeavors.
continued on the following page
Page 1
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To Our Shareholders (continued)-------------------------------------------------
At its October 15, 2007 meeting, the Board of Trustees declared a distribution
of $0.887 per share. The distribution consists of $0.06 undistributed net
investment income, and net realized gains on investments of $0.827. The
distribution is payable on November 21, 2007 to shareholders of record on
October 25, 2007. This is the largest single distribution by the Fund since
fiscal year 2000; further, this year's total annual distribution is also the
largest since 2000.
The 2008 annual meeting of shareholders will be held on January 11, 2008. Time
and location will be included in the proxy statement, scheduled to be mailed to
shareholders on November 26, 2007. 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, 2007
ADDITIONS REDUCTIONS
Amerivon Holdings LLC Amgen, Inc.
Chattem, Inc. CMS Energy Corp.
Companhia Vale do Rio Doce ADS Celanese Corp.
(exchangeable from Vale Capital Ltd.) FTI Consulting, Inc.
ConocoPhillips Johnson & Johnson
(exchangeable from Merrill Lynch & Co., Inc.) Manor Care, Inc.
ExpressJet Holdings, Inc. MedImmune, Inc.
Gannett Co., Inc. Nuveen Investments, Inc.
Nabors Industries, Inc. (exchangeable from Morgan Stanley, Inc.)
(exchangeable from NATIXIS Financial Products Inc.) NVIDIA Corp.
St. Jude Medical, Inc. (exchangeable from IXIS Financial Products Inc.)
(exchangeable from NATIXIS Financial Products Inc.) Reinsurance Group of America, Inc.
Sepracor Inc. U.S. Bancorp
(exchangeable from NATIXIS Financial Products Inc.) Vornado Realty Trust
Tesoro Corp.
(exchangeable from Merrill Lynch & Co., Inc.)
Page 2
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Largest Investment Holdings by underlying common stock--------------------------
Value % Total
(Note 1) Net Assets
----------- ----------
Freeport-McMoRan Copper and Gold, Inc............................................ $ 3,489,750 2.7%
Freeport-McMoRan 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.
LSB Industries, Inc.............................................................. 3,195,000 2.5
LSB manufactures and sells chemical products for the mining, agricultural
and industrial markets. The company also manufactures and sells
commercial and residential climate control products.
Prudential Financial, Inc........................................................ 3,086,490 2.4
Prudential provides financial services worldwide. The company offers a
variety of products and services including life insurance, mutual funds,
annuities, asset management and real estate brokerage.
The Walt Disney Company.......................................................... 3,059,375 2.3
Disney, an entertainment company, has operations that include media
networks, studio entertainment, theme parks and resorts, consumer
products, and Internet and direct marketing.
Bristol-Myers Squibb Co.......................................................... 3,026,400 2.3
Bristol-Myers is a diversified worldwide health and personal care company that
manufactures medicines and other products. The company's products include
therapies for various diseases and disorders, consumer medicines, infant
formulas, and nutritional supplements.
LSI Corp......................................................................... 3,023,750 2.3
LSI designs, develops, manufactures and markets integrated circuits and
storage systems. The company offers products and services for a variety
of electronic systems applications that are marketed to original equipment
manufacturers in the telecommunications, computers and storage industries.
(exchangeable from Agere Systems Inc. and LSI Corp.)
Nabors Industries, Inc........................................................... 2,886,916 2.2
Nabors is a land drilling contractor, and also performs well-servicing and
workovers. The company conducts oil, gas and geothermal land drilling
operations. (exchangeable from Nabors Industries Ltd. and NATIXIS
Financial Products Inc.)
MetLife, Inc..................................................................... 2,746,400 2.1
MetLife provides insurance and financial services to a range of individual
and institutional customers.
New York Community Bancorp, Inc.................................................. 2,695,356 2.1
New York Community Bancorp is a multi-bank holding company that
offers a full range of traditional and non-traditional products and services.
Companhia Vale do Rio Doce....................................................... 2,671,200 2.1
Companhia Vale do Rio Doce produces and sells iron ore, pellets, ----------- ----
manganese, alloys, gold, bauxite and alumina. The company is based in
Brazil, where it owns and operates railroads and maritime terminals.
(exchangeable from Vale Capital Ltd.)
Total............................................................................ $29,880,637 23.0%
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Page 3
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MAJOR INDUSTRY EXPOSURE---------------------------------------------------------
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Aerospace & Defense 4.0%
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Banking/Savings & Loan 6.0%
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-------------------------
Computer Hardware 5.2%
-------------------------
--------------------------------------------------
Energy 14.5%
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Health Care 4.4%
-------------------
---------------------------------------
Insurance 9.3%
---------------------------------------
---------------------------
Minerals and Mining 5.6%
---------------------------
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Pharmaceuticals 9.3%
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------------------------------------
Semiconductors 7.0%
------------------------------------
---------------------
Telecommunications 4.8%
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DIVERSIFICATION OF ASSETS-------------------------------------------------------
% Total Net Assets
September 30,
Value ------------------
Cost (Note 1) 2007 2006
------------ ------------ ------ ------
Aerospace and Defense............ $ 5,167,199 $ 5,162,500 4.0% 5.4%
Agriculture...................... 2,041,683 1,907,000 1.5 --
Banking/Savings and Loan......... 8,464,316 7,767,006 6.0 5.6
Chemicals........................ 2,106,391 3,498,800 2.7 3.2
Computer Hardware................ 6,069,627 6,810,600 5.2 3.6
Computer Software................ 3,595,596 3,790,500 2.9 3.2
Consumer Goods................... 4,320,896 5,042,750 3.9 1.5
Energy........................... 18,081,101 18,925,185 14.5 9.3
Finance.......................... 892,500 1,335,945 1.0 3.7
Financial Services............... 4,303,394 3,323,200 2.6 2.8
Foods............................ 1,058,000 1,062,000 0.8 1.8
Health Care...................... 5,919,214 5,767,547 4.4 3.9
Insurance........................ 10,499,064 12,129,890 9.3 10.0
Media and Entertainment.......... 4,610,339 5,056,975 3.9 5.2
Minerals and Mining.............. 5,478,580 7,300,950 5.6 --
Multi-Industry................... 3,787,073 3,876,562 3.0 6.1
Pharmaceuticals.................. 12,703,901 12,056,382 9.3 10.5
Real Estate...................... 982,239 1,023,750 0.8 0.6
Retail........................... 2,991,615 2,698,125 2.1 1.1
Semiconductors................... 8,537,645 9,056,250 7.0 8.8
Telecommunications............... 5,654,805 6,240,406 4.8 4.7
Transportation................... 1,928,160 1,947,500 1.5 --
Other............................ -- -- -- 6.9
Short-Term Securities............ 3,298,295 3,298,295 2.5 --
------------ ------------ ------ ------
Total Investments.............. $122,491,633 129,078,118 99.3 97.9
============
Other Assets, Net of Liabilities. 873,999 0.7 2.1
------------ ------ ------
Total Net Assets............... $129,952,117 100.0% 100.0%
============ ====== ======
Page 4
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PORTFOLIO OF INVESTMENTS SEPTEMBER 30,2007--------------------------------------
Principal Identified Value
Amount Cost (Note 1)
---------- ------------ ------------
CONVERTIBLE BONDS AND NOTES -- 59.1%
Aerospace and Defense -- 3.6%
$1,500,000 AAR Corp. 1.75%, due 2026 cv. sr. notes (BB)........................... $ 1,535,953 $ 1,800,000
1,000,000 Alliant Techsystems Inc. 2.75%, due 2011 cv. sr. sub. notes (B1)....... 1,007,502 1,262,500
1,500,000 DRS Technologies, Inc. 2%, due 2026 cv. sr. notes (B1)
(Acquired 01/30/06 - 05/16/07; Cost $1,623,744) (1,2)................. 1,623,744 1,620,000
------------ ------------
4,167,199 4,682,500
------------ ------------
Agriculture -- 1.5%
2,000,000 Merrill Lynch & Co., Inc. 1.5%, due 2012 cv. securities (Aa3)
(exchangeable into Archer-Daniels-Midland Co. common stock)
(Acquired 02/23/07; Cost $2,041,683) (1,2)............................ 2,041,683 1,907,000
------------ ------------
Banking/Savings and Loan -- 2.3%
1,000,000 PrivateBancorp, Inc. 3.625%, due 2027 cv. sr. notes (NR)............... 1,000,000 981,250
2,000,000 U.S. Bancorp floating rate, due 2037 cv. sr. deb. (Aa2)................ 1,980,772 1,993,400
------------ ------------
2,980,772 2,974,650
------------ ------------
Computer Hardware -- 5.2%
1,000,000 C&D Technologies, Inc. 5.25%, due 2025 cv. sr. notes (NR).............. 1,000,000 958,750
2,000,000 Credit Suisse, New York Branch 14%, due 2008
equity-linked notes (Aa1)
(exchangeable for Corning Inc. common stock).......................... 2,000,000 2,040,600
1,000,000 EMC Corp. 1.75%, due 2011 cv. sr. notes (BBB+)......................... 1,040,114 1,422,500
1,000,000 EMC Corp. 1.75%, due 2013 cv. sr. notes (BBB+)......................... 1,029,513 1,433,750
1,000,000 Richardson Electronics, Ltd. 8%, due 2011 cv. sr. sub. notes (NR)...... 1,000,000 955,000
------------ ------------
6,069,627 6,810,600
------------ ------------
Computer Software -- 2.9%
1,000,000 Blackboard Inc. 3.25%, due 2027 cv. sr. notes (B-)..................... 1,000,000 1,110,000
1,000,000 GSI Commerce, Inc. 2.5%, due 2027 cv. sr. notes (NR)
(Acquired 06/27/07; Cost $1,001,857) (2).............................. 1,001,857 1,110,000
1,500,000 Lehman Brothers Holdings Inc. 1%, due 2009 medium-term notes (A1)
(performance linked to Microsoft Corp. common stock) (1).............. 1,593,739 1,570,500
------------ ------------
3,595,596 3,790,500
------------ ------------
Consumer Goods -- 2.5%
1,500,000 Chattem, Inc. 1.625%, due 2014 cv. sr. notes (NR)...................... 1,527,123 1,691,250
1,000,000 Church & Dwight Co., Inc. 5.25%, due 2033 cv. sr. deb. (Ba1)........... 1,000,000 1,552,500
------------ ------------
2,527,123 3,243,750
------------ ------------
Energy -- 6.2%
1,000,000 Cameron International Corp. 2.50%, due 2026 cv. sr. notes (Baa1)....... 991,709 1,483,750
1,500,000 Covanta Holding Corp. 1%, due 2027 sr. cv. deb. (B1) (1)............... 1,610,828 1,533,750
1,500,000 Nabors Industries, Inc. 0.94%, due 2011 sr. exchangeable notes (A-)
(exchangeable for Nabors Industries Ltd. common stock)................ 1,493,126 1,445,625
1,225,000 Oil States International, Inc. 2.375%, due 2025
contingent cv. sr. notes (NR)......................................... 1,454,215 2,027,375
1,250,000 Rentech, Inc. 4%, due 2013 cv. sr. notes (NR).......................... 1,250,000 1,052,344
500,000 USEC Inc. 3%, due 2014 cv. sr. notes (CCC)............................. 500,000 543,750
------------ ------------
7,299,878 8,086,594
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Financial Services -- 1.6%
2,000,000 Euronet Worldwide, Inc. 3.50%, due 2025 cv. deb. (B+) (1).............. 2,383,235 2,027,500
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Page 5
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PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2007 (CONTINUED)-------------------------
Principal Identified Value
Amount Cost (Note 1)
---------- ------------ ------------
CONVERTIBLE BONDS AND NOTES -- continued
Health Care -- 3.2%
$ 375,000 China Medical Technologies, Inc. 3.5%, due 2011 cv. sr. sub. notes (NR) $ 386,670 $ 541,406
500,000 LifePoint Hospitals, Inc. 3.25%, due 2025 cv. sr. sub. deb. (B2)....... 477,529 431,875
450,000 LifePoint Hospitals, Inc. 3.50%, due 2014 cv. sub. notes (B)........... 452,450 402,750
1,000,000 Omnicare, Inc. 3.25%, due 2035 cv. sr. deb. (B2) (1)................... 1,082,200 813,750
1,000,000 SonoSite Inc. 3.75%, due 2014 cv. sr. notes (NR)....................... 1,015,967 1,011,250
1,000,000 St. Jude Medical, Inc. 1.22%, due 2008 cv. sr. deb. (BBB+)............. 1,004,369 1,021,250
------------ ------------
4,419,185 4,222,281
------------ ------------
Insurance -- 2.4%
3,000,000 Prudential Financial, Inc. floating rate, due 2036 cv. sr. notes (A3).. 2,993,341 3,086,490
------------ ------------
Media and Entertainment -- 3.9%
2,000,000 Gannett Co., Inc. floating rate, due 2037 cv. sr. notes (A3)........... 1,993,026 1,997,600
2,500,000 The Walt Disney Company 2.125%, due 2023 cv. sr. notes (A2)............ 2,617,313 3,059,375
------------ ------------
4,610,339 5,056,975
------------ ------------
Minerals and Mining -- 0.9%
1,000,000 Newmont Mining Corp. 1.25%, due 2014 cv. sr. notes (BBB+)
(Acquired 07/12/07; Cost $1,018,205) (2).............................. 1,018,205 1,140,000
------------ ------------
Multi-Industry -- 3.0%
750,000 Diversa Corp. 5.5%, due 2027 cv. sr. notes (NR)
(exchangeable for Verenium Corp. common stock)........................ 750,000 681,562
3,000,000 LSB Industries, Inc. 5.5%, due 2012 cv. sr. sub. deb. (NR)
(Acquired 06/28/07 - 09/13/07; Cost $3,037,073) (2)................... 3,037,073 3,195,000
------------ ------------
3,787,073 3,876,562
------------ ------------
Pharmaceuticals -- 6.3%
3,000,000 Bristol-Myers Squibb Co. floating rate, due 2023 cv. sr. deb. (A2)..... 3,005,969 3,026,400
1,625,000 Mylan Inc. 1.25%, due 2012 sr. cv. notes (BB+)......................... 1,665,984 1,507,188
1,500,000 Teva Pharmaceutical Finance Co. B.V. 1.75%, due 2026
cv. sr. deb. (Baa2)
(exchangeable for Teva Pharmaceutical Industries Ltd. ADR)............ 1,487,869 1,588,125
2,000,000 Wyeth floating rate, due 2024 cv. sr. deb. (A3)........................ 2,169,078 2,117,540
------------ ------------
8,328,900 8,239,253
------------ ------------
Real Estate -- 0.8%
1,000,000 ProLogis 2.25%, due 2037 cv. sr. notes (BBB+)
(Acquired 03/20/07 - 04/16/07; Cost $982,239) (2)..................... 982,239 1,023,750
------------ ------------
Retail -- 0.9%
1,500,000 Charming Shoppes, Inc. 1.125%, due 2014 sr. cv. notes (BB-)............ 1,491,615 1,198,125
------------ ------------
Semiconductors -- 7.0%
2,000,000 Agere Systems Inc. 6.5%, due 2009 cv. sub. notes (B+)
(exchangeable for LSI Corp.).......................................... 2,025,897 2,030,000
1,500,000 Cypress Semiconductor Corp. 1%, due 2009 cv. sr. notes (NR)............ 1,521,397 1,972,500
2,000,000 Fairchild Semiconductor Corp. 5%, due 2008 cv. sr. sub. notes (B)
(exchangeable into Fairchild Semiconductor International, Inc.
common stock)......................................................... 1,992,203 1,980,000
2,000,000 Intel Corp. 2.95%, due 2035 jr. sub. cv. deb. (A-) (1)................. 1,998,597 2,080,000
1,000,000 LSI Corp. 4%, due 2010 cv. sub. notes (B+)............................. 999,551 993,750
------------ ------------
8,537,645 9,056,250
------------ ------------
Page 6
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PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2007 (CONTINUED)-------------------------
Principal Identified Value
Amount Cost (Note 1)
---------- ------------ ------------
CONVERTIBLE BONDS AND NOTES -- continued
Telecommunications -- 3.4%
$1,000,000 Anixter International Inc. 1%, due 2013 sr. cv. notes (BB-)............ $ 1,120,975 $ 1,397,500
1,000,000 Equinix, Inc. 2.5%, due 2012 cv. sub. notes (CCC+)..................... 1,008,493 1,022,500
1,000,000 General Cable Corp. 1%, due 2012 sr. cv. notes (B1).................... 1,019,000 1,048,750
1,000,000 SAVVIS, Inc. 3%, due 2012 cv. sr. notes (NR)........................... 1,007,377 933,750
------------ ------------
4,155,845 4,402,500
------------ ------------
Transportation -- 1.5%
2,000,000 ExpressJet Holdings, Inc. 4.25%, due 2023 cv. notes (NR)............... 1,928,160 1,947,500
------------ ------------
TOTAL CONVERTIBLE BONDS AND NOTES...................................... 73,317,660 76,772,780
------------ ------------
CORPORATE BONDS AND NOTES -- 1.1%
Retail -- 1.1%
1,500,000 Amerivon Holdings LLC 4%, due 2010 units (NR)
(Acquired 06/01/07; Cost $1,500,000) (2,3)............................ 1,500,000 1,500,000
------------ ------------
Shares CONVERTIBLE PREFERRED STOCKS -- 8.9%
Aerospace and Defense -- 0.4%
40,000 Ionatron, Inc. 6.5% series A redeemable cv. pfd. (NR)
(Acquired 10/27/05; Cost $1,000,000) (2).............................. 1,000,000 480,000
------------ ------------
Banking/Savings and Loan -- 3.7%
54,178 New York Community Bancorp, Inc. 6% BONUSES units (Baa1)............... 2,946,933 2,695,356
20,000 Sovereign Capital Trust IV 4.375% PIERS (Baa1)
(exchangeable for Sovereign Bancorp, Inc. common stock) (1)........... 1,200,086 850,000
25,000 Washington Mutual Capital Trust 5.375% PIERS units (A3)
(exchangeable for Washington Mutual, Inc. common stock)............... 1,336,525 1,247,000
------------ ------------
5,483,544 4,792,356
------------ ------------
Chemicals -- 1.9%
50,000 Celanese Corp. 4.25% cv. perpetual pfd. (NR)........................... 1,205,391 2,507,000
------------ ------------
Energy -- 2.3%
20,000 Chesapeake Energy Corp. 4.5% cum. cv. pfd. (B+)........................ 2,003,471 2,015,000
20,000 PetroQuest Energy, Inc. 6.875% cum. cv. perpetual pfd. (NR)............ 1,000,000 998,750
------------ ------------
3,003,471 3,013,750
------------ ------------
Telecommunications -- 0.6%
100 Medis Technologies Ltd. 7.25% series A cum. cv. perpetual pfd. (NR).... 1,000,000 718,886
------------ ------------
TOTAL CONVERTIBLE PREFERRED STOCKS..................................... $ 11,692,406 $ 11,511,992
------------ ------------
MANDATORY CONVERTIBLE SECURITIES -- 27.7% (4)
Chemicals -- 0.8%
20,000 Huntsman Corp. 5%, due 02/16/08 mandatory cv. pfd. (NR)................ 901,000 991,800
------------ ------------
Consumer Goods -- 1.4%
1,750 The Stanley Works floating rate equity units, due 05/17/12 (A2)........ 1,793,773 1,799,000
------------ ------------
Page 7
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PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2007 (CONTINUED)-------------------------
Identified Value
Shares Cost (Note 1)
---------- ------------ ------------
MANDATORY CONVERTIBLE SECURITIES -- continued
Energy -- 6.0%
$ 40,000 Bristow Group Inc. 5.5%, due 09/15/09 mandatory cv. pfd. (B)........... $ 2,027,500 $ 2,246,800
1,000 Chesapeake Energy Corp. 6.25%, due 06/15/09 mandatory cv. pfd. (B+).... 250,000 284,630
2,000 Merrill Lynch & Co., Inc. 5.4%, due 09/27/10 PRIDES (NR)
(linked to the performance of ConocoPhillips common stock)............ 2,000,000 1,959,910
41,135 Merrill Lynch & Co., Inc. 12%, due 06/27/08
capped appreciation notes (NR)
(linked to the performance of Tesoro Corp. common stock).............. 1,999,984 1,892,210
45,950 NATIXIS Financial Products Inc. 9.55%, due 01/26/08
mandatory trigger exchangeable notes (NR)
(exchangeable for Nabors Industries, Inc. common stock)
(Acquired 07/23/07; Cost $1,500,268) (2).............................. 1,500,268 1,441,291
------------ ------------
7,777,752 7,824,841
------------ ------------
Finance -- 1.0%
25,500 Morgan Stanley, Inc. 5.875%, due 10/15/08
mandatorily exchangeable securities (Aa3)
(exchangeable for Nuveen Investments, Inc. common stock).............. 892,500 1,335,945
------------ ------------
Financial Services -- 1.0%
70,000 E*TRADE Financial Corp. 6.125%, due 11/18/08 equity units (Ba3)........ 1,920,159 1,295,700
------------ ------------
Foods -- 0.8%
40,000 Lehman Brothers Holdings Inc. 6.25%, due 10/15/07 PIES (A1)
(exchangeable for General Mills, Inc. common stock)................... 1,058,000 1,062,000
------------ ------------
Health Care -- 1.2%
35,732 NATIXIS Financial Products Inc. 9.1%, due 01/07/08
mandatory trigger exchangeable notes (NR)
(exchangeable for St. Jude Medical, Inc. common stock)
(Acquired 07/02/07; Cost $1,500,029) (2).............................. 1,500,029 1,545,266
------------ ------------
Insurance -- 7.0%
7,000 Alleghany Corp. 5.75%, due 06/15/09 mandatory cv. pfd. (BBB-).......... 1,852,200 2,635,500
75,000 Citigroup Funding Inc. variable rate exch. notes, due 10/27/08 (Aa1)
(exchangeable for Genworth Financial, Inc. common stock).............. 2,212,500 2,202,000
80,000 MetLife, Inc. 6.375%, due 08/15/08 common equity units (BBB+).......... 2,084,000 2,746,400
52,500 XL Capital Ltd. 7%, due 02/15/09 equity security units (A3)............ 1,357,023 1,459,500
------------ ------------
7,505,723 9,043,400
------------ ------------
Minerals and Mining -- 4.7%
22,500 Freeport-McMoRan Copper & Gold Inc. 6.75%, due 05/01/10
mandatory cv. pfd. (B+)............................................... $ 2,422,775 $ 3,489,750
30,000 Vale Capital Ltd. 5.5%, due 06/15/10 mandatory convertible notes (NR)
(exchangeable for Companhia Vale do Rio Doce ADS)..................... 1,534,600 2,005,500
10,000 Vale Capital Ltd. 5.5%, due 06/15/10 mandatory convertible notes (NR)
(exchangeable for Companhia Vale do Rio Doce
Preference A Shares ADS)............................................. 503,000 665,700
------------ ------------
4,460,375 6,160,950
------------ ------------
Page 8
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2007 (CONTINUED)-------------------------
Identified Value
Shares Cost (Note 1)
---------- ------------ ------------
MANDATORY CONVERTIBLE SECURITIES -- continued
Pharmaceuticals -- 2.9%
42,008 NATIXIS Financial Products Inc. 8.1%, due 12/05/07
mandatory trigger exchangeable notes (NR)
(exchangeable for Sepracor Inc. common stock)
(Acquired 05/23/07; Cost $2,000,001) (2)............................. $ 2,000,001 $ 1,188,574
9,500 Schering-Plough Corp. 6%, due 08/13/10 mandatory cv. pfd. (Baa3)...... 2,375,000 2,628,555
------------ ------------
4,375,001 3,817,129
------------ ------------
Telecommunications -- 0.9%
14,000 Credit Suisse Securities (USA), Inc. 5.5%, due 11/15/08 SAILS (Aa1)
(exchangeable for Equinix, Inc. common stock)........................ 498,960 1,119,020
------------ ------------
TOTAL MANDATORY CONVERTIBLE SECURITIES (4)............................ $ 32,683,272 $ 35,995,051
------------ ------------
Principal
Amount
----------
SHORT-TERM SECURITIES -- 2.5%
Commercial Paper -- 2.5%
$3,300,000 American Express Credit Corp. 4.65%, due 10/01/07 (P1)................ 3,298,295 3,298,295
------------ ------------
Total Convertible Bonds and Notes -- 59.1%............................ $ 73,317,660 $ 76,772,780
Total Corporate Bonds and Notes -- 1.1%............................... 1,500,000 1,500,000
Total Convertible Preferred Stocks -- 8.9%............................ 11,692,406 11,511,992
Total Mandatory Convertible Securities -- 27.7%....................... 32,683,272 35,995,051
Total Short-Term Securities -- 2.5%................................... 3,298,295 3,298,295
------------ ------------
Total Investments -- 99.3%............................................ $122,491,633 129,078,118
============
Other assets and liabilities, net -- 0.7%............................. 873,999
------------
Total Net Assets -- 100.0%............................................ $129,952,117
============
(1) Contingent payment debt instrument which accrues contingent interest.
See Note 1(f).
(2) Security not registered under the Securities Act of 1933, as amended
(i.e., the security was purchased in a Rule 144A or a Reg 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 September 30, 2007 was $16,150,881 which represented
12.4% of the Fund's net assets.
(3) Investment is a restricted security, valued at fair value as determined
in good faith in accordance with procedures adopted by the Board of
Trustees. It is possible that the estimated value may differ
significantly from the amount that might ultimately be realized in the
near term, and the difference could be material. The market value of
this security amounts to $1,500,000 which represented 1.15% of the
Fund's net assets.
(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.
ADR American Depositary Receipts.
ADS American Depositary Shares.
BONUSES Bifurcated Option Note Unit Securities.
PIES Premium Income Exchangeable Securities.
PRIDES Preferred Redeemable Income Dividend Equity Securities.
PIERS Preferred Income Equity Redeemable Securities.
SAILS Shared Appreciation Income Linked Securities.
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's.
NR is used whenever a rating is unavailable.
Summary of Portfolio Ratings:
% of
Portfolio
---------
Aa 8
A 19
Baa 16
Ba 7
B 19
Caa 1
NR 30
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
Page 9
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES---------------------------------------------
SEPTEMBER 30, 2007
------------------
ASSETS:
Investments at value (cost $122,491,633) (Note 1)........... $129,078,118
Cash........................................................ 1,365,904
Receivable for securities sold.............................. 528,709
Dividends and interest receivable........................... 615,315
Other assets................................................ 29,070
------------
Total assets................................................ 131,617,116
------------
LIABILITIES:
Payable for securities purchased............................ 1,519,000
Accrued management fee (Note 2)............................. 81,698
Accrued expenses............................................ 26,365
Other liabilities........................................... 37,936
------------
Total liabilities........................................... 1,664,999
------------
NET ASSETS.................................................... $129,952,117
============
NET ASSETS CONSIST OF:
Capital shares (Note 3)..................................... $ 126,591
Additional paid-in capital.................................. 112,000,501
Undistributed net investment income......................... 358,935
Accumulated net realized gain from investment transactions.. 10,879,605
Unrealized appreciation on investments...................... 6,586,485
------------
NET ASSETS.................................................... $129,952,117
============
Net asset value per share ($129,952,117 / 12,659,098
outstanding shares)......................................... $ 10.27
============
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS---------------------------------------------------------
FOR THE YEAR ENDED SEPTEMBER 30, 2007
INVESTMENT INCOME (NOTE 1):
Interest.................................................... $ 3,377,879
Dividends................................................... 2,187,412
------------
Total Income............................................... 5,565,291
------------
EXPENSES (NOTE 2):
Management fee.............................................. 875,997
Custodian................................................... 20,579
Transfer agent.............................................. 23,270
Audit fees.................................................. 34,700
Legal fees.................................................. 101,683
Trustees' fees.............................................. 110,625
Reports to shareholders..................................... 52,981
Administrative services fees................................ 53,976
Other....................................................... 86,422
------------
Total Expenses............................................. 1,360,233
------------
NET INVESTMENT INCOME......................................... 4,205,058
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions.............. 10,457,847
Net change in unrealized appreciation of investments........ 2,333,162
------------
Net gain on investments..................................... 12,791,009
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $ 16,996,067
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
Page 10
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS---------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, 2007 AND 2006
2007 2006
------------ ------------
CHANGE IN NET ASSETS FROM OPERATIONS:
Net investment income....................................... $ 4,205,058 $ 4,128,672
Net realized gain from investment transactions.............. 10,457,847 6,420,502
Net change in unrealized appreciation of investments........ 2,333,162 (2,794,837)
------------ ------------
Net increase in net assets resulting from operations....... 16,996,067 7,754,337
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................... (4,907,146) (3,815,429)
Net realized gain on investments............................ (3,293,707) ---
------------ ------------
Total distributions........................................ (8,200,853) (3,815,429)
------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTE 3)........................... 1,893,024 501,102
------------ ------------
CHANGE IN NET ASSETS.......................................... 10,688,238 4,440,010
Net assets at beginning of period............................. 119,263,879 114,823,869
------------ ------------
NET ASSETS AT END OF PERIOD................................... $129,952,117 $119,263,879
============ ============
Undistributed net investment income at end of period........ $ 358,935 $ 1,061,023
============ ============
--------------------------------------------------------------------------------
Notes to Financial Statements --------------------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) Organization - Ellsworth Fund Ltd. (the "Fund"), is registered under the
Investment Company Act of 1940 as a diversified, closed-end management
investment company.
(b) Use of Estimates - 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.
(c) Indemnification - Under the Fund's organizational documents, each trustee,
officer or other agent of the Fund (including the Fund's investment adviser) is
indemnified against certain liabilities that may arise out of performance of
their duties to the Fund. Additionally, in the normal course of business, the
Fund enters into contracts that contain a variety of indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. The risk of material loss as a result of such indemnification is
considered remote.
(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.
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48).
FIN 48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48
requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. The
interpretation will become effective for tax years beginning after December 15,
2006. Management believes the adoption of FIN 48 will have no impact to the
financial statements.
Page 11
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)---------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) 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. 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. Unlisted securities traded in
the over-the-counter market are valued using an evaluated quote provided by an
independent pricing service, or, if an evaluated quote is unavailable, such
securities are valued using prices received from dealers, provided that if the
dealer supplies both bid and asked prices, the price to be used is the mean of
the bid and asked prices. The independent pricing service derives an evaluated
quote by obtaining dealer quotes, analyzing the listed markets, reviewing
trade execution data and employing sensitivity analysis. Evaluated quotes may
also reflect appropriate factors such as individual characteristics of the
issue, communications with broker-dealers, and other market data. 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 pursuant to procedures approved by the Board of Trustees. Short-
term debt securities with original maturities of 60 days or less are valued at
amortized cost.
(f) 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 6 cents per
share for the year ended September 30, 2007. In addition, Federal tax
regulations require the Fund to reclassify realized gains on contingent payment
debt instruments to interest income. At September 30, 2007 there were
unrealized losses of approximately 4 cents per share on contingent payment debt
instruments.
(g) Change in Method of Accounting -- 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 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, 2003 and 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. These changes had no effect on previously
reported total net assets or total returns.
(h) 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 fiscal years ended September 30, 2007 and 2006
were as follows:
2007 2006
---------- ----------
Ordinary Income $4,907,146 $3,815,429
Net Realized Gain on Investments 3,293,707 ---
---------- ----------
8,200,853 3,815,429
========== ==========
Page 12
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)---------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
At September 30, 2007 the components of distributable net assets and federal
tax cost were as follows:
Unrealized appreciation $ 11,628,554
Unrealized depreciation (5,129,914)
------------
Net unrealized appreciation 6,498,640
Undistributed ordinary income 3,760,446
Undistributed capital gains 7,565,939
------------
Total distributable net assets 11,326,385
============
Cost for federal income tax purposes $122,579,479
(i) Market Risk -- It is the Fund's policy to invest at least 65% 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 of their underlying securities. Thus they expose the Fund to greater
downside risk than traditional convertible securities, but generally less than
that of the underlying common stock. The market value of those securities was
$35,995,051 at September 30, 2007, representing 27.7% of net assets.
(j) Accounting Pronouncements -- In September 2006, the Financial Accounting
Standards Board (FASB) issued Statement on Financial Accounting Standards
(SFAS) No. 157, "Fair Value Measurements." This standard establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value and requires additional disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. The changes to current generally accepted accounting
principles from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded
disclosures about fair value measurements. As of September 30, 2007, the Fund
does not believe the adoption of SFAS No. 157 will impact the financial
statement amounts, however, additional disclosures may be required about the
inputs used to develop the measurements and the effect of certain of the
measurements on changes in net assets for the period.
NOTE 2 - MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into an investment advisory agreement with Davis-Dinsmore
Management Company ("Davis-Dinsmore"). Pursuant to the investment advisory
agreement, Davis-Dinsmore provides the Fund with investment advice, office
space and facilities. Under the terms of the investment advisory agreement,
the Fund pays Davis-Dinsmore on the last day of each month an advisory fee
for such month computed at an annual rate of 0.75% of the first $100,000,000
and 0.50% of the excess over $100,000,000 of the Fund's net asset value in such
month.
The Fund, pursuant to an administrative services agreement with Davis-Dinsmore,
has agreed to pay Davis-Dinsmore for certain accounting and other
administrative services provided to the Fund. Under the administrative
services agreement, the Fund pays Davis-Dinsmore on the last day of each month
a fee for such month computed at an annual rate of 0.05% of the Fund's net
asset value in such month.
Certain officers and trustees of the Fund are officers and directors of Davis-
Dinsmore.
Page 13
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)---------------------------------------
NOTE 3 - PORTFOLIO ACTIVITY
At September 30, 2007 there were 12,659,098 shares of beneficial interest
outstanding, with a par value of $0.01 per share. During the years ended
September 30, 2007 and 2006, 230,015 shares and 66,814 shares were issued in
connection with reinvestment of dividends from net investment income, resulting
in an increase in paid-in capital of $1,893,024 and $501,102, respectively.
Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated $100,503,272 and $100,835,525, respectively, for the year ended
September 30, 2007.
A distribution of $0.887 per share, derived from net investment income of
$0.06, and net realized gains on investments of $0.827 was declared on October
15, 2007, payable November 21, 2007 to shareholders of record at the close of
business October 25, 2007.
Page 14
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING:
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------
2007 2006 2005 2004 2003
-------------------------------------------------------
OPERATING PERFORMANCE:
Net asset value, beginning of year........ $ 9.60 $ 9.29 $ 8.71 $ 8.58 $ 7.81
-------------------------------------------------------
Net investment income..................... 0.33 0.33 0.29 0.30(a) 0.32(a)
Adjustment for change in
amortization policy..................... -- -- -- (0.02) (0.01)
-------------------------------------------------------
Net investment income, as adjusted..... 0.33 0.33 0.29 0.28 0.31
-------------------------------------------------------
Net realized and unrealized gain (loss)... 1.00 0.29 0.59 0.35(a) 0.75(a)
Adjustment for change in
amortization policy..................... -- -- -- 0.02 0.01
-------------------------------------------------------
Net realized and unrealized
gain (loss), as adjusted............... 1.00 0.29 0.59 0.37 0.76
-------------------------------------------------------
Total from investment operations........ 1.33 0.62 0.88 0.65 1.07
-------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income...... (0.39) (0.31) (0.30) (0.32) (0.30)
Distributions from realized gains......... (0.27) -- -- -- --
-------------------------------------------------------
Total distributions..................... (0.66) (0.31) (0.30) (0.32) (0.30)
-------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Effect of rights offering................. -- -- -- (0.20) --
Capital share repurchases................. -- -- -- -- --
-------------------------------------------------------
Total capital share transactions........ -- -- -- (0.20) --
-------------------------------------------------------
Net asset value, end of year.............. $ 10.27 $ 9.60 $ 9.29 $ 8.71 $ 8.58
=======================================================
Market value, end of year................. $ 9.09 $ 8.20 $ 7.84 $ 7.95 $ 8.05
Total Net Asset Value Return (%)(b)....... 14.4 6.8 10.3 5.2 14.0
Total Investment Return (%)(c)............ 19.6 8.8 2.5 2.8 10.8
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands).... $129,952 $119,264 $114,824 $107,107 $89,801
Ratio of expenses to average net assets(%) 1.1 1.2 1.2 1.2 1.2
Ratio of net investment income to
average net assets (%).................. 3.4 3.6 3.4 3.2(d) 3.8(d)
Portfolio turnover rate (%)............... 84 60 82 70 86
--------------
(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 and 2003 reflect ratios adjusted for change in
amortization policy. Ratios previously reported for 2004 and 2003 were
3.4% and 3.9%, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
Page 15
--------------------------------------------------------------------------------
Report of Independent Registered------------------------------------------------
Public Accounting Firm
To the Shareholders and Board of Trustees of
Ellsworth Fund Ltd.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Ellsworth Fund Ltd. (the "Fund") as of
September 30, 2007, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the three years in
the period 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
audits. The financial highlights for each of the years in the two year period
ended September 30, 2004 have been audited by other auditors, whose report
dated October 29, 2004 expressed an unqualified opinion thereon.
We conducted our audits 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. The Fund is not required to have, nor were we engaged to perform
an audit of the Fund's internal control over financial reporting. Our audits
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, 2007,
by correspondence with the custodian and brokers. 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 audits provide 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
Ellsworth Fund Ltd. as of September 30, 2007, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and its financial highlights for each of
the three years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
November 12, 2007
Page 16
--------------------------------------------------------------------------------
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 as well as the Plan application 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 share 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 share 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 the 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 share
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 shares on that date.
Page 17
--------------------------------------------------------------------------------
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 Fund 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 shareholders or former shareholders 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 Fund's 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 of portfolio holdings for the first and
third fiscal quarters to shareholders, however the schedule is posted to the
Fund's 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 portfolio securities is 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, a non-profit national
trade association (www.cefa.com). Thomas H. Dinsmore is on the Executive Board
and is the president of the association. The association 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 Davis-
Dinsmore disclose Fund portfolio holdings to such broker in advance of the
public disclosure of such portfolio holdings. Davis-Dinsmore may make such
disclosure under the following conditions: (i) the specific purpose of the
disclosure is to assist Davis-Dinsmore in identifying potential investment
opportunities for the Fund; (ii) prior to the receipt of nonpublic 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 broker's own benefit, except in connection with the above
described purpose for which it was disclosed; (iii) Davis-Dinsmore shall keep
written records of its agreement with each broker to which it distributes
nonpublic portfolio holdings; and (iv) Davis-Dinsmore 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 18
--------------------------------------------------------------------------------
------------------------------------TRUSTEES------------------------------------
Each trustee is also a trustee of Bancroft Fund Ltd.(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 trustee oversees two investment companies in the Fund
Complex.
--------------------------------------------------------------------------------
Personal Principal Occupation(s) During Past Five Years;
Information Other Directorship(s)
--------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Gordon F. Ahalt Retired. Trustee of Bancroft and Helix Energy
65 Madison Avenue Solutions Group Inc. (an energy services
Suite 550 company).
Morristown, NJ 07960
Term expires 2010
Trustee since 1986
Age 79
--------------------------------------------------------------------------------
Elizabeth C. Bogan, Ph.D. Senior Lecturer in Economics at Princeton
65 Madison Avenue University; Trustee of Bancroft.
Suite 550
Morristown, NJ 07960
Term expires 2010
Trustee since 1986
Age 63
--------------------------------------------------------------------------------
Daniel D. Harding Since 2003, Senior Adviser with Harding Loevner
65 Madison Avenue Managament LP (an investment advisory firm).
Suite 550 Prior to 2003, co-founder and Chief Investment
Morristown, NJ 07960 Officer at Harding Loevner Management LP;
Term expires 2008 Trustee of Bancroft.
Trustee since 1986
Age 55
--------------------------------------------------------------------------------
Nicolas W. Platt Since August 2006, Managing Director, Rodman &
65 Madison Avenue Renshaw, LLC (a full-service investment bank).
Suite 550 Prior to August 2006, President of CNC-US (an
Morristown, NJ 07960 international consulting company). Prior to
Term expires 2010 January 2003, Senior Partner of Platt &
Trustee since 1997 Rickenbach (a public relations firm). Prior to
Age 54 May 2001, with WPP Group, UK and its public
relations subsidiaries, Ogilvy Public Relations,
Burson-Marsteller and Robinson Lehr Montgomery;
Trustee of Bancroft.
--------------------------------------------------------------------------------
INTERESTED TRUSTEES
Thomas H. Dinsmore, C.F.A. (1) Chairman and Chief Executive Officer of the
65 Madison Avenue Fund, Bancroft and Davis-Dinsmore; Trustee of
Suite 550 Bancroft and Director of Davis-Dinsmore.
Morristown, NJ 07960
Term expires 2008
Trustee since 1986
Chairman of the Board
since 1996
Age 54
--------------------------------------------------------------------------------
Jane D. O'Keeffe (1)
65 Madison Avenue President of the Fund, Bancroft and
Suite 550 Davis-Dinsmore; Trustee of Bancroft and
Morristown, NJ 07960 Director of Davis-Dinsmore.
Term expires 2009
Trustee since 1995
Age 51
--------------------------------------------------------------------------------
(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
--------------------------------------------------------------------------------
-------------------------------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 Trustees. Each officer holds office until the annual meeting to be
held in 2007, 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. Trustee, Chairman and Chief Executive Officer
(1,2,3) Trustee, Chairman of the Fund and Bancroft; Director, Chairman and
and Chief Executive Officer Chief Executive Officer of Davis-Dinsmore.
Officer since 1986
Age 54
--------------------------------------------------------------------------------
Jane D. O'Keeffe (1,2,3) Trustee and President of the Fund and Bancroft;
Trustee and President Director and President of Davis-Dinsmore.
Officer since 1994
Age 52
--------------------------------------------------------------------------------
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 50 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 60 from 1994 to 2002.
--------------------------------------------------------------------------------
Germaine M. Ortiz Vice President of the Fund, Bancroft and
Vice President Davis-Dinsmore.
Officer since 1996
Age 38
--------------------------------------------------------------------------------
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 46
--------------------------------------------------------------------------------
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 31
--------------------------------------------------------------------------------
(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 P. Lake is the cousin of Mr. Dinsmore and Ms. O'Keeffe.
(4) Mr. H. Tucker Lake, Jr. is the father of Mr. Joshua P. Lake.
PAGE 20
BOARD OF TRUSTEES INTERNET
GORDON F. AHALT www.ellsworthfund.com
ELIZABETH C. BOGAN, Ph.D. email: info@ellsworthfund.com
THOMAS H. DINSMORE, C.F.A.
DANIEL D. HARDING INVESTMENT ADVISER
JANE D. O'KEEFFE Davis-Dinsmore Management Company
NICOLAS W. PLATT 65 Madison Avenue, Suite 550
Morristown, NJ 07960
OFFICERS (973) 631-1177
THOMAS H. DINSMORE, C.F.A.
Chairman of the Board SHAREHOLDER SERVICES AND TRANSFER AGENT
and Chief Executive Officer American Stock Transfer & Trust Company
59 Maiden Lane
JANE D. O'KEEFFE New York, NY 10038
President (800) 937-5449
www.amstock.com
GARY I. LEVINE
Executive Vice President, BENEFICIAL SHARE LISTING
Chief Financial Officer and Secretary American Stock Exchange Symbol: ECF
H. TUCKER LAKE, JR. LEGAL COUNSEL
Vice President Ballard Spahr Andrews & Ingersoll LLP
GERMAINE M. ORTIZ INDEPENDENT ACCOUNTANTS
Vice President Tait, Weller & Baker LLP
MERCEDES A. PIERRE
Vice President and
Chief Compliance Officer
JOSHUA P. LAKE, C.T.P.
Treasurer and Assistant Secretary
JAMES A. DINSMORE
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 its own shares 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 FUND LTD.
65 MADISON AVENUE, SUITE 550
MORRISTOWN, NEW JERSEY 07960
www.ellsworthfund.com
[LOGO]
AMERICAN
STOCK EXCHANGE
--------------
LISTED
--------------
ECF(TM)
ITEM 2. CODE OF ETHICS.
The Board of Trustees of the Fund has adopted a code of ethics that applies to
the Fund's principal executive officer and principal financial officer. See
attached Exhibit EX-99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees determined that Trustee Daniel D. Harding, 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 Fund
by Tait, Weller & Baker LLP ("Tait Weller") for services rendered to the Fund
during the Fund's last two fiscal years ended September 30, 2007 and 2006.
Fiscal YE Audit Audit-Related All Other
September 30 Fees Fees (1) Tax Fees (2) Fees
------------- ------- ------------- ------------ ---------
2006 $31,000 $ 0 $2,600 $0
2007 $32,000 $ 0 $2,700 $0
(1) All Audit-Related Fees were pre-approved by the Fund's Audit Committee.
No Audit-Related Fees were approved by the Fund's Audit Committee pursuant
to section 2.01(c)(7)(i)(C) of Regulation S-X, which waives the
pre-approval requirement for certain de minimus fees.
(2) "Tax Fees" include those fees billed by Tait Weller in connection with
their review of the Fund's income tax returns for fiscal years 2006
and 2007. All Tax Fees were pre-approved by the Fund's Audit Committee.
No Tax Fees were approved by the Fund'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, 2006 and
September 30, 2007, Tait Weller did not provide any non-audit services
to the Fund, with the exception of the services for which the Fund paid the
Tax Fees noted above. Tait Weller did not provide any non-audit services to
the Fund's investment adviser, Davis-Dinsmore Management Company
("Davis-Dinsmore") or its affiliates or otherwise bill the Fund 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 Fund by its independent
registered public accountants before they are provided to the Fund. Such
pre-approval also includes the proposed fees to be charged by the independent
registered public accountants 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 Fund's independent registered public accountants to the Fund's investment
adviser if the engagement relates directly to the operations and financial
reporting of the Fund and if the Fund'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 Securities and Exchange Act of 1934 (the "Exchange
Act") and the members of such committee are:
ELIZABETH C. BOGAN, PH.D.
DANIEL D. HARDING
GORDON F. AHALT
(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 Fund Ltd.
Ellsworth Fund Ltd.
Davis-Dinsmore Management Company
Proxy Voting Guidelines
(Adopted April 16, 2007)
These proxy voting guidelines have been adopted by the Boards of Trustees of
Bancroft Fund Ltd. and Ellsworth Fund Ltd. (collectively, the "Funds"), as well
as by the Board of Directors of Davis-Dinsmore Management Company ("Davis-
Dinsmore").
The Boards of Trustees 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. Except as provided in Section E.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 or analyst 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 or analyst 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 trustees and the proxies will be voted in
accordance with direction received from the Audit Committee.
H. Amendments
1. Any proposed material amendment to these Guidelines shall be
submitted for review and approval to:
a. the Funds' Board of Trustees, including a majority of the
disinterested trustees; and
b. the Adviser's Board of Directors.
2. Non-material amendments to these Guidelines may be made by the Chair
of the Funds, upon consultation with counsel to the Funds and the Funds' Chief
Compliance Officer, and will be reported to the Funds' Board of Trustees at
their next scheduled in-person meeting.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) (1) Mr. Thomas H. Dinsmore, Chairman and Chief Executive Officer, serves as
the Portfolio Manager of the Registrant. He has served in that capacity since
1996. This information is as of November 28, 2007. Mr. Dinsmore usually
receives investment recommendations from a team of research analysts prior to
making investment decisions about transactions in the portfolio.
(2) The following table provides information relating to other (non-registrant)
accounts where this portfolio manager is primarily responsible for day-to-day
management as of September 30, 2007. The portfolio manager does not manage such
accounts or assets with performance-based advisory fees, or other pooled
investment vehicles.
Registered Investment Other Pooled Other
Portfolio Manager Companies Investment Vehicles Accounts
------------------ --------------------- -------------------- --------
Thomas H. Dinsmore Number: 1 n/a n/a
Assets: $136,074,308 n/a n/a
Mr. Dinsmore is the Portfolio Manager of one other account, Bancroft Fund Ltd.
(Bancroft), a registered investment company with total net assets of
$136,074,308 as of September 30, 2007. Mr. Dinsmore is Chairman and Chief
Executive Officer of Bancroft. This information is as of September 30, 2007.
The Registrant and Bancroft have similar investment objectives and strategies.
As a result, material conflicts of interest may arise between the two funds if
a security is not available in a sufficient amount to fill open orders for both
funds. To deal with these situations, the investment adviser for the
Registrant and Bancroft has adopted Trade Allocation Procedures (the
"Allocation Procedures"). The Allocation Procedures set forth a method to
allocate a partially filled order among the funds. Pursuant to the method, the
amount of shares that each fund purchases is allocated pro rata based on the
dollar amount of each fund's intended trade or, if the order is subject to a
minimum lot size, as closely as possibly to pro rata.
The Allocation Procedures permit the adviser to allocate an order in a way that
is different from the method set forth above if (i) each fund is treated fairly
and equitably and neither fund is given preferential treatment, and (ii) the
allocation is reviewed by the adviser's chief compliance officer.
(3) This information is as of September 30, 2007. The Portfolio Manager is
compensated by Davis-Dinsmore Management Company, the Adviser, through a three-
component plan, consisting of a fixed base salary, annual cash bonus, and
benefit retirement plan. His compensation is reviewed and approved by the
Adviser's Board of Directors annually. His compensation may be adjusted from
year to year based on the perception of the Adviser's Board of Directors of the
portfolio manager's overall performance and his managementresponsibilities. His
compensation is not based on (i) a formula specifically tied to the performance
of the Registrant or Bancroft, including performance against an index, or
(ii) the value of assets held in the Registrant's portfolio.
(4) As of September 30, 2007, Mr. Dinsmore's beneficial ownership in the
Registrant's shares was in the range of $100,001-$500,000.
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 trustees 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 November 28, 2007, an evaluation was performed under the supervision
and with the participation of the officers of Ellsworth Fund Ltd. (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 November 28, 2007, 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 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 Fund Ltd.
By: /s/Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: November 28, 2007
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 28, 2007
By: /s/Gary I. Levine
Gary I. Levine
Chief Financial Officer
(Principal Financial Officer)
Date: November 28, 2007