<PAGE> 1
TO OUR SHAREHOLDERS:
There are times in life when one gets to participate in something
extraordinary. The bull run by the American stock market that began in 1990 has
seen the S&P 500 stock index rise from below 300 to over 1100 as I write this.
Over the twelve months ended March 31, 1998, this index has returned an
astonishing 48% (including dividends). The last bear market we have experienced
was in the summer and fall of 1990 when the S&P 500 index fell 20%. The last
stock market correction occurred in early 1994 when the S&P 500 index fell 9%.
With these exceptions (also including a correction in 1984 and the crash of
1987), the stock market (as represented by the S&P 500) has consistently moved
upwards from its low of 104 in August 1982 to its present value of over 1100.
While it appears unlikely that nearly sixteen years of good market
returns would be unparalleled, this is not true. The stock market from 1949 to
the end of 1968 was very similar as the S&P 500 index moved up from 13.55 to
109.37. The rise was not uninterrupted, as there were some bear markets along
the way (1958, 1962 and 1966). Rising interest rates preceded each of these bear
markets. The long-term secular bull market continued until 1968 when interest
rates rose, inflation started to move up strongly and tax rates were raised.
It is our position that this parallel does provide a perspective on
today's market that suggests that if interest rates do not move up strongly and
if inflation remains low then the stock market should still be attractive. If,
however, the key factors of interest rates, inflation and taxes move up, then
perhaps it would be appropriate to take profits and look for ways of reducing
exposure to potential market volatility. We do not currently see these red
flags, although interest rates appear to have stopped moving down.
Lipper Analytical Services, Inc. has determined that the Fund's net
asset value (NAV) rose 9.84%, 32.15%, 107.12% and 253.35% for the three-months,
twelve-months, five-years and ten-years ended March 31, 1998*. We have
determined that the value of the Fund's shares rose 16.71%, 47.00%, 131.06% and
326.15% for those same three-month, twelve-month, five-year and ten-year periods
(assuming all dividends reinvested at actual reinvestment price). The average
closed-end convertible fund's NAV rose 7.51%, 24.66%, 89.72% and 250.16%* and
the average open-end convertible fund's NAV rose 7.47%, 25.58%, 83.08% and
221.41% for those same periods.**
Morningstar+ continues to give the Ellsworth Convertible Growth and
Income Fund, Inc. a four star (above average) rating. Shareholders who wish a
copy of this report can contact us and we will send you one.
At its April meeting, the Board of Directors declared a dividend of ten
cents per share payable from net investment income. The dividend is payable May
28, 1998 to shareholders of record May 14, 1998.
/s/ Thomas H. Dinsmore
Chairman
May 13, 1998
- ---------------
* From Lipper Analytical Services, Inc., Lipper Closed-End Fund Performance
Analysis Service dated March 31, 1998 with dividends reinvested, for the nine
closed-end convertible funds followed by Lipper Analytical (eight for 5 years
and seven for 10 years).
** As quoted in Barrons, this consists of the fifty-seven open-end convertible
funds followed by Lipper Analytical Services, Inc. with dividends reinvested.
+ Morningstar is an analysis and statistical reporting service that reports on
and rates most mutual funds.
Page 1
<PAGE> 2
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
INVESTMENTS
MARCH 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
OR SHARES (NOTE A)
---------- ----------
<S> <C> <C>
ADVERTISING -- 2.1%
Interpublic Group Cos., Inc. 1.80% 2004 cv. sub. deb.* (Aa) .............................. $1,000,000 $ 923,750
Omnicom Group, Inc. 2-1/4% 2013 cv. sub. deb.* (A-) ...................................... 1,000,000 1,128,750
----------
2,052,500
----------
AEROSPACE -- 4.6%
Morgan Stanley Dean Witter Discover & Co. 0% 2000 medium-term exch. notes (A1)
(exch. for Boeing Company common stock) .................................................. 2,000,000 2,340,000
Orbital Sciences Corp. 5% 2002 cv. sub. notes* (NR) ...................................... 350,000 609,000
Simula, Inc. 8% 2004 sr. cv. sub. notes (NR) ............................................. 750,000 828,750
SPACEHAB, Inc. 8% 2007 cv. sub. notes* (NR) .............................................. 700,000 749,000
----------
4,526,750
----------
BANKING -- 10.0%
National Australia Bank Ltd. 7-7/8% exch. capital units (A1)
(exch. for ADR's representing National Australia Bank Ltd. common stock) ................. 40,000 shs 1,160,000
National City Corp. common stock ......................................................... 13,400 shs 979,038
WBK Trust 10% STRYPES* # (NR)
(exch. for Westpac Banking Corp. common stock) ........................................... 65,000 shs 2,214,063
BankAtlantic Bancorp 5-5/8% 2007 cv. sub. deb. (NR) ...................................... 1,680,000 2,022,300
BankAtlantic Bancorp 6-3/4% 2006 cv. sub. deb. (NR) ...................................... 50,000 104,750
First State Bancorp 7-1/2% 2017 cv. sub. deb. (NR) ....................................... 500,000 762,500
Jefferson-Pilot Corp. 7-1/4% 2000 ACES # (A1)
(exch. for NationsBank Corp. common stock) ............................................... 20,600 2,587,875
----------
9,830,526
----------
BUILDING & REAL ESTATE -- 1.7%
Avatar Holdings, Inc. 7% 2005 cv. sub. notes (NR) ........................................ 750,000 810,000
The Rouse Company 5-3/4% 2002 euro. cv. sub. deb. (Baa2) ................................. 750,000 816,750
----------
1,626,750
----------
CAPITAL GOODS -- 4.5%
CS First Boston, Inc. 3-1/2% 2001 sr. medium-term exch. notes* (Aa)
(exch. for General Electric Corp. common stock) .......................................... 1,000,000 1,708,750
Ingersoll-Rand Co. 6-3/4% FELINE PRIDES # (A3) ........................................... 39,500 shs 994,906
Robbins & Myers, Inc. 6-1/2% 2003 cv. sub. notes (NR) .................................... 960,000 1,401,600
U.S. Filter Corp. 4-1/2% 1999 cv. sub. notes (B1) ........................................ 325,000 359,734
----------
4,464,990
----------
COMMUNICATIONS -- 9.0%
WorldCom, Inc. GA depositary shares (representing 8% cum. cv. A pfd.) (B1) ............... 10,000shs 1,492,500
Bell Atlantic Financial 5-3/4% 2003 cv. sub. deb.*
(exch. for conv. into cash equiv. of Telephone New Zealand common stock) (A+) ............ 2,000,000 2,132,500
NatWest Markets 0% 2003 exch. trust securities*
(exch. for Lucent Technologies, Inc. common stock) (AA2) ................................. 2,000,000 3,250,000
Premiere Technologies, Inc. 5-3/4% 2004 cv. sub. notes* (NR) ............................. 500,000 616,250
Telefonica De Espana 2% 2002 gtd. exch. deb.* (NR) ....................................... 1,000,000 1,412,500
----------
8,903,750
----------
CONSUMER GOODS -- 1.0%
Newell Financial Trust I 5-1/4% trust cv. pfd.* (A-)
(conv. into Newell Co. common stock) ..................................................... 17,500 shs 989,844
----------
DATA-PROCESSING SERVICES -- 3.4%
Affiliated Computer Services, Inc 4% 2005 cv. sub. notes*(Ba2) ........................... 500,000 500,000
American Express Credit Corp. 1-1/8% 2003 cash exch. notes (A+) .......................... 1,100,000 1,045,000
Data Processing Resources Corp. 5-1/4% 2005 cv. sub. notes* (NR) ......................... 250,000 271,875
National Data Corp. 5% 2003 cv. sub. notes (NR) .......................................... 1,500,000 1,558,125
----------
3,375,000
----------
ENERGY -- 9.1%
AES Trust I $2.6875 term cv. securities, series A (exch. for AES Corp. common stock) (Ba1) 32,000 shs 2,556,000
MCN Energy Group, Inc. 8% FELINE PRIDES # (Ba2) .......................................... 10,000 shs 575,000
Unocal Capital Trust 6-1/4% trust cv. pfd. (Ba1) ......................................... 12,500 shs 692,188
Diamond Offshore Drilling, Inc. 3-3/4% 2007 cv. sub. notes (Baa2) ........................ 750,000 942,656
Halter Marine Group, Inc. 4-1/2% 2004 cv. sub. notes* (B2) ............................... 375,000 316,406
Halter Marine Group, Inc. 4-1/2% 2004 cv. sub. notes (B2) ................................ 250,000 210,938
Parker Drilling Co. 5-1/2% 2004 cv. sub. notes (B3) ...................................... 1,200,000 1,200,000
Pennzoil Company 4-3/4% 2003 exch. sr. deb
(exch. for Chevron Corp. common stock) (Baa2) ............................................ 1,800,000 2,489,625
----------
8,982,813
----------
</TABLE>
Page 2
<PAGE> 3
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
OR SHARES (NOTE A)
----------- -----------
<S> <C> <C>
ENTERTAINMENT--11.0%
Chancellor Media Corp. 6% cv. exch. pfd.* (B) ........................................... 5,000shs $ 477,188
Chancellor Media Corp. 7% cv. pfd. (Caa) ................................................ 10,000shs 1,308,125
Hollinger International, Inc. depositary shares (representing 9-3/4% cv. B pfd.) (B2) ... 40,000shs 572,500
Houston Industries, Inc. 7% 2000 ACES pfd. # (Baa1)
(exch. for Time Warner, Inc. common stock) ............................................ 20,000shs 1,296,250
News Corporation Exchange Trust 5% cv. trust originated pfd.* (Ba2)
(exch. for British Sky Broadcasting Group plc American Depositary Shares) ............. 10,000shs 885,625
SFX Broadcasting, Inc. 6-1/2% cum. cv. exch. D pfd.* (Caa) .............................. 4,000shs 427,000
Triathlon Broadcasting Co. depositary shares (representing 9% mandatory cv. pfd.) (NR) .. 50,000shs 550,000
Clear Channel Communications, Inc. 2-5/8% 2003 sr. cv. notes ............................ $ 1,500,000 1,500,000
Credit Suisse 3% 2001 equity linked certificates # (Aa)
(exch. for the cash equivalent of Walt Disney Co. common stock) ....................... 1,000,000 1,383,750
Imax Corp. 5-3/4% 2003 cv. sub. notes* (B3) ............................................. 1,000,000 1,435,625
International CableTel, Inc. 7% 2008 cv. sub. notes* (Caa)
(conv. into NTL, Inc. common stock) ................................................... 400,000 512,000
International CableTel, Inc. 7% 2008 cv. sub. notes Reg (Caa)
(conv. into NTL, Inc. common stock) ................................................... 350,000 448,000
-----------
10,796,063
-----------
FINANCIAL & INSURANCE--8.0%
American General Delaware, L.L.C. 6% cv. A monthly income preferred securities (A1) ..... 20,000shs 1,620,000
Frontier Financing Trust 6-1/4% cv. trust originated pfd.* (Baa3)
(conv. into Frontier Insurance Group, Inc. common stock) .............................. 25,000shs 1,637,500
Life Re Capital Trust II 6% adj. cv. rate equity security units (NR)
(conv. into Life Re Corp. common stock) ............................................... 5,000shs 360,000
American International Group 2-1/4% 2004 cv. notes* (AAA) ............................... 500,000 555,000
First Central Financial Corp. 9% 2000 cv. sub. deb.++ (NR) .............................. 774,000 --
Penn Treaty American Corp. 6-1/4% 2003 cv. sub. notes* (BB+) ............................ 1,375,000 1,641,406
US West, Inc. 75/8% 1998 DECS # (A2)
(exch. for Enhance Financial Services Group, Inc. common stock) ....................... 35,000 2,073,750
-----------
7,887,656
-----------
FOODS--3.1%
Apple South Financing I 7% cv. A pfd. (conv. into Apple South, Inc. common stock)* (NR) . 15,000shs 879,375
Suiza Capital Trust II 5-1/2% cv. pfd (conv. Into Suiza Foods Corp. common stock)* (B2) . 5,000shs 251,875
Ralston Purina Co. 7% 2000 SAILS # (A1)
(exch. for Interstate Bakeries Corp. common stock) .................................... 30,000 1,893,750
-----------
3,025,000
-----------
HEALTH CARE & DRUGS--9.2%
American Retirement Corp. 5-3/4% 2002 cv. sub. deb. (NR) ................................ 500,000 550,000
Assisted Living Concepts, Inc. 6% 2002 cv. sub. deb. (NR) ............................... 500,000 571,875
Atria Communities, Inc. 5% 2002 cv. sub. notes* (NR) .................................... 750,000 802,500
HealthSouth Corp. 3-1/4% 2003 cv. sub. notes* (Ba2) ..................................... 1,000,000 997,500
Morgan Stanley Dean Witter Discover & Co. 0% 2001 medium-term exchangeable notes (A1)
(exch. for ADR's representing SmithKline Beecham plc common stock) .................... 1,000,000 1,672,500
Republic National Bank of NY 1-7/8% 2002 sr. exch. notes (Aa1)
(exch. for the cash equivalent of Merck & Co., Inc. common stock) ..................... 2,000,000 2,140,000
Roche Holdings, Inc. 0% 2010 LYON* (Aa2) ................................................ 2,500,000 1,443,750
Sandoz Capital BVI Ltd. 2% 2002 cv. sub. notes* (cv. into Novartis AG common stock) (AAA) 500,000 832,500
-----------
9,010,625
-----------
HOTEL SERVICES--2.8%
Host Marriott Financial Trust 6-3/4% cv. quarterly income pfd. (NR) ..................... 10,000shs 570,000
Royal Caribbean Cruises Ltd. $3.625 cv. A pfd. (Ba2) .................................... 5,000shs 552,500
Hilton Hotels Corp. 5% 2006 cv. sub. notes (Baa2) ....................................... 1,500,000 1,651,875
-----------
2,774,375
-----------
MANUFACTURED HOUSING--2.4%
Fleetwood Capital Trust 6% cv. trust pfd.* (NR)
(conv. into Fleetwood Enterprises, Inc. common stock) ................................. 40,000shs 2,327,500
-----------
OFFICE EQUIPMENT--0.9%
Xerox Credit 2-7/8% 2002 medium-term notes (A1) ......................................... 750,000 870,938
-----------
PARKING SERVICES--0.7%
Central Parking Financial Trust 5-1/4% trust cv. pfd.* (NR)
(conv. into Central Parking Corp. common stock) ....................................... 25,000shs 654,688
-----------
</TABLE>
Page 3
<PAGE> 4
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
OR SHARES (NOTE A)
----------- -----------
<S> <C> <C>
RETAIL--5.3%
Costco Companies, Inc. 0% 2017 cv. sub. notes* (A1) ..................... $ 1,000,000 $ 668,125
Costco Companies, Inc. 0% 2017 cv. sub. notes (A1) ...................... 500,000 334,063
Home Depot, Inc. 3-1/4% 2001 cv. sub. notes (A1) ........................ 2,000,000 3,022,500
Rite Aid Corp. 5-1/4% 2002 cv. sub. notes* (Baa1) ....................... 1,000,000 1,156,250
-----------
5,180,938
-----------
TECHNOLOGY--6.2%
Microsoft Corp. 2-3/4% cv. exch. series A pfd ........................... 5,000shs 462,500
Arbor Software Corp. 4-1/2% 2005 cv. sub. notes* (NR) ................... 125,000 132,500
The Bear Stearns Companies, Inc. 6-3/4% 2000 medium-term notes* (Aa2)
(exch. for Seagate Technology, Inc. common stock) ..................... 7,500 518,025
Hewlett-Packard Co., Inc. 0% 2017 LYON* (NR) ............................ 1,500,000 795,938
Morgan Stanley Dean Witter Discover & Co. 6% 1998 DECS # (A1)
(exch. for Cisco Systems, Inc. common stock) .......................... 7,500 714,375
Morgan Stanley Dean Witter Discover & Co. 0% 2001 technology exch. note
trust certificates* (A1) (exch. for technology basket common stocks ++) 1,000,000 1,195,625
Thermo Electron Corp. 4-1/4% 2003 cv. sub. deb.* (Ba2) .................. 750,000 874,688
Thermo Instruments Corp. 4-1/2% 2003 cv. sub. deb.* (Ba1) ............... 375,000 411,328
VLSI Technology, Inc. 8-1/4% 2005 cv. sub. notes (B) .................... 1,000,000 1,004,375
-----------
6,109,354
-----------
U.S. TREASURY NOTES--0.0%
6-1/4% 3/31/99** ........................................................ 25,000 25,180
-----------
CORPORATE SHORT-TERM NOTES--2.9%
American Express Credit Corp. 5.69% 4/2/98 (P1) ......................... 2,900,000 2,898,625
-----------
TOTAL CONVERTIBLE BONDS AND NOTES--68.0% ................................ $66,929,075
TOTAL CONVERTIBLE PREFERRED STOCKS--25.9% ............................... 25,507,127
TOTAL COMMON STOCKS--1.0% ............................................... 979,038
TOTAL CORPORATE SHORT-TERM NOTES--2.9% .................................. 2,898,625
-----------
TOTAL INVESTMENTS--97.8% ................................................ 96,313,865
OTHER ASSETS AND LIABILITIES, NET--2.2% ................................. 2,131,506
-----------
TOTAL NET ASSETS--100.0% ................................................ $98,445,371
===========
</TABLE>
- -------------
* Rule 144A security, may be sold only to qualified institutional buyers
# See Note A(5)
+ Guaranteed by National Westminster Bank PLC
+++ Value reflects fair value determination made by the Board of Directors of
the Company as a result of FCC financial difficulties
++ Ticker symbols: CSCO, EDS, HWP, INTC, MSFT & ORCL
** Collateral for a letter of credit
ACES -- Automatically convertible equity securities
ADR -- American Depository Receipts
DECS -- Debt exchangeable for common stock
FELINES -- Family of equity-linked income securities
GEMMS -- Guaranteed exchangeable monetisation of multiple shares
LYON -- Liquid yield option note
PRIDES -- Preferred redeemable increased dividend equity securities
SAILS -- Stock appreciation income-linked securities
STRYPES -- Structured yield product exchangeable for stock
The cost of investments for federal income tax purposes is $78,790,381 resulting
in gross unrealized appreciation and depreciation of $18,986,358 and $1,462,874,
respectively, or net unrealized appreciation of $17,523,484 on a tax cost basis.
See accompanying notes to financial statements.
Page 4
<PAGE> 5
STATEMENT OF ASSETS AND LIABILITIES (unaudited)
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
<S> <C>
ASSETS:
Investments at value (cost $78,790,381) (Note A) ..................... $96,313,865
Cash ................................................................. 1,178,737
Receivable for securities sold ....................................... 645,622
Dividends and interest receivable .................................... 590,628
Prepaid insurance .................................................... 21,814
Other assets ......................................................... 15,701
-----------
Total assets ......................................................... 98,766,367
-----------
LIABILITIES:
Payable for securities purchased ..................................... 297,188
Accrued management fee (Note B) ...................................... 9,087
Accrued expenses ..................................................... 14,717
-----------
Total liabilities .................................................... $ 320,992
-----------
NET ASSETS ........................................................... $98,445,375
===========
NET ASSETS CONSIST OF:
Undistributed net investment income .................................. $ 558,903
Undistributed net realized gain from investment transactions ......... 7,798,095
Unrealized appreciation on investments ............................... 17,523,484
Capital shares (Note C) .............................................. 78,241
Additional paid-in capital ........................................... 72,486,648
-----------
NET ASSETS ........................................................... $98,445,371
===========
Net asset value per share ($98,445,371 divided by 7,824,101
outstanding shares) ............................................... $ 12.58
===========
</TABLE>
See accompanying notes to financial statements.
Page 5
<PAGE> 6
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
STATEMENT OF OPERATIONS
Six Months Ended March 31, 1998 (unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME (Note A)
Interest .................................................... $ 1,132,414
Dividends ................................................... 758,277
-----------
Total Income ................................................ 1,890,691
-----------
EXPENSES (Note B):
Management fee .............................................. 339,782
Custodian ................................................... 10,609
Transfer agent .............................................. 10,696
Professional fees ........................................... 28,626
Reports to shareholders ..................................... 45,430
Directors' fees ............................................. 30,050
Treasurer's office .......................................... 12,500
Listing fee ................................................. 10,000
Other ....................................................... 44,145
-----------
Total Expenses .............................................. 531,838
-----------
NET INVESTMENT INCOME ....................................... $ 1,358,853
===========
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions .............. 7,798,095
-----------
Net change in unrealized appreciation of investments ........ (994,403)
-----------
Net gain on investments ..................................... 6,803,692
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ 8,162,545
===========
</TABLE>
See accompanying notes to financial statements.
Page 6
<PAGE> 7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997
---------------- ------------------
<S> <C> <C>
Increase in net assets from operations:
Net investment income.............................................. $ 1,358,853 $ 2,813,490
Net realized gain from investment transactions .................... 7,798,095 10,543,504
Net increase (decrease) in unrealized appreciation of investments . (994,403) 8,277,974
------------ ------------
Net increase in net assets resulting from operations .............. 8,162,545 21,634,968
------------ ------------
Dividends paid from net investment income.......................... (1,258,841) (2,796,764)
Distribution from net realized gain on investments................. (10,545,488) (7,057,407)
------------ ------------
Total Dividends.................................................... (11,804,329) (9,854,171)
------------ ------------
Capital share transactions (Note C)
Value of shares issued on reinvestment of distributions ........... 7,265,578 4,680,550
Repurchase of capital shares ...................................... -- (35,184)
------------ ------------
Change in net assets resulting from capital share transactions .... 7,265,578 4,645,366
------------ ------------
Increase in net assets ............................................ 3,623,794 16,426,163
Net assets at beginning of period.................................. $ 94,821,577 78,395,414
------------ ------------
Net assets at end of period (including undistributed net investment
income of $558,903 and $461,274, respectively)..................... $98,445,371 $ 94,821,577
============ ============
</TABLE>
See accompanying notes to financial statements.
Page 7
<PAGE> 8
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED SEPTEMBER 30,
ENDED ---------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: MARCH 31, 1998+ 1997 1996 1995 1994 1993
- -------------------------------- -------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 13.33 $ 11.80 $ 10.76 $ 9.72 $ 10.39 $ 9.31
------- ------- ------- ------- ------- -------
Net investment income ................... .17 .40 .43 .48 .51 .53
Net realized and unrealized gain (loss) . .73 2.59 1.37 1.30 (.58) 1.14
------- ------- ------- ------- ------- -------
Total from investment operations ...... .90 2.99 1.80 1.78 (.07) 1.67
Less Distributions:
Dividends from net investment income .... (.17) (.40) (.47) (.51) (.53) (.50)
Distributions from realized gains ....... (1.48) (1.06) (.29) (.23) (.07) (.09)
------- ------- ------- ------- ------- -------
Total distributions ................... (1.65) (1.46) (.76) (.74) (.60) (.59)
------- ------- ------- ------- ------- -------
Net asset value, end of period .......... 12.58 13.33 11.80 10.76 9.72 10.39
======= ======= ======= ======= ======= =======
Net assets, end of period (000's) ....... 98,445 94,822 78,395 69,769 61,316 64,457
Market price, end of period ............. 12.000 11.250 9.875 9.125 8.375 9.375
Total Investment Return:
Based on market value ................. 24.01% 30.93% 17.13% 18.95% (4.46)% 19.73%
Based on net asset value* ............. 8.10% 27.77% 17.43% 19.50% (0.61)% 18.60%
Ratios/Supplemental Data:
Ratio of expenses to average net assets . 1.2%** 1.2% 1.2% 1.2% 1.1% 1.2%
Ratio of net investment income to average
net assets ............................ 3.0%** 3.4% 3.9% 5.0% 5.2% 5.5%
Portfolio turnover rate ................. 42% 71% 70% 44% 45% 99%
Average commission rate paid ............ $ .0600 $ .0606 $ .0689
</TABLE>
- ---------------
+ Unaudited
* Assumes valuation of the Fund's shares, and reinvestment of dividends, at net
asset values.
** Annualized
See accompanying notes to financial statements.
Page 8
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL PORTFOLIO CHANGES January 1, 1998 to March 31, 1998
SHARES OR PRINCIPAL AMOUNT
-------------------------------------------
HELD AT
ADDITIONS REDUCTIONS 3-31-98
--------- ---------- -------
<S> <C> <C> <C>
Affiliated Computer Services., Inc. cv. sub. notes 144A 4% 2005. 500,000 500,000
American Bankers Insurance Group, Inc. cv. pfd. B .............. 15,000 --
American Express Credit Corp. 1-1/8% 2003 cash exch. notes ..... 1,100,000 1,100,000
Avatar Holdings, Inc. 7% 2005 cv. sub. notes ................... 750,000 750,000
BankAtlantic Bancorp 5-5/8% 2007 cv. sub. deb .................. 825,000 1,680,000
BankAtlantic Bancorp 6-3/4% 2006 cv. sub. deb .................. 700,000 50,000
Bell Atlantic Financial Services 5-3/4% 2003 cv. sub. deb. 144A 2,000,000 2,000,000
Central Parking Finance Trust 5-1/4% trust cv. pfd 144A ........ 25,000 25,000
Ciba Geigy Corp. 6-1/4% 2016 exch. sub. deb. 144A .............. 1,800,000 --
Clear Channel Communications, Inc. 2-5/8% 2003 sr. cv. notes ... 1,500,000 1,500,000
Devon Financing Trust 6-1/2% trust cv. pfd. 144A ............... 10,000 --
First Data Corp. common stock .................................. 45,966 --
Fleetwood Capital Trust 6% trust cv. pfd. 144A ................. 40,000 40,000
HealthSouth Corp. 3-1/4% 2003 cv. sub. notes 144A .............. 1,000,000 1,000,000
Host Marriott Financial Trust 6-3/4% cv. quarterly income pfd .. 10,000 10,000
Ingersoll-Rand Co. 6-3/4% cv. pfd .............................. 39,500 39,500
International CableTel, Inc. 7% 2008 cv. sub. notes ............ 350,000 750,000
International CableTel, Inc. 7-1/4% 2005 cv. sub. notes 144A ... 600,000 750,000
Interpublic Group Cos., Inc. 1.8% 2004 cv. sub. deb. 144A ...... 500,000 1,000,000
Kapson Senior Quarters Corp. 8% cv. pfd ........................ 15,000 --
Magna International, Inc. 4-7/8% 2005 cv. sub. deb. 144A ....... 375,000 --
Mercury Air Group, Inc. 7-3/4% 2006 cv. sub. deb ............... 375,000 --
Nabors Industries, Inc. 5% 2006 cv. sub. notes ................. 550,000 --
National Data Corp. 5% 2003 cv. sub. notes ..................... 500,000 1,500,000
Oak Industries, Inc. 4-7/8% 2008 cv. sub. notes 144A ........... 100,000 --
Omnicom Group, Inc. 2-1/4% 2013 cv. sub. deb. 144A ............. 500,000 1,000,000
Reader's Digest 8-1/4% 2001 ACES Trust ......................... 35,000 35,000 --
Republic National Bank of NY 1-7/8% 2002 cv. sr. notes ......... 500,000 2,000,000
Roche Holdings, Inc. 0% 2010 liquid yield option notes 144A .... 1,000,000 2,500,000
Sprint Corp. 8-1/4% 2000 exch. notes ........................... 25,000 --
Union Bank Of Switzerland Finance N.V. 2-1/2% 2001 euro. cv. deb 500,000 --
Washington Mutual Savings Bank common stock .................... 7,800 --
</TABLE>
Page 9
<PAGE> 10
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 management
investment company. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements, and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements:
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. Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Interest
of $5,110 was earned on cash balances held by the custodian of the Fund's assets
during the six months ended March 31, 1998.
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 or excise taxes is believed
necessary.
4. Dividends and Distributions to Shareholders
The liability for dividends and distributions payable is recorded on the
ex-dividend date.
5. Market Risk
It is the Fund's policy to invest the majority 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 in their
underlying security. Thus they expose the Fund to greater downside risk than
traditional convertible securities, but still less than that of the underlying
common stock. The market value of those securities was $13,733,719 at March 31,
1998, representing 14.0% of net assets.
(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 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 $12,500 for the six months ended March 31, 1998. The
officers of the Fund are also directors, officers or employees of the investment
adviser, and are compensated by the investment adviser.
(C) At March 31, 1998 there were 7,824,101 shares of $.01 par value common stock
outstanding (20,000,000 shares authorized). During the six months ended March
31, 1998, 713,185 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 $7,265,578.
Page 10
<PAGE> 11
(D) Purchases and sales of investments, exclusive of corporate short-term
notes, aggregated $36,983,892 and $43,674,698, respectively, for the six months
ended March 31, 1998.
(E) A distribution of $.10 per share from net investment income was declared on
April 27, 1998, payable May 28, 1998 to shareholders of record at the close of
business May 14, 1998.
(F) The Year 2000 Issue
Like other investment companies and financial and business organizations around
the world, the Fund could be adversely affected if the computer systems used by
the Adviser and other service providers do not properly process and calculate
date-related information and data from and after January 1, 2000. The Adviser
has reviewed its in-house systems and found them to be Year 2000 compliant.
Assurances have been obtained from all outside service providers that they
either are now compliant or will be by 1998 year-end and that they will begin
testing any replacement systems in 1999. The Fund does not expect to incur any
significant costs in order to address the Year 2000 issue.
Results of the 1998 Annual Shareholders Meeting
The results of the shareholder vote at the Annual Meeting of Shareholders held
on January 9, 1998, were:
1. All directors nominated by management were elected for terms expiring in
2001.
<TABLE>
<CAPTION>
Votes for Votes withheld
-------- ------------
<S> <C> <C>
Gordon F. Ahalt 6,116,806 113,741
Elizabeth C. Bogan, Ph.D. 6,124,249 106,298
Nicolas W. Platt 6,082,067 148,480
</TABLE>
2. The selection of Coopers & Lybrand as independent accountants was ratified
with 6,119,931 shares voted for, 51,136 shares voted against, and 59,480
abstained.
3. The proposal to amend the Articles of Incorporation that would give
shareholders the right to tender their shares during the current fiscal
year did not pass, as 1,062,871 shares voted for, 2,275,247 shares voted
against, 181,955 shares abstained and 2,710,474 shares were broker
non-votes.
- --------------------------------------------------------------------------------
Important Factors Regarding Forward-Looking Statements
Information contained within the letter to Shareholders constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Company believes its expectations
are based on reasonable assumptions, the Company's actual results could differ
materially from its expectations. Factors which could cause actual results to
differ from expectations include, among others, changes in the Federal Reserve
Board's monetary policy, an increase in interest rates, inflation or taxes,
changes to foreign and domestic markets in general or changes to the market for
convertible securities.
- --------------------------------------------------------------------------------
Pursuant to Section 23 of the Investment Company Act of 1940, notice is hereby
given that the Fund may in the future purchase shares of Ellsworth Convertible
Growth and Income Fund, Inc. Common Stock from time to time, at such times, and
in such amounts, as may be deemed advantageous to the Fund. Nothing herein shall
be considered a commitment to purchase such shares.
Page 11
<PAGE> 12
DIRECTORS
GORDON F. AHALT
WILLIAM A. BENTON
ELIZABETH C. BOGAN
THOMAS H. DINSMORE, C.F.A.
DONALD M. HALSTED, JR.
GEORGE R. LIEBERMAN
DUNCAN O. MCKEE
JANE D. O'KEEFFE
NICOLAS W. PLATT
OFFICERS
THOMAS H. DINSMORE Chairman of the Board
JANE D. O'KEEFFE President
SIGMUND LEVINE Senior Vice President
and Secretary
H. TUCKER LAKE Vice President, Trading
GERMAINE M. ORTIZ Assistant Vice President
GARY I. LEVINE Treasurer and
Assistant Secretary
MERCEDES A. PIERRE Assistant Treasurer
INVESTMENT ADVISOR
Davis-Dinsmore Management Company
65 Madison Ave., Morristown, NJ 07960-7308
(973) 631-1177
http://www.bcvecf.com
email: [email protected]
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) 432-8224
http://stkxfer.bankofny.com
COMMON STOCK LISTING
American Stock Exchange
Symbol: ECF
ELLSWORTH
CONVERTIBLE
GROWTH AND
INCOME FUND
[FPO LOGO]
1998
SEMI-ANNUAL
REPORT
MARCH 31, 1998
Printed on recycled paper
