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SIGNATURE GARY LEVINE
TITLE TREASURER
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
Interim Investment Advisory Agreement
August 11, 1996
DAVIS-DINSMORE MANAGEMENT COMPANY
65 Madison Avenue
Morristown, New Jersey 07960
Gentlemen:
The undersigned, Ellsworth Convertible Growth and Income Fund,
Inc., a Maryland corporation (the "Company"), is an investment company
registered under the Investment Company Act of 1940 (the "Act"). The
Company is a diversified closed-end management investment company, and
invests and reinvests its assets. The Company hereby engages you to act
as its Investment Adviser and to supervise certain of its affairs,
subject to the terms and conditions herein set forth.
Section 1. Advisory Services. The Company will from time to
time furnish to you detailed statements of its investments and resources
and information as to its investment needs, and will make available to
you such financial reports, proxy statements, legal and other
information relating to its investments as may be in the possession of
the Company or available to it. You shall, at your expense, furnish to
the Company, at the regular executive offices of the Company, continuing
investment information, advice and recommendations with respect to the
purchase and sale of investments and the making of commitments with
respect thereto. In giving such advice and making such recommendations,
you shall be guided by the Company's investment policy as delineated by
the statements contained in the various documents filed with the
Securities and Exchange Commission as such documents may from time to
time be amended. You shall place at the disposal of the Company such
statistical, research, analytical and technical services, information
and reports as may reasonably be required. Your advice and
recommendations with respect to the purchase and sale of investments
and the making of investment commitments shall be submitted at the
principal office of the Company to an officer or officers of the Company
designated for that purpose by the Board of Directors of the Company.
Such officer or officers shall have, subject to the control of the
Company's Board of Directors, sole responsibility for investment
decisions, and full authority to act upon your advice and
recommendations and to place orders on behalf of the Company for the
purchase and sale of portfolio securities. Reports of portfolio
transactions shall be made monthly to the Board of Directors.
You have an obligation, in placing portfolio transactions for
the Company, to obtain the most favorable price and execution available
under the circumstances and to keep true, accurate and current books
and records containing sufficient detail to demonstrate compliance with
this obligation. In determining the most favorable price and execution
in each transaction the determinative factor is not necessarily the
lowest possible commission cost. You should consider the full range and
quality of the services of broker-dealers in placing brokerage including
but not by way of limitation, the value of research provided as well as
execution capability, commission rate, financial responsibility and
responsiveness of the broker-dealer to you. Accordingly, to the extent
provided by law, in executing portfolio transactions, you may pay a
broker-dealer which provides brokerage and research services a
commission in excess of that which another broker-dealer would have
charged for the same transaction.
Section 2. Independent Contractor. You shall, for all purposes
hereof, be deemed to be an independent contractor and shall have no
authority to act for or represent the Company unless otherwise provided.
No agreement, bid, offer, commitment, contract or other engagement
entered into by you, whether on your behalf or whether purported to have
been entered into on behalf of the Company, shall be binding upon the
Company, and all acts authorized to be done by you under this contract
shall be done by you as an independent contractor and not as agent.
Section 3. Expenses. To the extent described in this Section
3, you shall provide the Company with office space and facilities, pay
the salaries of its executive officers and furnish clerical, bookkeeping
and statistical services to the Company, and pay all expenses incurred
by you in the performance of this contract.
The Company will pay all expenses incurred by it and not assumed
by you including, but not by way of limitation, expenses in connection
with its organization and with the offering of its securities; fees and
expenses of its unaffiliated directors; legal and accounting fees, fees
of its custodian, registrar, transfer agent; dividend disbursing agent
and Automatic Dividend Investment Plan Agent; taxes, interest, brokerage
commissions; and direct costs of postage, printing, copying and travel
expenses attributable to the conduct of the business of the Company.
In addition, the Company will pay the costs and expenses of its
Treasurer's office, up to a maximum of $25,000 per year, incurred in
connection with its performance of certain services for the Company,
including the valuation of securities owned by the Company, the
preparation of financial statements and schedules of the Company's
investments for inclusion in certain periodic reports to the Company's
Board of Directors and to the Securities and Exchange Commission, the
maintenance of files relating to the foregoing, and rent, personnel
costs and other overhead expenses allocable to the aforementioned
services. Subject to approval of the Company's directors who are not
"interested persons" of either you or the Company, as defined by the
Act, the Company may also pay the costs of any additional services
performed in the future by the Treasurer's office in lieu of similar
services previously performed by third party contractors at the
Company's expense.
Section 4. Compensation. As compensation for the services
performed by you, the Company will pay you on the last day of each month
a fee for such month computed at an annual rate of .75% of the first
$100,000,000 of the Company's average net assets and .50% of the
Company's average net assets in excess of $100,000,000. The annual fee
will be reduced to the extent that the Company's ordinary expenses for
the year (including your fee but excluding interest, local, state and
federal taxes and extraordinary expenses as determined by the directors
of the Company who are not "interested persons" of either you or the
Company, as defined by the Act) 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 Company for the twelve months of each fiscal
year. You will promptly refund any amount theretofore paid in excess of
the fee determined to be due for such year.
For the purpose of calculation of the fee, the net asset value
for a month will be the average of the Company's net asset values at the
close of business on the last business day on which the New York Stock
Exchange is open in each week in the month. The determination of what
constitutes an "extraordinary item" rather than an ordinary expense
shall be conclusively determined by the directors of the Company who are
not "interested persons" of either the Company or you, as defined by the
Act.
If this contract shall become effective subsequent to the first
day of a month, or shall terminate before the last day of a month, your
compensation for such fraction of the monthly period shall be determined
by applying the foregoing percentage to the net asset value of the
Company during such fraction of a monthly period (which net asset value
shall be determined in such reasonable manner as the Board of the
Company shall deem appropriate) and in the proportion that such fraction
of a monthly period bears to the entire month.
Compensation under this contract will begin to accrue on its
effective date.
Section 5. Approval of Contract; Termination. At a meeting
held on August 1, 1996, the Board of Directors of the Company, including
a majority of the Independent Directors, approved this contract in
accordance with Rule 15a-4 under the Act. This Agreement became
effective as of August 11, 1996 and will remain in effect until the
earlier of (i) 120 days after its effective date (or December 9, 1996)
or (ii) shareholder approval of a new advisory agreement. The contract
is terminable without penalty by either party on 60 days' written notice
and will terminate automatically in the event of its assignment.
Except as specified above, this contract may not be amended,
transferred, assigned, sold or in any other manner hypothecated or
pledged; provided, however, that this limitation shall not prevent any
minor amendments to the contract which may be required by Federal or
state regulatory bodies.
Section 6. Liability. You shall give the Company the benefit
of your best judgment and efforts in rendering the services set forth
herein, and the Company agrees as an inducement to the undertaking of
these services by you that you shall not be liable for any error of
judgment or for any loss suffered by the Company in connection with any
matters to which this contract relates except that nothing herein
contained shall be construed to protect you against any liability by
reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties or reckless disregard of your obligations or
duties under this contract.
Section 7. Multiple Capacities. Except to the extent necessary
for performance of your obligations hereunder, nothing shall restrict
your right or the right of any of your directors, officers or employees
who may be directors, officers or employees of the Company to engage in
any other business or to devote time and attention to the management or
other aspects of any other business whether of a similar or dissimilar
nature or to render services of any kind to any other corporation, firm,
individual or association.
It is understood and agreed that the directors, officers,
agents, employees and stockholders of the Company may be interested in
your company as directors, officers, stockholders, employees, agents or
otherwise, and that the directors, officers, agents, employees and
stockholders of your company may be interested in the Company as a
stockholder or otherwise.
Section 8. Concerning Applicable Provisions of Law, Etc. This
contract shall be subject to all applicable provisions of law,
including, but not limited to, the applicable provisions of the Act;
and, to the extent that any provisions herein contained conflict with
any such applicable provisions of law, the latter shall control.
The laws of the State of New York shall, except to the extent
that any applicable provisions of some other law shall be controlling,
govern the construction, validity and effect of this contract.
The headings preceding the text of the several sections herein
are inserted solely for convenience of reference and shall not affect
the meaning, construction or effect of this contract.
If the contract set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this letter and returning the
same to the undersigned, whereupon this letter shall constitute a
binding contract between the parties hereto, subject to approval
provided for in Section 5.
Yours very truly,
ELLSWORTH CONVERTIBLE GROWTH AND
INCOME FUND, INC.
By: /s/ Thomas H. Dinsmore
Thomas H. Dinsmore
(President)
(Corporate Seal)
Attest: /s/ Sigmund Levine
Sigmund Levine
(Secretary)
DAVIS-DINSMORE MANAGEMENT
COMPANY
By: /s/ Thomas H. Dinsmore
Thomas H. Dinsmore
(President)
Attest: /s/ Sigmund Levine
Sigmund Levine
(Secretary)
(Corporate Seal)
1
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, Section 30(f) of the
Investment Company Act, and the regulations of the Securities and Exchange
Commission thereunder require the Company's officers and directors and direct
or indirect beneficial owners of more than 10% of the Company's Common Stock,
as well as Davis-Dinsmore, its directors and officers and certain of its other
affiliated persons (collectively, "Reporting Persons"), to file initial reports
of ownership and changes in ownership with the Securities and Exchange
Commission and the American Stock Exchange. Reporting Persons are required to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it and
written representations, the Company believes that all filing requirements
applicable to the Reporting Persons have been complied with during the fiscal
year ended September 30, 1996, except that (i) Davis-Dinsmore did not file a
Form 3 upon commencement of its activities as investment adviser to the Company
in June 1986 and did not separately report on Form 4s 2,000 shares of the
Company it purchased in 1987 or 1,000 shares of the Company it purchased in
1994, as well as additional shares acquired upon reinvestment of dividends and
distributions, until November 19, 1996 when it filed a Form 5 (which was 5 days
late), and Mrs. Jean Dinsmore did not file a Form 3 in June, 1986 as a result
of her position as a director of Davis-Dinsmore and did not separately report
on Form 4, 231 shares of the Company she purchased in 1988, as well as
additional shares acquired upon reinvestment of dividends and distributions,
until November 11, 1996 when she filed a Form 3 and November 13, 1996 when she
filed a Form 5, although in each case all such shares had previously been
reported on Section 16(a) forms that had been filed by Mr. Ronald Dinsmore (now
deceased), who at such dates was the primary owner of Davis-Dinsmore and the
husband of Mrs. Jean Dinsmore; (ii) Mrs. Sally Finnican, who was appointed a
director of Davis-Dinsmore on September 26, 1996, filed a Form 3 one month
late; and (iii) Mr. H. Tucker Lake, who purchased an aggregate of 559 shares of
the Company in June 1996, filed a Form 4 two days late.
Form N-SAR
For period ended 09/30/96
File Number 811-4656
This report is signed on behalf of the Registrant in the City of
Morristown and State of New Jersey on the 27th day of November, 1996.
Ellsworth Convertible Growth and
Income Fund, Inc.
Name of Registrant
By: /s/ Gary I. Levine
Gary I. Levine
Treasurer
Witness:/s/ Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Ellsworth Convertible Growth and Income Fund, Inc.:
In planning and performing our audit of the financial statements
and financial highlights of Ellsworth Convertible Growth and
Income Fund, Inc., for the year ended September 30, 1996, we
considered its internal control structure, including procedures
for safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the financial
statements and financial highlights and to comply with the requirements
of Form N-SAR, not to provide assurance on the internal control
structure.
The management of Ellsworth Convertible Growth and Income Fund, Inc.
is responsible for establishing and maintaining an internal control
structure. In fulfilling this responsibility, estimates and judgments
by management are required to assess the expected benefits and related
costs of internal control structure policies and procedures. Two of the
objectives of an internal control structure are to provide management
with reasonable, but not absolute, assurance that assets are safeguarded
against loss from unauthorized use or disposition and that transactions
are executed in accordance with management's authorization and recorded
properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure,
errors or irregularities may occur and not be detected. Also, projection
of any evaluation of the structure to future periods is subject to the
risk that it may become inadequate because of changes in conditions or
that the effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Institute
of Certified Public Accountants. A material weakness is a condition in
which the design or operation of the specific internal control structure
elements does not reduce to a relatively low level the risk that errors
or irregularities in amounts that would be material in relation to the
financial statements and financial highlights being audited may occur
and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no
matters involving the internal control structure, including procedures
for safeguarding securities, that we consider to be material weaknesses,
as defined above, as of September 30, 1996.
This report is intended solely for the information and use of management
of Ellsworth Convertible Growth and Income Fund, Inc. and the Securities
and Exchange Commission.
COOPERS & LYBRAND L.L.P.
New York, New York
October 18, 1996
