<PAGE> 1
ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
(LOGO)
1999 Semi-Annual Report
March 31, 1999
<PAGE> 2
Ellsworth Convertible Growth and Income Fund, Inc. operates as a closed-end,
diversified management investment company and invests primarily in convertible
securities, with the objectives of providing income and the potential for capi-
tal 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.
Highlights
Performance thru 3/31/99 with dividends reinvested:
<TABLE>
<CAPTION>
3 Months 1 Year 5 Year 10 Year
-------- ------- ------- --------
<S> <C> <C> <C> <C>
Ellsworth market value 2.23% (4.38)% 108.74% 240.19%
Ellsworth net asset value * 3.80 6.26 111.19 244.12
Closed-end convertible fund average * 1.57 (1.27) 74.43 214.92
S&P 500 ** 4.98 18.46 220.50 467.15
Russell 2000 ** (5.44) (16.20) 58.38# 151.82#
</TABLE>
Performance data represent past results and do not reflect future performance.
* From Lipper, Inc. Closed-End Fund Performance Analysis.
** From Bloomberg L.P. pricing service.
# Simple appreciation of index.
Quarterly History of NAV and Market Price:
<TABLE>
<CAPTION>
Net Asset Values Market Prices (AMEX, symbol ECF)
---------------------- --------------------------------
Qtr Ended High Low Close High Low Close
- --------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Jun 98 $12.80 $12.09 $12.60 $12.80 $12.09 $12.60
Sep 98 13.18 10.97 11.18 11.75 9.13 10.00
Dec 98 11.39 10.04 11.11 10.63 8.88 9.63
Mar 99 11.50 10.99 11.44 10.00 9.38 9.75
</TABLE>
Dividend Distributions:
<TABLE>
<CAPTION>
Record Payment Capital
Date Date Income Gains Total
- ------- ------- ------ ------- ------
<S> <C> <C> <C> <C>
5/14/98 5/28/98 $0.100 $ - $0.100
8/13/98 8/27/98 0.100 - 0.100
11/2/98 11/28/98 0.048 1.362 1.410
2/8/99 2/22/99 0.090 - 0.090
------ ------- ------
$0.138 $1.362 $1.700
====== ======= ======
</TABLE>
<PAGE> 3
To Our Shareholders:
The stock market over the last year has been a tale of the rich getting richer
and the poor getting poorer. As can be seen in the table on the opposite page,
the Standard & Poor's 500 (an index of 500 large capitalization stocks) provided
a total return of 18.46% for the twelve months ended March 31, 1999 while the
Russell 2000 (an index of the smallest 2000 of the 3000 largest capitalization
stocks) fell 16.20% for that same period. It is our opinion that this split
performance by the stock market has been caused in part by the dramatic increase
in investments directed toward S&P 500 index funds, as well as the addition of
successful companies to the index and the removal of less successful companies
from the index. Since the convertible universe is made up of issues convertible
into stocks that do not fully represent many industries and tend towards the
smaller capitalization market, convertible performance has tended to be closer
to that of the Russell 2000 over the years than the S&P 500. We believe that by
skewing the portfolio of Ellsworth toward larger capitalization issues, the Fund
was able to outperform the convertible closed-end fund average over the last
year.
Performance by the stock market is affected by factors such as corporate
earnings growth, taxes, inflation, monetary policy, interest rates and savings.
Earnings growth is predicted to slow down; estimates for earnings growth in the
S&P 500 for the next five years is around 7% while during the last five years
earnings have grown 10.3%. Taxes are likely to remain the same, but inflation
is now expected to rise above its current level of 1.7%. Monetary policy is in
the capable hands of Alan Greenspan and the Federal Reserve Board which appears
to be trying to provide a stable and predictable monetary environment. Interest
rates have risen over the last six months from the 5% level achieved by long
term treasuries in December of last year to a current rate over 5.8%. Finally,
personal savings rates have been reported to have fallen to 0% - no savings at
all according to government figures.
Given the above indicators, the preponderance of the evidence seems to predict
that the broader market should have a very difficult time providing the type of
returns that the S&P 500 has provided in recent years. That being said,
however, we do not expect a substantial decline in the market because cash is
still flowing into the market from pension funds and the savings rate does not
count unrealized gains in stock and real estate. Further, economic productivity
has improved recently, a factor likely to reduce inflationary pressures and help
earnings.
At its April meeting the Board of Directors declared a dividend of nine cents
per share from net investment income. The dividend is payable May 27, 1999 to
shareholders of record May 13, 1999.
/s/ Thomas H. Dinsmore
Chairman of the Board
May 13, 1999
<PAGE> 4
TEN LARGEST INVESTMENT HOLDINGS
<TABLE>
<CAPTION>
Principal
Amount Value % Total
or Shares (Note 1) Net Assets
- --------- -------- ----------
<C> <C> <C> <C>
1,500,000 The Home Depot, Inc............................................ $ 4,065,000 4.2%
The leading company in home center retailing.
1,250,000 NatWest Markets exch. for Lucent Technologies, Inc............. 3,443,750 3.5
Lucent designs, develops and manufactures communications
systems, software and products.
28,000 Houston Industries, Inc. exch. for Time Warner, Inc............ 3,374,000 3.5
Time Warner is a media company with operations in entertain-
ment, cable networks, publishing and cable.
3,000,000 Bell Atlantic Financial Services, Inc. exch. for Telecom Corp.
of New Zealand Ltd............................................. 3,153,750 3.2
Telecom of New Zealand is the principal supplier of tele-
communications in New Zealand.
20,600 Jefferson-Pilot Corp. exch. for BankAmerica Corp............... 2,410,200 2.5
BankAmerica provides retail banking and financial services
throughout the United States.
57,500 Nextel Communications, Inc..................................... 2,220,938 2.3
A major provider of wireless communications.
65,000 WBK Trust exch. for Westpac Banking Corp., Ltd................. 2,218,125 2.3
Westpac provides general and savings bank services in
Australia.
1,000,000 Morgan Stanley Dean Witter & Co. exch. for technology note..... 2,010,000 2.1
Exchangeable for the following technology companies:
CISCO Systems, Electronic Data Systems, Hewlett-Packard,
Intel, Microsoft and Oracle.
24,500 Comcast Corp. exch. for AT&T Corp.............................. 1,961,531 2.0
AT&T is a major provider of long-distance and wireless
communications.
2,000,000 The Bear Stearns Companies., Inc. exch. for Merck & Co., Inc.
and Pfizer, Inc................................................ 1,940,000 2.0
Merck and Pfizer are global pharmaceutical companies that ----------- ---------
discover, develop, manufacture and market medicine and
health products.
Total.......................................................... $26,797,294 27.6%
=========== ==========
</TABLE>
<PAGE> 5
MAJOR INDUSTRY EXPOSURE
<TABLE>
<CAPTION>
% Total
Net Assets
----------
<S> <C>
Communications.............................................. 14.62%
Health Care & Drugs......................................... 13.08
Entertainment............................................... 12.08
Technology.................................................. 9.92
Retail...................................................... 9.31
Banking..................................................... 8.90
Financial & Insurance....................................... 5.17
Capital Goods............................................... 5.04
Data-Processing Services.................................... 3.81
Aerospace................................................... 3.79
----------
Total....................................................... 85.72%
==========
</TABLE>
MAJOR PORTFOLIO CHANGES
Three months ended March 31, 1999
<TABLE>
<CAPTION>
Principal
Amount
or Shares
---------
ADDITIONS
<S> <C>
Amazon.com, Inc............................................. 500,000
At Home Corp................................................ 500,000
The Bear Stearns Companies., Inc.
(exch. for Merck & Co., Inc. & Pfizer, Inc................. 2,000,000
Citrix Systems, Inc......................................... 1,000,000
Comcast Corp. (exch. for AT&T Corp.)........................ 24,500
Credit Suisse First Boston Corp. (exch. for Microsoft Corp.) 1,500,000
Merrill Lynch Pierce Fenner & Smith (exch. for Novartis AG). 900,000
NTL, Inc.................................................... 875,000
Sportsline USA, Inc......................................... 375,000
Estee Lauder Companies, Inc................................. 8,700
Globalstar Telecomm Ltd..................................... 30,000
NIPSCO Industries, Inc...................................... 20,000
REDUCTIONS
Arbor Software Corp......................................... 500,000
Estee Lauder Companies, Inc................................. 8,000
Evergreen Media Corp........................................ 8,000
International CableTel, Inc. (exch. for NTL, Inc.).......... 500,000
NatWest Markets (exch. for Lucent Technologies, Inc.)....... 250,000
Norddeutsche LB Girozen (exch. for Deutsche Telekom AG)..... 500,000
Owens-Illinois, Inc......................................... 250,000
Republic National Bank of NY (exch. for Merck & Co., Inc.).. 1,000,000
Sandoz Capital BVI, Ltd. (exch. for Novartis AG)............ 500,000
SmithKline Beecham PLC...................................... 13,734
Telefonica De Espana........................................ 500,000
</TABLE>
<PAGE> 6
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
or Shares (Note 1)
---------- ----------
<S> <C> <C>
ADVERTISING -- 1.2%
Interpublic Group Cos., Inc. 1.80% 2004 cv. sub. deb. 144A (NR)...............$1,000,000 $ 1,133,125
----------
AEROSPACE -- 3.8%
Morgan Stanley Dean Witter Discover & Co. 0% 2000 medium-term exch. notes (A1) 2,000,000 1,908,750
(exch. for Boeing Company common stock)
Orbital Sciences Corp. 5% 2002 cv. sub. notes (B)............................. 125,000 147,500
Orbital Sciences Corp. 5% 2002 cv. sub. notes 144A(B)......................... 350,000 413,000
Simula, Inc. 8% 2004 sr. cv. sub. notes (NR).................................. 825,000 688,875
SPACEHAB, Inc. 8% 2007 cv. sub. notes 144A (NR)............................... 700,000 546,000
----------
3,704,125
----------
BANKING -- 8.9%
CNB Capital Trust I 6% SPuRS (Baa2)........................................... 50,000shs 1,287,500
(exch. for CNB Bancshares, Inc. common stock)
National Australia Bank Ltd. 7 7/8% exch. capital units (A1).................. 40,000shs 1,252,500
WBK Trust 10% STRYPES 144A * (NR)............................................. 65,000shs 2,218,125
(exch. for Westpac Banking Corp., Ltd. common stock)
BankAtlantic Bancorp 5 5/8% 2007 cv. sub. deb. (NR)........................... 1,915,000 1,541,575
Jefferson-Pilot Corp. 7 1/4% 2000 ACES * (A1)................................. 20,600 2,410,200
(exch. for BankAmerica Corp. common stock) ----------
8,709,900
----------
CAPITAL GOODS -- 5.0%
CS First Boston, Inc. 2 1/4 % 2003 sr. medium-term exch. notes 144A (Aa3)..... 1,700,000 1,925,250
(exch. for General Electric Corp. common stock)
CS First Boston, Inc. 2 5/8% 2003 sr. medium-term exch. notes (Aa)............ 1,250,000 1,159,375
(exch. for Minnesota Mining and Manufacturing common stock)
Robbins & Myers, Inc. 6 1/2% 2003 cv. sub. notes (NR)......................... 760,000 665,000
U.S. Filter Corp. 4 1/2% 2001 cv. sub. notes (Ba3)............................ 1,200,000 1,178,250
----------
4,927,875
----------
COMMUNICATIONS -- 14.6%
Globalstar Communications, Ltd. 8% cv. pfd. 144A (NR)......................... 30,000shs 1,185,000
Nextel Communications, Inc. 0% 2013 cv. pfd. 144A (NR)........................ 57,500shs 2,220,938
Bell Atlantic Financial Services, Inc. 5 3/4% 2003 cv. sub. deb. 144A (A1).... 3,000,000 3,153,750
(exch. for cash equiv. of Telecom Corp. of New Zealand common stock)
Bell Atlantic Financial Services, Inc. 4 1/4% 2005 cv. sub. deb. 144A (A1).... 1,000,000 1,093,750
(exch. for cash equiv. of Cable & Wireless Communications plc common stock)
Comcast Corp. 1.75% 2029 exch. extendable sub. deb. (BA3)..................... 24,500 1,961,531
(exch. for cash based on the value of AT&T Corp. common stock)
MediaOne Group, Inc. 6 1/4% 2001 PIES-a * (Ba1)............................... 15,000 1,241,250
(exch. for AirTouch Communications, Inc. common stock)
NatWest Markets 0% 2003 exch. trust securities 144A +......................... 1,250,000 3,443,750
(exch. for Lucent Technologies, Inc. common stock) (AA2) ----------
14,299,969
----------
CONSUMER GOODS -- 1.0%
Newell Financial Trust I 5 1/4% QUIPS 144A (Baa1)............................. 17,500shs 983,281
(conv. into Newell Co. common stock) ----------
DATA-PROCESSING SERVICES -- 3.8%
Affiliated Computer Services, Inc. 4% 2005 cv. sub. notes 144A (Ba2).......... 500,000 628,750
American Express Credit Corp. 1 1/8% 2003 cash exch. notes (Aa3).............. 1,100,000 1,281,500
National Data Corp. 5% 2003 cv. sub. notes (Ba3).............................. 1,750,000 1,814,531
----------
3,724,781
----------
ELECTRIC UTILITIES -- 1.3%
NIPSCO Industries, Inc. PIES-b * (NR)......................................... 20,000shs 1,010,000
Texas Utilities Co. 9 1/4% FELINE PRIDES * (Baa3)............................. 5,000shs 266,563
----------
1,276,563
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
or Shares (Note 1)
---------- ----------
<S> <C> <C>
ENERGY -- 3.5%
AES Corp. 4 1/2% 2005 cv. jr. sub. deb. (Ba1).................................$1,750,000 $ 1,675,625
Diamond Offshore Drilling, Inc. 3 3/4% 2007 cv. sub. notes (Baa2)............. 750,000 776,719
Swiss Life Financial Ltd. 2% 2005 GEMMS 144A (NR)............................. 1,000,000 995,000
(exch. for Royal Dutch Petroleum common stock) ----------
3,447,344
----------
ENTERTAINMENT -- 12.1%
Chancellor Media Corp. 7% cv. pfd. (Caa2)..................................... 10,000shs 1,320,000
Houston Industries, Inc. 7% 2000 ACES * (Baa1)................................ 28,000shs 3,374,000
(exch. for Time Warner, Inc. common stock)
News Corporation Exchange Trust 5% cv. trust originated pfd. 144A (Ba2)....... 10,000shs 900,000
(exch. for British Sky Broadcasting Group plc ADS's)
Triathlon Broadcasting Co. depositary shares (representing 9% mandatory cv. pfd. 50,000shs 534,375
At Home Corp. 0% 2018 cv. sub. deb. (NR)...................................... 500,000 522,500
Clear Channel Communications, Inc. 2 5/8% 2003 sr. cv. notes (Baa3)........... 1,500,000 1,854,375
Imax Corp. 5 3/4% 2003 cv. sub. notes 144A (B1)............................... 1,000,000 1,070,000
NTL, Inc. 7% 2008 cv. sub. notes 144A (Caa1).................................. 1,250,000 1,895,313
SportsLine USA, Inc. 5% 2006 cv. sub. notes 144A (NR).......................... 375,000 344,063
----------
11,814,626
----------
FINANCIAL & INSURANCE -- 5.2%
American General Delaware, L.L.C. 6% cv. A MIPS (A2).......................... 13,000shs 1,163,500
Frontier Financing Trust 6 1/4% cv. trust originated pfd. 144A (Baa3)......... 20,000shs 780,000
(conv. into Frontier Insurance Group, Inc. common stock)
American International Group 2 1/4% 2004 cv. notes (AAA)...................... 500,000 717,500
Deutsche Bank Finance N.V. 2% 2003 cv. deb. 144A (NR)......................... 500 561,000
(exch. for Allianz AG ordinary shares)
Penn Treaty American Corp. 6 1/4% 2003 cv. sub. notes (BB+)................... 375,000 393,750
Penn Treaty American Corp. 6 1/4% 2003 cv. sub. notes 144A (BB+).............. 1,375,000 1,443,750
----------
5,059,500
----------
FOODS -- 1.8%
Avado Financing I 7% cv. A pfd. (B2).......................................... 5,000shs 152,188
(conv. into Avado Brands, Inc. common stock)
Avado Financing I 7% cv. A pfd. 144A (B2)..................................... 10,000shs 304,375
(conv. into Avado Brands, Inc. common stock)
Ralston Purina Co. 7% 2000 SAILS * (Baa1)..................................... 30,000 1,350,000
(exch. for Interstate Bakeries Corp. common stock) ----------
1,806,563
----------
HEALTH CARE & DRUGS -- 13.1%
Monsanto Co., Inc. 6 1/2% 2001 adj. conv. rate equity security units * (A3)... 10,000shs 465,000
SmithKline Beecham plc common stock........................................... 13,000shs 929,500
The Bear Stearns Cos., Inc. 1% 2006 medium term notes (A2).................... 2,000,000 1,940,000
(conv. into an index comprised of Merck & Co., Inc. and Pfizer, Inc.
common stocks)
Elan Finance Corp. 0% 2018 LYON 144A (Baa3)................................... 3,000,000 1,732,500
(exch. for ADR's representing Elan Corp., plc common stock)
Genzyme Corp. 5 1/4% 2005 cv. sub. notes 144A (NR)............................ 500,000 724,375
HealthSouth Corp. 3 1/4% 2003 cv. sub. notes (Ba2)............................ 250,000 203,125
HealthSouth Corp. 3 1/4% 2003 cv. sub. notes 144A (Ba2)....................... 1,000,000 812,500
Merrill Lynch Pierce Fenner & Smith 1% 2003 euro medium term notes............ 900,000 852,750
(cv. into Novartis AG common stock) (Aa3)
Republic National Bank of NY 1 7/8% 2002 sr. exch. notes (Aa1)................ 1,000,000 1,235,000
(exch. for the cash equivalent of Merck & Co., Inc. common stock)
Roche Holdings, Inc. 0% 2010 LYON 144A (Aa2).................................. 2,500,000 1,581,250
Sepracor, Inc. 7% 2005 cv. notes (NR)......................................... 1,000,000 1,166,250
Swiss Life Financial Ltd. 2% 2003 GEMMS 144A (NR)............................. 1,000,000 1,147,500
(exch. for Glaxo Wellcome PLC common stock) ----------
12,789,750
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
or Shares (Note 1)
---------- ----------
<S> <C> <C>
MANUFACTURED HOUSING -- 1.7%
Fleetwood Capital Trust 6% cv. trust pfd. 144A (Baa3)........................ 40,000shs $1,710,000
(conv. into Fleetwood Enterprises, Inc. common stock) ----------
OFFICE EQUIPMENT -- 0.9%
Xerox Credit 2 7/8% 2002 medium-term notes (A2).............................. $ 750,000 881,250
----------
RETAIL -- 9.3%
Dollar General Trust 8 1/2% STRYPES * (NR)................................... 32,500shs 1,371,094
(conv. into Dollar General Corp. common stock)
Estee Lauder Trust 6 1/4% TRACES II * (NR)................................... 8,700shs 785,719
(conv. into Estee Lauder Companies, Inc. common stock)
Amazon.com, Inc. 4 3/4% 2009 cv. sub. notes 144A (Caa3)...................... 500,000 631,875
Costco Companies, Inc. 0% 2017 cv. sub. notes (A3)........................... 500,000 530,625
Costco Companies, Inc. 0% 2017 cv. sub. notes 144A (A3)...................... 1,000,000 1,061,250
The Home Depot, Inc. 3 1/4% 2001 cv. sub. notes (A1)......................... 1,500,000 4,065,000
Rite Aid Corp. 5 1/4% 2002 cv. sub. notes 144A (Baa1)........................ 650,000 665,031
----------
9,110,594
----------
STAFFING SERVICES -- 0.8%
Interim Services, Inc. 4 1/2% 2005 cv. sub. deb. (Ba3)....................... 1,000,000 771,875
----------
TECHNOLOGY -- 9.9%
Citrix Systems, Inc. 0% 2006 cv. sub. deb. 144A (NR)......................... 1,000,000 343,750
CS First Boston, Inc. 1% 2006 medium-term exch. notes (AA)................... 1,500,000 1,509,375
(exch. for Microsoft Corp. common stock)
DoubleClick, Inc. 4 3/4% 2006 cv. sub. notes 144A (NR)....................... 250,000 313,750
Hewlett-Packard Co., Inc. 0% 2017 LYON 144A (Aa3)............................ 1,500,000 837,188
LSI Logic Corp. 4 1/4% 2004 cv. sub. notes 144A (NR)......................... 250,000 300,313
Morgan Stanley Dean Witter Discover & Co. 0% 2001 technology exch. note...... 1,000,000 2,010,000
trust certificates 144A (A1) (exch. for specific technology common stocks @)
Synoptics Communications, Inc. 5 1/4% 2003 cv. sub. deb. 144A................ 750,000 817,500
(exch. for Northern Telecommunications Ltd. common stock) (Ba3)
Times Mirror Company 4 1/4% 2001 PEPS * (A1)................................. 13,500 1,562,625
(exch. for Netscape Communications Corp. common stock)
Tribune Co. 6 1/4% 2001 DECS * (A2).......................................... 37,500 1,031,250
(exch. for The Learning Company, Inc. common stock)
VLSI Technology, Inc. 8 1/4% 2005 cv. sub. notes (B)......................... 1,000,000 980,000
----------
9,705,751
----------
U.S. TREASURY NOTES -- 0.0%
4 7/8% 3/31/01 **............................................................ 17,000 16,968
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
or Shares (Note 1)
---------- ----------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 4.6%
American Express Credit Corp. (P1).......................................... $4,500,000 $ 4,497,123
(4.92% and 5% maturing 4/1/99 and 4/6/99 ------------
TOTAL CONVERTIBLE BONDS AND NOTES --73.2%................................... $ 71,660,182
TOTAL CONVERTIBLE PREFERRED STOCKS -- 23.8%................................. 23,284,158
TOTAL COMMON STOCKS -- 1.0%................................................. 929,500
TOTAL CORPORATE SHORT-TERM NOTES -- 4.6%.................................... 4,497,123
------------
TOTAL INVESTMENTS -- 102.6%................................................. $100,370,960
OTHER ASSETS AND LIABILITIES, NET -- (2.6)%................................. (2,554,643)
------------
TOTAL NET ASSETS -- 100.0%.................................................. $ 97,863,640
============
</TABLE>
* See Note A(5)
+ Guaranteed by National Westminster Bank PLC
@ Ticker symbols: CSCO, EDS, HWP, INTC, MSFT & ORCL
** Collateral for a letter of credit
ACES Automatic Common Exchange Securities
ADR American Depositary Receipts
ADS American Depositary Shares
DECS Debt Exchangeable for Common Stock
FELINE Family of Equity-Linked Income Securities
GEMMS Guaranteed Exchangeable Monetisation of Multiple Shares
LYON Liquid Yield Option Note
MIPS Monthly Income Preferred Securities
PEPS Premium Equity Participating Securities
PIES-a Premium Income Exchangeable Securities
PIES-b Premium Income Equity Securities
PRIDES Preferred Redeemable Increased Dividend Equity Securities
QUIPS Quarterly Income Preferred Securities
SAILS Stock Appreciation Income Linked Securities
SPuRS Shared Preference Redeemable Securities
STRYPES Structured Yield Product Exchangeable for Stock
TRACES Trust Automatic Common Exchange Securities
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's,
a division of McGraw-Hill Companies, Inc.
The cost of investments for federal income tax purposes is $86,203,570 resulting
in gross unrealized appreciation and depreciation of $18,126,532 and $3,959,142
respectively, or net unrealized appreciation of $14,167,390 on a tax cost basis.
See accompanying notes to financial statements
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITES (unaudited)
<TABLE>
<CAPTION>
March 31, 1999
--------------
<S> <C>
ASSETS
Investments at value (cost $86,203,570) (Note 1).............. $100,370,960
Cash.......................................................... 340,966
Dividends and interest receivable............................. 630,466
Other assets.................................................. 15,701
------------
Total assets................................................ 101,358,093
------------
LIABILITIES:
Payable for securities purchased.............................. 3,516,973
Accrued management fee (Note 2)............................... 8,734
Accrued expenses.............................................. 16,069
------------
Total liabilities........................................... 3,541,776
------------
NET ASSETS $ 97,816,317
============
NET ASSETS CONSIST OF:
Undistributed net investment income........................... $ 583,892
Undistributed net realized gain from investment transactions.. 3,460,379
Unrealized appreciation on investments........................ 14,167,390
Capital shares (Note C)....................................... 85,508
Additional paid-in capital.................................... 79,519,148
------------
NET ASSETS...................................................... $ 97,816,317
============
Net asset value per share ($97,816,317 / 8,550,786 outstanding). $ 11.44
============
</TABLE>
STATEMENT OF OPERATIONS
Six Months Ended March 31, 1999 (unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME (Note 1):
<S> <C>
Interest...................................................... $ 1,269,320
Dividends..................................................... 621,038
-----------
Total Income................................................ 1,890,358
-----------
EXPENSES (Note 2):
Management fee................................................ 343,280
Custodian..................................................... 13,292
Transfer agent................................................ 11,348
Professional fees............................................. 35,607
Directors' fees............................................... 36,050
Reports to shareholders....................................... 34,719
Treasurer's office............................................ 12,500
Other......................................................... 51,562
-----------
Total Expenses.............................................. 538,358
-----------
NET INVESTMENT INCOME........................................... 1,352,000
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions................ 3,460,379
Net increase in unrealized appreciation of investments........ 10,327,415
-----------
Net gain on investments....................................... 13,787,794
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $15,139,794
===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended a Year Ended
March 31, 1999 September 30, 1998
---------------- ------------------
INCREASE IN NET ASSETS FROM OPERATIONS:
<S> <C> <C>
Net investment income................................. $ 1,352,000 $ 2,734,991
Net realized gain from investment
transactions........................................ 3,460,379 10,663,221
Net change in unrealized appreciation
of investments...................................... 10,327,415 (14,677,908)
---------------- ------------------
Net change in net assets resulting from operations. 15,139,794 (1,279,696)
---------------- ------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income............................... (1,145,127) (2,823,662)
Net realized gain on investments.................... (10,656,426) (10,545,487)
---------------- ------------------
Total dividends.................................... (11,801,553) (13,369,149)
---------------- ------------------
CAPITAL SHARE TRANSACTIONS (Note 3)................... 7,039,766 7,265,578
---------------- ------------------
CHANGE IN NET ASSETS.................................. 10,378,007 (7,383,267)
Net assets at beginning of period..................... 87,438,310 94,821,577
---------------- ------------------
NET ASSETS AT END OF PERIOD
(including undistributed net investment income of
$583,892 and $372,603, respectively.................. $97,816,317 $87,438,310
================ ==================
</TABLE>
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, 1999* 1998 1997 1996 1995 1994
--------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $11.18 $13.33 $11.80 $10.76 $ 9.72 $10.39
Net investment income.................. .16 .35 .40 .43 .48 .51
Net realized and unrealized gain (loss) 1.60 (.65) 2.59 1.37 1.30 (.58)
------ ------ ------ ------ ------ ------
Total from investment operations..... 1.76 (.30) 2.99 1.80 1.78 (.07)
Less Distributions:
Dividends from net investment income... (.14) (.37) (.40) (.47) (.51) (.53)
Distributions from realized gains...... (1.36) (1.48) (1.06) (.29) (.23) (.07)
------ ------ ------ ------ ------ ------
Total distributions.................. (1.50) (1.85) (1.46) (.76) (.74) (.60)
------ ------ ------ ------ ------ ------
Net asset value, end of period......... $11.44 $11.18 $13.33 $11.80 $10.76 $9.72
====== ====== ====== ====== ====== ======
Market value, end of period............ $9.750 $10.00 $11.25 $9.875 $9.125 $8.375
Net assets, end of period ($000's)..... 97,816 87,438 94,822 78,395 69,769 61,316
Total Investment Return:
Based on net asset value**......... 3.80% (2.39)% 27.77% 17.43% 19.50% (0.61)%
Based on market value#............. 2.23% 5.21% 30.93% 17.13% 18.95% (4.46)%
Ratios/Supplemental Data:
Ratio of expenses to average net
assets............................... 1.2%## 1.1% 1.2% 1.2% 1.2% 1.1%
Ratio of net investment income to
average net assets................... 3.1%## 3.0% 3.4% 3.9% 5.0% 5.2%
Portfolio turnover rate................ 20% 59% 71% 70% 44% 45%
</TABLE>
* Unaudited
** 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.
## Annualized
See accompanying notes to financial statements
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
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:
(a) 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.
(b) 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 $6,207 was earned on cash balances held by the custodian of the Fund's
assets during the six months ended March 31, 1999.
(c) 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.
(d) Dividends and Distributions to Shareholders
The liability for dividends and distributions payable is recorded on the ex-
dividend date.
(e) 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 $17,085,826 at
March 31, 1999, representing 17.5% of net assets.
2. Management Fee and Other Transactions with Affiliates
The management fee is paid to investment adviser Davis-Dinsmore Management
Company (the "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, 1999.
The officers of the Fund are also directors, officers or employees of the
Adviser, and are compensated by the Adviser.
The Fund has adopted a Director deferred compensation arrangement, which allows
the Directors to defer the receipt of all or a portion of Director Fees payable
on or after October 31, 1998. The amount of these fees will remain an asset of
the Fund. The Fund will be obligated to pay these fees, with interest, to the
Directors who have elected to defer receipt of their fees on a future date or
dates specified by the Directors, or as determined under the terms of the
arrangement.
<PAGE> 13
3. Portfolio Activity
At March 31, 1999 there were 8,550,786 shares of $.01 par value common stock
outstanding (20,000,000 shares authorized). During the six months ended
March 31, 1999, 726,685 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 $7,039,766.
Purchases and sales of investments, exclusive of corporate short-term notes,
aggregated $20,805,978 and $17,037,782, respectively, for the six months ended
March 31, 1999.
A distribution of $0.09 per share from net investment income was declared on
April 19, 1999, payable May 27, 1999 to shareholders of record at the close of
business May 13, 1999.
4. Year 2000 Readiness Disclosure
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 last year to ensure these programs and systems will be
Year 2000 compliant. The computers used for trading and pricing are
entium II desktop systems, certified to be Year 2000 compliant by the
manufacturer, Dell Computer. The vendors whose accounting software the Adviser
uses, Microsoft Corp. and Advent Software, have also supplied it with
statements certifying that their products are now compliant.
In its daily operations, the Adviser relies on electrical power and telephone
service to operate its copier, telefax and telephone systems. The power and
telephone providers have stated, on their respective websites, that they
expect all mission-critical systems to be compliant by mid-1999. Based on
statements made by the Adviser's landlord, it is expected that access to the
Adviser's offices and the use of its facilities will continue without incident.
Second and Third Party Issues. The Bank of New York, the Fund's custodian,
transfer agent and registrar, has publicly announced (in a press release
dated January 11, 1999), that Year 2000 renovation and testing of mission-
critical systems was completed by December 31, 1998, in compliance with
requirements set forth by the Federal Financial Institutions Examination
Council. In addition, the Bank also has programs in place to monitor the
status of third party vendors and service providers.
Bloomberg, the Adviser's securities pricing service provider, has not yet
released to the public the audit results of its testing, due to the pro-
prietary nature of their systems.
The Adviser continues to receive updates from each of these and its other
outside vendors as they become available.
Investments. 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, since 1998 the Adviser has been
reviewing public filings and web page disclosures of each issuer and
assessing each with respect to Year 2000 compliance. Some of the criteria
the Adviser looks at are: costs incurred and estimates of system repair and
replacement, whether or not there is a contingency plan prepared, and the
status of second and third party issues. The Adviser continues to monitor
these disclosures and uses them concurrently with its other methods of
evaluating a security's value as an investment vehicle.
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.
<PAGE> 14
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
has made assurances that mission-critical systems are compliant as of
1998 year-end as stated above, the Bank cannot ensure that all the
vendors it relies upon are also 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 parties, 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. However, the Adviser is investigating an
alternate site which would be used in the event that electric and/or
telephone service is lost at its office. In addition, the staff members
who are responsible for pricing the portfolio and trading own cellular
telephones which would be used as backup to contact brokers if the main
telephone systems and the Bloomberg pricing service were not available.
The Adviser has purchased a laptop computer and a small generator to
charge both the cell phone and laptop computer's batteries. The Adviser
will bear the cost of this equipment and intends to review these plans
periodically and to update them as circumstances change.
- -------------------------------------------------------------------------
Results of the 1999 Annual Shareholders Meeting:
The results of the shareholder vote at the Annual Meeting of Shareholders
held on January 11, 1999, were:
1. All directors nominated by management were elected for terms
expiring in 2002.
<TABLE>
<CAPTION>
Votes for Votes withheld
--------- --------------
<S> <C> <C>
Thomas H. Dinsmore 6,115,990 110,238
Donald M. Halsted, Jr. 6,105,607 120,621
Duncan O. McKee 6,105,899 120,329
</TABLE>
2. The selection of PricewaterhouseCoopers LLP as independent
accountants was ratified with 6,114,241 shares voted for,
33,080 shares voted against, and 78,907 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 940,333 shares
voted for, 2,575,719 shares voted against, 253,893 shares
abstained and 2,456,283 shares were broker non-votes.
- -----------------------------------------------------------------------
Important Factors Regarding Forward-Looking Statements:
The letter to Shareholders and Year 2000 Statement contain forward-
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements which reflect the intent,
belief or expectations of the Company and its management regarding
the anticipated effect of events, circumstances and trends should be
considered forward-looking statements. These forward-looking state-
ments are not guarantees of future performance and there are a number
of meaningful factors which could cause the Company's results to vary
materially from those indicated by any such statements. Factors which
could cause actual results to differ from expectations include, among
others, changes in individuals' savings rates, a decline in
productivity or new products, 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> 15
BOARD OF DIRECTORS
GORDON F. AHALT Petroleum Consultant
WILLIAM A. BENTON Retired Stock Exchange Specialist
ELIZABETH C. BOGAN Senior Lecturer in Economics at
Princeton University
THOMAS H. DINSMORE, C.F.A. Chairman of the Board of Ellsworth
DONALD M. HALSTED, JR. Investor
GEORGE R. LIEBERMAN Retired Advertising Executive
DUNCAN O. MCKEE Retired Attorney
JANE D. O'KEEFFE President of Ellsworth
NICOLAS W. PLATT Public Relations Executive
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
- --------------------------------------------------------------------
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.
