<PAGE> 1
1995 Annual Report September 30, 1995
TO OUR SHAREHOLDERS:
Fiscal year 1995 was exciting and different as technology stocks and bank
stocks pulled the stock market to new highs. The financial effects of the gains
in efficiency due to the information revolution are more and more obvious and
are clearly driving many investments. The convertible market has done well in
this environment and while the Fund was not heavily invested in technology, it
was heavily invested in banking and finance which also did very well. Indeed,
as presented below, we estimate that the Fund's net asset value out-performed
the average open-end convertible fund by over 500 basis points for the fiscal
year.
Convertibles continue to look attractive to us as conversion premiums,
yields and lengths of maturity remain at levels that provide some protection
from a decline in the overall market and a reasonable expectation of future
appreciation. Also, convertible investments are available in industries that we
find attractive, such as drugs, transaction processing, banks and technology.
Despite the solid returns experienced this fiscal year, the potential exists
for a good year next year.
In our last letter, we discussed the evolution of the convertible market
since the inception of Ellsworth in 1986. We thought that we were ahead of our
time with the Ellsworth charter by allowing covered call option writing,
convertible arbitrage hedging strategies, limited purchase of common stock and
puts on stock market indices. Even with all of this flexibility, management has
consistently chosen `plain vanilla' convertible bonds and preferred stocks to
make up the majority of assets in the Fund, and expects to continue doing so
for the foreseeable future. Our basic philosophy remains low risk in our
investment category and we will continue to seek to enhance returns using
strategies, both new and old, that best meet our conservative investment
objectives of long term capital appreciation and a high rate of current income.
We estimate that the Fund's net asset value (NAV) rose 6.33%, 19.50% and
98.90% for the three-month, one-year and five-year periods ended September 30,
1995 (assuming all dividends reinvested at NAV). The value of the Fund's shares
rose 4.25%, 18.95% and 106.41% for those three-month, one-year and five-year
periods (assuming all dividends reinvested at actual reinvestment price). As
quoted in Barron's, Lipper Analytical Services reported that the average
open-end convertible fund's NAV rose 5.61%, 14.24% and 106.04% for those same
periods (also assuming all dividends reinvested).*
At its October meeting the Board of Directors declared a 40 cents per share
dividend consisting of 11.2 cents from net investment income, 2.6 cents from
realized short-term capital gains and 26.2 cents from realized long-term
capital gains. The payable date for this distribution is November 29, 1995, to
shareholders of record November 5, 1995.
The 1996 Annual Meeting of Shareholders will be held on January 18, 1996 at
the Bonita Bay Club in Bonita Springs, Florida. All shareholders are invited to
attend.
It is with our deepest regret that we must inform you of the passing of Dr.
Clinton O. Chichester, a director of this Fund since 1987. His advice and his
humor will be missed.
At a meeting held on November 18, 1995, the Board of Directors appointed
Jane D. O'Keeffe to fill the vacancy on the Board.
/S/ RONALD E. DINSMORE /S/ THOMAS H. DINSMORE
- - ----------------------- ----------------------
Chairman of the Board President
November 15, 1995
* Average NAV of the forty-one open-end convertible funds followed by Lipper
Analytical Services, Inc., an independent statistical service.
<PAGE> 2
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
--------- ---------- -----------
<S> <C> <C> <C>
ADVERTISING--4.3%
$1,175,000 Interpublic Group Cos., Inc. 33/4% 2002 Euro. cv. sub. deb. $ 998,459 $ 1,063,375
415,000 Interpublic Group Cos., Inc. 33/4% 2002 cv. sub. deb.* . . . 353,025 373,500
1,275,000 Omnicom Group, Inc. 41/2% 2000 cv. sub. deb.* . . . . . . . 1,329,875 1,542,750
------------ -----------
2,681,359 2,979,625
------------ -----------
AEROSPACE--5.6%
20,040 shs Kaman Corp. depositary shares (representing 1/4 share 6.50%
cv. pfd.) . . . . . . . . . . . . . . . . . . . . . . . . 1,031,419 1,042,080
2,000,000 Morgan Stanley Group, Inc. 0% 2000 medium-term
exchangeable notes . . . . . . . . . . . . . . . . . . . . 1,812,796 1,775,000
(exch. for Boeing Company common stock)
900,000 Orbital Sciences Corp. 63/4% 2003 cv. sub. deb. . . . . . . 1,123,188 1,107,000
------------ -----------
3,967,403 3,924,080
------------ -----------
AUTOMOTIVE--3.1%
15,000 shs Ford Motor Co. depositary shares (representing $4.20 cum. cv.
A pfd.) . . . . . . . . . . . . . . . . . . . . . . . . . 752,119 1,524,375
50,000 shs MascoTech Industries, Inc. 6% cv. pfd. . . . . . . . . . . . 978,075 662,500
------------ -----------
1,730,194 2,186,875
------------ -----------
BANKING--11.9%
20,000 shs Barnett Banks, Inc. $4.50 cum. cv. A pfd. . . . . . . . . . 1,187,106 2,130,000
15,375 shs Chemical Banking Corp. common stock . . . . . . . . . . . . 663,097 935,953
20,000 shs First Commerce Corp. 71/4% cum. cv. pfd. . . . . . . . . . . 506,250 727,500
12,000 shs Fourth Financial Corp. depositary shares (representing 7% cum.
cv. A pfd.). . . . . . . . . . . . . . . . . . . . . . . . 376,500 373,500
19,100 shs National City Corp. depositary shares (representing $4.00
cum. cv. pfd.) . . . . . . . . . . . . . . . . . . . . . . 1,147,063 1,413,400
10,035 shs NationsBank Corp. common stock . . . . . . . . . . . . . . . 411,124 676,108
15,000 shs ONBANCorp, Inc. 63/4% cv. B pfd. . . . . . . . . . . . . . . 379,375 427,500
15,000 shs Washington Mutual Savings Bank $6.00 cv. perpetual D pfd.. . 1,436,250 1,588,125
------------ -----------
6,106,765 8,272,086
------------ -----------
BROADCASTING & CABLE--3.7%
975,000 Comcast Corp. 33/8% 2005 cv. sub. deb. . . . . . . . . . . . 893,594 1,004,250
600,000 International CableTel, Inc. 71/4% 2005 cv. sub. notes* . . 600,000 708,000
853,050 Time Warner, Inc. 83/4% 2015 cv. sub. deb. . . . . . . . . . 882,204 891,437
------------ -----------
2,375,798 2,603,687
------------ -----------
BUILDING & REAL ESTATE--0.7%
550,000 CEMEX, S.A. de CV. 41/4% 1997 cv. sub. notes* . . . . . . . 554,688 456,500
------------ -----------
CAPITAL GOODS--5.7%
72,000 shs Westinghouse Electric Corp. depositary shares
(representing $1.30 cv. C pfd.) . . . . . . . . . . . . . 1,008,700 1,075,500
1,067,000 Cooper Industries, Inc. 7.05% 2015 cv. sub. deb. . . . . . . 1,150,559 1,085,673
1,750,000 General Signal Corp. 53/4% 2002 cv. sub. notes . . . . . . . 1,781,875 1,785,000
------------ -----------
3,941,134 3,946,173
------------ -----------
COMMUNICATIONS--3.5%
1,200,000 Comcast Cellular Corp. 0% 2000 senior participating
zero coupon . . . . . . . . . . . . . . . . . . . . . . . 720,338 918,000
redeemable series A notes
293 shs MFS Communications Co., Inc. common stock . . . . . . . . . 13,075 12,819
15,000 shs MFS Communications Co., Inc. depositary shares . . . . . . 502,500 624,375
(representing 8% cum. cv. A pfd.)
25,000 Sprint Corp. 81/4% 2000 FCENS # . . . . . . . . . . . . . . 815,788 893,750
------------ -----------
(exch. for Southern New England Telecommunications Corp.
common stock) 2,051,701 2,448,944
------------ -----------
DATA-PROCESSING SERVICES--6.9%
15,000 shs General Motors Corp. (GME) depositary shares
(representing $3.25 cv. C pfd.) . . . . . . . . . . . . . 844,950 973,125
45,000 American Express Company 61/4% 1996 FCENS # . . . . . . . . 1,653,750 2,340,000
(exch. for First Data Corp. common stock)
1,000,000 First Financial Management Corp. 5% 1999 cv. sub. deb. . . . 1,000,000 1,510,000
------------ -----------
3,498,700 4,823,125
------------ -----------
ENERGY--5.8%
41,000 shs Chieftain International Funding Corp. 71/4% cv. red. pfd. . 1,107,270 1,045,500
25,000 shs Unocal Corp. $3.50 cv. pfd.* . . . . . . . . . . . . . . . . 1,255,625 1,325,000
500,000 Pennzoil Company 43/4% 2003 exch. sr. deb. . . . . . . . . 479,375 473,750
(exch. for Chevron Corp. common stock)
1,000,000 Pennzoil Company 61/2% 2003 exch. sr. deb. . . . . . . . . 1,078,781 1,167,500
------------ -----------
(exch. for Chevron Corp. common stock) 3,921,051 4,011,750
------------ -----------
ENVIRONMENTAL SERVICES--1.2%
25,000 Browning-Ferris Industries, Inc. 71/4% 1998 FCENS # . . . . 890,625 831,250
------------ -----------
(exch. for Browning-Ferris Industries common stock)
FINANCIAL & INSURANCE--11.7%
30,000 shs American General Delaware, LLC 6% cv. A MIPS + . . . . . . . 1,515,875 1,657,500
69,110 shs Pioneer Financial Services, Inc. common stock . . . . . . . 752,427 1,019,373
10,000 shs St. Paul Capital LLC 6% cv. MIPS + . . . . . . . . . . . . . 512,000 585,000
750,000 American Travellers Corp. 61/2% 2005 cv. sub. deb. . . . . . 750,000 785,625
1,300,000 Chubb Capital Corp. 6% 1998 Euro. cv. sub. deb. . . . . . . 1,324,500 1,465,750
925,000 First Central Financial Corp. 9% 2000 cv. sub. deb. . . . . 935,125 943,500
1,500,000 Old Republic International Corp. 53/4% 2002 cv. sub. deb. . 1,771,250 1,710,000
------------ -----------
7,561,177 8,166,748
------------ -----------
</TABLE>
<PAGE> 3
INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
--------- ------------ ------------
<S> <C> <C> <C>
FOODS--4.5%
50,000 shs ConAgra, Inc. 63/4% cum. cv. E pfd. . . . . . . . . . . . . $ 1,587,433 $ 2,012,500
$1,000,000 Grand Metropolitan Public Limited Co. 61/2%
2000 cv. sub. deb.* . . . . . . . . . . . . . . . . . . . 1,000,000 1,150,000
------------ -----------
2,587,433 3,162,500
------------ -----------
HEALTH CARE & DRUGS--11.6%
1,350,000 Bindley Western Industries, Inc. 6 1/2% 2002 cv. sub. deb. . 1,274,310 1,468,125
500,000 Ciba Geigy Corp. 6 1/4% 2016 exch. sub. deb.* . . . . . . . 478,750 497,500
(exch. for ALZA Corp. common stock)
750,000 Integrated Health Services, Inc. 5 3/4% 2001 cv. sr.
sub. deb.* . . . . . . . . . . . . . . . . . . . . . . . . 750,000 798,750
1,250,000 Medco Containment Service, Inc. 6% 2001 cv. sub. deb. . . . 1,649,063 2,393,750
2,500,000 Roche Holdings, Inc. 0% 2010 liquid yield option notes* . . 921,876 1,009,375
1,050,000 Sandoz Capital BVI Ltd. 2% 2002 cv. sub. notes** . . . . . . 876,835 887,250
500,000 TheraTx, Inc. 8% 2002 cv. sub. notes* . . . . . . . . . . . 500,000 480,000
500,000 United Technologies Corp. 0% 1997 pharmaceutical exch. notes 518,281 572,500
------------ -----------
6,969,115 8,107,250
------------ -----------
OFFICE EQUIPMENT--0.9%
7,500 shs Alco Standard Corp. depositary shares (representing
6 1/2% cv. BB pfd.) . . . . . . . . . . . . . . . . . . . . 580,313 631,875
------------ -----------
PAPER & PAPER PRODUCTS--1.4%
20,000 shs International Paper Capital Trust Company 51/4% cv. pfd.* . 1,000,000 960,000
------------ -----------
RETAIL--0.5%
775,000 Tops Appliance City, Inc. 61/2% 2003 cv. sub. deb. . . . . . 625,000 360,375
------------ -----------
TECHNOLOGY--8.2%
750,000 Emerson Radio Corp. 81/2% 2002 sr. cv. sub. deb.* . . . . . 750,000 727,500
300,000 Integrated Device Technology, Inc. 51/2% 2002 cv. sub. notes 345,375 331,500
350,000 Motorola, Inc. 0% 2013 liquid yield option notes . . . . . . 325,061 318,500
125,000 Sanmina Corp. 51/2% 2002 cv. sub. notes* . . . . . . . . . . 125,000 131,563
1,295,000 Seagate Technology, Inc. 63/4% 2012 cv. sub. deb. . . . . . 1,099,075 1,398,600
150,000 Texas Instruments, Inc. 23/4% 2002 Euro. cv. sub. deb. . . . 285,750 288,375
775,000 Thermo Electron Corp. 5% 2001 cv. sub. deb.* . . . . . . . . 797,750 1,187,688
200,000 Thermo Optek Corp. 5% 2000 cv. sub. deb.* . . . . . . . . . 200,000 206,000
125,000 Thermo Quest Corp. 5% 2000 cv. sub. deb.* . . . . . . . . . 125,000 130,000
250,000 3Com Corp. 101/4% 2001 cv. sub. notes* . . . . . . . . . . . 341,875 390,000
600,000 VLSI Technology, Inc. 81/4% 2005 cv. sub. notes . . . . . . 613,750 612,750
------------ -----------
5,008,636 5,722,476
------------ -----------
TEXTILES--2.1%
1,330,000 Interface, Inc. 8% 2013 cv. sub. deb. . . . . . . . . . . . 1,222,325 1,456,350
------------ -----------
TRANSPORTATION--3.3%
5,000 shs Delta Airlines, Inc. depositary shares (representing
$3.50 cum. cv. C pfd.) . . . . . . . . . . . . . . . . . . 273,425 283,750
1,000,000 AMR Corp. 61/8% 2024 cv. sub. deb. . . . . . . . . . . . . . 1,000,000 1,027,500
1,075,000 Delta Airlines, Inc. 3.23% 2003 cv. sub. notes . . . . . . . 799,327 975,563
------------ -----------
2,072,752 2,286,813
------------ -----------
U.S. TREASURY NOTES--0.0%
25,000 65/8% 3/31/97++ . . . . . . . . . . . . . . . . . . . . . . 24,980 25,266
------------ -----------
CORPORATE SHORT-TERM NOTES--1.7%
1,200,000 General Electric Capital Services, Inc. 5.60% 10/2/95 . . . 1,199,253 1,199,253
------------ -----------
- - -----------------
TOTAL BONDS AND NOTES--62.6% . . . . . . . . . . . . . . . . . . . . . . . . . . 39,549,175 43,656,387
TOTAL PREFERRED STOCKS--30.2% . . . . . . . . . . . . . . . . . . . . . . . . . . 17,982,246 21,063,105
TOTAL COMMON STOCKS--3.8% . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,839,723 2,644,253
TOTAL CORPORATE SHORT-TERM NOTES--1.7% . . . . . . . . . . . . . . . . . . . . . 1,199,253 1,199,253
------------ -----------
TOTAL INVESTMENTS--98.3% . . . . . . . . . . . . . . . . . . . . . . . . . . . . $60,570,397 68,562,998
============
OTHER ASSETS AND LIABILITIES, NET--1.7% . . . . . . . . . . . . . . . . . . . . . 1,206,264
-----------
TOTAL NET ASSETS--100.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . $69,769,262
===========
</TABLE>
* Rule 144A security, may be sold only to qualified institutional buyers.
# Forced Conversion Exchangeable Notes.
+ Monthly Income Preferred Securities.
** When-issued security, settlement 10/6/95.
++ Collateral for a letter of credit.
The cost of investments for federal income tax purposes is $60,570,397
resulting in gross unrealized appreciation and depreciation of $9,085,071 and
$1,092,470 respectively, or net unrealized appreciation of $7,992,601 on a tax
cost basis.
See accompanying notes to financial statements.
<PAGE> 4
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
------------------
<S> <C>
ASSETS:
Investments at value (Identified cost $60,570,397) (Note A) . . . . . . . . $68,562,998
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,513
Receivable for securities sold . . . . . . . . . . . . . . . . . . . . . . 2,413,136
Dividends and interest receivable . . . . . . . . . . . . . . . . . . . . . 609,902
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,968
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,646,517
------------
LIABILITIES:
Payable for securities purchased . . . . . . . . . . . . . . . . . . . . . 1,803,335
Accrued management fee (Note B) . . . . . . . . . . . . . . . . . . . . . . 43,342
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,578
------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,877,255
------------
NET ASSETS AT VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $69,769,262
============
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . $ 724,705
Undistributed net realized gain from investment transactions . . . . . . . 1,864,321
Unrealized appreciation of investments . . . . . . . . . . . . . . . . . . 7,992,601
Capital shares (Note C) . . . . . . . . . . . . . . . . . . . . . . . . . . 64,839
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 59,122,796
------------
NET ASSETS AT VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $69,769,262
============
Net asset value per share ($69,769,262 / 6,483,919 outstanding shares) . . . . . $ 10.76
============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ended September 30, 1995 and 1994
1995 1994
------------ ------------
<S> <C> <C>
Increase in net assets from operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . $ 3,162,167 $ 3,242,532
Net realized gain from investment transactions . . . . . . . . . . 1,864,104 1,425,820
Net unrealized appreciation (depreciation) of investments . . . . . 6,758,963 (4,903,574)
----------- -----------
Net increase (decrease) in net assets resulting from operations 11,785,234 (235,222)
----------- -----------
Dividends to shareholders from:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . (3,313,565) (3,352,112)
Net realized gain on investments . . . . . . . . . . . . . . . . . (1,425,603) (458,360)
----------- -----------
Total dividends . . . . . . . . . . . . . . . . . . . . . . . (4,739,168) (3,810,472)
----------- -----------
Capital share transactions (Note C) . . . . . . . . . . . . . . . . . . . 1,407,527 903,869
----------- -----------
Increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . 8,453,593 (3,141,825)
Net assets at beginning of year . . . . . . . . . . . . . . . . . . . . . 61,315,669 64,457,494
----------- -----------
NET ASSETS AT END OF YEAR (including undistributed net investment
income of $724,705 and $876,103, respectively) . . . . . . . . . . . . . $69,769,262 $61,315,669
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
STATEMENT OF OPERATIONS:
FOR THE YEAR ended September 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME (Note A):
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,468,848
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,431,699
------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,900,547
------------
EXPENSES (Note B):
Management fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474,860
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,809
Transfer agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,830
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,517
Directors' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,050
Treasurer's office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,884
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,430
------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 738,380
------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,162,167
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions . . . . . . . . . . . . . . . 1,864,104
Net increase in unrealized appreciation of investments . . . . . . . . . . . 6,758,963
------------
Net gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,623,067
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . $11,785,234
============
</TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------
Per Share Operating Performance 1995 1994 1993 1992 1991
- - ------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year . . . . $9.72 $10.39 $9.31 $8.45 $7.50
------ ------- ------ ------ ------
Net investment income . . . . . . . . . . . .48 .51 .53 .54 .53
Net realized and unrealized gain (loss) . . 1.30 (.58) 1.14 .82 1.00
------ ------- ------ ------ ------
Total from investment operations . . 1.78 (.07) 1.67 1.36 1.53
Less Distributions:
Dividends from net investment income . . . (.51) (.53) (.50) (.50) (.58)
Distributions from realized gains . . . . . (.23) (.07) (.09) -- --
------ ------- ------ ------ ------
Total distributions . . . . . . . . . (.74) (.60) (.59) (.50) (.58)
------ ------- ------ ------ ------
Net asset value, end of year . . . . . . . 10.76 9.72 10.39 9.31 8.45
====== ======= ====== ====== ======
Market value, end of year . . . . . . . . . 9.125 8.375 9.375 8.375 7.375
Total Investment Return:
Based on market value** . . . . . . . 18.95% (4.46)% 19.73% 20.97% 25.41%
Based on net asset value* . . . . . . 19.50% (0.61)% 18.60% 16.55% 21.14%
Ratios/Supplemental Data:
Net assets, end of year (000's) . . . . . . 69,769 61,316 64,457 56,946 51,687
Ratio of expenses to average net assets . . 1.2% 1.1% 1.2% 1.2% 1.4%
Ratio of net investment income to
average net assets . . . . . . . . . . . . 5.0% 5.2% 5.5% 6.1% 6.7%
Portfolio turnover rate . . . . . . . . . . 44% 45% 99% 70% 37%
</TABLE>
- - ------------
* Assumes valuation of the Fund's shares, and reinvestment of dividends, at
net asset values.
** Assumes valuation of the Fund's shares at market price, and reinvestment of
dividends at actual reinvestment price.
See accompanying notes to financial statements.
<PAGE> 6
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(A) Ellsworth Convertible Growth and Income Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a diversified,
closed-end investment company. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements:
1. Security Valuation
Investments in securities traded on a national securities exchange are valued
at market using the last reported sales price. Securities traded in the
over-the-counter market and listed securities for which no sales were reported
are valued at the mean between closing reported bid and asked prices. Where no
closing prices are available, value is determined by management, with the
approval of the Board of Directors.
2. 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. Premiums received from option contracts
written which are subsequently exercised or expired are included in the
proceeds from sales of investments in calculating the gain or loss. Dividend
income is recorded on the ex-dividend date and interest income is recorded on
the accrual basis.
3. Federal Income Taxes
It is the policy of the Fund to distribute substantially all of its taxable
income within the prescribed time and to otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
Therefore, no provision for federal income taxes is believed necessary.
4. Dividends and Distributions to Shareholders
The liability for dividends and distributions payable is recorded on the
ex-dividend date.
(B) The management fee is paid to Davis/Dinsmore Management Company, investment
adviser. The contract provides for payment of a monthly advisory fee, computed
at an annual rate of 3/4% of 1% of the first $100,000,000 and 1/2 of 1% of the
excess over $100,000,000 of the Fund's net asset value in such month. The
annual fee is subject to reduction to the extent that the ordinary expenses of
the Fund (excluding taxes and interest) exceed 1.5% of the first $100,000,000
and 1% of the excess over $100,000,000 of the average of the monthly net asset
values of the Fund for the year.
The adviser's organization furnishes investment advice, office equipment and
facilities, and pays the salaries of all executive officers of the Fund, except
that the costs associated with personnel and certain non-personnel expenses of
the office of the Treasurer up to a maximum of $25,000 a year are reimbursed by
the Fund. Such reimbursements amounted to $25,000 for the year ended September
30, 1995. The officers of the Fund are directors, officers or employees of the
investment adviser.
(C) At September 30, 1995, 6,483,919 shares of $.01 par value common stock
(20,000,000 shares authorized) were outstanding. During the year ended
September 30, 1995, 178,733 shares were issued in connection with reinvestment
of dividends from net investment income and capital gains, resulting in an
increase in paid-in capital of $1,407,527. During the year ended September 30,
1994, 99,054 shares were issued.
(D) Purchases and sales of investments aggregated $27,057,469 and $28,169,277,
respectively, for the year ended September 30, 1995, exclusive of short-term
securities.
(E) A distribution of 40 cents per share, derived from net investment income of
11.2 cents, and net realized gains on investments of 28.8 cents, was declared
on October 26, 1995, payable November 29, 1995, to shareholders of record at
the close of business November 5, 1995.
<PAGE> 7
(F) Quarterly Results of Operations (unaudited)
<TABLE>
<CAPTION>
REALIZED AND NET INCREASE (DECREASE) IN
NET UNREALIZED NET ASSETS
INVESTMENT NET GAIN (LOSS) RESULTING
QUARTERS ENDED INVESTMENT INCOME INCOME ON INVESTMENTS FROM OPERATIONS
- - ------------------ ----------------- ------------------ ---------------------- ---------------------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1993 $1,070,401 $.17 $900,496 $.14 $ (55,822) $(.03) $ 844,674 $ .11
March 31, 1994 899,770 .14 687,396 .11 (3,141,800) (.50) (2,454,404) (.39)
June 30, 1994 973,075 .15 812,343 .13 (1,253,572) (.20) (441,229) (.07)
September 30, 1994 1,008,335 .16 842,297 .13 973,440 .15 1,815,737 .28
December 31, 1994 992,268 .15 820,158 .12 (1,844,697) (.29) (1,024,539) (.17)
March 31, 1995 956,999 .15 751,652 .11 3,417,413 .52 4,169,065 .63
June 30, 1995 993,535 .15 819,719 .13 3,644,310 .55 4,464,029 .68
September 30, 1995 957,745 .15 770,638 .12 3,406,041 .52 4,176,679 .64
</TABLE>
Federal income tax status of dividends paid per share during fiscal year ended
September 30, 1995:
<TABLE>
<CAPTION>
TOTAL ORDINARY LONG-TERM QUALIFYING
PAYMENT DATE PAID INCOME CAPITAL GAIN DISTRIBUTION*
- - ---------------- ------- -------- ------------ -------------
<S> <C> <C> <C> <C>
November 29, 1994 $0.3660 $0.1777 $0.1883 44%
February 27, 1995 0.1250 0.1250 -- 40%
May 30, 1995 0.1250 0.1250 -- 40%
August 28, 1995 0.1250 0.1250 -- 40%
</TABLE>
* The percentages indicate the portion of each ordinary income distribution
which qualifies under the Internal Revenue Code for the deduction for
dividends received by corporate shareholders.
The persons primarily responsible for the day-to-day management of the Fund's
portfolio are, Ronald E. Dinsmore, Chairman of The Board, Thomas H. Dinsmore,
President, and Jane D. O'Keeffe, Vice President. Messrs. Dinsmore have served
in this capacity for nine years, since inception of the Fund in 1986, and Ms.
O'Keeffe has served since 1994. During the previous five years Ms. O'Keeffe was
a portfolio manager and Vice President of Fiduciary Trust International of New
York City.
Ellsworth Convertible Growth and Income Fund operates as a closed-end,
diversified management investment company and invests primarily in convertible
securities and uses other related strategies, with the objectives of providing
income and the potential for capital appreciation--which objectives the Company
considers to be relatively equal, over the long-term, due to the nature of the
securities in which it invests.
<PAGE> 8
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Ellsworth Convertible Growth and Income Fund, Inc. (the "Fund"), including the
portfolio of investments, as of September 30, 1995, 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 five 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.
We conducted our audits in accordance with generally accepted auditing
standards. 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. An audit 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, 1995, 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 Convertible Growth and Income Fund, Inc. as of September 30, 1995,
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 the financial
highlights for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
October 25, 1995
<PAGE> 9
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
AUTOMATIC DIVIDEND INVESTMENT AND CASH PAYMENT PLAN
PLAN AND AUTHORIZATION FORM
The Bank of New York
Dividend Reinvestment
P.O. Box 11002, Church Street Station
New York, N.Y. 10286-1002
Dear Sirs:
I own, REGISTERED IN MY NAME . . . . . . . . . . . . . . . . . . . .
shares of Common Stock of Ellsworth Convertible Growth and Income Fund, Inc.
(the "Company").
I wish to invest all the dividends and distributions paid by the
Company on my shares automatically in additional shares from the date hereof
until this arrangement is terminated as stated below. As a participant in this
plan (the "Plan"), I may also wish to purchase additional shares of the Company
through the Plan. AUTHORIZATION. You are authorized to act as my agent as
follows:
A. Establish an Account in my name.
B. Take into my Account all dividends and distributions paid by the
Company on all its Common Stock held in my name now or in the future and on all
additional shares of the Company (including fractions) held by you in my
Account.
C. In connection with any fiscal year-end capital gains distribution,
take the distribution (and any dividends from net investment income payable
with the distribution) in Common Stock at market price or net asset value,
whichever is lower.
D. In connection with the Company's first three quarterly dividends
in each fiscal year from net investment income (and any other dividends or
distributions declared by the Company, other than those paid pursuant to
paragraph C), take the dividend or distribution in Common Stock at net asset
value if the net asset value as determined by the Company as of the close of
business on the last trading day preceding the date of payment is lower than
the closing market price of the Common Stock on the American Stock Exchange on
that trading day, plus brokerage commissions. If the market price of the Common
Stock is lower than its net asset value, take the dividend or distribution in
cash and add it to my Account.
E. As soon as practicable after each cash payment is made to my
Account in accordance with paragraph D above, use the funds in my Account to
buy on the American Stock Exchange as many additional full shares of the
Company's Common Stock (plus a fractional interest in one share computed to
three decimal places) as are available at prices which are less than net asset
value. If, before you have completed the purchase of all shares for the
distribution at prices less than net asset value, the market price equals or
exceeds the net asset value of such shares, then you shall pay the remaining
proceeds of the distribution to the Company and take the balance of the
distribution in shares of Common Stock at net asset value.
F. I understand that as a Plan participant I may also voluntarily
purchase additional shares through the Plan by delivering a check payable to
the Bank for at least $100, but not more than $10,000 in any month for deposit
into my Account. Within 30 days, the Bank will combine all similar monies
received and purchase Company shares in the open market. Checks drawn on
foreign banks are subject to collection and collection fees and will be
invested the next investment date after funds have been collected.
G. You may mingle the cash in my Account with similar funds of other
stockholders of the Company for whom you act as agent under the Plan. The cost
of the shares and any fractional interests you buy for my Account in connection
with a particular dividend, distribution or cash purchase shall be determined
by the average cost per share, including brokerage commission, of all shares
bought by you for all shareholders for whom you act under the Plan in
connection with that dividend, distribution or cash purchase.
H. Whenever you receive or purchase shares or fractional interests
for my Account, you will send me confirmation of the transaction as soon as
practicable. You will hold such shares and fractional interests as my agent in
your name or the name of your nominee. Do not send me stock certificates for
full shares until I so request in writing or until my Account is terminated as
stated below. You will vote any shares so held for me in accordance with any
proxy returned to the Company by me in respect of the shares of which I am a
record owner.
(over)
<PAGE> 10
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
I. I understand that there is presently no service charge for you
serving as my agent and maintaining my Account, except that my Account will be
charged a $1.25 service fee for each cash purchase transaction on my behalf
pursuant to paragraph F. You may, in addition, charge me for extra services
performed at my request. I further understand that the Company reserves the
right to amend the Plan in the future to impose an additional service charge.
J. You will be liable only for willful misconduct or gross negligence
in acting as my agent under the Plan. NAME AND ADDRESS. My name as shown on my
Common Stock certificate or certificates (including all names if more than one)
and my address, are as follows:
Please Print:
NAME OR NAMES
-------------------------------------------------------
(print names exactly as on stock certificate)
NUMBER AND STREET
---------------------------------------------------
CITY, STATE AND ZIP CODE
--------------------------------------------
SOCIAL SECURITY NUMBER
----------------------------------------------
STOCK CERTIFICATES. I understand that if I hold more than one Common Stock
certificate registered in similar but not identical names or if more than one
address is shown for me on the Company's Common Stock records, all my shares of
Common Stock must be put into the same name and address if all of them are to
be covered by one Account. I understand that additional shares subsequently
acquired by me otherwise than through the Plan will be covered by my Account if
and when they are registered in the same name and address as the shares in my
Account.
INCOME TAX. I understand that participation in the Plan for automatic
investment of dividends and distributions and cash purchase of shares does not
relieve me of any income tax which may be payable by me on such dividends and
distributions and on expenses incurred by the Company on my behalf.
AMENDMENTS AND CHANGE OF AGENT. I understand that the company may amend the
terms of the Plan and reserves the right to change the agent which acts for all
participants in the Plan at any time by giving written notice thereof to each
participant at his address as shown on your records. Any such change shall be
effective as to all dividends and distributions payable to shareholders of
record on any date more than 30 days after mailing of such notice and shall be
effective 30 days after the mailing of such notice as to cash purchases.
Further, I understand that the Company in connection with any dividend or
distribution will change the price at which shares of its Common Stock are
issued to participants in the Plan if the net asset value of the shares is less
than 95% of the market price of such shares on the last trading day preceding
the payment date of any distribution of net investment income or net capital
gain, unless the Board obtains a legal opinion from independent counsel that
the purchase of shares at net asset value under these circumstances will not
have a material adverse effect upon the federal income tax liability of the
Company. The Board may not authorize issuance of shares offered to Plan
participants only, if such issuance is at a price less than net asset value,
without the prior specific approval of the Company's stockholders or of the
Securities and Exchange Commission.
TERMINATION.I may terminate my Account at any time by delivering written notice
to you prior to the record date of any dividend or distribution. I understand
that you or the Company may terminate all authorizations for any reason at any
time by sending written notice addressed to participants at their address as
shown on your records, such termination to be effective as to all dividends and
distributions payable to stockholders of record on any date more than 30 days
after mailing of such notice and shall be effective 30 days after the mailing
of such notice as to cash purchases. I understand you will terminate my Account
if you are informed of the transfer of all shares of the Company's Common Stock
registered in my name. Following the date of termination, you shall send me at
my address shown on your records a stock certificate or certificates for the
full shares held by you in my Account and a check for the value of any
fractional interest in my Account based on the market price of the Company's
Common Stock on that date.
<TABLE>
<S> <C>
Signature(s) Date
---------------------------------------------------------- -----------------------------
(if shares are in more than one name, all must sign.)
----------------------------------------------------------
</TABLE>
(over)
<PAGE> 11
PRINCIPAL PORTFOLIO CHANGES
July 1 to September 30, 1995
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT
---------------------------------------
HELD AT
ADDITIONS REDUCTIONS 9-30-95
----------- -------------- ----------
<S> <C> <C> <C>
Alco Standard Corp. depositary shares (representing 6 1/2%
cv. BB pfd.) 7,500 7,500
American Travellers Corp. 6 1/2% 2005 cv. sub. deb. 750,000 750,000
Cooper Industries, Inc. 7.05% 2015 cv. sub. deb. 500,000 1,067,000
Emerson Radio Corp. 8 1/2% 2002 sr. cv. sub. deb. 144A 750,000 750,000
Fourth Financial Corp. depositary shares (representing 7% cum.
cv. A pfd.) 12,000 12,000
Int'l Paper Capital Trust Company, 5 1/4% cv. pfd. 144A 20,000 20,000
Morgan Stanley Group, Inc. 0% 2000 medium-term exch. notes 2,000,000 2,000,000
Sandoz Capital BVI Ltd. 2% 2002 cv. sub. notes 1,050,000 1,050,000
VLSI Technology, Inc. 8 1/4% 2005 cv. sub. notes 600,000 600,000
Amoco Canada Petroleum Co. 7 3/8% 2013 sub. exch. deb. 1,750,000 --
Chemical Banking Corp. common stock 8,500 15,375
CIGNA Corp. 8.20% 2010 cv. sub. deb. 1,000,000 --
Corning Delaware 6% cv. pfd. 10,000 --
MascoTech Industries, Inc. 6% cv. pfd. 30,000 50,000
Morgan Stanley Group, Inc. 7% 1997 notes 25,000 --
Time Warner, Inc. 8 3/4% 2015 cv. sub. deb. 698,200 853,050
Tops Appliance City, Inc. 6 1/2% 2003 cv. sub. deb. 975,000 775,000
US Steel-Marathon Group 7% 2018 cv. sub. deb. 1,250,000 --
</TABLE>
AUTOMATIC DIVIDEND INVESTMENT AND CASH PAYMENT PLAN Shareholders may
participate in our reinvestment plan whereby all dividends and distributions
are automatically invested in additional Ellsworth shares 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 Bank of NY (The "Bank"), as your
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.
Plan participants may also voluntarily send cash payments of $100 to
$10,000 per month to the Bank, to be combined with other Plan monies, for
purchase of additional Ellsworth 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 Bank in your dividend reinvestment account.
All registered shareholders are eligible to join the Plan. 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.
To join the Plan, fill out and mail the authorization form located on
the previous page. The Fund may purchase shares of its Common Stock whenever
it may be deemed advantageous to the Fund. Nothing herein shall be considered a
commitment to purchase such shares.
The Fund may purchase shares of its Common Stock whenever it may be deemed
advantageous to the Fund. Nothing herein shall be considered a commitment to
purchase such shares.
<PAGE> 12
DIRECTORS
GORDON F. AHALT
WILLIAM A. BENTON
ELIZABETH C. BOGAN
RONALD E. DINSMORE
THOMAS H. DINSMORE, C.F.A.
DONALD M. HALSTED, JR.
GEORGE R. LIEBERMAN
JANE D. O'KEEFFE
DIRECTOR EMERITUS
DUNCAN O. MCKEE
OFFICERS
RONALD E. DINSMORE Chairman of the Board
THOMAS H. DINSMORE President
SIGMUND LEVINE Executive Vice President
and Secretary
JANE D. O'KEEFFE Vice President
H. TUCKER LAKE Vice President, Trading
GARY I. LEVINE Treasurer and
Assistant Secretary
INVESTMENT ADVISER
Davis/Dinsmore Management Company
65 Madison Ave., Morristown, NJ 07960-7308
(201) 631-1177
SHAREHOLDER SERVICES AND TRANSFER AGENT
The Bank of New York
Shareholder Relations Department - 11E
P.O. Box 11258, Church Street Station
New York, NY 10286-1258
(800) 524-4458
COMMON STOCK LISTING
American Stock Exchange
Symbol: ECF
ELLSWORTH
CONVERTIBLE
GROWTH AND
INCOME FUND
[ELLSWORTH LOGO]
ANNUAL REPORT
SEPTEMBER 30, 1995
[LOGO] Printed on recycled paper
