UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number: 811-04656
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ELLSWORTH CONVERTIBLE GROWTH AND INCOME FUND, INC.
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(Exact name of registrant as specified in charter)
65 Madison Avenue, Morristown, New Jersey 07960-7308
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(Address of principal executive offices) (Zip code)
Thomas H. Dinsmore
Ellsworth Convertible Growth and Income Fund, Inc.
65 Madison Avenue
Morristown, New Jersey 07960-7308
(Name and address of agent for service)
Copy to:
Martha J. Hays, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, PA 19103-7599
Registrant's telephone number, including area code: 973-631-1177
Date of fiscal year end: September 30
Date of reporting period: June 30, 2005
ITEM 1. SCHEDULE OF INVESTMENTS.
PORTFOLIO OF INVESTMENTS JUNE 30, 2005 (UNAUDITED)
Principal Value
Amount (Note 1)
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CONVERTIBLE BONDS AND NOTES -- 47.6%
AUTOMOTIVE -- 1.9%
$4,500,000 Lear Corp. 0% 2022 cv. sr. notes (Ba2).................................. $ 2,033,438
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BANKING/SAVINGS AND LOAN -- 1.7%
2,077,000 The Bear Stearns Companies, Inc. 0.25% 2010 medium-term notes (A1)
(exch. for Fifth Third Bancorp common stock) (1)....................... 1,804,705
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CONSUMER GOODS -- 1.7%
1,375,000 Church & Dwight Co., Inc. 5.25% 2033 cv. sr. deb. (Ba2)................ 1,831,363
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ENERGY -- 4.9%
750,000 OMI Corp. 2.875% 2024 cv. sr. notes (B+)............................... 699,375
2,000,000 Oil States International, Inc. 2.375% 2025 contingent cv. sr. notes
(NR) (Acquired 06/16/05; Cost $1,980,000) (2)......................... 2,085,000
4,000,000 Weatherford International Ltd. 0% 2020 cv. sr. deb. (Baa1)............. 2,567,960
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5,352,335
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ENTERTAINMENT -- 2.4%
2,500,000 The Walt Disney Company 2.125% 2023 cv. sr. notes (Baa1)............... 2,574,775
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FINANCIAL AND INSURANCE -- 0.9%
1,000,000 Swiss Re America Holding Corp. 3.25% 2021 euro. sub. cv. bonds (A1)
(conv. into Swiss Reinsurance Company common stock)
(Acquired 11/15/01 - 12/05/01; Cost $1,007,875) (2)................... 934,650
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HEALTH CARE -- 4.1%
1,500,000 Community Health Systems, Inc. 4.25% 2008 cv. sub. notes (B3).......... 1,733,400
1,750,000 Isolagen, Inc. 3.5% 2024 cv. sub. notes (NR)
(Acquired 10/29/04 - 02/17/05; Cost $1,771,250) (2)................... 1,251,250
1,000,000 Mentor Corp. 2.75% 2024 cv. sub. notes (NR)............................ 1,470,625
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4,455,275
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MULTI-INDUSTRY -- 0.9%
1,000,000 Lehman Brothers Holdings, Inc. 1% 2011 medium-term notes (A1)
(performance linked to Cendant Corp. common stock) (1)................ 985,000
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OFFICE EQUIPMENT -- 1.3%
1,500,000 IOS Capital, LLC 5% 2007 cv. sub. notes (Ba3)
(exch. for IKON Office Solutions, Inc. common stock)
(Acquired 05/08/02 - 06/02/03; Cost $1,498,125) (2)................... 1,470,000
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PHARMACEUTICALS -- 7.9%
2,000,000 Amgen, Inc. 0% 2032 LYONs (A2) (1)..................................... 1,459,990
550,000 CV Therapeutics, Inc. 3.25% 2013 sr. sub. cv. notes (NR)............... 587,125
1,500,000 Cephalon, Inc. 2% 2015 cv. sr. sub. notes (B-)......................... 1,501,406
1,250,000 Encysive Pharmaceuticals, Inc. 2.5% 2012 cv. sr. notes (NR)............ 1,233,500
500,000 Ivax Corp. 4.5% 2008 cv. sr. sub. notes (NR)........................... 496,250
1,250,000 Ivax Corp. 1.5% 2024 cv. sr. notes (NR) (1)............................ 1,284,188
1,000,000 Teva Pharmaceutical Finance II, LLC series A 0.5% 2024 cv. sr. deb.
(BBB) (exch. for ADR representing Teva Pharmaceutical Industries
Ltd. common stock)................................................... 983,750
1,000,000 Teva Pharmaceutical Finance II, LLC series B 0.25% 2024 cv. sr. deb.
(BBB) (exch. for ADR representing Teva Pharmaceutical Industries
Ltd. common stock)................................................... 997,500
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8,543,709
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PORTFOLIO OF INVESTMENTS JUNE 30, 2005 (CONTINUED)
Principal Value
Amount (Note 1)
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CONVERTIBLE BONDS AND NOTES -- (CONTINUED)
RETAIL -- 3.8%
$1,250,000 Casual Male Retail Group, Inc. 5% 2024 cv. sr. sub. notes (NR)......... $ 1,175,000
1,250,000 Dick's Sporting Goods, Inc. 1.6061% 2024 sr. cv. notes (B)............. 965,000
2,400,000 The TJX Companies, Inc. 0% 2021 LYONs (Baa1)........................... 1,979,424
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4,119,424
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TECHNOLOGY -- 9.2%
1,000,000 Advanced Micro Devices, Inc. 4.75% 2022 cv. sr. deb. (B3) (1).......... 996,250
1,250,000 Agilent Technologies, Inc. 3% 2021 sr. cv. deb. (Ba2) (1).............. 1,235,938
2,000,000 Citigroup Funding, Inc. 1% 2010 medium-term notes (Aa1)
(exch. into cash equivalent of a basket of technology stocks)......... 1,980,000
2,250,000 International Rectifier Corp. 4.25% 2007 cv. sub. notes (B2)........... 2,213,438
1,250,000 LSI Logic Corp. 4% 2010 cv. sub. notes (B)............................. 1,237,500
1,500,000 Sybase, Inc. 1.75% 2025 cv. sub. notes (NR)
(Acquired 2/15/05 - 04/20/05; Cost $1,491,557) (2).................... 1,429,185
1,000,000 Vishay Intertechnology, Inc. 3.625% 2023 cv. sub. notes (B3)........... 957,500
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10,049,811
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TELECOMMUNICATIONS -- 5.3%
1,000,000 Comverse Technology, Inc. 0% 2023 ZYPS (BB-) (3)....................... 1,379,250
1,000,000 Lucent Technologies, Inc. 2.75% 2023 series A cv. sr. deb. (B1)........ 1,078,160
500,000 Lucent Technologies, Inc. 2.75% 2025 series B cv. sr. deb. (B1)........ 562,050
1,250,000 Nortel Networks Corp. 4.25% 2008 cv. sr. notes (B3).................... 1,173,500
1,500,000 Tekelec, Inc. 2.25% 2008 sr. sub. cv. notes (NR)....................... 1,576,875
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5,769,835
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UTILITIES -- 1.6%
1,500,000 CMS Energy Corp. 2.875% 2024 cv. sr. notes (B1)........................ 1,820,700
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TOTAL CONVERTIBLE BONDS AND NOTES...................................... $51,745,020
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Shares CONVERTIBLE PREFERRED STOCKS -- 23.3%
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BANKING/SAVINGS AND LOAN -- 6.5%
17,500 Commerce Capital Trust II 5.95% cv. trust pfd. (Baa1)
(exch. for Commerce Bancorp, Inc. common stock)....................... 1,037,068
40,000 National Australia Bank Ltd. 7.875% exch. capital units (NR)........... 1,560,000
20,000 New York Community Bancorp, Inc. 6% BONUSES units (Baa2)............... 994,700
35,000 Sovereign Capital Trust IV 4.375% PIERS (Ba1)
(exch. for Sovereign Bancorp, Inc. common stock) (1).................. 1,568,000
35,000 Washington Mutual Capital Trust PIERS units (Baa1)
(exch. for Washington Mutual, Inc. common stock)...................... 1,863,750
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7,023,518
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CHEMICALS -- 1.8%
80,000 Celanese Corp. 4.25% cv. perp. pfd. (NR)............................... 1,954,400
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ENERGY -- 6.1%
33,000 Chesapeake Energy Corp. 5% cum. cv. pfd. (B-)
(Acquired 04/13/05 - 06/30/05; Cost $3,482,500) (2)................... 3,828,000
5,000 Semco Energy, Inc. 5% series B cv. cum. pfd. (B-)
(Acquired 03/09/05 - 03/10/05; Cost $1,003,750) (2)................... 975,000
20,000 The Williams Companies, Inc. 5.5% 2033 jr. sub. cv. deb. (B-).......... 1,827,500
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6,630,500
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ENTERTAINMENT -- 0.8%
22,500 Emmis Communications Corp. 6.25% series A cum. cv. pfd. (Caa1)......... 929,531
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PORTFOLIO OF INVESTMENTS JUNE 30, 2005 (CONTINUED)
Value
Shares (Note 1)
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CONVERTIBLE PREFERRED STOCKS -- CONTINUED
FINANCIAL AND INSURANCE -- 4.9%
20 Fannie Mae 5.375% non-cumulative cv. pfd. (Aa3)
(Acquired 12/29/04 - 01/11/05; Cost $2,078,125) (2)................... $ 1,943,750
20,000 Reinsurance Group of America, Inc. 5.75% PIERS (Baa2).................. 1,182,188
100,000 The St. Paul Travelers Companies, Inc. 4.5% 2032
cv. jr. sub. notes (Baa1)............................................. 2,238,500
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5,364,438
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HEALTH CARE -- 1.5%
28,000 Omnicare Capital Trust II 4% PIERS (Ba3)
(exch. for Omnicare, Inc. common stock) (1)........................... 1,631,000
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MINING -- 1.7%
2,000 Freeport-McMoRan Copper and Gold, Inc. 5.5% cv. perpetual pfd. (B-).... 1,846,356
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TOTAL CONVERTIBLE PREFERRED STOCKS..................................... $25,379,743
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MANDATORY CONVERTIBLE SECURITIES -- 17.8% (4)
CHEMICALS -- 1.7%
40,000 Huntsman Corp. 5% mand. cv. pfd. (NR).................................. 1,821,880
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CONSUMER GOODS -- 1.2%
30,000 Constellation Brands, Inc. dep. shs. representing 5.75%
series A mandatory cv. pfd. (B)....................................... 1,334,100
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ENERGY -- 3.1%
20,000 Amerada Hess Corp. 7% mand. cv. pfd. ACES (Ba3)........................ 1,831,400
20,000 Valero Energy Corp. 2% mand. cv. pfd. (BB)............................. 1,566,720
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3,398,120
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FINANCIAL AND INSURANCE -- 6.1%
25,000 The Chubb Corp. 7% equity units (A2) (1)............................... 794,000
30,000 Merrill Lynch & Co., Inc. 6.75% mand. exch. sec. (Aa3)
(exch. for Nuveen Investments, Inc. common stock)..................... 1,094,760
80,000 MetLife, Inc. 6.375% common equity units (BBB+)........................ 2,112,800
42,500 Morgan Stanley, Inc. 5.875% mand. exch. sec. (Aa3)
(exch. for Nuveen Investments, Inc. common stock)..................... 1,548,700
45,000 XL Capital, Ltd. 6.5% equity security units (A2)....................... 1,076,850
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6,627,110
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FOODS -- 1.7%
40,000 Albertson's, Inc. 7.25% HITS units (Baa2) (1).......................... 893,600
40,000 Lehman Brothers Holdings, Inc. 6.25% PIES (A1)
(exch. for General Mills, Inc. common stock).......................... 983,600
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1,877,200
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PHARMACEUTICALS -- 2.9%
20,000 Baxter International, Inc. 7% equity units (Baa1) (1).................. 1,105,200
40,000 Schering-Plough Corp. 6% mand. cv. pfd. (Baa3)......................... 2,039,200
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3,144,400
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UTILITIES -- 1.1%
45,000 DTE Energy Co. 8.75% equity security units (BBB-) (1).................. 1,134,450
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TOTAL MANDATORY CONVERTIBLE SECURITIES (4)............................. $19,337,260
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PAGE 3
PORTFOLIO OF INVESTMENTS JUNE 30, 2005 (CONTINUED)
Principal
Amount Value
or Shares (Note 1)
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COMMON STOCKS -- 4.4%
ENERGY -- 0.9%
20,000 shs Devon Energy Corp................................................... $ 1,013,600
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HEALTH CARE -- 1.0%
21,115 shs LifePoint Hospitals, Inc. (3)....................................... 1,067,363
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PHARMACEUTICALS -- 1.6%
26,300 shs Johnson & Johnson................................................... 1,709,500
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TELECOMMUNICATIONS -- 0.9%
40,000 shs SBC Communications, Inc............................................. 950,000
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TOTAL COMMON STOCKS................................................. 4,740,463
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SHORT-TERM SECURITIES -- 10.5%
COMMERCIAL PAPER -- 10.5%
$11,400,000 American Express Credit Corp. (P1)
(3.08% & 3.20% maturing 07/01/05 & 07/05/05)....................... 11,396,360
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U.S. GOVERNMENT OBLIGATIONS -- 0.0%
11,000 U.S. Treasury notes 2.25% 04/30/06 (Aaa) (5)........................ 10,890
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TOTAL SHORT-TERM SECURITIES......................................... $ 11,407,250
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TOTAL CONVERTIBLE BONDS AND NOTES -- 47.6%.......................... 51,745,020
TOTAL CONVERTIBLE PREFERRED STOCKS -- 23.3%......................... 25,379,743
TOTAL MANDATORY CONVERTIBLE SECURITIES -- 17.8%..................... 19,337,260
TOTAL COMMON STOCKS -- 4.4%......................................... 4,740,463
TOTAL SHORT-TERM SECURITIES -- 10.5%................................ 11,407,250
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TOTAL INVESTMENTS -- 103.6%......................................... 112,609,736
OTHER ASSETS AND LIABILITIES, NET -- (3.6)%......................... (3,915,909)
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TOTAL NET ASSETS -- 100.0%.......................................... $108,693,827
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(1) Contingent payment debt instrument which accrues contingent interest. See
Note 1(b) below.
(2) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction). The security may be
resold only pursuant to an exemption from registration under the 1933 Act,
typically to qualified institutional buyers. The Fund generally has no
rights to demand registration of these securities. The aggregate market
value of these securities at June 30, 2005 was $13,916,835 which
represented 12.8% of the Fund's net assets.
(3) Non-income producing security.
(4) Mandatory convertible. See Note 1(e) below.
(5) Collateral for a letter of credit.
ACES Automatic Convertible Equity Securities.
ADR American Depositary Receipts.
BONUSES Bifurcated Option Note Unit Securities.
HITS Hybrid Income Term Security.
LYONs Liquid Yield Option Notes.
PIES Premium Income Exchangeable Securities.
PIERS Preferred Income Equity Redeemable Securities.
ZYPS Zero Yield Puttable Securities.
Ratings in parentheses by Moody's Investors Service, Inc. or Standard & Poor's.
NR is used whenever a rating is unavailable.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
Notes to Financial Statements (unaudited)
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 as of the close of regular trading.
Unlisted 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 as of the close of regular trading. Securities
for which quotations are not readily available, restricted securities and other
assets are valued at fair value as determined in good faith by management with
the approval of the Board of Directors. Short-term debt securities with
original maturities of 60 days or less are valued at amortized cost.
(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, including
accretion of discounts and amortization of non-equity premium. For certain
securities, known as "contingent payment debt instruments," Federal tax
regulations require the Fund to record non-cash, "contingent" interest income in
addition to interest income actually received. Contingent interest income
amounted to 4 cents per share for the nine months ended June 30, 2005. In
addition, Federal tax regulations require the Fund to reclassify realized gains
on contingent payment debt instruments to interest income. At June 30, 2005
there were unrealized gains of approximately 1 cent per share on contingent
payment debt instruments.
(c) Federal Income Taxes
The Fund's policy is 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.
At September 30, 2004, the Fund had a capital loss carryforward of $4,915,273
available to the extent allowed by tax law to offset future net capital gains,
if any. To the extent that the carryforward is used, no capital gains
distributions will be made. The carryforward expires in 2011. The Fund
utilized net capital loss carryforwards of $2,804,454 during the fiscal year
ended September 30, 2004.
(d) Distributions to Shareholders
Distributions to shareholders from net investment income are recorded by the
Fund on the ex-dividend date. Distributions from capital gains, if any, are
recorded on the ex-dividend date and paid annually. The amount and character of
income and capital gains to be distributed are determined in accordance with
income tax regulations, which may differ from generally accepted accounting
principles. The tax character of distributions paid during the fiscal years
ended September 30, 2004 and 2003 were $3,681,116 and $3,143,201, respectively,
both from ordinary income.
Notes to Financial Statements (continued)
(e) Market Risk
It is the Fund's policy to invest at least 80% 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 of their
underlying securities. Thus they expose the Fund to greater downside risk than
traditional convertible securities, but generally less than that of the
underlying common stock. The market value of those securities was $19,337,260
at June 30, 2005, representing 17.8% of net assets.
ITEM 2. CONTROLS AND PROCEDURES.
Conclusions of principal officers concerning controls and procedures
(a) The Registrant's principal executive officer and principal financial
officer, or persons performing similar functions, have concluded that the
Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940, as amended (the "Act"),
(17 CFR 270.30a-3(c))) are effective as of August 10, 2005, based on the
evaluation of these controls and procedures required by Rule 30a-3(b) under
the Act (and 15d-15(b) under the Securities Exchange Act of 1934, as amended
(17 CFR 240.15d-15(b)).
(b) There have been no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the Registrant's last fiscal quarter
that has materially affected, or is reasonably likely to materially affect,
the Registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
Separate certifications of the principal executive officer and the principal
financial officer of the Registrant, as required by Rule 30a-2(a) under the
Investment Company Act of 1940, are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Ellsworth Convertible Growth and
Income Fund, Inc.
By: /s/Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: August 24, 2005
Pursuant to the requirements of the Securities and Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/Thomas H. Dinsmore
Thomas H. Dinsmore
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: August 24, 2005
By: /s/Gary I. Levine
Gary I. Levine
Chief Financial Officer
(Principal Financial Officer)
Date: August 24, 2005