<PAGE> 1
[FPO LOGO]
Ellsworth Convertible Growth and Income Fund
1998 Annual Report
September 30, 1998
<PAGE> 2
1998 Annual Report
September 30, 1998
Ellsworth Convertible Growth and Income Fund, Inc. 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.
<TABLE>
<CAPTION>
QUARTERLY HISTORY OF NAV AND MARKET PRICE
NET ASSET VALUES MARKET PRICES
HIGH LOW CLOSE HIGH LOW CLOSE
<S> <C> <C> <C> <C> <C> <C>
Dec 31 $13.57 $11.25 $11.55 $12.00 $ 9.94 $10.38
Mar 31 12.58 11.29 12.58 12.25 10.06 11.94
Jun 30 12.80 12.09 12.60 12.25 11.31 11.63
Sep 30 13.18 10.97 11.18 11.75 9.13 10.00
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE THRU 9/30/98
with dividends reinvested
YTD 1YR 5YR 10YR
<S> <C> <C> <C> <C>
- - Ellsworth market value -0.98% 5.21% 83.35% 253.33%
- - Ellsworth net asset
value -0.78% -2.39% 73.97% 203.33%
- - Lipper average
of closed-end
convertible funds -5.20% -6.16% 53.68% 191.64%
- - S&P 500 6.01% 9.06% 147.82% 391.64%
- - Russell 2000 -16.04% -18.89% 43.74* 143.87*
</TABLE>
Performance data represent past results and do not reflect future performance.
*Simple appreciation of index
<TABLE>
<CAPTION>
MAJOR INDUSTRY EXPOSURE AS OF 9/30/98
% OF
NET ASSETS
<S> <C>
Communications 10.65
Health Care & Drugs 10.57
Entertainment 9.66
Banking 9.33
Retail 8.77
Financial & Insurance 7.18
Technology 5.84
Capital Goods 5.34
Energy 4.72
Aerospace 4.38
</TABLE>
<TABLE>
<CAPTION>
TOP TEN CONVERTIBLES HELD AS OF 9/30/98
% OF
NET ASSETS
<S> <C>
Home Depot, Inc. 4.00
Bell Atlantic Financial exch. for
Telephone New Zealand 3.44
NatWest Markets exch. for Lucent Technologies, Inc. 3.00
Houston Industries, Inc. exch. for Time Warner, Inc. 2.44
Republic National Bank of NY exch. for
Merck & Co. 2.44
BankAtlantic Bancorp 2.29
Jefferson-Pilot Corp. exch. for NationsBank Corp. 2.24
Morgan Stanley Dean Witter Discover & Co.
exch. for Boeing Company 2.16
Ralston Purina Co. exch. for Interstate Bakeries Corp. 2.13
WBK Trust 2.05
</TABLE>
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> 3
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
TO OUR SHAREHOLDERS:
Market volatility has become the market standard for 1998. In our last
report, we indicated that volatility in the financial markets was being caused
by foreign economic woes, the year 2000 computer bug, uncertainty over the
President's political future and a market that appeared to be ahead of itself.
To this list we must now add that there were a number of very large hedge funds
that used too much leverage. A number of such funds were forced to liquidate
portions of their portfolios totaling many billions of dollars in a very brief
of period of time. Further, many of these funds used convertible securities in
some of their strategies and included them when selling securities to raise
capital. Because of this, convertibles as an asset class underperformed
equities, something that they generally don't do in volatile markets. According
to Lipper Analytical*, for the nine-months ended September 30, 1998, the average
open-end convertible fund's net asset value (NAV) fell 6.11% and the average
closed-end convertible fund's NAV fell 5.20%, while that of the general equity
funds fell only 4.89%.** Also according to Lipper Analytical, Ellsworth's net
asset value (NAV) fell 0.78%+ for that same period.
Shareholders should note that Ellsworth's investment restrictions do not
allow it to borrow money in order to leverage its assets,++ so that when markets
do not perform as expected shareholders do not see their losses magnified by
that leverage.
In this last quarter we saw a very short bear market. Several market
indices fell by roughly 20% from their peaks in July. This has generally been
accepted as the definition of a bear market. It is, in our opinion, a bear
market that had again at its root the overuse of leverage. It appears that those
institutions that were overleveraged have reduced their positions and should not
contribute as massively to volatility in the future. The problems outlined above
are still with us and even with the decline, stock prices are not cheap by
historical standards. Offsetting these problems are demographic trends that
imply continued inflows of retirement funds, U.S. government surpluses reducing
the supply of U.S. debt in the marketplace and further improvements in
productivity due to the continuation of the information revolution. We intend to
remain appropriately invested and are inclined to view the current
underperformance of the convertible market as an opportunity to improve the
content of our portfolio.
In the September 30, 1998 edition of the Principia for Closed-End Funds,
Morningstar++ continued to rate Ellsworth at four stars (above average).
Shareholders who wish a copy of this report should contact us.
At its September meeting, the Fund's Board of Directors voted to pay a
dividend of $1.41. This dividend consists of 4.8 cents per share from net
investment income and $1.362 per share of long-term capital gain. The dividend
is payable on November 28, 1998 to shareholders of record on November 2, 1998.
The 1999 annual meeting of shareholders will be held at the Atlantis Golf
Club in Atlantis, Florida on January 11, 1999. All shareholders are welcome to
attend and we hope to see you there.
/s/ Thomas H. Dinsmore
Chairman of the Board
November 5, 1998
- --------------------------------------------------------------------------------
* Lipper Analytical Services, Inc. is an independent statistical service.
** 59 open-end convertible funds with dividends reinvested
9 closed-end convertible funds with dividends reinvested
3670 general equity funds with dividends reinvested.
+ With all dividends reinvested at NAV.
++ The Fund may borrow up to 5% of total assets for temporary or emergency
purposes and to finance repurchases of its shares.
++ Morningstar is an independent statistical service that rates mutual funds.
<PAGE> 4
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMONT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
- ---------- ------------- --------------
<S> <C> <C> <C>
ADVERTISING--1.0%
$1,000,000 Interpublic Group Cos., Inc. 1.80% 2004 cv. sub. deb.* (NR).......... $ 836,591 $ 888,750
----------- -----------
AEROSPACE--4.4%
2,000,000 Morgan Stanley Dean Witter Discover & Co. 0% 2000 medium-term
exch. notes (A1)................................................... 1,924,318 1,887,500
(exch. for Boeing Company common stock)
350,000 Orbital Sciences Corp. 5% 2002 cv. sub. notes* (B)................... 350,000 427,000
125,000 Orbital Sciences Corp. 5% 2002 cv. sub. notes - Reg (B).............. 122,656 152,500
825,000 Simula, Inc. 8% 2004 sr. cv. sub. notes (NR)......................... 832,875 721,875
700,000 SPACEHAB, Inc. 8% 2007 cv. sub. notes* (NR).......................... 701,438 637,000
----------- -----------
3,931,287 3,825,875
----------- -----------
BANKING--9.3%
50,000 shs CNB Capital Trust I 6% SPuRS (Baa2).................................. 1,253,063 1,337,500
(exch. for CNB Bancshares, Inc. common stock)
40,000 shs National Australia Bank Ltd. 77/8% exch. capital units (A1).......... 1,038,700 1,065,000
65,000 shs WBK Trust 10% STRYPES*# (NR)......................................... 1,906,508 1,795,625
(exch. for Westpac Banking Corp. common stock)
2,165,000 BankAtlantic Bancorp 55/8% 2007 cv. sub. deb. (NR)................... 2,417,375 2,002,625
20,600 Jefferson-Pilot Corp. 71/4% 2000 ACES# (A1).......................... 1,853,661 1,957,000
(exch. for NationsBank Corp. common stock)
----------- -----------
8,469,307 8,157,750
----------- -----------
CAPITAL GOODS--5.3%
1,700,000 CS First Boston, Inc. 21/4% 2003 sr. medium-term
exch. notes* (Aa3)................................................. 1,700,000 1,657,500
(exch. for General Electric Corp. common stock)
1,250,000 CS First Boston, Inc. 25/8% 2003 sr. medium-term exch. notes (Aa).... 1,250,000 1,193,750
(exch. for Minnesota Mining and Manufacturing common stock)
760,000 Robbins & Myers, Inc. 61/2% 2003 cv. sub. notes (NR)................. 805,600 740,050
1,200,000 U.S. Filter Corp. 41/2% 2001 cv. sub. notes (Ba3).................... 1,265,406 1,080,000
----------- -----------
5,021,006 4,671,300
----------- -----------
COMMUNICATIONS--10.7%
3,000,000 Bell Atlantic Financial 53/4% 2003 cv. sub. deb.*................... 3,146,320 3,011,250
(exch. for cash equiv. of Telephone New Zealand common stock) (A1)
1,000,000 Bell Atlantic Financial 41/4% 2005 cv. sub. deb.*................... 1,002,970 975,000
(exch. for cash equiv. of Cable & Wireless Communications
plc common stock) (A1)
15,000 MediaOne Group, Inc. 61/4% 2001 PIES# (Ba1)......................... 871,875 838,125
(exch. for AirTouch Communications, Inc. common stock)
1,500,000 NatWest Markets 0% 2003 exch. trust securities*+.................... 1,406,229 2,625,000
(exch. for Lucent Technologies, Inc. common stock) (AA2)
500,000 Norddeutsche 3% 2003 euro. cv. deb.................................. 580,000 586,875
(exch. for Deutsche Telekom AG common stock) (Aa1)
1,000,000 Telefonica De Espana 2% 2002 gtd. exch. deb.* (NR).................. 1,000,000 1,280,000
----------- -----------
8,007,394 9,316,250
----------- -----------
CONSUMER GOODS--1.1%
17,500 shs Newell Financial Trust I 51/4% QUIPS* (Baa1)........................ 878,750 981,094
(conv. into Newell Co. common stock) ----------- -----------
DATA-PROCESSING SERVICES--3.3%
500,000 Affiliated Computer Services, Inc. 4% 2005 cv. sub. notes* (Ba2).... 500,000 462,813
1,100,000 American Express Credit Corp. 11/8% 2003 cash exch. notes (Aa3)..... 1,043,144 1,072,500
1,500,000 National Data Corp. 5% 2003 cv. sub. notes (Ba3).................... 1,518,125 1,378,125
----------- -----------
3,061,269 2,913,438
----------- -----------
ELECTRIC UTILITIES--0.3%
5,000 shs Texas Utilities Co. 91/4% FELINE PRIDES# (Baa3)..................... 250,000 281,250
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
INVESTMENTS(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
- ----------- ------------- -------------
<S> <C> <C> <C>
ENERGY--4.7%
10,000 shs MCN Energy Group, Inc. 8% FELINE PRIDES# (Ba1)...................... $ 502,800 $ 353,125
$1,750,000 AES Corp. 41/2% 2005 cv. jr. sub. deb. (Ba1)........................ 1,750,000 1,605,625
750,000 Diamond Offshore Drilling, Inc. 33/4% 2007 cv. sub. notes (Baa2).... 765,000 691,875
700,000 Parker Drilling Co. 51/2% 2004 cv. sub. notes (B3).................. 825,500 506,625
1,000,000 Swiss Life Financial Ltd. 2% 2005 GEMMS* (NR)....................... 1,006,563 972,500
(exch. for Royal Dutch Petroleum common stock)
----------- -----------
4,849,863 4,129,750
----------- -----------
ENTERTAINMENT--9.7%
5,000 shs Chancellor Media Corp. 6% cv. exch. pfd.* (Caa2).................... 250,000 359,063
10,000 shs Chancellor Media Corp. 7% cv. pfd. (Caa2)........................... 500,000 982,500
28,000 shs Houston Industries, Inc. 7% 2000 ACES# (Baa1)....................... 1,460,230 2,136,750
(exch. for Time Warner, Inc. common stock)
10,000 shs News Corporation Exchange Trust 5% cv. trust originated pfd.* (Ba2). 1,006,897 955,000
(exch. for British Sky Broadcasting Group plc ADS's)
50,000 shs Triathlon Broadcasting Co. depositary shares (representing 9%
mandatory cv. pfd.) (NR).......................................... 525,000 475,000
1,500,000 Clear Channel Communications, Inc. 25/8% 2003 sr. cv. notes (Baa3).. 1,500,000 1,518,750
1,000,000 Imax Corp. 53/4% 2003 cv. sub. notes* (B1).......................... 1,000,000 1,091,250
400,000 International CableTel, Inc. 7% 2008 cv. sub. notes* (Caa1)......... 400,000 494,000
(conv. into NTL, Inc. common stock)
350,000 International CableTel, Inc. 7% 2008 cv. sub. notes Reg (Caa1)...... 450,625 432,250
(conv. into NTL, Inc. common stock)
----------- -----------
7,092,752 8,444,563
----------- -----------
FINANCIAL & INSURANCE--7.2%
20,000 shs American General Delaware, L.L.C. 6% cv. A MIPS (A2)................ 1,015,875 1,640,000
25,000 shs Frontier Financing Trust 61/4% cv. trust originated pfd.* (Baa3).... 1,296,875 1,093,750
(conv. into Frontier Insurance Group, Inc. common stock)
500,000 American International Group 21/4% 2004 cv. notes* (AAA)............ 500,000 570,000
30,000 MediaOne Group, Inc. 75/8% 1998 DECS# (A2).......................... 720,000 1,522,500
(exch. for Enhance Financial Services Group, Inc. common stock)
1,375,000 Penn Treaty American Corp. 61/4% 2003 cv. sub. notes* (BB+)......... 1,406,875 1,450,625
----------- -----------
4,939,625 6,276,875
----------- -----------
FOODS--2.9%
10,000 shs Apple South Financing I 7% cv. A pfd.* (B2)......................... 500,000 470,000
(conv. into Apple South, Inc. common stock)
5,000 shs Apple South Financing I 7% cv. A pfd. Reg. (B2)..................... 297,188 235,000
(conv. into Apple South, Inc. common stock)
30,000 Ralston Purina Co. 7% 2000 SAILS# (Baa1)............................ 1,861,638 1,860,000
(exch. for Interstate Bakeries Corp. common stock)
----------- -----------
2,658,826 2,565,000
----------- -----------
HEALTH CARE & DRUGS--10.6%
750,000 Atria Communities, Inc. 5% 2002 cv. sub. notes* (B3)................ 754,375 749,063
500,000 Genzyme Corp. 51/4% 2005 cv. sub. notes* (NR)....................... 500,000 550,000
1,000,000 HealthSouth Corp. 31/4% 2003 cv. sub. notes* (Ba2).................. 1,000,000 773,125
250,000 HealthSouth Corp. 31/4% 2003 cv. sub. notes - Reg. (Ba2)............ 222,500 193,281
1,000,000 Morgan Stanley Dean Witter Discover & Co. 0% 2001 medium-term
exchangeable notes (A1)........................................... 1,223,072 1,482,500
(exch. for ADR's representing SmithKline Beecham plc common stock)
2,000,000 Republic National Bank of NY 17/8% 2002 sr. exch. notes (Aa1)....... 1,966,855 2,135,000
(exch. for the cash equivalent of Merck & Co., Inc. common stock)
2,500,000 Roche Holdings, Inc. 0% 2010 LYON* (Aa2)............................ 1,203,662 1,509,375
500,000 Sandoz Capital BVI Ltd. 2% 2002 cv. sub. notes*..................... 526,250 780,625
(cv. into Novartis AG common stock) (AAA)
1,000,000 Swiss Life Financial Ltd. 2% 2003 GEMMS* (NR)....................... 1,025,156 1,072,500
(exch. for Glaxo Wellcome PLC common stock)
----------- -----------
8,421,870 9,245,469
----------- -----------
MANUFACTURED HOUSING--2.0%
40,000 shs Fleetwood Capital Trust 6% cv. trust pfd.* (Baa3)................... 2,000,000 1,740,000
(conv. into Fleetwood Enterprises, Inc. common stock) ----------- -----------
OFFICE EQUIPMENT--0.9%
750,000 Xerox Credit 27/8% 2002 medium-term notes (A2)...................... 740,000 798,750
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
INVESTMENTS(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IDENTIFIED VALUE
OR SHARES COST (NOTE A)
- ----------- ------------- -------------
<S> <C> <C> <C>
PACKAGING--0.4%
10,000 shs Owens-Illinois, Inc. 43/4% cv. pfd. A (BA3)......................... $ 507,800 $ 357,500
----------- -----------
RETAIL--8.8%
32,500 shs Dollar General Trust 81/2% STRYPES# (NR)............................ 1,265,499 1,170,000
(conv. into Dollar General Corp. common stock)
16,000 shs Estee Lauder Trust 61/4% TRACES# (NR)............................... 966,573 880,000
(conv. into Estee Lauder Companies, Inc. common stock)
$1,000,000 Costco Companies, Inc. 0% 2017 cv. sub. notes* (A3)................. 531,244 617,500
500,000 Costco Companies, Inc. 0% 2017 cv. sub. notes - Reg. (A3)........... 310,433 308,750
2,000,000 Home Depot, Inc. 31/4% 2001 cv. sub. notes (A1)..................... 2,003,125 3,498,750
1,000,000 Rite Aid Corp. 51/4% 2002 cv. sub. notes* (Baa1).................... 1,024,375 1,192,500
----------- -----------
6,101,249 7,667,500
----------- -----------
STAFFING SERVICES--1.0%
1,000,000 Interim Services, Inc. 41/2% 2005 cv. sub. deb. (Ba3)............... 1,012,500 853,750
----------- -----------
TECHNOLOGY--5.8%
500,000 Arbor Software Corp. 41/2% 2005 cv. sub. notes* (NR)................ 512,488 346,875
750,000 The Bear Stearns Companies, Inc. 63/4% 2000 medium-term notes* (Aa2) 750,000 511,125
(exch. for Seagate Technology, Inc. common stock)
1,500,000 Hewlett-Packard Co., Inc. 0% 2017 LYON* (Aa3)....................... 832,185 799,688
1,000 Morgan Stanley Dean Witter Discover & Co. 0% 2001 technology exch.
note trust certificates* (A1)..................................... 933,003 1,281,250
(exch. for technology basket common stocks++)
500,000 Synoptics Communications, Inc. 51/4% 2003 cv. sub. deb.*............ 510,625 491,250
(exch. for Northern Telecommunications Ltd. common stock) (Ba3)
37,500 Tribune Co. 61/4% 2001 DECS# (A2)................................... 1,047,656 810,938
(exch. for The Learning Company, Inc. common stock)
1,000,000 VLSI Technology, Inc. 81/4% 2005 cv. sub. notes (B)................. 1,012,750 862,500
----------- -----------
5,598,707 5,103,626
----------- -----------
U.S. TREASURY NOTES--0.0%
25,000 61/4% 3/31/99**..................................................... 24,922 25,203
----------- -----------
CORPORATE SHORT-TERM NOTES--8.7%
3,000,000 American Express Credit Corp. 5.40% 10/8/98 (P1).................... 2,993,700 2,993,700
1,300,000 American Express Credit Corp. 5.50% 10/2/98 (P1).................... 1,299,203 1,299,203
3,300,000 American Express Credit Corp. 5.25% 10/2/98 (P1).................... 3,298,556 3,298,556
----------- -----------
7,591,459 7,591,459
----------- -----------
TOTAL CONVERTIBLE BONDS AND NOTES--68.6%................................................ $56,981,959 $59,935,536
TOTAL CONVERTIBLE PREFERRED STOCKS--20.9%............................................... 17,421,759 18,308,157
TOTAL CORPORATE SHORT-TERM NOTES--8.7%.................................................. 7,591,459 7,591,459
----------- -----------
TOTAL INVESTMENTS--98.2%................................................................ $81,995,177 85,835,152
=========== ===========
OTHER ASSETS AND LIABILITIES, NET--1.8%................................................. 1,603,158
-----------
TOTAL NET ASSETS--100.0%................................................................ $87,438,310
===========
</TABLE>
* Rule 144A security, may be sold only to qualified institutional buyers
# See Note A(5)
+ Guaranteed by National Westminster Bank PLC
++ Ticker symbols: CSCO, EDS, HWP, INTC, MSFT & ORCL
** Collateral for a letter of credit
<TABLE>
<S> <C> <C> <C>
ACES Automatic Common Exchange Securities MIPS Monthly Income Preferred Securities
ADR American Depositary Receipts PIES Premium Income Exchangeable Securities
ADS American Depositary Shares PRIDES Preferred Redeemable Increased Dividend Equity Securities
DECS Debt Exchangeable for Common Stock QUIPS Quarterly Income Preferred Securities
FELINE Family of Equity-Linked Income Securities SAILS Stock Appreciation Income Linked Securities
GEMMS Guaranteed Exchangeable Monetisation of Multiple Shares SPuRS Shared Preference Redeemable Securities
LYON Liquid Yield Option Note STRYPES Structured yield product exchangeable for stock
TRACES Trust Automatic Common Exchange Securities
</TABLE>
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's,
a division of McGraw-Hill Companies, Inc., have been obtained from sources
believed to be reliable but have not been audited by PricewaterhouseCoopers LLP.
The cost of investments for federal income tax purposes is $81,995,177 resulting
in gross unrealized appreciation and depreciation of $8,296,422 and $4,456,447,
respectively, or net unrealized appreciation of $3,839,975 on a tax cost basis.
See accompanying notes to financial statements.
<PAGE> 7
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES:
SEPTEMBER 30, 1998
------------------
<S> <C>
ASSETS:
Investments at value (Identified cost $81,995,177) (Note A).................. $85,835,152
Cash......................................................................... 125,709
Receivable for securities sold............................................... 862,733
Dividends and interest receivable............................................ 634,238
Other assets................................................................. 24,101
-----------
Total assets................................................................. 87,481,933
-----------
LIABILITIES:
Accrued management fee (Note B).............................................. 7,807
Accrued expenses............................................................. 35,816
-----------
Total liabilities............................................................ 43,623
-----------
NET ASSETS AT VALUE.......................................................... $87,438,310
===========
NET ASSETS CONSIST OF:
Undistributed net investment income.......................................... $372,603
Undistributed net realized gain from investment transactions ................ 10,660,843
Unrealized appreciation on investments....................................... 3,839,975
Capital shares (Note C)...................................................... 78,241
Additional paid-in capital................................................... 72,486,648
-----------
NET ASSETS AT VALUE.......................................................... $87,438,310
===========
Net asset value per share ($87,438,310 / 7,824,101 outstanding shares)....... $ 11.18
===========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
STATEMENT OF OPERATIONS:
FORTHE YEAR ended September 30, 1998
<S> <C>
INVESTMENT INCOME (Note A):
Interest......................................................... $ 2,316,713
Dividends........................................................ 1,445,407
------------
Total Income..................................................... 3,762,120
------------
EXPENSES (Note B):
Management fee................................................... 698,191
Custodian fees................................................... 29,733
Transfer agent fees.............................................. 29,688
Professional fees................................................ 53,609
Directors' fees.................................................. 58,800
Reports to shareholders.......................................... 58,744
Treasurer's office............................................... 25,000
Other............................................................ 73,364
------------
Total Expenses................................................... 1,027,129
------------
NET INVESTMENT INCOME............................................ 2,734,991
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions .................. 10,663,221
Net change in unrealized appreciation of investments............. (14,677,908)
------------
Net loss on investments ......................................... (4,014,687)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ (1,279,696)
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 8
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FORTHEYEARSended September 30, 1998 and 1997
1998 1997
------------ -----------
<S> <C> <C>
Increase in net assets from operations:
Net investment income...................................................... $ 2,734,991 $ 2,813,490
Net realized gain from investment transactions............................. 10,663,221 10,543,504
Net change in unrealized appreciation of investments....................... (14,677,908) 8,277,974
------------- -----------
Net increase (decrease) in net assets resulting from operations.......... (1,279,696) 21,634,968
------------- -----------
Dividends to shareholders from:
Net investment income...................................................... (2,823,662) (2,796,764)
Net realized gain on investments........................................... (10,545,487) (7,057,407)
------------- -----------
Total dividends.......................................................... (13,369,149) (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 (decrease) in net assets............................................ (7,383,267) 16,426,163
Net assets at beginning of year.............................................. 94,821,577 78,395,414
------------- -----------
NET ASSETS AT END OF YEAR (including undistributed net investment
income of $372,603 and $461,274, respectively)............................. $ 87,438,310 $94,821,577
============= ===========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------------
Per Share Operating Performance: 1998 1997 1996 1995 1994
- -------------------------------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............... $13.33 $ 11.80 $10.76 $9.72 $10.39
------ ------- ------ ------ ------
Net investment income............................ .35 .40 .43 .48 .51
Net realized and unrealized gain (loss).......... (.65) 2.59 1.37 1.30 (.58)
------ ------- ------ ------ ------
Total from investment operations............... (.30) 2.99 1.80 1.78 (.07)
Less Distributions:
Dividends from net investment income............. (.37) (.40) (.47) (.51) (.53)
Distributions from realized gains................ (1.48) (1.06) (.29) (.23) (.07)
------ ------- ------ ------ ------
Total distributions............................ (1.85) (1.46) (.76) (.74) (.60)
------ ------- ------ ------ ------
Net asset value, end of year..................... $11.18 $ 13.33 $11.80 $10.76 $9.72
====== ======= ====== ====== ======
Market value, end of year ....................... $10.00 $11.250 $9.875 $9.125 $8.375
Total Investment Return:
Based on net asset value*...................... (2.39)% 27.77% 17.43% 19.50% (0.61)%
Based on market value**........................ 5.21% 30.93% 17.13% 18.95% (4.46)%
Ratios/Supplemental Data:
Net assets, end of year ($000's)................. 87,438 94,822 78,395 69,769 61,316
Ratio of expenses to average net assets.......... 1.1% 1.2% 1.2% 1.2% 1.1%
Ratio of net investment income to
average net assets............................. 3.0% 3.4% 3.9% 5.0% 5.2%
Portfolio turnover rate.......................... 59% 71% 70% 44% 45%
</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> 9
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 $13,349 was earned on cash balances held by the custodian of the Fund's
assets during the year ended September 30, 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 $13,605,313 at September
30, 1998, representing 15.6% 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 $25,000 for the year ended September 30, 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 September 30, 1998 there were 7,824,101 shares of $.01 par value common
stock outstanding (20,000,000 shares authorized). During the year ended
September 30, 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.
(D) Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated $52,893,048 and $65,431,688, respectively, for the year ended
September 30, 1998.
(E) A distribution of $1.41 per share, derived from net investment income of 4.8
cents, and net realized gains on investments of $1.362, was declared on October
19, 1998, payable November 28, 1998 to shareholders of record at the close of
business November 2, 1998.
<PAGE> 10
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statement of operations and of
changes in net assets, and the financial highlights present fairly, in all
material respects, the financial position of Ellsworth Convertible Growth and
Income Fund, Inc. (the "Fund") as of September 30, 1998, 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. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities owned at
September 30, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
October 16, 1998
<PAGE> 11
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> 12
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> 13
<TABLE>
<CAPTION>
PRINCIPAL PORTFOLIO CHANGES
July 1 to September 30, 1998
SHARES OR PRINCIPAL AMOUNT
------------------------------------------------
HELD AT
ADDITIONS REDUCTIONS 9-30-98
----------------- -------------- -------------
<S> <C> <C> <C>
AES Corp. 41/2% 2005 cv. jr. sub. deb. 1,750,000 1,750,000
BankAtlantic Bancorp 55/8% 2007 cv. sub. deb. 310,000 2,165,000
Bell Atlantic Financial Services 41/4% 2005 cv. sub. deb. 144A (CWZ) 1,000,000 1,000,000
MediaOne Group, Inc. 61/4% 2001 PIES (ATI) 15,000 15,000
Norddeutsche 3% 2003 euro. cv. deb. 500,000 500,000
Synoptics Communications, Inc. 51/4% 2003 cv. sub. deb. 144A (NT) 500,000 500,000
Tribune Co. 61/4% 2001 DECS (TLC) 37,500 37,500
AES Trust I $2.6875 term cv. securities A 32,000 --
AMF Bowling, Inc. 0% 2018 cv. deb. 144A 4,900,000 --
BEA Systems, Inc. 4% 2005 cv. sub. notes 144A 750,000 --
Central Parking Financial Trust 51/4% cv. pfd 144A 25,000 --
Credit Suisse 3% 2001 equity-linked certificates (DIS) 1,000,000 --
Host Marriott Financial Trust 63/4% cv. pfd. 10,000 --
Ingersoll-Rand Co. 63/4% FELINE PRIDES 39,500 --
Lodgian Capital Trust 7% cv. trust pfd. 144A 20,000 --
Morgan Stanley Dean Witter Discover & Co. 6% 1998 DECS (CSCO) 7,500 --
NatWest Markets 0% 2003 exch. trust securities 144A (LU) 500,000 1,500,000
National City Corp. common stock 13,400 --
Royal Caribbean Cruises Ltd. $3.625 cv. A pfd. 5,000 --
Unocal Capital Trust 61/4% trust cv. pfd. 12,500 --
</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.
<PAGE> 14
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
THE YEAR 2000 ISSUE
BACKGROUND. Like other investment companies as well as financial and business
organizations around the world, the Fund could be adversely affected if the
computer systems and embedded technology 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.
PROGRAMS AND SYSTEMS. The Adviser assessed and tested its internal computer
programs and systems earlier this year to ensure these programs and systems will
be Year 2000 compliant. The computers used for trading and pricing are Pentium
II desktop systems, certified to be Year 2000 compliant by the manufacturer,
Dell Computer. The vendors whose accounting software we use, Microsoft Corp. and
Advent Software, have also supplied us with statements certifying that their
products are now compliant.
2ND AND 3RD PARTY ISSUES. The Bank of New York, the Fund's custodian, transfer
agent and registrar, has stated that it will meet all interim and final
regulatory deadlines in order to be fully compliant by December 31, 1998. The
Bank has advised the Fund that it is currently in the process of assessing,
repairing and replacing, and testing the systems necessary to meet these
deadlines.
Bloomberg, the Adviser's securities pricing service provider, provides periodic
statements in writing that detail their strategy in dealing with the Year 2000
problem. In addition, Bloomberg states that its assessments of its trading
system software have not uncovered any problems to date. Bloomberg attributes
this to the fact that they started addressing the Year 2000 issue as early as
1982, since there were many financial instruments that had maturity dates
subsequent to January 1, 2000.
We continue to receive updates from each of these and our other outside vendors
as they become available.
Since the Fund has investments in securities whose issuers may be materially
adversely impacted by the Year 2000 issue, the Fund could also be adversely
affected. For this reason, earlier this year, we began reviewing public filings
and web page disclosures of each issuer and assessing each with respect to Year
2000 compliance. Some of the criteria we look at are: costs incurred and
estimated of system repair and replacement, whether or not there is a
contingency plan prepared and the status of second and third party issues. We
are continuing to monitor these disclosures and use them concurrently with our
other methods of evaluating a security's value as an investment vehicle.
In addition to computers and related systems, the operation of office and
facilities equipment, such as fax machines, photocopiers, telephone switches,
security systems, elevators, and other common devices may be affected by the
Year 2000 Problem. The Adviser is currently assessing the potential effect of,
and costs of remediating, the Year 2000 Problem regarding its office and
facilities equipment. The companies that provide telephone and electricity
services regularly update their respective web sites with contingency plans and
information on compliance status.
The Fund has not incurred any costs to date in the matter of the Year 2000
problem, nor do we expect the Fund to have any in the future.
MOST REASONABLY LIKELY WORST CASE YEAR 2000 SCENARIO FOR THE FUND. Since the
Fund has investments in securities whose issuers may be materially adversely
impacted by the Year 2000 issue, the Fund could also be adversely affected.
The failure to correct a material Year 2000 problem is perhaps most likely to
occur with respect to the Bank of New York, the Fund's custodian, transfer agent
and registrar. Although the Bank expects mission-critical systems to be
compliant by 1998 year-end as stated above, the Bank cannot ensure that all the
vendors it relies upon will
<PAGE> 15
THE YEAR 2000 ISSUE (CONTINUED)
also be completely compliant. The effects might include difficulty in the
settlement of trades in a timely manner and dividend distribution delays. There
is also the possibility that the Fund's fees to the Bank might be increased due
to the Bank's increased cost of doing business.
For the Adviser the problems that might be faced include the lack of telephone
and power service needed to perform daily pricing and trading.
Such failures and others could materially and adversely affect the Fund's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and their
customers, the Fund is unable to determine at this time whether the consequences
of Year 2000 failures will have a material impact on the Fund's results of
operations, liquidity or financial condition.
CONTINGENCY PLAN. Based on the representations made by the Bank of New York, the
Fund has not made any contingency plans relating to the receipt of services the
Bank provides. The Adviser currently has plans underway which include the
following: an alternate site in which to do business in the event that electric
and/or telephone service is lost and the purchase of laptop computers and small
generators to run them. In addition, cellular telephones would be used in the
event that regular telephone and Bloomberg service is lost, to contact brokers
for pricing and trading. The Adviser will bear the cost of this equipment. The
Adviser currently expects to have these plans in place and fully functional by
May of 1999. The Adviser intends to review these plans periodically and to
update them as circumstances change.
- --------------------------------------------------------------------------------
Federal income tax status of dividends paid per share during fiscal year ended
September 30, 1998 (unaudited):
<TABLE>
<CAPTION>
TOTAL ORDINARY LONG-TERM QUALIFYING
PAYMENT DATE PAID INCOME CAPITAL GAIN DISTRIBUTION*
--------------------- --------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
November 29, 1997 $1.55 $0.266 $1.284 36%
February 23, 1998 0.10 0.10 -- 34%
May 28, 1998 0.10 0.10 -- 34%
August 27, 1998 0.10 0.10 -- 34%
-------- ---------- ------------
1.85 0.566 1.284
</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.
- --------------------------------------------------------------------------------
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Information contained within the letter to Shareholders and the Statement on The
Year 2000 Issue 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, changes
to the market for convertible securities or the inability of the Company's
service providers and the companies whose securities the Company buys to resolve
any Year 2000 issues.
<PAGE> 16
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 Avenue, 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
[LOGO] Printed on recycled paper
