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 B. King, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
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: March 31, 2008
ITEM 1. REPORTS TO STOCKHOLDERS.
ELLSWORTH FUND LTD.
[ELLSWORTH LOGO APPEARS HERE]
2008 Semi-Annual Report
March 31, 2008
2008 Semi-Annual Report
March 31, 2008
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 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 March 31, 2008 with dividends reinvested
Calendar Annualized 10 Year
YTD 1 Year 5 Years 10 Years Volatility
------ ------ ------- -------- ----------
Ellsworth market price ................... (4.58)% 2.40% 7.18% 5.15% 7.62%
Ellsworth net asset value ................ (7.65) (1.46) 7.51 4.61 10.85
Merrill Lynch All Convertibles Index ..... (5.61) (3.74) 8.73 5.60 18.21
S&P 500 Index ............................ (9.45) (5.08) 11.30 3.50 18.95
Lehman Aggregate Bond Total Return Index . 2.17 7.67 25.12 79.71 3.85
The above data is from Bloomberg L.P. pricing service, with the exception of the
Lehman Aggregate Bond Total Return Index which is from Lipper, Inc. Closed-End
Fund Performance Analysis, dated March 31, 2008.
Ellsworth's performance in the table above has not been adjusted for the fiscal
2004 rights offering; net asset value dilution was 2.21%. 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. 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
---------- ------ ----- ------ ----- ----- -----
Jun. 07 $10.28 $9.73 $10.24 $9.18 $8.56 $9.14
Sep. 07 10.46 9.62 10.27 9.45 8.04 9.09
Dec. 07 10.49 8.99 9.32 9.38 7.85 8.16
Mar. 08 9.27 8.37 8.52 8.26 7.54 7.70
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Dividend Distributions (12 Months)
Record Payment Capital
Date Date Income Gains Total
-------- -------- ------ ------- ------
5/16/07 5/30/07 $0.080 $ -- $0.080
8/16/07 8/30/07 0.100 -- 0.100
10/25/07 11/21/07 0.060 0.827 0.887
2/14/08 2/28/08 0.090 -- 0.090
------ ------ ------
$0.330 $0.827 $1.157
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To Our Shareholders
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May 9, 2008
In recent years financial innovations and alternative investments have come to
provide many companies with a growing pool of capital available to meet their
needs. These newer capital sources have often displaced convertible securities
issued by companies that, in the past, would probably have used convertible
securities for their needs. With the disruption in the financial markets of the
last few months, however, these newer capital sources have become less
available. Consequently many companies have returned, in a big way, to the
convertible market. The return of these issuers is providing investors with
large issues from well-known companies.
Recent offerings have attractive yields and premiums, and are welcome additions
to the convertible universe. According to Merrill Lynch the convertible market
has grown to $321.3 billion from $313.1 billion at December 31, 2007. The
average weighted yield has moved up to 3.4% from under 3% last fall. The
average weighted premium to conversion value is 43%, while it had been about
35% last fall, and it had risen to 47% earlier this year. Finally, parity delta
(a measure of equity sensitivity) is at 63.8 according to Merrill Lynch. This
metric indicates that the convertible market is still sensitive to moves in the
stocks underlying these securities. We are convinced that this convertible
market provides many investment opportunities for our Fund.
Performance in the Fund's second fiscal quarter was enhanced by its exposure to
the Minerals and Mining, and Energy industries. Among the better performing
issues in the portfolio were McMoRan Exploration Co. (Energy), Oil States
International, Inc. (Energy) and St. Jude Medical, Inc. (Health Care).
Performance was held back by exposure to the Insurance, Computer Software and
Computer Hardware industries.
Ellsworth's market return, with dividends reinvested, outperformed the Merrill
Lynch All Convertibles Index (the "Index") over the three-month and one-year
periods ended March 31, 2008, while underperforming over the five- and ten-year
periods. The Fund's NAV, also with dividends reinvested, after adjustment for
fund expenses (the Index includes no expenses), and for the Fund's fiscal 2004
rights offer, outperformed over the one-, five- and ten-year periods. In
addition, for the ten-year period, the Fund's NAV and market volatility, as
measured by standard deviation, were substantially lower than that of the
Index. Many market professionals consider the volatility of past returns to be
a useful approximation of past levels of risk. A higher volatility level
equates to a higher measure of risk, and thus the Fund's excellent results were
achieved with less risk than that implied by the Index. 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 those of the equity markets with less volatility.
There are many leveraged closed-end funds that make use of an issue known as
Auction Rate Preferred Shares (ARPS). These shares are designed to have their
dividend rate set through a periodic auction, usually every 7 to 35 days. When
a successful auction
continued on the following page
Page 1
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To Our Shareholders (continued)
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occurs, holders who wish to liquidate their holdings may do so. If the auction
does not attract sufficient bids to clear the market, the remarketing agent
(usually a bank) would generally step in to fill the gap. This was the way these
shares worked with only an occasional auction failure for twenty years. During
the first calendar quarter of 2008 many agents refused to step up and so the
auctions failed. While this did not mean that the ARPS were in danger of
default, holders who wished to liquidate their positions could not do so. The
issuers had to pay a penalty rate until the auctions were successful or the ARPS
redeemed. Ellsworth has never issued any preferred shares and so has not been
subjected to the uncertainties created in the market by these recent events.
The results of the 2008 annual meeting of shareholders are shown in the
Miscellaneous Notes section of this report. We thank you for your support. At
its April meeting, the Board of Trustees declared a dividend of $0.09 per share.
The dividend consists of undistributed net investment income and will be payable
on May 29, 2008 to shareholders of record on May 15, 2008.
/s/ Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board
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Major Portfolio Changes by underlying common stock
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Six months ended March 31, 2008
ADDITIONS REDUCTIONS
ADC Telecommunications, Inc. AAR Corp.
Avery Dennison Corp. Cameron International Corp.
Corning, Inc. Corning, Inc.
Equinix, Inc. Gannett Co., Inc.
General Mills, Inc. Johnson & Johnson
Morgans Hotel Group Archer Daniels Midland Company
Mylan Inc. Nabors Industries Ltd.
Nabors Industries Ltd. Newmont Mining Corp.
St. Jude Medical, Inc. PetroQuest Energy, Inc.
The Great Atlantic & Pacific Tea Company, Inc. St. Jude Medical, Inc.
Wachovia Corporation The Walt Disney Company
Washington Mutual, Inc. U.S. Bancorp
Page 2
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Largest Investment Holdings by underlying common stock
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Value % Total
(Note 1) Net Assets
----------- ----------
Prudential Financial, Inc.......................................... $ 3,864,600 3.4%
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.
Bristol-Myers Squibb Co............................................ 2,988,900 2.7
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.
Freeport-McMoRan Copper and Gold, Inc.............................. 2,809,000 2.5
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................................................ 2,670,000 2.4
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.
Chesapeake Energy Corp............................................. 2,657,568 2.4
Cheasapeake 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.
Companhia Vale do Rio Doce......................................... 2,655,000 2.4
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.)
New York Community Bancorp, Inc.................................... 2,583,613 2.3
New York Community Bancorp is a multi-bank holding company that
offers a full range of traditional and non-traditional products
and services.
St. Jude Medical, Inc.............................................. 2,569,875 2.3
St. Jude Medical develops, manufactures and distributes medical
devices for the worldwide cardiovascular market. The company
serves patients and health care customers with products and
services including heart valves, cardiac rhythm management
systems and cardiovascular devices.
Oil States International, Inc...................................... 2,083,563 1.9
Oil States provides specialty products and services to oil and
gas drilling and production companies. The company supplies
connection technology for offshore oil and gas development and
production, distributes tubular goods, and furnishes hydraulic
work over and well control services.
MetLife, Inc....................................................... 2,079,000 1.8
MetLife provides insurance and financial services to a range ----------- -----
of individual and institutional customers.
Total.............................................................. $26,961,119 24.1%
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Page 3
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Major Industry Exposure
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Banking/Savings and Loan 4.0%
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Computer Hardware 5.5%
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Consumer Goods 5.3%
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Energy 14.0%
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Health Care 3.7%
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-----------------------------------
Insurance 8.6%
-----------------------------------
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Minerals and Mining 5.7%
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Pharmaceuticals 9.7%
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Semiconductors 6.4%
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Short-Term Securities 10.5%
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Telecommunications 5.9%
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Diversification of Assets
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% Total Net Assets
--------------------------
Six Months Year
Ended Ended
Value March 31, September 30,
(Note 1) 2008 2007
------------ ---------- -------------
Aerospace and Defense.............. $ 3,179,375 2.8% 4.0%
Agriculture........................ -- -- 1.5
Banking/Savings and Loan........... 4,455,863 4.0 6.0
Chemicals.......................... 2,024,400 1.8 2.7
Computer Hardware.................. 6,199,350 5.5 5.2
Computer Software.................. 3,272,600 2.9 2.9
Consumer Goods..................... 5,926,100 5.3 3.9
Energy............................. 15,693,531 14.0 14.5
Finance............................ -- -- 1.0
Financial Services................. 1,702,500 1.5 2.6
Foods.............................. 3,152,125 2.8 0.8
Health Care........................ 4,189,375 3.7 4.4
Insurance.......................... 9,579,321 8.6 9.3
Media and Entertainment............ 1,072,500 1.0 3.9
Minerals and Mining................ 6,398,470 5.7 5.6
Multi-Industry..................... 3,155,625 2.8 3.0
Pharmaceuticals.................... 10,873,660 9.7 9.3
Real Estate........................ 953,750 0.9 0.8
Retail............................. 1,200,000 1.1 2.1
Semiconductors..................... 7,196,250 6.4 7.0
Telecommunications................. 6,583,750 5.9 4.8
Transportation..................... 1,907,500 1.7 1.5
Travel and Leisure................. 803,750 0.7 --
Short-Term Securities.............. 11,796,722 10.5 2.5
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Total Investments.................. 111,316,517 99.3 99.3
Other Assets, Net of Liabilities... 778,163 0.7 0.7
------------ ---------- -------------
Total Net Assets................... $112,094,680 100.0% 100.0%
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Page 4
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Portfolio of Investments March 31, 2008 (unaudited)
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Principal Value
Amount (Note 1)
----------- ------------
CONVERTIBLE BONDS AND NOTES -- 52.7%
Aerospace and Defense -- 2.6%
$ 1,000,000 Alliant Techsystems Inc. 2.75%, due 2011 cv. sr. sub. notes (B1). $ 1,242,500
1,500,000 DRS Technologies, Inc. 2%, due 2026 cv. sr. notes (B1)...........
(Acquired 01/30/06 - 05/16/07; Cost $1,672,355) (1,2)........... 1,696,875
------------
2,939,375
------------
Computer Hardware -- 5.5%
1,000,000 C&D Technologies, Inc. 5.25%, due 2025 cv. sr. notes (NR)........ 952,500
2,000,000 Credit Suisse, New York Branch 12.90%, due 2008
equity-linked notes (NR)
(exchangeable for Corning Inc. common stock).................... 1,995,600
1,000,000 EMC Corp. 1.75%, due 2011 cv. sr. notes (BBB+)................... 1,181,250
1,000,000 EMC Corp. 1.75%, due 2013 cv. sr. notes (BBB+)................... 1,178,750
1,000,000 Richardson Electronics, Ltd. 8%, due 2011
cv. sr. sub. notes (NR)......................................... 891,250
------------
6,199,350
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Computer Software -- 2.9%
1,000,000 Blackboard Inc. 3.25%, due 2027 cv. sr. notes (B-)............... 957,500
1,000,000 GSI Commerce, Inc. 2.5%, due 2027 cv. sr. notes (NR)............. 768,750
1,500,000 Lehman Brothers Holdings Inc. 1%, due 2009 medium-term notes (A1)
(performance linked to Microsoft Corp. common stock) (1)........ 1,546,350
------------
3,272,600
------------
Consumer Goods -- 2.6%
1,500,000 Chattem, Inc. 1.625%, due 2014 cv. sr. notes (NR)................ 1,629,375
750,000 Church & Dwight Co., Inc. 5.25%, due 2033 cv. sr. deb. (Ba1)..... 1,331,250
------------
2,960,625
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Energy -- 4.3%
1,000,000 Canadian Solar Inc. 6%, due 2017 cv. sr. notes (NR)
(Acquired 12/04/07; Cost $1,000,000) (2)........................ 1,076,250
1,500,000 Covanta Holding Corp. 1%, due 2027 sr. cv. deb. (B1) (1)......... 1,668,750
1,325,000 Oil States International, Inc. 2.375%, due 2025
contingent cv. sr. notes (NR)................................... 2,083,563
------------
4,828,563
------------
Financial Services -- 1.5%
2,000,000 Euronet Worldwide, Inc. 3.50%, due 2025 cv. deb. (B+) (1)........ 1,702,500
------------
Foods -- 1.8%
500,000 The Great Atlantic & Pacific Tea Company, Inc. 5.125%,
due 2011 cv. sr. notes (Caa1)................................... 496,250
1,500,000 The Great Atlantic & Pacific Tea Company, Inc. 6.75%,
due 2012 cv. sr. notes (Caa1)................................... 1,475,625
------------
1,971,875
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Health Care -- 2.4%
900,000 Omnicare, Inc. 3.25%, due 2035 cv. sr. deb. (B2) (1)............. 600,750
1,000,000 SonoSite Inc. 3.75%, due 2014 cv. sr. notes (NR)................. 1,018,750
1,000,000 St. Jude Medical, Inc. 1.22%, due 2008 cv. sr. deb. (BBB+)....... 1,018,750
------------
2,638,250
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Insurance -- 3.4%
3,000,000 Prudential Financial, Inc. floating rate, due 2036
cv. sr. notes (A3).............................................. 2,919,600
1,000,000 Prudential Financial, Inc. floating rate, due 2037
cv. sr. notes (A3)
(Acquired 12/07/07; Cost $988,750) (2).......................... 945,000
------------
3,864,600
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Page 5
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Portfolio of Investments March 31, 2008 (continued)
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Principal Value
Amount (Note 1)
----------- ------------
CONVERTIBLE BONDS AND NOTES -- continued
Media and Entertainment -- 1.0%
$ 1,000,000 The Walt Disney Company 2.125%, due 2023 cv. sr. notes (A2)...... $ 1,072,500
------------
Multi-Industry -- 2.8%
750,000 Diversa Corp. 5.5%, due 2027 cv. sr. notes (NR)
(exchangeable for Verenium Corp. common stock).................. 485,625
3,000,000 LSB Industries, Inc. 5.5%, due 2012 cv. sr. sub. deb. (NR)
(Acquired 06/28/07 - 09/13/07; Cost $3,037,813) (2)............. 2,670,000
------------
3,155,625
------------
Pharmaceuticals -- 6.7%
3,000,000 Bristol-Myers Squibb Co. floating rate, due 2023
cv. sr. deb. (A2)............................................... 2,988,900
1,000,000 Mylan Inc. 1.25%, due 2012 sr. cv. notes (B-).................... 836,250
1,500,000 Teva Pharmaceutical Finance Co. B.V. 1.75%, due 2026
cv. sr. deb. (Baa2).............................................
(exchangeable for Teva Pharmaceutical Industries Ltd. ADR)...... 1,704,375
2,000,000 Wyeth floating rate, due 2024 cv. sr. deb. (A3).................. 2,015,940
------------
7,545,465
------------
Real Estate -- 0.9%
1,000,000 ProLogis 2.25%, due 2037 cv. sr. notes (BBB+)
(Acquired 03/20/07 - 04/16/07; Cost $982,038) (2)............... 953,750
------------
Semiconductors -- 6.4%
2,000,000 Agere Systems Inc. 6.5%, due 2009 cv. sub. notes (BB+)
(exchangeable for LSI Corp.).................................... 2,030,000
1,000,000 Cypress Semiconductor Corp. 1%, due 2009 cv. sr. notes (NR)...... 1,191,250
2,000,000 Fairchild Semiconductor Corp. 5%, due 2008 cv. sr. sub. notes (B)
(exchangeable into Fairchild Semiconductor International, Inc.
common stock).................................................. 2,002,500
2,000,000 Intel Corp. 2.95%, due 2035 jr. sub. cv. deb. (A-) (1)........... 1,972,500
------------
7,196,250
------------
Telecommunications -- 5.4%
500,000 ADC Telecommunications Inc. 3.50%, due 2015 cv. sub. notes (NR).. 450,000
1,000,000 ADC Telecommunications Inc. 3.50%, due 2017 cv. sub. notes (NR).. 886,250
1,000,000 Anixter International Inc. 1%, due 2013 sr. cv. notes (BB-)...... 1,173,750
2,000,000 Equinix, Inc. 2.5%, due 2012 cv. sub. notes (CCC+)............... 1,802,500
1,000,000 General Cable Corp. 1%, due 2012 sr. cv. notes (B1).............. 991,250
1,000,000 SAVVIS, Inc. 3%, due 2012 cv. sr. notes (NR)..................... 757,500
------------
6,061,250
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Transportation -- 1.7%
2,000,000 ExpressJet Holdings, Inc. 4.25%, due 2023 cv. notes (NR)......... 1,907,500
------------
Travel and Leisure -- 0.7%
1,000,000 Morgans Hotel Group 2.375%, due 2014 sr. sub. cv notes (NR)
(Acquired 10/11/07 - 10/12/07; Cost $1,026,250) (2)............. 803,750
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TOTAL CONVERTIBLE BONDS AND NOTES................................ 59,073,828
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Page 6
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Portfolio of Investments March 31, 2008 (continued)
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Principal
Amount Value
or Shares (Note 1)
----------- ------------
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)...................... $ 1,200,000
------------
CONVERTIBLE PREFERRED STOCKS -- 8.4%
Aerospace and Defense -- 0.2%
40,000 shs Applied Energetics, Inc. 6.5% series A redeemable cv. pfd. (NR)
(Acquired 10/27/05; Cost $1,000,000) (2)........................ 240,000
------------
Banking/Savings and Loan -- 3.5%
54,178 shs New York Community Bancorp, Inc. 6% BONUSES units (Baa1)......... 2,583,613
18,000 shs Sovereign Capital Trust IV 4.375% PIERS (Baa1)
(exchangeable for Sovereign Bancorp, Inc. common stock) (1)..... 551,250
1,100 shs Washington Mutual, Inc. 7.75%
series R non-cumulative perpetual cv. pfd. (Ba2)................ 781,000
------------
3,915,863
------------
Chemicals -- 1.8%
40,000 shs Celanese Corp. 4.25% cv. perpetual pfd. (NR)..................... 2,024,400
------------
Energy -- 2.4%
22,800 shs Chesapeake Energy Corp. 4.5% cum. cv. pfd. (NR).................. 2,657,568
------------
Telecommunications -- 0.5%
100 shs Medis Technologies Ltd. 7.25% series A
cum. cv. perpetual pfd. (NR).................................... 522,500
------------
TOTAL CONVERTIBLE PREFERRED STOCKS............................... 9,360,331
------------
MANDATORY CONVERTIBLE SECURITIES -- 24.4% (4)
Consumer Goods -- 2.6%
30,000 shs Avery Dennison Corp. 7.875%, due 11/15/10
mandatory cv. pfd. (BBB-)....................................... 1,473,600
1,750 shs The Stanley Works floating rate equity units, due 05/17/12 (A2).. 1,491,875
------------
2,965,475
------------
Energy -- 7.3%
30,000 shs Bristow Group Inc. 5.5%, due 09/15/09 mandatory cv. pfd. (B)..... 1,996,875
10,000 shs McMoRan Exploration Co. 6.75%, due 11/15/10
mandatory cv. pfd. (NR)......................................... 1,196,400
2,000 shs Merrill Lynch & Co., Inc. 5.4%, due 09/27/10 PRIDES (A+)
(linked to the performance of ConocoPhillips common stock)...... 1,688,620
41,135 shs Merrill Lynch & Co., Inc. 12%, due 06/27/08
capped appreciation notes (NR)
(linked to the performance of Tesoro Corp. common stock)........ 1,278,681
63,050 shs NATIXIS Financial Products Inc. 7.05%, due 12/05/08
mandatory trigger exchangeable notes (NR)
(exchangeable for Nabors Industries, Inc. common stock)
(Acquired 02/29/08; Cost $1,999,946) (2)........................ 2,046,824
------------
8,207,400
------------
Page 7
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Portfolio of Investments March 31, 2008 (continued)
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Value
Shares (Note 1)
----------- ------------
MANDATORY CONVERTIBLE SECURITIES -- continued
Foods -- 1.1%
50,000 shs Lehman Brothers Holdings Inc. 6%, due 10/12/10 PIES (A1)
(exchangeable for General Mills, Inc. common stock)............. $ 1,180,250
------------
Health Care -- 1.4%
33,950 shs NATIXIS Financial Products Inc. 9%, due 04/22/08
mandatory trigger exchangeable notes (NR)
(exchangeable for St. Jude Medical, Inc. common stock)
(Acquired 10/17/07; Cost $1,533,182) (2)........................ 1,551,125
------------
Insurance -- 5.1%
4,000 shs Alleghany Corp. 5.75%, due 06/15/09 mandatory cv. pfd. (BB+)..... 1,259,496
75,000 shs Citigroup Funding Inc. variable rate, due 09/27/08
exchangeable notes (Aa3)
(exchangeable for Genworth Financial, Inc. common stock)........ 1,731,000
70,000 shs MetLife, Inc. 6.375%, due 08/15/08 common equity units (BBB+).... 2,079,000
52,500 shs XL Capital Ltd. 7%, due 02/15/09 equity security units........... 645,225
------------
5,714,721
------------
Minerals and Mining -- 4.9%
20,000 shs Freeport-McMoRan Copper & Gold Inc. 6.75%, due 05/01/10
mandatory cv. pfd. (B+)......................................... 2,809,000
30,000 shs Vale Capital Ltd. 5.5%, due 06/15/10
mandatory convertible notes (NR)
(exchangeable for ADSs representing
Companhia Vale do Rio Doce common stock)....................... 1,993,125
10,000 shs Vale Capital Ltd. 5.5%, due 06/15/10
mandatory convertible notes (NR)
(exchangeable for ADSs representing
Companhia Vale do Rio Doce Preferred Shares)................... 661,875
------------
5,464,000
------------
Pharmaceuticals -- 2.1%
1,000 shs Mylan Inc. 6.5%, due 11/15/10 mandatory cv. pfd. (B-)............ 867,500
9,500 shs Schering-Plough Corp. 6%, due 08/13/10
mandatory cv. pfd. (Baa3)....................................... 1,455,210
------------
2,322,710
------------
TOTAL MANDATORY CONVERTIBLE SECURITIES (4)....................... 27,405,681
------------
COMMON STOCKS -- 2.2%
Banking/Savings and Loan -- 0.5%
20,000 shs Wachovia Corp.................................................... 540,000
------------
Minerals and Mining -- 0.8%
9,000 shs Southern Copper Corp............................................. 934,470
------------
Pharmaceuticals -- 0.9%
15,500 shs Johnson & Johnson................................................ 1,005,485
------------
TOTAL COMMON STOCKS.............................................. 2,479,955
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Page 8
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Portfolio of Investments March 31, 2008 (continued)
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Principal Value
Amount (Note 1)
----------- ------------
SHORT-TERM SECURITIES -- 10.5%
Commercial Paper -- 10.5%
$11,800,000 American Express Credit Corp. 2%, due 04/01/08 (P1).............. $ 11,796,722
------------
Total Convertible Bonds and Notes -- 52.7%....................... $ 59,073,828
Total Corporate Bonds and Notes -- 1.1%.......................... 1,200,000
Total Convertible Preferred Stocks -- 8.4%....................... 9,360,331
Total Mandatory Convertible Securities -- 24.4%.................. 27,405,681
Total Common Stocks -- 2.2%...................................... 2,479,955
Total Short-Term Securities -- 10.5%............................. 11,796,722
------------
Total Investments -- 99.3%....................................... 111,316,517
Other assets and liabilities, net -- 0.7%........................ 778,163
------------
Total Net Assets -- 100.0%....................................... $112,094,680
============
(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 Regulation D
transaction). The security may be resold only pursuant to an exemption
from registration under the Securities Act of 1933, typically to
qualified institutional buyers. The Fund generally has no rights to
demand registration of these securities. The aggregate market value of
these securities at March 31, 2008 was $13,183,574 which represented
11.8% 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 fair value of this
security represented 1.1% 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.
Investment Abbreviations:
ADR American Depositary Receipts.
ADS American Depositary Shares.
BONUSES Bifurcated Option Note Unit Securities.
PIES Premium Income Exchangeable Securities.
PIERS Preferred Income Equity Redeemable Securities.
PRIDES Preferred Redeemable Income Dividend Equity 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 4
A 19
Baa 16
Ba 3
B 22
Caa 4
NR 30
Common Stocks 2
See accompanying notes to financial statements
Page 9
--------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited)
--------------------------------------------------------------------------------
March 31, 2008
--------------
Assets:
Investments at value (cost $116,039,555)(Note 1)............. $ 111,316,517
Cash......................................................... 322,621
Receivable for securities sold............................... 16,711
Dividends and interest receivable............................ 565,324
Other assets................................................. 17,616
--------------
Total assets............................................. 112,238,789
--------------
Liabilities:
Accrued management fee (Note 2).............................. 75,499
Accrued expenses............................................. 8,610
Other liabilities............................................ 60,000
--------------
Total liabilities........................................ 144,109
--------------
Net Assets...................................................... $ 112,094,680
==============
Net Assets consist of:
Capital shares (Note 3)...................................... $ 131,533
Additional paid-in capital................................... 116,017,978
Undistributed net investment income.......................... 812,649
Accumulated net realized loss from investment transactions... (144,442)
Unrealized depreciation on investments....................... (4,723,038)
--------------
Net Assets...................................................... $ 112,094,680
==============
Net asset value per share ($112,094,680 /
13,153,252 outstanding shares)................................ $ 8.52
==============
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
For the Six Months Ended March 31, 2008
Investment Income (Note 1):
Interest...................................................... $ 1,676,326
Dividends..................................................... 1,377,450
-------------
Total Income................................................ 3,053,776
-------------
Expenses (Note 2):
Management fee................................................ 423,790
Custodian..................................................... 5,862
Transfer agent................................................ 12,427
Audit fees.................................................... 17,487
Legal fees.................................................... 36,922
Trustees' fees................................................ 49,375
Reports to shareholders....................................... 33,035
Administrative services fees.................................. 29,956
Other......................................................... 47,869
-------------
Total Expenses.................................................. 656,723
-------------
Net Investment Income........................................... 2,397,053
-------------
Realized and Unrealized Gain on Investments:
Net realized loss from investment transactions................ (554,972)
Net change in unrealized appreciation of investments.......... (11,309,524)
-------------
Net loss on investments....................................... (11,864,496)
-------------
Net Decrease in Net Assets Resulting from Operations............ $ (9,467,443)
=============
See accompanying notes to financial statements
Page 10
---------------------------------------------------------------------------------------------------
Statement of Changes in Net Assets
---------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
March 31, 2008(a) September 30, 2007
----------------- ------------------
Change in net assets from operations:
Net investment income......................................... $ 2,397,053 $ 4,205,058
Net realized gain from investment transactions................ (554,972) 10,457,847
Net change in unrealized appreciation of investments.......... (11,309,524) 2,333,162
------------ ------------
Net change in net assets resulting from operations.......... (9,467,443) 16,996,067
------------ ------------
Distributions to shareholders from:
Net investment income......................................... (1,943,339) (4,907,146)
Net realized gain on investments.............................. (10,469,074) (3,293,707)
------------ ------------
Total distributions......................................... (12,412,413) (8,200,853)
------------ ------------
Capital share transaction (Note 3).............................. 4,022,419 1,893,024
------------ ------------
Change in net assets............................................ (17,857,437) 10,688,238
Net assets at beginning of period............................... 129,952,117 119,263,879
------------ ------------
Net assets at end of period..................................... $112,094,680 $129,952,117
============ ============
Undistributed net investment income at end of period.......... $ 812,649 $ 358,935
============ ============
___________________
(a) Unaudited.
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
--------------------------------------------------------------------------------
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
became 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,
supplied by an independent pricing service, 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 the 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 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 5 cents per
share for the six months ended March 31, 2008. In addition, Federal tax
regulations require the Fund to reclassify realized gains on contingent payment
debt instruments to interest income. At March 31, 2008 there were unrealized
losses of approximately 14 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 March 31, 2008 unrealized appreciation (depreciation) of investment
securities on a tax basis were as follows:
Unrealized appreciation $ 6,165,115
Unrealized depreciation (11,004,045)
------------
Net unrealized depreciation (4,838,930)
Cost for federal income tax purposes $116,155,447
(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
$27,405,681 at March 31, 2008, representing 24.4% 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 March 31, 2008, 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.
NOTE 3 - PORTFOLIO ACTIVITY
At March 31, 2008 there were 13,153,252 shares of beneficial interest
outstanding, with a par value of $0.01 per share. During the six months ended
March 31, 2008, 494,154 were issued in connection with reinvestment of dividends
from net investment income, resulting in an increase in paid-in capital of
$4,022,419.
Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated $27,682,840 and $42,488,427, respectively, for the six months ended
March 31, 2008.
A distribution of $0.09 per share, derived from net investment income was
declared on April 14, 2008, payable May 29, 2008 to shareholders of record at
the close of business May 15, 2008.
Page 13
---------------------------------------------------------------------------------------------------
Financial Highlights Selected data for a share of beneficial interest outstanding:
---------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended September 30,
March 31, -------------------------------------------------------
2008(a) 2007 2006 2005 2004 2003
------------------------------------------------------------------
Net asset value,
beginning of period.......... $ 10.27 $ 9.60 $ 9.29 $ 8.71 $ 8.58 $ 7.81
------------------------------------------------------------------
Net investment income.......... 0.18 0.33 0.33 0.29 0.30(b) 0.32(b)
Adjustment for change in
amortization policy.......... -- -- -- -- (0.02) (0.01)
------------------------------------------------------------------
Net investment income,
as adjusted.............. 0.18 0.33 0.33 0.29 0.28 0.31
------------------------------------------------------------------
Net realized and unrealized
gain (loss)................. (0.95) 1.00 0.29 0.59 0.35(b) 0.75(b)
Adjustment for change in
amortization policy.......... -- -- -- -- 0.02 0.01
------------------------------------------------------------------
Net realized and unrealized
gain (loss), as adjusted... (0.95) 1.00 0.29 0.59 0.37 0.76
------------------------------------------------------------------
Total from investment
operations................ (0.77) 1.33 0.62 0.88 0.65 1.07
------------------------------------------------------------------
Less Distributions:
Dividends from net
investment income............ (0.15) (0.39) (0.31) (0.30) (0.32) (0.30)
Distributions from
realized gains............... (0.83) (0.27) -- -- -- --
------------------------------------------------------------------
Total distributions.......... (0.98) (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 period. $ 8.52 $ 10.27 $ 9.60 $ 9.29 $ 8.71 $ 8.58
==================================================================
Market value, end of period.... $ 7.70 $ 9.09 $ 8.20 $ 7.84 $ 7.95 $ 8.05
Total Net Asset Value
Return (%)(c)................ (8.2) 14.4 6.8 10.3 5.2 14.0
Total Investment Return (%)(d). (5.3) 19.6 8.8 2.5 2.8 10.8
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $112,095 $129,952 $119,264 $114,824 $107,107 $89,801
Ratio of expenses to
average net assets (%)....... 1.1(e) 1.1 1.2 1.2 1.2 1.2
Ratio of net investment
income to average net
assets (%)................... 3.9(e) 3.4 3.6 3.4 3.2(f) 3.8(f)
Portfolio turnover rate (%).... 24 84 60 82 70 86
___________________
(a) Unaudited.
(b) As previously reported. See Note 1(g).
(c) Assumes valuation of the Fund's shares, and reinvestment of dividends, at
net asset values.
(d) Assumes valuation of the Fund's shares at market price and reinvestment of
dividends at actual reinvestment price.
(e) Annualized.
(f) 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 14
--------------------------------------------------------------------------------
BOARD APPROVAL OF ADVISORY CONTRACT
--------------------------------------------------------------------------------
The independent trustees of Ellsworth renewed the advisory contract with
Davis-Dinsmore Management Company in October 2007. The following are the
material factors and conclusions that formed the basis for that approval.
--------------------------------------------------------------------------------
The nature and extent of the advisory services provided by Davis-Dinsmore.
The Board (the "Board") of the Fund and the independent trustees reviewed the
services to be provided by Davis-Dinsmore under the Advisory Agreement. The
Board noted that under the Advisory Agreement, Davis-Dinsmore would supervise
all aspects of the Fund's operations including the investment and
reinvestment of cash, securities or other properties comprising the Fund's
assets. In this regard, the Board noted that under the Advisory Agreement it
is Davis-Dinsmore's responsibility to, among other things, (a) supervise all
aspects of the operations of the Fund; (b) obtain and evaluate pertinent
information about significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether affecting the economy
generally or any industry or the Fund or any issuer of securities held or to
be purchased by the Fund; (c) determine which issuers and securities shall be
represented in the Fund's investment portfolio and regularly report thereon
to the Board; (d) place orders for the purchase and sale of securities for
the Fund; and (e) take, on behalf of the Fund, such other action as may be
necessary or appropriate in connection with the above. Based on such review,
both the Board and the independent trustees concluded that the range of
services to be provided by Davis-Dinsmore under the Advisory Agreement was
appropriate and that Davis-Dinsmore currently is providing services in
accordance with the terms of the Advisory Agreement.
The quality of services provided by Davis-Dinsmore. In reviewing the
qualifications of Davis-Dinsmore to provide investment advisory services,
both the Board and the independent trustees reviewed the credentials and
experience of Davis-Dinsmore's investment personnel who will provide
investment advisory services to the Fund, and considered Davis-Dinsmore's
(i) portfolio and product review process, particularly its adherence to the
Fund's investment mandate, (ii) compliance function and its culture of
compliance, (iii) use of technology, including the use, from time to time, of
direct satellite links to issuer interviews and conferences, (iv) investment
research operations (which involves meetings with issuers and analysts,
investment seminars and field trips to issuers, and the review of: (a)
financial newspapers, industry literature, publications and periodicals, (b)
research materials prepared by others, (c) issuer annual reports and
prospectuses, and (d) issuer press releases) and trading operations (which
involves computerized execution of orders), and (v) focus on providing
quality services while keeping the Fund's fees and expenses as low as
possible. The Board and the independent trustees also took into
consideration the presentations made by Davis-Dinsmore at prior Board
meetings pertaining to its management of the Fund. Based on the review of
these and other factors, both the Board and the independent trustees
determined and concluded that the quality of services to be provided by
Davis-Dinsmore was appropriate and that Davis-Dinsmore currently is providing
satisfactory services to the Fund in accordance with the terms of the
Advisory Agreement.
The performance of the Fund relative to comparable funds. Both the Board and
the independent trustees reviewed the performance of the Fund (at net asset
value) during the past one, three, five and ten years ended September 30,
2007 against the performance of other closed-end funds categorized to be in
the Fund's peer group by Lipper, Inc. Both the Board and the independent
trustees noted that the Fund's performance for the three, five and ten year
periods was below the average performance of all closed-end funds in the peer
group, but was above the average performance of such funds for the one year
period. In evaluating the Fund's performance against other funds in its peer
group, the Board and the independent trustees took into account the fact that
many of the Fund's competitors engage in leverage, which has increased their
returns, but that the Fund does not engage in leverage. In addition,
Page 15
--------------------------------------------------------------------------------
BOARD APPROVAL OF ADVISORY CONTRACT (continued)
--------------------------------------------------------------------------------
the Board and the independent trustees recognized that many of the Fund's
competitors have a higher percentage of their assets invested in securities with
lower credit quality than does the Fund, and that such securities have performed
better than higher quality securities in recent years. The Board and the
independent trustees also noted that portfolio manager's investment approach
is to make equity investments utilizing convertible securities to provide a
total return similar to that of equity securities, but with lower volatility
and higher income. The Board and the independent trustees recognized that
only three of the funds in the Fund's peer group followed a similar
investment approach. Because of the differences in how funds in the Fund's
peer group are managed, the Board and the independent trustees concluded that
they should consider the performance of the Fund against appropriate indices
as a more relevant factor in assessing the performance of the Fund.
The performance of the Fund relative to indices. Both the Board and the
independent trustees reviewed the performance of the Fund (at net asset
value) during the past one, three, five and ten years ended September 30,
2007 against the performance of the Merrill Lynch All Convertibles Index and
Merrill Lynch Investment Grade Convertibles Index. Both the Board and the
independent trustees noted that, for the five and ten year periods, the
Fund's performance was below the Merrill Lynch All Convertibles Index but was
above such Index for the one and three year periods. The Board and the
independent trustees also considered the fact that currently a majority of
the securities held by the Fund have an investment grade rating or are of
comparable quality to securities with investment grade ratings, and noted
that, for the one, three, five and ten year periods, the Fund's performance
was above the Merrill Lynch Investment Grade Convertibles Index. Based on
this review and taking into account all of the other factors that the Board
and the independent trustees considered in determining whether to continue
the Advisory Agreement, the Board and the independent trustees concluded that
no changes should be made to the Fund's investment objective or policies, or
the portfolio management team.
Meetings with the Fund's portfolio manager and investment personnel. Both
the Board and the independent trustees noted that they meet regularly with
the Fund's portfolio manager and investment personnel, and believe that such
individuals are competent and able to carry out their responsibilities under
the Advisory Agreement.
Overall performance of Davis-Dinsmore. After considering the overall
performance of Davis-Dinsmore in providing investment advisory and
administrative services to the Fund, both the Board and the independent
trustees concluded that such performance was satisfactory.
Fees relative to those of clients of Davis-Dinsmore with comparable
investment strategies. Both the Board and the independent trustees noted
that the Fund and Bancroft Fund Ltd. (the "Funds") are the only clients of
Davis-Dinsmore, and that the advisory fee rates for the Funds are the same.
Both the Board and the independent trustees concluded that, because the fee
rates are the same for the Funds, the current advisory fee rate of the Fund
was fair as compared to the rate for Bancroft Fund Ltd.
Fees relative to those of comparable funds with other advisors. After
reviewing the advisory fee rate for the Fund against the advisory fee rates
for funds advised by other advisors in the Fund's peer group both the Board
and the independent trustees determined that the Fund's advisory fee rate was
at approximately the median of the funds in its peer group, and concluded
that the current advisory fee rate of the Fund was fair and reasonable.
Page 16
--------------------------------------------------------------------------------
BOARD APPROVAL OF ADVISORY CONTRACT (continued)
--------------------------------------------------------------------------------
Expense limitations and fee waivers. Both the Board and the independent
trustees noted that, although there are no contractual expense limitations or
fee waivers in effect for the Fund, Davis-Dinsmore is very diligent in its
efforts to keep expenses of the Fund as low as possible. Both the Board and
the independent trustees also noted that the cost of compliance with
regulatory initiatives was increasing. Both the Board and the independent
trustees concluded that the current level of expenses for the Fund were fair
and reasonable.
Breakpoints and economies of scale. Both the Board and the independent
trustees reviewed the structure of the Fund's advisory fee under the Advisory
Agreement, and noted that the fee includes one breakpoint when the Fund's
assets reach $100 million. Both the Board and the independent trustees noted
that breakpoints had become effective for the Fund as a result of the Fund's
rights offering that occurred during the 2004 fiscal year, which resulted in
lower management fee expenses as a percentage of assets. Both the Board and
the independent trustees concluded that the Fund's fee levels under the
Advisory Agreement therefore reflect economies of scale and that it was not
necessary to implement any further changes to the structure of the advisory
fee for the Fund.
Profitability of Davis-Dinsmore. Both the Board and the independent trustees
reviewed information concerning the profitability and financial condition of
Davis-Dinsmore. In particular, the Board reviewed Davis-Dinsmore's financial
statements including its statement of income and retained earnings, statement
of cash flows, and audited balance sheet. The Board also reviewed Davis-
Dinsmore's costs in providing services to the Funds. The Board noted that
Davis-Dinsmore's sole source of revenue was fees from the Funds for providing
advisory and administrative services to the Funds. The Board and the
independent trustees noted that Davis-Dinsmore's operations remain profitable
and that increasing the success of the Funds will positively impact Davis-
Dinsmore's profitability. Based on the review of the profitability of Davis-
Dinsmore and its financial condition, both the Board and the independent
trustees concluded that the compensation to be paid by the Fund to Davis-
Dinsmore under the Advisory Agreement was not excessive.
Benefits of soft dollars to Davis-Dinsmore. Both the Board and the
independent trustees discussed the fact that there are no third-party soft
dollar arrangements in effect with respect to the Fund. Both the Board and
the independent trustees recognized that Davis-Dinsmore does receive
proprietary research from brokers with whom it executes portfolio
transactions on behalf of the Fund. This research is used by Davis-Dinsmore
in making investment decisions for the Fund. Both the Board and the
independent trustees also considered representations made by Davis-Dinsmore
that portfolio transactions received best execution. Because such research
ultimately benefits the Fund, the Board and the independent trustees
concluded that it was appropriate to receive proprietary research.
Davis-Dinsmore's financial soundness in light of the Fund's needs. Both the
Board and the independent trustees considered whether Davis-Dinsmore is
financially sound and has the resources necessary to perform its obligations
under the Advisory Agreement, and concluded that Davis-Dinsmore has the
financial resources necessary to fulfill its obligations under the Advisory
Agreement.
Historical relationship between the Fund and Davis-Dinsmore. In determining
whether to continue the Advisory Agreement for the Fund, both the Board and
the independent trustees also considered the prior relationship among Davis-
Dinsmore and the Fund, as well as the independent
Page 17
--------------------------------------------------------------------------------
BOARD APPROVAL OF ADVISORY CONTRACT (continued)
--------------------------------------------------------------------------------
trustees' knowledge of Davis-Dinsmore's operations, and concluded that it was
beneficial to maintain the current relationship, in part, because of such
knowledge. Both the Board and the independent trustees also reviewed the
general nature of the non-investment advisory services currently performed by
Davis-Dinsmore, such as administrative services, and the fees received by
Davis-Dinsmore for performing such services. In addition to reviewing such
services, both the Board and the independent trustees also considered the
organizational structure employed by Davis-Dinsmore to provide those
services. Based on the review of these and other factors, both the Board and
the independent trustees concluded that Davis-Dinsmore was qualified to
provide non-investment advisory services to the Fund, including
administrative services, and that Davis-Dinsmore currently is providing
satisfactory non-investment advisory services to the Fund.
Other factors and current trends. Both the Board and the independent
trustees considered the culture of compliance and high ethical standards at
Davis-Dinsmore, and the efforts historically and currently undertaken by
Davis-Dinsmore to engage in best practices. Both the Board and the
independent trustees noted Davis-Dinsmore's historical adherence to
compliance procedures, as well as the Fund's investment objectives, policies
and restrictions. Both the Board and the independent trustees concluded that
this commitment to adhere to the highest ethical standards was an important
factor in their determination that they should approve the continuance of the
Advisory Agreement for the Fund.
--------------------------------------------------------------------------------
After considering all of the above factors and based on informed business
judgment, the Board determined that the Advisory Agreement is in the best
interests of the Fund and its shareholders and that the compensation to
Davis-Dinsmore under the Advisory Agreement is fair and reasonable. As a result,
the Board continued the Advisory Agreement.
Page 18
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MISCELLANEOUS NOTES
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Results of the 2008 Annual Shareholders Meeting
The Annual Meeting of Shareholders of the Fund was held on January 11, 2008. The
results of the shareholder vote were:
1. All persons nominated were elected.
Terms expiring in 2011 Shares voted for Shares withheld
---------------------- ---------------- ---------------
Thomas H. Dinsmore 11,527,234 336,454
Daniel D. Harding 11,634,457 229,231
2. The Audit Committee's appointment of Tait, Weller & Baker LLP as
independent accountants was ratified, as 11,723,710 shares voted for,
44,252 shares voted against and 95,726 shares abstained.
--------------------------------------------------------------------------------
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.
Page 19
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MISCELLANEOUS NOTES (continued)
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
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 president of the association. The association is solely responsible
for the content of its website.
--------------------------------------------------------------------------------
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.
Page 20
Board of Trustees Internet
GORDON F. AHALT www.ellsworthfund.com
KINCHEN C. BIZZELL email: info@ellsworthfund.com
ELIZABETH C. BOGAN, Ph.D.
THOMAS H. DINSMORE, C.F.A. Investment Adviser
DANIEL D. HARDING Davis-Dinsmore Management Company
JANE D. O'KEEFFE 65 Madison Avenue, Suite 550
NICOLAS W. PLATT Morristown, NJ 07960-7308
(973) 631-1177
Officers
Shareholder Services and Transfer Agent
THOMAS H. DINSMORE, C.F.A. American Stock Transfer & Trust Company
Chairman of the Board 59 Maiden Lane
and Chief Executive Officer New York, NY 10038
(800) 937-5449
JANE D. O'KEEFFE www.amstock.com
President
Beneficial Share Listing
GARY I. LEVINE American Stock Exchange Symbol: ECF
Executive Vice President,
Chief Financial Officer and Legal Counsel
Secretary Ballard Spahr Andrews & Ingersoll, LLP
H. TUCKER LAKE, JR. Independent Accountants
Vice President Tait, Weller & Baker LLP
GERMAINE M. ORTIZ
Vice President
MERCEDES A. PIERRE
Vice President and Chief Compliance Officer
JAMES A. DINSMORE
Assistant Vice President
JOANN VENEZIA
Assistant Vice President and
Assistant Secretary
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.
Not applicable to this semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this semi-annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this semi-annual report.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments in securities of unaffiliated issuers is included as
part of the report to shareholders, filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this semi-annual report.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this semi-annual report.
ITEM 9. PURCHASE 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 Ellsworth Fund Ltd. (the "Registrant") or any "affiliated
purchaser," as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of
1934 (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 22(b)(15) 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 June 5, 2008 an evaluation was performed under the supervision
and with the participation of the officers of 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, as required by
Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or
15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)), the
Registrant's officers, including the PEO and PFO, concluded
that, as of June 5, 2008, 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 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) The code of ethics disclosure required by Item 2 is not applicable to
this semi-annual report.
(a)(2) Certifications of the principal executive officer and the principal
financial officer pursuant to Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)),
are attached hereto.
(a)(3) There were no written solicitations to purchase securities under Rule
23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered
by the report by or on behalf of the Registrant to ten or more persons.
(b) Certifications of the principal executive officer and the principal
financial officer, as required by Rule 30a-2(b) under the Act
(17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act
(17 CFR 240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of
Title 18 of the United States Code (18 U.S.C. 1350) are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities 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: June 6, 2008
Pursuant to the requirements of the Securities 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: June 6, 2008
By: /s/Gary I. Levine
Gary I. Levine
Chief Financial Officer
(Principal Financial Officer)
Date: June 6, 2008