<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<FILENAME>ecf-2003_497.txt
<DESCRIPTION>497
<TEXT>
               Ellsworth Convertible Growth and Income Fund, Inc.

                        1,754,826 Shares of Common Stock
                   Issuable upon Exercise of Non-Transferable
               Rights to Subscribe for such Shares of Common Stock

         Ellsworth Convertible Growth and Income Fund, Inc. (the "Fund") is
offering to its common stockholders of record as of October 14, 2003
non-transferable rights ("Rights"). These Rights will allow you to subscribe for
one share of the Fund's Common Stock for each six Rights held (the "Offer"). You
will receive one Right for each whole share of Common Stock that you hold of
record as of October 14, 2003, rounded up to the nearest number of Rights evenly
divisible by six. The Rights will not be listed for trading on the American
Stock Exchange ("AMEX") or any other exchange. The subscription price (the
"Subscription Price") will be the lesser of 95% of (a) the net asset value per
share of the Fund's Common Stock on November 20, 2003 (the "Pricing Date"), or
(b) the average of the volume-weighted average sales prices of a share of the
Fund's Common Stock on the AMEX on the Pricing Date and the four preceding
trading days.

         Rights may be exercised at any time prior to 5:00 p.m., Eastern time,
on November 19, 2003 (the "Expiration Date"), unless extended. Since the Offer
closes prior to the Pricing Date, stockholders who exercise their Rights will
not know the Subscription Price at the time they exercise their Rights. Payment
of the estimated Subscription Price of $7.76 per share must be made when a
stockholder exercises the Rights.

         The Fund is a closed-end, diversified management investment company,
whose shares of Common Stock are listed and traded on the AMEX under the symbol
"ECF." The Fund invests primarily in convertible securities with the objectives
of providing income and the potential for capital appreciation (which objectives
the Fund considers to be relatively equal, over the long term, due to the nature
of the securities in which it invests). The Fund will invest, under normal
circumstances, at least 80% of the value of its assets (consisting of net assets
plus the amount of any borrowings for investment purposes) in convertible
securities. Investing in the Fund involves certain risks. See "Risk Factors and
Special Considerations" on page 18. The net asset value per share of the Fund's
Common Stock at the close of business on October 14, 2003 was $8.84, and the
last reported sales price of a share of the Fund's Common Stock on the AMEX on
that date was $7.97.

         Neither the Securities and Exchange Commission ("SEC") nor any state
securities commission has approved or disapproved of these securities or
determined if this Prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.

                                                               Proceeds, before
                       Estimated                                  expenses, to
                 Subscription Price (1)      Sales Load           the Fund (2)
                 ----------------------      ----------          --------------
Per Share                $7.76                  None                 $7.76
Total                 $13,617,450               None              $13,617,450

(1)      Estimated based on an estimated Subscription Price per share of 95% of
         the average of the volume-weighted average sales prices of a share of
         the Fund's Common Stock on the AMEX on October 14, 2003 and the four
         preceding trading days.

(2)      Before deduction of expenses payable by the Fund, estimated at
         $165,559, which will be charged against paid-in capital of the Fund.

                The date of this Prospectus is October 16, 2003.
<PAGE>

         Stockholders who do not fully exercise their Rights should expect that
they will, at the completion of the Offer, own a smaller proportional interest
in the Fund than if they exercised their Rights. As a result of the Offer, you
may experience an immediate dilution of the aggregate net asset value of your
shares, which under certain circumstances may be substantial. This is because
the Subscription Price per share and the net proceeds to the Fund for each new
share sold will be less than the Fund's net asset value per share on the
Expiration Date. The Fund cannot state precisely the extent of this dilution at
this time because it does not know what the net asset value or market price per
share will be when the Offer expires or what proportion of the Rights will be
exercised. See "Prospectus Summary - Risk Factors and Special Considerations -
Dilution"

         This Prospectus contains information you should know before exercising
your Rights, including information about risks. Please read it before you invest
and keep it for future reference. A Statement of Additional Information, dated
October 16, 2003, containing additional information about the Fund, has been
filed with the SEC and is incorporated by reference in its entirety into this
Prospectus. The table of contents of the Statement of Additional Information
appears on page 32 of this Prospectus, and a copy is available at no charge by
calling the Information Agent at (888) 705-1032 or at the SEC's internet website
(http://www.sec.gov).

         Shares will be ready for delivery on or about December 16, 2003.
<PAGE>

                               PROSPECTUS SUMMARY

         You should consider the matters discussed in this summary before
investing in the Fund through the Offer. This summary is qualified in its
entirety by reference to the detailed information included in this Prospectus
and the related Statement of Additional Information.

Purpose of the Offer

         The Board of Directors of the Fund has determined that it would be in
the best interest of the Fund and its stockholders to increase the assets of the
Fund available for investment so that it may be in a better position to take
advantage of investment opportunities that may arise. The Offer seeks to reward
existing stockholders in the Fund by giving them the opportunity to purchase
additional shares at a price below market and/or net asset value and without
incurring any brokerage commissions. See "The Offer - Purposes of the Offer."

         The Board of Directors believes that a larger asset base may increase
the level of market interest in and visibility of the Fund and improve the
trading liquidity of the Fund's shares on the American Stock Exchange ("AMEX").

Important Terms of the Offer


Offer...........................................   The Fund is offering to its
                                                   stockholders non-transferable
                                                   rights ("Rights") to
                                                   subscribe for shares of the
                                                   Fund's Common Stock (the
                                                   "Offer").

Total number of shares available for primary
     subscription...............................   1,754,826 Shares of the
                                                   Fund's Common Stock (the
                                                   "Shares").

Number of Rights you will receive for each
     outstanding share you own on
     October 14, 2003 (the "Record Date").......   One Right for every one
                                                   share, rounded up to the
                                                   nearest number of Rights
                                                   evenly divisible by six.

Number of Shares you may purchase with your
     Rights at the Subscription Price per Share.   One Share for every six
                                                   Rights.

Subscription Price (the "Subscription Price")...   The lesser of 95% of (A) the
                                                   net asset value per share of
                                                   the Fund's Common Stock on
                                                   November 20, 2003 (the
                                                   "Pricing Date"), or (B) the
                                                   average of the
                                                   volume-weighted average sales
                                                   prices of a share of the
                                                   Fund's Common Stock on the
                                                   AMEX on the Pricing Date and
                                                   the four preceding trading
                                                   days.

Additional Terms of the Offer

         The Rights will not be listed for trading on the AMEX or any other
exchange. Rights may be exercised at any time from October 17, 2003 through 5:00
p.m., Eastern time, on November 19, 2003 (the "Expiration Date"), unless
extended. Since the Expiration Date is prior to the Pricing Date, stockholders
who exercise their Rights will not know the Subscription Price at the time they
exercise their Rights.

                                       1
<PAGE>

Payment of the estimated Subscription Price of $7.76 per Share must be made when
a stockholder exercises the Rights.

Over-Subscription Privilege

         If you fully exercise all Rights issued to you, you will be entitled to
subscribe for additional Shares that were not subscribed for by other
stockholders. If sufficient Shares are available, all stockholders'
over-subscription requests will be honored in full. If these requests for
additional Shares exceed the Shares available, the available Shares will be
allocated pro rata among stockholders who over-subscribe based on the number of
Rights originally issued to them by the Fund. See "The Offer - Over-Subscription
Privilege."

Method of Exercising Rights

         The Rights will be evidenced by subscription certificates
("Subscription Certificates"). If you are a stockholder of record, your
Subscription Certificate will be sent to you. If your shares are held by a
nominee, such as a bank, broker, trust company or other financial institution
("Nominee"), the Subscription Certificate will be sent to your Nominee.

         Stockholders who are record owners can choose between either option
below to exercise rights. Stockholders whose shares are held by a Nominee, must
choose option (2) below to exercise their Rights.

         You may exercise your Rights in the following ways:

         (1)      Complete and sign the Subscription Certificate. Mail it in the
envelope provided or deliver it, together with payment of the Estimated
Subscription Price of $7.76 per Share, to American Stock Transfer & Trust
Company (the "Subscription Agent") at the address indicated on the Subscription
Certificate. Your completed and signed Subscription Certificate and payment in
good funds of the Estimated Subscription Price of $7.76 per Share must be
received prior to 5:00 p.m. Eastern time on the Expiration Date. Final payment
of the actual Subscription Price per Share must be received by the Subscription
Agent by December 11, 2003.

         (2)      Contact your Nominee, which can arrange, on your behalf, to
guarantee delivery of payment and delivery of a properly completed and executed
Subscription Certificate pursuant to a notice of guaranteed delivery ("Notice of
Guaranteed Delivery"). A stockholder who is a record owner may also contact a
bank, broker, trust company, New York Stock Exchange member firm or financial
institution, which can arrange for a Notice of Guaranteed Delivery. A fee may be
charged for this service. The Notice of Guaranteed Delivery must be received by
the Expiration Date. A properly completed and executed Subscription Certificate,
together with payment of the Estimated Subscription Price of $7.76 per Share,
must be received by the Subscription Agent by the close of business on the third
business day after the Expiration Date (November 24, 2003, unless the Offer is
extended) or the Subscription Agent will not honor a Notice of Guaranteed
Delivery. Final payment of the actual Subscription Price per share must be
received by the Subscription Agent by December 11, 2003.

         Since the Expiration Date is prior to the Pricing Date, stockholders
who choose to exercise their Rights will not know the Subscription Price at the
time they exercise such Rights. Stockholders will have no right to rescind their
subscription after the Subscription Agent has received their payment for Shares.
See "The Offer - Method of Exercising Rights" and "The Offer - Payment for
Shares." Subscription payments will be held by the Subscription Agent, in a
segregated, interest bearing account, pending completion of the processing of
the subscription. No interest on subscription payments will be paid to
subscribers.

                                       2
<PAGE>

         The Rights are not transferable. Therefore, only the underlying Shares,
and not the Rights, will be admitted for trading on the AMEX. Fractional shares
will not be issued on exercise of Rights.

Obtaining Subscription Information

         Stockholders' inquiries about the Offer should be directed to their
broker, bank or trust company, or to:

                    Georgeson Shareholder Communications Inc.
                                 (888) 705-1032

         You may also call the Fund collect at (973) 631-1177.

Important Dates to Remember

                   Event                                         Date
                   -----                                         ----

Record Date............................................... October 14, 2003
Subscription Period....................................... October 17, 2003
                                                           through
                                                           November 19, 2003*
Expiration Date (Deadline for delivery of Subscription
    Certificate together with payment of Estimated
    Subscription Price, or for delivery of Notice of
    Guaranteed Delivery).................................. November 19, 2003*
Pricing Date.............................................. November 20, 2003*
Nominee Subscription Certificate and Payment of
        Estimated Subscription Price for
        Shares Due Pursuant to Notice of
        Guaranteed Delivery............................... November 24, 2003*
Confirmation to Participants.............................. November 26, 2003*
Final Payment for Shares.................................. December 11, 2003*

*Unless the Offer is extended.

Tax Consequences

         For Federal income tax purposes, neither the receipt nor the exercise
of the Rights will result in taxable income to you. You will not realize a
taxable loss if your Rights expire without being exercised. See "The Offer -
Federal Income Tax Consequences of the Offer."

Information about the Fund

         The Fund is a closed-end, diversified management investment company,
incorporated under the laws of the State of Maryland on April 30, 1986.

         The Fund invests primarily in convertible securities, with the
objectives of providing income and the potential for capital appreciation (which
objectives the Fund considers to be relatively equal due to the nature of the
securities in which it invests). These investment objectives may be changed in
the future by the Fund's Board of Directors without the approval of a majority
of the Fund's outstanding voting securities. The Fund will provide stockholders
with at least 60 days prior notice of any change to this investment policy.

                                       3
<PAGE>

         The Fund expects that a substantial majority of its invested assets
will consist of convertible securities. The Fund has adopted a non-fundamental
investment policy providing that the Fund will invest, under normal
circumstances, at least 80% of the value of its assets (consisting of net assets
plus the amount of any borrowings for investment purposes) in convertible
securities. This investment policy may be changed in the future by the Fund's
Board of Directors without the approval of a majority of the Fund's outstanding
voting securities. The Fund will provide stockholders with at least 60 days
prior notice of any change to this investment policy.

         In addition to the non-fundamental policy respecting convertible
securities, the Fund has also adopted a fundamental policy that under normal
market conditions it will invest at least 65% of its total assets in convertible
securities (i.e., bonds, debentures, corporate notes, preferred stock or other
securities that are convertible into common stock) and common stock received
upon conversion or exchange of securities and retained in the Fund's portfolio
to permit orderly disposition or to establish long-term holding periods for
federal income tax purposes. This investment policy cannot be changed without
the approval of a majority of the Fund's outstanding voting securities. The
remainder of the Fund's total assets may be invested in other securities,
including non-convertible equity and debt securities, options, warrants, U.S.
Government or agency obligations, or repurchase agreements or they may be held
as cash or cash equivalents. The Fund is not required to sell securities for the
purpose of assuring that 65% of its total assets are invested in convertible
securities.

         An investment in the Fund is not appropriate for all investors. There
can be no assurance that the Fund's investment objectives will be realized. See
"Investment Objectives and Policies."

Capital Stock

         The Fund's Common Stock is listed and traded on the AMEX under the
symbol "ECF". As of October 14, 2003, the Fund had 10,461,994 shares of Common
Stock issued and outstanding. See "Description of Capital Stock."

Investment Adviser

         Davis-Dinsmore Management Company (the "Adviser") provides investment
advisory services to the Fund. For its services, the Fund pays the Adviser 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. For purposes of calculation of the fee, the net asset
value for a month will be the average of the Fund's net asset values at the
close of business on the last business day on which the New York Stock Exchange
is open in each week in the month. See "Management of the Fund."

Risk Factors and Special Considerations

         The following summarizes some of the matters that you should consider
before subscribing for Shares of the Fund through the Offer.

Dilution...........................     Stockholders who do not fully exercise
                                        their Rights should expect that they
                                        will, at the completion of the Offer,
                                        own a smaller proportional interest in
                                        the Fund than if they exercised their
                                        Rights. As a result of the Offer, you
                                        may experience an immediate dilution of
                                        the aggregate net asset value of your
                                        shares, which, under certain
                                        circumstances, may be substantial. This
                                        is because the Subscription Price per
                                        share and the net proceeds to the Fund
                                        for each new Share sold will be less
                                        than the Fund's net asset value per
                                        share on the Expiration Date. It is not

                                       4
<PAGE>

                                        possible to state precisely the amount
                                        of such dilution because it is not known
                                        at this time how many Shares will be
                                        subscribed for or what the net asset
                                        value or market price per share will be
                                        on the Pricing Date. For an example of
                                        the potential dilution that may result
                                        from the Offer see "Risk Factors and
                                        Special Considerations - Dilution."

Risk of Trading Discounts..........     The Fund's shares have generally traded
                                        in the market below (a discount from)
                                        net asset value since the commencement
                                        of the Fund's operations in April 1986.
                                        The Fund's shares have traded at
                                        discounts of as much as 26.50% since the
                                        Fund's inception. The possibility that
                                        shares of the Fund will trade at a
                                        discount from net asset value is a risk
                                        separate and distinct from the risk that
                                        the Fund's net asset value will
                                        decrease. The risk of purchasing shares
                                        of a closed-end fund, such as the Fund,
                                        that might trade at a discount is more
                                        pronounced for investors who wish to
                                        sell their shares in a relatively short
                                        period of time because, for those
                                        investors, realization of a gain or loss
                                        on their investments is likely to be
                                        more dependent upon the existence of a
                                        premium or discount than upon portfolio
                                        performance. See "Risk Factors and
                                        Special Considerations - Risk of Trading
                                        Discounts."

                                        For the fiscal year ended September 30,
                                        2003, the Fund's shares traded in the
                                        market at an average daily discount to
                                        net asset value of 4.02%. As of October
                                        14, 2003, the discount to net asset
                                        value was 9.84%. There can be no
                                        assurance that the current discount
                                        level will not change. See "Description
                                        of Capital Stock - Net Asset Values and
                                        Sales Prices."

Risk of Decline in Net
Asset Value........................     The Fund is subject to market risk - the
                                        possibility that the securities it holds
                                        will decline over short or extended
                                        periods of time. As a result, the value
                                        of an investment in the Fund's Common
                                        Stock will fluctuate with the market,
                                        and you could lose money over short or
                                        long periods of time. 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 in their underlying securities.
                                        Thus, they expose the Fund to greater
                                        downside risk than traditional
                                        convertible securities, but still less
                                        than that of the underlying common
                                        stock. See "Investment Objectives and
                                        Policies - Discussion of Convertible
                                        Securities."

Credit Risk........................     Credit risk is the risk that an issuer
                                        will fail to pay interest or dividends
                                        and principal in a timely manner.
                                        Companies that issue convertible
                                        securities may be small to medium-size,
                                        and they often have low credit ratings.
                                        In addition, the credit rating of a
                                        company's convertible securities is
                                        generally lower than that of its
                                        conventional debt securities.
                                        Convertible securities are normally
                                        considered "junior" securities - that
                                        is, the company usually must pay
                                        interest on its conventional debt before
                                        it can make payments on its convertible

                                       5
<PAGE>

                                        securities. Credit risk could be high
                                        for the Fund, because it could invest in
                                        securities with low credit quality.

Interest Rate Risk.................     Interest rate risk is the possibility
                                        that prices of securities will decline
                                        along with overall bond prices, over
                                        short or even long periods, because of
                                        rising interest rates. Convertible
                                        securities are particularly sensitive to
                                        interest rate changes when their
                                        predetermined conversion price is much
                                        higher than the issuing company's common
                                        stock.

Manager Risk.......................     Manager risk is the risk that poor
                                        security selection will cause the Fund
                                        to underperform other funds with a
                                        similar investment objective.

Anti-Takeover Provisions...........     The Fund has provisions in its Charter
                                        which could have the effect of limiting
                                        the ability of other entities or persons
                                        to acquire control of the Fund, to cause
                                        it to engage in certain transactions or
                                        to modify its structure. See "Certain
                                        Charter Provisions."

Ineligibility of Shares Issued to
Receive Next Dividend..............     Historically, the Fund has paid
                                        quarterly dividends to its stockholders.
                                        It is likely that the Fund's Board of
                                        Directors will declare a dividend during
                                        the Subscription Period. Because the
                                        record date for such dividend would be
                                        prior to the Expiration Date, any Shares
                                        issued pursuant to the Offer would not
                                        be eligible to receive such dividend.
                                        Additionally, since the Subscription
                                        Price would be determined after the
                                        dividend record date, the Subscription
                                        Price would be priced ex-dividend.

                                       6
<PAGE>

                                  FUND EXPENSES

         The following tables are intended to assist investors in understanding
the various costs and expenses that a stockholder of the Fund will bear,
directly or indirectly.

Stockholder Transaction Expenses
      Sales Load......................................................   None
      Cash Payment Plan Fee...........................................  $1.25(1)
Annual Expenses (as a percentage of average net assets attributable
    to the Fund's Common Stock)
      Management Fees.................................................   0.75%
      Other Expenses(2)...............................................   0.55%
                                                                       --------

      Total Annual Expenses...........................................   1.30%
                                                                       ========
--------------------

(1)      Represents the bank service charge per transaction for the Cash Payment
         Plan.

(2)      Other Expenses are based on estimated amounts for the current fiscal
         year.

Example

         The following Example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Fund's Common Stock. These amounts are based
upon payment by the Fund of management fees and other expenses at the levels set
forth in the above table.

         An investor would directly or indirectly pay the following expenses on
a $1,000 investment in shares of the Fund's Common Stock, assuming (i) the
market price at the time of investment was equal to the net asset value ("NAV")
per share, (ii) a 5% annual return and (iii) reinvestment of all distributions
at NAV:

         One Year         Three Years            Five Years           Ten Years
           $13                $41                    $71                $157

         This Example assumes that the percentage amounts listed under Annual
Expenses remain the same in the years shown. The above tables and the assumption
in the Example of a 5% annual return and reinvestment at NAV are required by
regulation of the SEC and are applicable to all investment companies, and the
assumed 5% annual return is not a prediction of, and does not represent, the
projected performance of the Fund's Common Stock. Actual expenses and annual
rates of return may be more or less than those allowed for purposes of this
Example. In addition, while the Example assumes reinvestment of all
distributions at NAV, the Fund's Automatic Dividend Investment and Cash Payment
Plan contemplates reinvestment of net investment income dividends and capital
gain distributions in shares of the Fund's Common Stock, based on the lower of
the market price or NAV on the valuation date, except that distributions may not
be reinvested for less than 95% of the market price.

         THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.

                                       7
<PAGE>

                              FINANCIAL HIGHLIGHTS

         The financial highlights table is intended to help you understand the
Fund's financial performance for the periods presented and reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned on an investment in the Fund (assuming
reinvestment of all dividends and distributions). The information for the six
months ended March 31, 2003 has not been audited. The information for each of
the ten fiscal years in the period ended September 30, 2002 has been audited by
PricewaterhouseCoopers LLP, independent accountants. The audited financial
statements included in the Annual Report to the Fund's Stockholders for the
fiscal year ended September 30, 2002, together with the report of
PricewaterhouseCoopers LLP thereon, and the unaudited financial statements
included in the Semi-Annual Report to the Fund's Stockholders for the six months
ended March 31, 2003 are incorporated by reference into the Statement of
Additional Information. Further information about the performance of the Fund is
available in the Fund's 2002 Annual Report to Stockholders and the Fund's
Semi-Annual Report to Stockholders dated March 31, 2003. The Statement of
Additional Information, the Fund's 2002 Annual Report to Stockholders and the
Fund's Semi-Annual Report to Stockholders dated March 31, 2003 may be obtained
from the Fund free of charge by calling the Fund collect at (973) 631-1177.

<TABLE>
<CAPTION>
                                       Six Months Ended                        Years Ended September 30,
                                        March 31, 2003      -------------------------------------------------------------
                                          (unaudited)         2002              2001             2000              1999
                                           --------         --------          --------         --------          --------
<S>                                        <C>              <C>               <C>              <C>               <C>
Operating Performance:
Net asset value, beginning of period.....  $   7.81         $   8.67          $  11.82         $  11.23          $  11.18
                                           --------         --------          --------         --------          --------
Net investment income....................       .12              .34               .47              .42               .33
Net realized and unrealized gain (loss)..       .13             (.76)            (1.88)            1.71              1.40
                                           --------         --------          --------         --------          --------
    Total from investment operations.....       .25             (.42)            (1.41)            2.13              1.73
Less Distributions:
Dividends from net investment income.....      (.16)            (.44)             (.42)            (.35)             (.32)
Distributions from realized gains........        --               --             (1.32)           (1.23)            (1.36)
                                           --------         --------          --------         --------          --------
    Total Distributions..................      (.16)            (.44)            (1.74)           (1.58)            (1.68)
Capital share repurchases................        --               --                --              .04                --
                                           --------         --------          --------         --------          --------
Net asset value, end of period...........  $   7.90         $   7.81          $   8.67         $  11.82          $  11.23
                                           ========         ========          ========         ========          ========

Market value, end of period..............  $   7.52         $   7.55          $   8.35         $   9.88          $   9.38

Total Net Asset Value Return (%)(a)......      3.23            (5.20)           (13.34)           21.85             16.42
Total Investment Return (%)(b)...........      1.71            (4.54)             2.21            25.72             10.39

Ratios/Supplemental Data:
Net assets, end of year ($000's).........  $ 82,649         $ 81,125          $ 88,901         $109,180          $ 96,040
Ratio of expenses to average net
   assets (%)............................       1.3(c)           1.2               1.2              1.2               1.1
Ratio of net investment income to
    average net assets (%)...............       3.2(c)           3.9               5.0              3.8               3.0
Portfolio turnover rate (%)..............        38               89                82               98                67
</TABLE>

---------------------------
(a)   Assumes valuation of the Fund's shares, and reinvestment of dividends, at
      net asset values.
(b)   Assumes valuation of the Fund's shares at market price and reinvestment of
      dividends at actual reinvestment price.
(c)   Annualized.

                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                                      Years Ended September 30,
                                            --------------------------------------------------------------------------------
                                              1998          1997           1996           1995          1994           1993
                                            -------       -------        -------        -------       -------        -------
<S>                                         <C>           <C>            <C>            <C>           <C>            <C>
Operating Performance:
Net asset value, beginning of period....    $ 13.33       $ 11.80        $ 10.76        $  9.72       $ 10.39        $  9.31
                                            -------       -------        -------        -------       -------        -------
Net investment income...................        .35           .40            .43            .48           .51            .53
Net realized and unrealized gain (loss).       (.65)         2.59           1.37           1.30          (.58)          1.14
                                            -------       -------        -------        -------       -------        -------
    Total from investment operations....       (.30)         2.99           1.80           1.78          (.07)          1.67
Less Distributions:
Dividends from net investment income....       (.37)         (.40)          (.47)          (.51)         (.53)          (.50)
Distributions from realized gains.......      (1.48)        (1.06)          (.29)          (.23)         (.07)          (.09)
                                            -------       -------        -------        -------       -------        -------
    Total Distributions.................      (1.85)        (1.46)          (.76)          (.74)         (.60)          (.59)
Capital share repurchases...............         --            --             --             --            --             --
                                            -------       -------        -------        -------       -------        -------
Net asset value, end of period..........    $ 11.18       $ 13.33        $ 11.80        $ 10.76       $  9.72        $ 10.39
                                            =======       =======        =======        =======       =======        =======

Market value, end of period.............    $ 10.00       $ 11.25        $  9.88        $  9.13       $  8.38        $  9.38

Total Net Asset Value Return (%)(a).....      (2.39)        27.77          17.43          19.50         (0.61)         18.60
Total Investment Return (%)(b)..........       5.21         30.93          17.13          18.95         (4.46)         19.73

Ratios/Supplemental Data:
Net assets, end of year ($000's)........    $87,438       $94,822        $78,395        $69,769       $61,316        $64,457
Ratio of expenses to average net
   assets (%)...........................        1.1           1.2            1.2            1.2           1.1            1.2
Ratio of net investment income to
    average net assets (%)..............        3.0           3.4            3.9            5.0           5.2            5.5
Portfolio turnover rate (%).............         59            71             70             44            45             99
</TABLE>
---------------------------
(a)      Assumes valuation of the Fund's shares, and reinvestment of dividends,
         at net asset values.
(b)      Assumes valuation of the Fund's shares at market price and reinvestment
         of dividends at actual reinvestment price.

                                       9
<PAGE>

                             INVESTMENT PERFORMANCE

         The table below presents average annual total returns of the Fund's
Common Stock on two separate bases. The NAV Return is the compound average
annual rate of return, using NAVs, on an amount invested in the Fund from the
beginning to the end of the stated period and assumes reinvestment of net
investment income dividends and capital gains distributions at NAV. The Market
Value Return presents the same information, but values the Fund at market rather
than NAV and reinvestment of dividends at actual reinvestment price and,
therefore, reflects the actual experience of a stockholder, before commission
costs, who bought and sold shares of the Fund at the beginning and ending dates.

         The record of the Credit Suisse First Boston Convertible Securities
Index (the "CSFB Index") has been included so that the Fund's results may be
compared with an index of convertible securities. The CSFB Index is an unmanaged
index which generally includes 250-300 issues representing convertible issues,
U.S. dollar-denominated debentures and preferred stock which can be converted
into a specified number of shares of common stock. The record of the Standard &
Poor's Composite Stock Price 500 Index (the "S&P 500 Index") has been included
so that the Fund's results may be compared with a widely recognized, unmanaged
benchmark of U.S. stock market performance that is dominated by the stocks of
large U.S. companies. The record of the Russell 2000(R) Index has been included
so that the Fund's results may be compared with an unmanaged index reflecting
the performance of the 2,000 smallest companies in the Russell 3000(R) Index
(which represent the 3,000 largest U.S. companies based on total market
capitalization). The Fund primarily invests in convertible securities. The
figures for each Index assume reinvestment of dividends.

<TABLE>
<CAPTION>
                                                                                                   From June 30,
                           One Year        Three Years                                           1986 (day trading
                             Ended            Ended        Five Years Ended     Ten Years Ended     began) to
                          September 30,   September 30,      September 30,       September 30,    September 30,
                             2003(%)          2003(%)           2003(%)             2003(%)           2003(%)
                          ------------    ------------       ------------        ------------     ------------
<S>                          <C>              <C>                <C>                <C>               <C>
Fund NAV Return              13.99            -1.82              5.89                8.76              9.10

Fund Market Value
  Return                     10.81             2.70              8.47               10.64              9.72

Credit Suisse First
Boston Convertible
Securities Index              9.89             8.58              8.81               -3.85             29.51

S&P 500 Index                24.40           -10.12              1.00               10.04             10.98

Russell 2000(R)  Index       36.54            -0.75              7.56                6.78*             6.90*
</TABLE>
--------------------
* Simple appreciation of index.

         It should be noted that the NAV Return for the period from June 30,
1986 through September 30, 2003 is based on the Fund's initial NAV of $9.30 per
share, rather than the initial public offering price of $10.00 per share.
Accordingly, that figure does not reflect underwriting commissions and discounts
or expenses of the offering paid by stockholders who purchased the Fund's shares
in the initial public offering.

                                       10
<PAGE>

         The above results represent past performance and should not be
considered an indication of future performance from an investment in the Fund
today. They are provided only to give an historical perspective of the Fund. The
investment return and net asset and market prices will fluctuate, so that shares
of Common Stock may be worth more or less than their original cost when sold.

                                    THE OFFER

Terms of the Offer

         The Fund is offering to common stockholders of record, as of the close
of business on the Record Date, Rights to subscribe for an aggregate of
1,754,826 Shares of the Common Stock of the Fund.

         Each stockholder is being issued one Right for each whole share of
Common Stock owned on the Record Date rounded up to the nearest number of Rights
evenly divisible by six. The Rights entitle a stockholder to acquire at the
subscription price one Share for each six Rights held. Fractional Shares will
not be issued upon the exercise of Rights. In the case of shares held of record
by a Nominee, the number of Rights issued to such Nominee will be adjusted to
permit rounding up (to the nearest number of Rights evenly divisible by six) of
the Rights to be received by each of the beneficial owners for whom it is the
holder of record only if the Nominee provides to the Fund, on or before the
close of business on November 18, 2003, a written representation of the number
of Rights required for such rounding.

         Rights may be exercised at any time during the subscription period,
which commences on October 17, 2003 and ends as of 5:00 p.m., Eastern time, on
November 19, 2003 (the "Subscription Period") unless extended by the Fund (such
date, as it may be extended, is referred to in this Prospectus as the
"Expiration Date"). A stockholder's right to acquire one additional Share for
each six Rights held during the Subscription Period at the subscription price is
referred to as the "Primary Subscription." The Rights are evidenced by
subscription certificates ("Subscription Certificates"), which will be mailed to
stockholders or their Nominee.

         The subscription price (the "Subscription Price") will be the lesser of
95% of (A) the net asset value per share of the Fund's Common Stock on November
20, 2003 (the "Pricing Date"), or (B) the average of the volume-weighted average
sales prices of a share of the Fund's Common Stock on the AMEX on the Pricing
Date and the four preceding trading days. Since the time of the close of the
Offer on the Expiration Date is prior to the Pricing Date, holders who choose to
exercise their Rights will not know the Subscription Price at the time they
exercise their Rights.

         In addition, any stockholder who fully exercises all Rights issued to
him or her is entitled to subscribe for additional Shares, which were not
otherwise subscribed for in the Primary Subscription, at the Subscription Price
(the "Over-Subscription Privilege"). Shares acquired pursuant to the
Over-Subscription Privilege are subject to allotment, which is more fully
discussed below under "The Offer - Over-Subscription Privilege."

         The Rights are non-transferable. Therefore, only the underlying Shares,
and not the Rights, will be listed for trading on the AMEX.

Purposes of the Offer

         The Board of Directors of the Fund has determined that (i) it would be
in the best interests of the Fund and its stockholders to increase the assets of
the Fund available for investment so that it may be in a better position to take
advantage of investment opportunities that may arise, and (ii) the potential
benefits of the Offer to the Fund and its stockholders will outweigh the
dilution to stockholders who do not fully

                                       11
<PAGE>

exercise their Rights. The proceeds of the Offer will enable the Fund's
portfolio managers to take advantage of perceived investment opportunities
without having to sell existing portfolio holdings which they otherwise would
retain. Increasing the size of the Fund also might result in lowering the Fund's
expenses as a percentage of average net assets. The Offer seeks to reward
investors by giving existing stockholders the opportunity to purchase additional
Shares at a price below market and/or net asset value and without brokerage
commissions.

         The Board of Directors of the Fund believe that a larger asset base may
increase the level of market interest in and visibility of the Fund and improve
the trading liquidity of the Fund's shares on the AMEX.

         Currently, the majority of new convertible offerings are made pursuant
to Rule 144A of the Securities Act of 1933, as amended (the "Securities Act").
In order to participate in these offerings, a buyer must qualify as a Qualified
Institutional Buyer ("QIB"). A QIB generally must have $100 million under
management. Although the assets of the Fund are less than $100 million, the Fund
is able to participate in these offerings because its investment adviser,
Davis-Dinsmore Management Company (the "Adviser"), is a QIB (it is an investment
adviser registered under the Investment Advisers Act of 1940, as amended, and
invests on a discretionary basis at least $100 million in securities). If the
Adviser no longer qualified as a QIB, the Fund would no longer be able to
participate in Rule 144A offerings. However, if the Offer is successful, the
Fund may independently qualify as a QIB.

         The Adviser will benefit from the Offer because its fees are based on
the average weekly net assets of the Fund. See "Management of the
Fund-Management Fees." It is not possible to state precisely the amount of
additional compensation the Adviser will receive as a result of the Offer
because it is not known how many Shares will be subscribed for and because the
net proceeds of the Offer will be invested in additional portfolio securities
that will fluctuate in value. Two of the Fund's Directors who voted to authorize
the Offer are "interested persons," within the meaning of the Investment Company
Act of 1940, as amended (the "1940 Act"), of the Adviser, and therefore could
benefit indirectly from the Offer. The other seven Directors are not "interested
persons" of the Fund or the Adviser.

         The Fund may, in the future, choose to make additional rights offerings
from time to time for a number of shares and on terms that may or may not be
similar to this Offer. Any such future rights offerings will be made in
accordance with the then applicable requirements of the 1940 Act and the
Securities Act.

         There can be no assurance that the Fund or its stockholders will
achieve any of the foregoing objectives or benefits through the Offer.

Over-Subscription Privilege

         If some stockholders do not exercise all of the Rights initially issued
to them, any Shares for which subscriptions have not been received from
stockholders will be offered by means of the Over-Subscription Privilege to
those stockholders who have exercised all of the Rights initially issued to them
and who wish to acquire additional Shares. Stockholders who exercise all of the
Rights initially issued to them should indicate on the Subscription Certificate
how many Shares they are willing to acquire through this Over-Subscription
Privilege. If sufficient Shares remain after completion of the Primary
Subscription, all over-subscription requests will be honored in full. However,
if sufficient Shares are not available to honor all over-subscription requests,
the available Shares will be allocated among those who over-subscribe based on
the number of Rights originally issued to them by the Fund, so that the number
of Shares issued to stockholders who subscribe through the Over-Subscription
Privilege will generally be in proportion to the number of shares of the Fund
owned by them on the Record Date. The

                                       12
<PAGE>

percentage of remaining Shares each over-subscribing Stockholder may acquire may
be rounded up or down to result in delivery of whole Shares. The allocation
process may involve a series of allocations in order to ensure that the total
number of Shares available for over-subscriptions is distributed, as nearly as
may be practicable, on a pro rata basis. The Fund will not offer or sell any
Shares which are not subscribed for through the Primary Subscription or the
Over-Subscription Privilege. The Over-Subscription Privilege may result in
additional dilution of interest and voting rights to stockholders, and
additional reduction in the Fund's NAV per share.

         Thomas H. Dinsmore and Jane D. O'Keeffe (control persons of the
Adviser) and certain other officers and employees of the Adviser may purchase
shares of Common Stock in the Primary Subscription and the Over-Subscription
Privilege. Any such purchases will be made on the same terms applicable to other
stockholders.

Subscription Price

         The Subscription Price for the Shares to be issued pursuant to the
Offer will be the lesser of 95% of (A) the net asset value per share of the
Fund's Common Stock on the Pricing Date or (B) the average of the
volume-weighted average sales prices of a share on the AMEX on the Pricing Date
and the four preceding trading days.

         The actual Subscription Price will not be determined until the Pricing
Date. Therefore, stockholders wishing to exercise Rights must send to American
Stock Transfer & Trust Company prior to the Expiration Date either: (i) the
Estimated Subscription Price of $7.76 per Share, together with a completed
Subscription Certificate, or (ii) a Notice of Guaranteed Delivery guaranteeing
delivery of a properly completed and executed Subscription Certificate and
payment for the Shares. See "The Offer - Methods of Exercising Rights" and "The
Offer - Payment For Shares" on pages 14-17.

         The Fund announced the proposed Offer on July 18, 2003. The NAV per
share of the Fund's Common Stock at the close of business on July 17, 2003 and
October 14, 2003 were $8.54 and $8.84, respectively, and the last reported sales
prices of a share of the Fund's Common Stock on the AMEX on those dates were
$8.30 and $7.97, respectively.

         It is expected that the Fund's Board of Directors will declare a
dividend during the Subscription Period. Any shares issued pursuant to the Offer
would not be eligible to receive such dividend. Since the Subscription Price
would be determined after the dividend record date, the Subscription Price would
be priced ex-dividend.

Expiration of the Offer

         The Expiration Date is 5:00 p.m., Eastern time, on November 19, 2003,
unless extended by the Fund. The Rights will expire on the Expiration Date and
may not be exercised after that date. Since the close of the Offer on the
Expiration Date is prior to the Pricing Date, stockholders who choose to
exercise their Rights will not know the Subscription Price when they decide
whether to acquire Shares on Primary Subscription or through the
Over-Subscription Privilege.

Subscription Agent

         The Subscription Agent for the Offer is American Stock Transfer & Trust
Company ("Subscription Agent"), which will receive, for its administrative,
processing, invoicing and other services as Subscription Agent, an estimated fee
of $25,000 and reimbursement for all out-of-pocket expenses related to the
Offer. The Subscription Agent is also the Fund's Transfer Agent.

                                       13
<PAGE>

         Signed Subscription Certificates should be sent to American Stock
Transfer & Trust Company by one of the following methods:

         (1)      BY FIRST CLASS MAIL:
                  American Stock Transfer & Trust Company
                  59 Maiden Lane
                  New York, NY 10038


         (2)      BY EXPRESS MAIL OR OVERNIGHT COURIER:
                  American Stock Transfer & Trust Company
                  59 Maiden Lane
                  New York, NY 10038


         (3)      BY HAND:
                  (9:00 a.m. - 5:00 a.m. New York City Time)
                  59 Maiden Lane
                  Plaza Level
                  New York, NY 10038

                  DELIVERY TO AN ADDRESS OTHER THAN THE ABOVE DOES NOT
                  CONSTITUTE GOOD DELIVERY.

Information Agent

         Any questions or requests for assistance may be directed to Georgeson
Shareholder Communications Inc., the Information Agent, at its toll free
telephone number listed below:

                    Georgeson Shareholder Communications Inc.
                                 (888) 705-1032

         Stockholders may also call the Fund collect at (973) 631-1177 or
contact their Nominees, who hold shares for the account of others, for
information with respect to the Offer.

         The Fund will pay a fee of $7,500 to Georgeson Shareholder
Communications Inc. and reimbursement for all out-of-pocket expenses related to
its services as Information Agent.

Method of Exercising Rights

         Stockholders of record may exercise their Rights by filling in and
signing the accompanying Subscription Certificate and mailing it in the envelope
provided or by delivering the completed and signed Subscription Certificate to
the Subscription Agent, together with any required payment for the Shares as
described below under "Payment for Shares." Stockholders of record may also
exercise Rights by contacting a broker, bank, trust company, New York Stock
Exchange member firm, or financial institution ("Intermediary") which can
arrange, on a stockholder's behalf, to guarantee delivery (using a "Notice of
Guaranteed Delivery") of a properly completed and executed Subscription
Certificate and payment for the Shares.

         Rights may also be exercised by a stockholder whose shares are held by
a Nominee, by contacting such Nominee, which can arrange, on the stockholder's
behalf, to guarantee delivery (using a

                                       14
<PAGE>

"Notice of Guaranteed Delivery") of a properly completed and executed
Subscription Certificate and payment for the Shares.

         The Nominee or Intermediary may charge a fee for this service.
Fractional Shares will not be issued. Completed Subscription Certificates must
be received by the Subscription Agent prior to 5:00 p.m., Eastern time, on the
Expiration Date (unless payment is to be effected by means of a Notice of
Guaranteed Delivery (see "Payment for Shares")) at the offices of the
Subscription Agent.

                  Stockholders who are Record Owners. Stockholders who are
                  record owners can choose between either option set forth below
                  under "Payment for Shares." If time is of the essence, option
                  (2) will permit delivery of the Subscription Certificate and
                  payment after the Expiration Date.

                  Investors Whose Shares Are Held Through A Nominee.
                  Stockholders whose shares are held by a Nominee, such as a
                  broker, bank, trust company or financial institution, must
                  contact that Nominee to exercise their Rights. In that case,
                  the Nominee will complete the Subscription Certificate on
                  behalf of the stockholder and arrange for proper payment by
                  one of the methods set forth below under "Payment for Shares."

                  Nominees. Nominees who hold shares for the account of others
                  should notify the respective beneficial owners of such shares
                  as soon as possible to ascertain such beneficial owners'
                  intentions and to obtain instructions with respect to the
                  Rights. If the beneficial owner so instructs, the Nominee
                  should complete the Subscription Certificate and submit it to
                  the Subscription Agent, together with the proper payment
                  described below under "Payment for Shares."

Payment for Shares

         Stockholders who acquire Shares in the Primary Subscription or pursuant
to the Over-Subscription Privilege may choose between the following methods of
payment:

         (1)      A record owner can send payment for the Shares acquired in the
                  Primary Subscription and any additional Shares subscribed for
                  pursuant to the Over-Subscription Privilege, together with the
                  Subscription Certificate, to the Subscription Agent based on
                  the Estimated Subscription Price of $7.76 per Share. To be
                  accepted, such payment, together with the Subscription
                  Certificate, must be received by the Subscription Agent prior
                  to 5:00 p.m., Eastern time, on the Expiration Date (November
                  19, 2003).

         (2)      If your Nominee or Intermediary delivered a Notice of
                  Guaranteed Delivery to the Subscription Agent prior to the
                  Expiration Date, your Nominee or Intermediary must send
                  payment for the Shares acquired in the Primary Subscription
                  and any additional Shares subscribed for pursuant to the
                  Over-Subscription Privilege, together with the Subscription
                  Certificate, to the Subscription Agent based on the Estimated
                  Subscription Price of $7.76 per Share. To be accepted, such
                  payment together with the Subscription Certificate must be
                  received by the Subscription Agent prior to 5:00 pm., Eastern
                  time, on the third business day after the Expiration Date
                  (November 24, 2003, unless the Offer is extended).

                                       15
<PAGE>

         If the first method described above is used, payment by money order,
personal check, certified check or bank cashier's check must accompany any
Subscription Certificate for the Subscription Certificate to be accepted.

         Stockholders will have no right to rescind their subscription after
receipt of their payment for shares by the Subscription Agent, except as
provided under "Risk Factors and Special Considerations - Possible Suspension of
the Offer."

         The method of delivery of Subscription Certificates and payment of the
Subscription Price to the Fund will be at the election and risk of the
stockholders, but if sent by mail it is recommended that such Subscription
Certificates and payment be sent by registered mail, properly insured, with
return receipt requested, and that a sufficient number of days be allowed to
ensure delivery to the Fund and clearance of payment prior to 5:00 p.m., Eastern
time, on the Expiration Date. If you pay directly, you have a choice of paying
by money order, personal check, certified check, bank cashier's check, or by
wire transfer. If you choose to pay by personal check, you will need to deliver
your check to the Subscription Agent not less than 5 business days before the
Expiration Date, since your check must clear before the Expiration Date.

         A confirmation will be sent by the Subscription Agent to each
subscribing stockholder (or, if the Fund's Shares on the Record Date are held by
a Nominee, to such Nominee) by November 26, 2003 (the "Confirmation Date"),
showing (i) the number of Shares acquired pursuant to the Primary Subscription;
(ii) the number of Shares, if any, acquired through the Over-Subscription
Privilege; (iii) the per Share and total purchase price for the Shares; and (iv)
any additional amount payable by the stockholder to the Fund or any excess to be
refunded by the Fund to the stockholder, in each case based on the Subscription
Price as determined on the Pricing Date. In the case of any stockholder who
exercises his or her right to acquire Shares pursuant to the Over-Subscription
Privilege, any excess payment which would otherwise be refunded to the
stockholder will be applied by the Fund toward payment for additional Shares
acquired pursuant to exercise of the Over-Subscription Privilege. Any additional
payment required from a stockholder must be received by the Subscription Agent
within ten business days after the Confirmation Date. Any excess payment to be
refunded by the Fund to a stockholder will be mailed by the Subscription Agent
to such stockholder as promptly as possible within ten business days after the
Confirmation Date. All proceeds received by the Subscription Agent in connection
with the Offer will be held by the Subscription Agent, on behalf of the Fund, in
a segregated, interest-bearing account.

         All payments by a stockholder must be made in United States dollars by
money order or check drawn on a bank located in the United States of America and
payable to American Stock Transfer & Trust Company.

         Issuance and delivery of certificates for the Shares purchased are
subject to collection of checks and actual payment through any Notice of
Guaranteed Delivery.

         If a stockholder who acquires Shares pursuant to the Primary
Subscription or Over-Subscription Privilege does not make payment of all amounts
due by the tenth business day after the Confirmation Date, the Fund reserves the
right to (i) find other purchasers for such subscribed and unpaid Shares; (ii)
apply any payment actually received by it toward the purchase of the greatest
number of whole Shares which could be acquired by such stockholder upon exercise
of the Primary Subscription and/or Over-Subscription Privilege; and/or (iii)
exercise any and all other rights and/or remedies to which it may be entitled,
including, without limitation, the right to set-off against payments actually
received by it with respect to such subscribed Shares.

                                       16
<PAGE>

         The Fund will only reject the purported exercise of any Right in the
event that a deficiency exists concerning the timeliness, validity, form and/or
eligibility of any exercise of Rights. All questions concerning such
deficiencies will be determined by the Fund, whose determinations will be final
and binding. The Fund in its sole discretion may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Fund determines
in its sole discretion. The Fund will not be under any duty to give notification
of any defect or irregularity in connection with the submission of Subscription
Certificates or incur any liability for failure to give such notification.

Delivery of Share Certificates

         Participants in the Fund's Automatic Dividend Investment and Cash
Payment Plan (the "Plan") will have any Shares acquired in the Primary
Subscription and pursuant to the Over-Subscription Privilege credited to their
accounts in the Plan. Stock certificates will not be issued for Shares credited
to Plan accounts. Stockholders whose Shares are held of record by a Nominee on
their behalf will have any Shares acquired in the Primary Subscription and
pursuant to the Over-Subscription Privilege credited to the account of such
Nominee. For all other stockholders, stock certificates for all Shares acquired
will be mailed promptly after full payment for the subscribed Shares has been
received and cleared.

Federal Income Tax Consequences of the Offer

         Stockholders who receive Rights pursuant to the Offer will not
recognize taxable income for U.S. Federal income tax purposes upon their receipt
of the Rights. If Rights issued to a Stockholder expire without being exercised,
no basis will be allocated to such Rights, and such Stockholder will not
recognize any gain or loss for U.S. Federal income tax purposes upon such
expiration.

         The tax basis of a stockholder's Common Stock will remain unchanged,
and the stockholder's basis in the Rights will be zero. Notwithstanding this
general rule, each stockholder may elect, with respect to all Rights issued to
him, to allocate the tax basis of all shares of Common Stock that he holds on
the Record Date between such shares and the Rights issued to him in proportion
to their fair market values on the Record Date. To be valid, this election must
be made by the stockholder in a statement attached to his timely-filed Federal
income tax return for the taxable year that includes the Record Date and, once
made, is irrevocable. However, if on the Record Date the fair market value of
the Rights is 15% or more of the fair market value of the Common Stock, each
stockholder will be required to allocate the tax basis of his shares of Common
Stock in the manner described above in determining gain or loss on any
subsequent sales of Common Stock. Stockholders should consult their own tax
advisers concerning this basis allocation rule, including the appropriate method
to be used in determining the relative values of the Common Stock and the
Rights.

         A stockholder who exercises Rights will not recognize any gain or loss
for U.S. Federal income tax purposes upon the exercise. The basis of the newly
acquired Common Stock will equal the Subscription Price paid for the Common
Stock. Upon a sale or exchange of the Common Stock so acquired, the stockholder
will recognize gain or loss measured by the difference between the proceeds of
the sale or exchange and the cost basis of such Common Stock. Assuming the
stockholder holds the Common Stock as a capital asset, any gain or loss realized
upon its sale will generally be treated as a capital gain or loss, which gain or
loss will be short-term or long-term, depending on the length of the
stockholder's holding period for such Common Stock. However, any loss recognized
upon the sale of shares of Common Stock with a tax holding period of 12 months
or less will be treated as a long-term capital loss to the extent of any capital
gain distribution previously received by the stockholder with respect to such
Shares, and a loss may be disallowed under wash sale rules to the extent that
the

                                       17
<PAGE>

stockholder purchases additional Common Stock (including by reinvestment of
distributions) within 30 days before or after the sale date. The holding period
for Common Stock acquired upon the exercise of Rights will begin on the date of
exercise of the Rights.

         The foregoing is a summary of the material U.S. Federal income tax
consequences of the Offer under the provisions of the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), and applicable existing and proposed
regulations thereunder, all as currently in effect and all subject to change at
any time, perhaps with retroactive effect. It does not include any state, local
or foreign tax consequences of the Offer. This summary is generally applicable
to stockholders that are United States persons as defined in the Code. Further,
this summary is not intended to be, nor should it be, construed as legal or tax
advice, and stockholders are urged to consult their own tax advisors to
determine the tax consequences to them of the Offer and their ownership of
Rights and Common Stock.

                     RISK FACTORS AND SPECIAL CONSIDERATIONS

Dilution

         If you do not exercise all of your Rights during the Subscription
Period, when the Offering is over you will own a relatively smaller percentage
of the Fund than if you had exercised all of your Rights. The Fund cannot tell
you precisely how much smaller the percentage of the Fund that you would own
will be because the Fund does not know how many of the Fund's stockholders will
exercise their Rights and how many of their Rights they will exercise.

         Stockholders will experience an immediate dilution of the aggregate NAV
of Shares as a result of the completion of the Offer because (i) the
Subscription Price per Share will be less than the Fund's NAV per Share on the
Expiration Date, (ii) the Fund will incur expenses in connection with the Offer,
and (iii) the number of Shares outstanding after the Offer will increase in a
greater percentage than the increase in the size of the Fund's assets. Such
dilution may, under certain circumstances, be substantial. This dilution also
will affect stockholders to a greater extent if they do not exercise their
Rights in full. It is not possible to state precisely the amount of any
decreases in either NAV or in ownership interests, because it is not known at
this time what the NAV per Share will be at the Expiration Date or what
proportion of the Shares will be subscribed. Finally, there may be a dilution of
earnings per Share due to the increase in the number of Shares outstanding, but
only to the extent that investments of the proceeds of the Offer do not achieve
the same return as current investments held by the Fund.

         The following example assumes that all of the Shares are sold at the
Estimated Subscription Price of $7.76 and after deducting estimated expenses
related to the issuance of the Shares.
<TABLE>
<CAPTION>

                               NAV per Share on     Dilution per Share
                               October 14, 2003         in Dollars        Percentage Dilution
                               ----------------         ----------        -------------------
<S>                                  <C>                  <C>                    <C>
Primary Subscription of
1,754,826 Shares                     $8.84                $0.17                  1.92%
</TABLE>


         As of October 14, 2003, the Fund's shares traded at a 9.84% discount
from NAV. If the Fund's Common Stock trades at a discount from NAV as of the
Pricing Date, the Fund estimates that such dilution would increase with the size
of the discount, and may, under certain circumstances, be substantial. See
"Prospectus Summary - Risk Factors and Special Considerations - Dilution" and

                                       18
<PAGE>

"Description of Capital Stock - Net Asset Values and Sales Prices." Except as
described in this Prospectus under "Risk Factors and Special Considerations -
Possible Suspension of the Offer," you will have no right to rescind your
subscription requests after receipt of your payment for Shares by the
Subscription Agent.

Risk of Trading Discounts

         Since the commencement of the Fund's operations, the Fund's Shares have
generally traded in the market at a discount to net asset value. This trading
discount is a risk separate and distinct from the risk that the Fund's net asset
value may decrease. The risk of purchasing shares of a closed-end fund that
trades at a discount is more pronounced if you wish to sell your shares in a
relatively short period of time. If you do so, realization of a gain or loss on
your investment is likely to be more dependent upon the existence of a premium
or discount than upon portfolio performance. The Fund's Shares are not subject
to redemption. Investors desiring liquidity may, subject to applicable
securities laws, trade their Shares in the Fund on the AMEX. Stockholders
expecting to sell their Shares during the course of the Offer should be aware
that there is a greater risk that the trading discount referred to above, which
may increase during the Offer, will adversely affect them. This increased risk
is because, among other things, the market price per Share may reflect the
anticipated dilution that will result from this Offer. There can be no assurance
that after the completion of the Offer, the Fund's trading discount will remain
at then current levels or decrease.

Risk of Decline in NAV

         As with any investment company that invests in convertible securities,
the Fund is subject to market risk - the possibility that convertible securities
will decline over short or extended periods of time. As a result, the value of
an investment in the Fund's Common Stock will fluctuate with the market, and you
could lose money over short or long periods of time. 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 in their underlying securities.
Thus, they expose the Fund to greater downside risk than traditional convertible
securities, but still less than that of the underlying common stock. See
"Investment Objectives and Policies - Discussion of Convertible Securities."

Risk Factors of Convertible Securities

         Convertible debt securities and preferred stocks may depreciate in
value if the market value of the underlying equity security declines or if rates
of interest increase. In addition, although debt securities are liabilities of a
corporation which the corporation is generally obligated to repay at a specified
time, debt securities, particularly convertible debt securities, are often
subordinated to the claims of some or all of the other creditors of the
corporation.

         Mandatory conversion securities (securities that automatically convert
into equity securities at a future date) may limit the potential for capital
appreciation and, in some instances, are subject to complete loss of invested
capital. Other innovative convertibles include "equity-linked" securities, which
are securities or derivatives that may have fixed, variable, or no interest
payments prior to maturity, may convert (at the option of the holder or on a
mandatory basis) into cash or a combination of cash and equity securities, and
may be structured to limit the potential for capital appreciation. Equity-linked
securities may be illiquid and difficult to value and may be subject to greater
credit risk than that of other convertibles. Moreover, mandatory conversion
securities and equity-linked securities have increased the sensitivity of the
convertible securities market to the volatility of the equity markets and to the
special

                                       19
<PAGE>

risks of those innovations, which may include risks different from, and possibly
greater than, those associated with traditional convertible securities.

         Preferred stocks are equity securities in the sense that they do not
represent a liability of the corporation. In the event of liquidation of the
corporation, and after its creditors have been paid or provided for, holders of
preferred stock are generally entitled to a preference as to the assets of the
corporation before any distribution may be made to the holders of common stock.
Debt securities normally do not have voting rights. Preferred stocks may have no
voting rights or may have voting rights only under certain circumstances. For a
more detailed description of Preferred Stock, see "Risk Factors and Special
Considerations - Other Investments" in the Statement of Additional Information.

Credit Risk

         Credit risk is the risk that an issuer will fail to pay interest or
dividends and principal in a timely manner. Companies that issue convertible
securities may be small to medium-size, and they often have low credit ratings.
In addition, the credit rating of a company's convertible securities is
generally lower than that of its conventional debt securities. Convertible
securities are normally considered "junior" securities - that is, the company
usually must pay interest on its conventional debt before it can make payments
on its convertible securities. Credit risk could be high for the Fund, because
it could invest in securities with low credit quality.

Interest Rate Risk

         Interest rate risk is the possibility that prices of securities will
decline along with overall bond prices, over short or even long periods, because
of rising interest rates. Convertible securities are particularly sensitive to
interest rate changes when their predetermined conversion price is much higher
than the issuing company's common stock.

Manager Risk

         Manager risk is the risk that poor security selection will cause the
Fund to underperform other funds with a similar investment objective.

Ineligibility of Shares Issued to Receive Next Dividend

         Historically, the Fund has paid quarterly dividends to its
stockholders. It is likely that the Fund's Board of Directors will declare a
dividend during the Subscription Period. Because the record date for such
dividend would be prior to the Expiration Date, any Shares issued pursuant to
the Offer would not be eligible to receive such dividend. Additionally, since
the Subscription Price would be determined after the dividend record date, the
Subscription Price would be priced ex-dividend.

Possible Suspension of the Offer

         The Fund has, as required by the Securities and Exchange Commission's
("SEC") registration form, undertaken to suspend the Offer until it amends this
Prospectus if, subsequent to the effective date of the Fund's Registration
Statement, the Fund's net asset value declines more than 10% from its net asset
value as of the effective date of the Fund's Registration Statement. The Fund
will notify stockholders of any such decline and suspension and thereby permit
them to cancel their exercise of Rights.

                                       20
<PAGE>

                                 USE OF PROCEEDS

         The Fund estimates the net proceeds of the Offer to be approximately
$13,451,891. This figure assumes (i) all Rights are exercised in full, (ii) a
Subscription Price of $7.76 and (iii) payment of offering expenses of
approximately $165,559. The Adviser anticipates that investment of the net
proceeds of the Offer in accordance with the Fund's investment objectives and
policies will take up to one month after receipt of such proceeds, depending on
market conditions and the availability of appropriate securities. Pending
investment, the net proceeds of the Offer will be held in the types of
short-term debt securities and instruments in which the Fund may invest. As a
result of this short-term investment of the proceeds, the Fund may realize a
lower yield than if it had immediately invested in convertible securities.

                       INVESTMENT OBJECTIVES AND POLICIES

Investment Objectives

         The Fund invests primarily in convertible securities with the
objectives of providing income and the potential for capital appreciation (which
objectives the Fund considers to be relatively equal due to the nature of the
securities in which it invests). These investment objectives may be changed by
the Fund's Board of Directors without the approval of a majority of the Fund's
outstanding voting securities. The Fund will provide stockholders with at least
60 days prior notice of any change to these investment objectives. There are
market risks inherent in any investment, and there is no assurance that the
Fund's investment objectives will be achieved.

Investment Policies

         The Fund expects that a substantial majority of its invested assets
will consist of convertible securities. The Fund has adopted a non-fundamental
investment policy providing that the Fund will invest, under normal
circumstances, at least 80% of the value of its assets (consisting of net assets
plus the amount of any borrowings for investment purposes) in convertible
securities. This investment policy may be changed in the future by the Fund's
Board of Directors without the approval of a majority of the Fund's outstanding
voting securities. The Fund will provide stockholders with at least 60 days
prior notice of any change to this investment policy.

         In addition to the non-fundamental policy respecting convertible
securities, the Fund has also adopted a fundamental policy that, under normal
market conditions it will invest at least 65% of its total assets in convertible
securities (i.e., bonds, debentures, corporate notes, preferred stock or other
securities that are convertible into common stock) and common stock received
upon conversion or exchange of securities and retained in the Fund's portfolio
to permit orderly disposition or to establish long-term holding periods for
federal income tax purposes. This investment policy cannot be changed without
the approval of a majority of the Fund's outstanding voting securities. The
remainder of the Fund's total assets may be invested in other securities,
including non-convertible equity and debt securities, options, warrants, U.S.
Government or agency obligations, or repurchase agreements or they may be held
as cash or cash equivalents. The Fund is not required to sell securities for the
purpose of assuring that 65% of its total assets are invested in convertible
securities.

         The Fund's investment policies are subject to certain restrictions. For
a complete list of the Fund's investment restrictions, see "Investment
Restrictions" in the Statement of Additional Information.

                                       21
<PAGE>

Discussion of Convertible Securities

         The Fund will invest primarily in convertible securities, including
bonds, debentures, corporate notes, preferred stock or other securities which
may be exchanged or converted into a predetermined number of the issuer's
underlying common stock during a specified time period. Prior to their
conversion, convertible securities have the same overall characteristics as
non-convertible debt securities insofar as they generally provide a stable
stream of income with generally higher yields than those of equity securities of
the same or similar issuers. Convertible securities rank senior to common stock
in an issuer's capital structure. They are of a higher credit quality and entail
less risk than an issuer's common stock, although the extent to which such risk
is reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed income security.

         The Fund is also permitted to invest in securities with innovative
structures, which have become more common in the convertible securities market.
These include "mandatory conversion" securities, which consist of debt
securities or preferred stocks that convert automatically into equity securities
of the same or a different issuer at a specified date and conversion ratio.

         The market value of a convertible security may be viewed as comprised
of two components: its "investment value," which is its value based on its yield
without regard to its conversion feature; and its "conversion value," which is
its value attributable to the underlying common stock obtainable on conversion.
The investment value of a convertible security is influenced by changes in
interest rates and the yield of similar non-convertible securities, with
investment value declining as interest rates increase and increasing as interest
rates decrease. The conversion value of a convertible security is influenced by
changes in the market price of the underlying common stock. If, because of a low
price of the underlying common stock, the conversion value is low relative to
the investment value, the price of the convertible security is governed
principally by its investment value. To the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the
convertible security will be increasingly influenced by its conversion value,
and the convertible security may sell at a premium over its conversion value to
the extent investors place value on the right to acquire the underlying common
stock while holding a fixed income security.

         Accordingly, convertible securities have unique investment
characteristics because (i) they have relatively high yields as compared to
common stocks, (ii) they have defensive characteristics since they provide a
fixed return even if the market price of the underlying common stock declines,
and (iii) they provide the potential for capital appreciation if the market
price of the underlying common stock increases.

         A convertible security may be subject to redemption at the option of
the issuer at a price established in the charter provision or indenture pursuant
to which the convertible security is issued. If a convertible security held by
the Fund is called for redemption, the Fund will be required to surrender the
security for redemption, convert it into the underlying common stock or sell it
to a third party. Before the Fund purchases a convertible security it will
review carefully the redemption provisions of the security.

         There may be additional types of convertible securities with features
not specifically referred to herein in which the Fund may invest consistent with
its investment objectives and policies. For a discussion of risk factors of
convertible securities, see "Risk Factors and Special Considerations - Risk of
Convertible Securities."

                                       22
<PAGE>

Other Investment Techniques

         Short Sales. Although the Fund does not generally do so, the Fund may
make short sales of securities which it owns or which it has the right to
acquire through conversion or exchange of other securities it owns. In a short
sale, the Fund does not immediately deliver the securities sold and does not
receive the proceeds from the sale. The Fund is said to have a short position in
the securities sold until it delivers the securities sold, at which time it
receives the proceeds of the sale. The Fund may not make short sales or maintain
a short position if, after giving effect to such short sale, or if, as a result
of maintaining such short position, more than 25% of the Fund's total assets,
taken at market value, are held as collateral for such sales. For a more
detailed description of the Fund's use of short sales, see "Risk Factors and
Special Considerations - Other Investment Techniques" in the Statement of
Additional Information.

         Lending of Portfolio Securities. Although the Fund does not presently
intend to do so, the Fund may lend securities representing up to 10% of its
total assets, taken at market value, to securities firms and financial
institutions such as banks and trust companies and receive therefor collateral
in cash or securities issued or guaranteed by the United States Government
("Government Securities") which are maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. For a
more detailed description of portfolio securities lending, see "Risk Factors and
Special Considerations - Other Investment Techniques" in the Statement of
Additional Information.

Other Investments

         Options. Although the Fund does not presently intend to do so, the Fund
may, to a limited extent, (i) sell (write) covered call options on common stocks
which it owns or has an immediate right to acquire through conversion or
exchange of other securities; or (ii) purchase put options on such common stocks
or on broadly based stock market indices. The Fund may also enter into closing
transactions with respect to such options. All options written or purchased by
the Fund must be listed on a national securities exchange. The Fund may not sell
(write) call options on more than 25% of its total assets, taken at market
value, and then only if such options are "covered," i.e., they are written on
common stocks owned by the Fund or which the Fund has an immediate right to
acquire through conversion or exchange of other securities; or invest more than
2% of its total assets, taken at market value, in the purchase of put options on
common stocks owned by the Fund or which it has an immediate right to acquire
through conversion or exchange of other securities and in the purchase of put
options on one or more broadly based stock market indices. The Fund may enter
into closing transactions with respect to call options which it has written. The
Fund may only write or purchase options listed on a national securities
exchange. Except as stated above the Fund may not engage in options
transactions. For a more detailed description of options, see "Risk Factors and
Special Considerations - Other Investments" in the Statement of Additional
Information.

         Illiquid Securities. The Fund may invest up to 20% of its net assets in
securities that are illiquid. Illiquid securities include securities that have
no readily available market quotations and cannot be disposed of promptly
(within seven days) in the normal course of business at a price at which they
are valued. Illiquid securities may include securities that are subject to
restrictions on resale ("restricted securities") because they have not been
registered under the Securities Act. For a more detailed description of illiquid
securities, see "Risk Factors and Special Considerations - Other Investments" in
the Statement of Additional Information.

         Foreign Securities. Although the Fund does not frequently do so, the
Fund may invest up to 10% of its total assets, taken at market value, in
securities of foreign issuers. Foreign securities involve certain additional
risks, such as political or economic instability of the issuer or of the country
of issue,

                                       23
<PAGE>

fluctuating exchange rates and the possibility of imposition of exchange
controls. For a more detailed description of foreign securities, see "Risk
Factors and Special Considerations - Other Investments" in the Statement of
Additional Information.

         Temporary Investments. The assets of the Fund are normally invested in
convertible securities. However, for temporary defensive purposes (i.e., when
the Adviser determines that market conditions warrant) or when it has
uncommitted cash balances, the Fund may hold cash or cash equivalents or invest
in: (1) Government Securities; (2) certificates of deposit, bankers' acceptances
and interest-bearing savings deposits of banks having total assets of more than
$1 billion and which are members of the Federal Deposit Insurance Corporation;
(3) commercial paper rated Prime 1 or higher by Moody's Investors Service, Inc.
("Moody's") or A-1 or higher by Standard & Poor's Corporation ("S&P") or, if not
rated, issued by companies which have an outstanding debt issue rated Aa or
higher by Moody's or AA or higher by S&P; (4) other debt securities rated Baa or
higher by Moody's or BBB or higher by S&P; and (5) repurchase agreements as
described below. Accordingly, the composition of the Fund's portfolio may vary
from time to time.

         Repurchase Agreements. Although the Fund does not presently intend to
do so, as part of its strategy for the temporary investment of cash balances,
the Fund may enter into "repurchase agreements" with maturities of not more than
seven days, pertaining to Government Securities, with member banks of the
Federal Reserve System or "primary dealers" (as designated by the Federal
Reserve Bank of New York) in such securities. The Fund will not invest more than
5% of its total assets, taken at market value, in repurchase agreements with any
single vendor. For a more detailed description of repurchase agreements, see
"Risk Factors and Special Considerations - Other Investments" in the Statement
of Additional Information.

         American Depositary Receipts. The Fund may invest in American
Depositary Receipts ("ADRs"). The Fund's investment in ADRs is subject to its
overall limitation on investing in foreign securities (limited to 10% of total
assets), unless certain conditions relating to ADRs are met. Such investment may
entail certain risks similar to foreign securities. ADRs are certificates
representing an ownership interest in a security or a pool of securities issued
by a foreign issuer and deposited with the depository, typically a bank, and
held in trust for the investor. For a more detailed description of ADRs, see
"Risk Factors and Special Considerations - Other Investments" in the Statement
of Additional Information.

                        ---------------------------------

         The Fund's investment objectives and policies are subject to certain
restrictions. See "Investment Restrictions" in the Statement of Additional
Information.

                             MANAGEMENT OF THE FUND

Directors and Officers

         The overall management of the business and affairs of the Fund is
vested in the Board of Directors. The Board of Directors approves all
significant agreements between the Fund and persons or companies furnishing
services to the Fund. The day-to-day operations of the Fund are delegated to the
officers of the Fund and to the Adviser, subject always to the objectives,
restrictions and policies of the Fund and to the general supervision of the
Board of Directors. Certain directors and officers of the Fund are affiliated
with the Adviser.

                                       24
<PAGE>

Investment Adviser

         Davis-Dinsmore Management Company, 65 Madison Avenue, Morristown, New
Jersey 07960 (the "Adviser"), serves as the Fund's investment adviser pursuant
to an investment advisory agreement dated January 12, 2001 (the "Advisory
Agreement"). The stockholders of the Fund approved the Advisory Agreement on
January 12, 2001. Most recently, the Advisory Agreement was continued for a
one-year term by the Board of Directors at a meeting held on November 18, 2002,
for the period ending December 31, 2003. The Adviser has served in this capacity
since inception of the Fund's business in 1986. The Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended. The
Adviser also serves as the investment adviser to Bancroft Convertible Fund, Inc.
(the "Bancroft Fund"), a closed-end, management investment company whose shares
have traded on the AMEX since 1972. Thomas H. Dinsmore and Jane D. O'Keeffe, the
Fund's Chairman and President, respectively, each own more than 25% of the
outstanding voting stock of the Adviser and are deemed to be control persons of
the Adviser.

Advisory Agreement

         Pursuant to the Advisory Agreement, the Adviser supervises all aspects
of the Fund's operations, including the investment and reinvestment of cash,
securities or other properties comprising the Fund's assets. In carrying out its
obligations the Adviser (a) supervises all aspects of the operations of the
Fund; (b) obtains and evaluates pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or any industry or the Fund
or any issuer of securities held or to be purchased by the Fund; (c) determines
which issuers and securities shall be represented in the Fund's investment
portfolio and regularly reports thereon to the Board of Directors; (d) places
orders for the purchase and sale of securities for the Fund; and (e) takes, on
behalf of the Fund, such other action as may be necessary or appropriate in
connection with the foregoing.

         The Adviser pays for the Fund's office space and facilities and the
salaries of the Fund's executive officers and furnishes clerical, bookkeeping
and statistical services to the Fund. The costs associated with personnel and
certain non-personnel expenses of the office of the Fund's Treasurer, up to a
maximum of $25,000 a year, are reimbursed by the Fund. The Fund pays all of its
expenses not assumed by the Adviser including expenses in connection with the
offering of its securities, fees and expenses of unaffiliated directors,
salaries of employees other than executive officers, taxes, fees and commissions
of all types, fees of its custodian, registrar, transfer agents and dividend
disbursing agents, and interest, brokerage commissions, legal and accounting
expenses and the like. The Fund pays or reimburses the Adviser for the direct
costs of postage, printing, copying and travel expenses attributable to the
conduct of the business of the Fund.

Portfolio Management

         The persons primarily responsible for the day-to-day management of the
Fund's portfolio are Thomas H. Dinsmore and Jane D. O'Keeffe, Chairman and
President, respectively, of the Adviser.

         Mr. Dinsmore has served as the Senior Analyst of the Adviser since
February 1983, and as Chairman and Chief Executive Officer since August 1996. In
addition, Mr. Dinsmore has served as Chairman and Chief Executive Officer of the
Fund and the Bancroft Fund since August 1996. Mr. Dinsmore is a Chartered
Financial Analyst. Mr. Dinsmore has been a director of the Fund since 1986 and
is also a director of the Bancroft Fund and the Adviser.

                                       25
<PAGE>

         Ms. O'Keeffe has served as President of the Adviser since August 1996.
Ms. O'Keeffe has also served as President of the Fund and the Bancroft Fund
since August 1996. Ms. O'Keeffe has been in the investment business since 1980.
Ms. O'Keeffe has been a director of the Fund since 1995 and is also a director
of the Bancroft Fund and the Adviser.

Management Fees

         As compensation for its services under the Advisory Agreement, the
Adviser receives 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. For purposes of calculation of the fee,
the net asset value for a month is the average of the Fund's net asset values at
the close of business on the last business day on which the New York Stock
Exchange is open in each week in the month.

         For the fiscal years ended September 30, 2003, 2002 and 2001, the
Adviser received investment advisory fees from the Fund of $643,000, $666,000
and $717,000, respectively.

Code of Ethics

         The Fund and the Adviser's Board of Directors approved separate Codes
of Ethics under Rule 17j-1 of the 1940 Act for the Fund and the Adviser
(collectively, the "Codes"). The Codes establish procedures for personal
investing and restrict certain transactions. See "Code of Ethics" in the
Statement of Additional Information.

                          DESCRIPTION OF CAPITAL STOCK

Common Stock

         The Fund has authorized capital consisting of 20,000,000 shares of
Common Stock, par value $.01 per share. As of October 14, 2003, 10,461,994
shares were outstanding, none of which was held by the Fund for its account.
Each share of Common Stock has equal dividend, voting and liquidation rights.
The shares of Common Stock are fully paid and non-assessable when issued. The
shares of Common Stock are not redeemable and have no pre-emptive or conversion
rights. There is no sinking fund provision. There are no restrictions on the
repurchase or redemption of the Common Stock. All voting rights for the election
of directors are non-cumulative, which means that the holders of more than 50%
of the shares of Common Stock can elect 100% of the directors then nominated for
election if they choose to do so and, in such event, the holders of the
remaining shares of Common Stock will not be able to elect any directors.

         The following table shows the number of shares of (i) capital stock
authorized and (ii) capital stock outstanding for each class of authorized
securities of the Fund as of October 14, 2003 and as adjusted for the Offer,
assuming that all Rights are exercised.

<TABLE>
<CAPTION>
                                                                                          Amount
                                             Amount                Amount              Outstanding,
                  Title of Class           Authorized           Outstanding*           As Adjusted
          ----------------------------  -----------------   -------------------   ---------------------
<S>                                        <C>                   <C>                    <C>
          Common Stock                     20,000,000            10,461,994             12,216,820
</TABLE>
------------------
* The Fund does not hold any shares of Common Stock for its own account.

                                       26
<PAGE>

Net Asset Values and Sales Prices

         The Fund's shares of Common Stock are publicly held and are listed and
traded on the AMEX under the symbol "ECF." The following table sets forth for
the periods indicated the high and low sales prices on the AMEX per share of
Common Stock of the Fund, the NAV per share on the dates of the market highs and
lows.

<TABLE>
<CAPTION>
                               Market Price Per Share              Net Asset Value
                                    and Related                 Per Share on Date of
                         Discount (-) / Premium (+) (1) (2)    Market High and Low (3)
                         ----------------------------------    -----------------------
Quarter Ended                  High               Low            High          Low
                         -----------------  ---------------    ---------    ----------
<S>                        <C>      <C>       <C>      <C>       <C>          <C>
December 31, 2001          $8.90   +0.5%      $7.85   -9.3%      $8.95        $8.63
March 31, 2002              8.95   +0.3        8.05   -8.6        8.94         8.49
June 30, 2002               8.39   -4.1        7.95   -8.0        8.84         8.42
September 30, 2002          8.24   -1.7        7.00   -9.9        8.38         7.62
December 31, 2002           7.90   -1.5        6.95   -7.5        8.06         7.51
March 31, 2003              7.96   -1.2        7.41   -3.8        8.16         7.69
June 30, 2003               8.42   -3.0        7.52   -5.4        8.71         7.95
September 30, 2003          8.51   -3.0        7.97   -6.1        8.71         8.49
</TABLE>
---------------------------
(1)      Highest and lowest market price per share reported on the AMEX.
(2)      "Related Discount (-) / Premium (+)" represents the discount or premium
         from NAV of the shares on the date of the high and low market price for
         the respective quarter.
(3)      Based on the Fund's computations.

         As evidenced by the above table, the Common Stock has generally traded
in the market below NAV. On July 18, 2003, when the proposed Offer was publicly
announced, the NAV per share of Common Stock was $8.59, and the closing price on
the AMEX was $8.45, representing a discount of 1.63% below NAV. On October 14,
2003, such NAV was $8.84, and such closing price was $7.97, representing a
discount of 9.84% below NAV.

         There can be no assurance that the Common Stock will trade in the
future at, above or below NAV.

                           CERTAIN CHARTER PROVISIONS

         The Fund has provisions in its Amended and Restated Articles of
Incorporation, as amended (the "Charter"), which could have the effect of
limiting the ability of other entities or persons to acquire control of the
Fund, to cause it to engage in certain transactions or to modify its structure.
The Charter provides for three classes of directors. Directors in each class
serve for a term of three years, with one class expiring each year. In addition,
directors may be removed only for cause and only by the affirmative vote of at
least two-thirds of the outstanding shares of the Fund's Common Stock.

         The Charter provides that the affirmative vote of two-thirds of the
outstanding shares of the Fund is necessary to authorize any of the following
actions: (i) a merger or consolidation with any other company, (ii) the
dissolution of the Fund, (iii) the sale of all or substantially all of the
assets of the Fund, (iv) a change in the classification of the Fund from a
diversified to a non-diversified management investment company as defined under
the 1940 Act, (v) a change in the nature of the business of the Fund so that it
would cease to be an investment company registered under the 1940 Act, and (vi)
any amendment to the Charter which makes the Common Stock a redeemable security
(as such term is

                                       27
<PAGE>

defined in the 1940 Act) or reduces the two-thirds vote required to authorize
any of the actions in this paragraph.

         The Charter also provides that, to the fullest extent that limitations
on the liability of directors and officers is permitted by the Maryland General
Corporation Law, no director or officer of the Fund shall be liable to the Fund
or its stockholders for damages. The foregoing should not be construed to
protect or purport to protect any director or officer of the Fund against any
liability to the Fund or its stockholders to which such director or officer
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
office. The Fund will indemnify and advance expenses to its currently acting and
former directors to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The Fund will indemnify and
advance expenses to its officers to the same extent as its directors and to such
further extent as is consistent with law. The Board of Directors may, by by-law,
resolution or agreement make further provision for indemnification of directors,
officers, employees and agents of the Fund to the fullest extent permitted by
the Maryland General Corporation Law.

                            REPURCHASES OF SECURITIES

General

         The Fund is a closed-end, diversified management investment company
and, as such, its stockholders generally do not, and will not, have the right to
redeem their shares of the Fund. Although the Fund will not offer to repurchase
its shares of Common Stock on a periodic basis, it may repurchase its shares
from time to time at such times, and in such amounts, as may be deemed
advantageous to the Fund or otherwise as required by the Charter, although
nothing herein shall be considered a commitment to repurchase such shares. Any
such repurchases shall be subject to the Maryland General Corporation Law and to
limitations imposed by the 1940 Act. The Fund may incur debt to finance share
repurchase transactions.

         Under the 1940 Act, the Fund may repurchase its securities (i) on a
securities exchange or such other open market designated by the SEC (provided
that the Fund has, in the case of purchases of its stock, informed holders of
the class of stock involved within the preceding six months of its intention to
repurchase such stock), (ii) by a tender offer open to all holders of the class
of securities involved or (iii) as otherwise permitted by the SEC. Where a
repurchase of shares of the Fund is to be made that is not to be effected on a
securities exchange or an open market or by the making of a tender offer, the
1940 Act provides that certain conditions must be met regarding, among other
things, distribution of net income, identity of the seller, price paid,
brokerage commissions, prior notice to holders of the class of its securities
involved of an intention to purchase such securities and the purchase not being
made in a manner or on a basis which discriminates unfairly against the other
holders of such class.

         If the Fund repurchases its shares of Common Stock for a price below
their NAV, the NAV of those shares of Common Stock that remain outstanding would
be enhanced, but this does not necessarily mean that the market price of those
outstanding shares would be affected, either positively or negatively.
Repurchases of shares of Common Stock by the Fund would also decrease its total
assets and accordingly may increase its expenses as a percentage of average net
assets.

Charter Provisions Pertaining to Share Repurchases

         The Charter requires the Board of Directors to adopt a proposal, to the
extent consistent with the 1940 Act, to submit a charter amendment to
stockholders if shares of the Fund's Common Stock have traded at an average
discount from net asset value of more than 5%, determined on the basis of the

                                       28
<PAGE>

discount as of the end of the last trading day in each week during the period of
12 calendar weeks next preceding November 15 in each year. The charter amendment
must provide that, upon the adoption of such amendment by the holders of
two-thirds of the Fund's outstanding shares of Common Stock, each share of the
Fund's Common Stock may be presented to the Fund as of the last trading day of
each fiscal quarter in that year for payment to the holder at net asset value
per share at the close of business on the date of presentment.

Open Market Purchases

         The Board of Directors of the Fund has authorized management to engage
in open market purchases from time to time of the Fund's Common Stock, up to a
maximum of 5% of its outstanding shares in any calendar year. Such open market
purchases ("share repurchases") will be funded through uninvested cash and cash
received upon the maturity, redemption or sale of the Fund's portfolio
securities. Management does not intend to borrow funds to finance open market
purchases. Management does not believe that open market purchases would likely
result in an increase in the Fund's expense ratio or in any material change to
the Fund's portfolio turnover rate or investment objectives because of the
overall limit on the number of shares that may be purchased. Open market
purchases may result in a reduction of the market discount. Management does not
intend to engage in open market purchases if the market price of the Fund's
shares exceeds such shares' net asset value or if the sale of the Fund's
portfolio securities would jeopardize the qualification of the Fund as a
"regulated investment company" under Subchapter M of the Code in any taxable
year.

                 DIVIDENDS, DISTRIBUTIONS AND REINVESTMENT PLAN

         Historically, the Fund has paid quarterly distributions to its
stockholders.

         The Fund has an Automatic Dividend Investment and Cash Payment Plan
(the "Plan"). Any stockholder may elect to join the Plan by sending an
application to American Stock Transfer & Trust Company, P.O. Box 922, Church
Street Station, NY 10269-0560 (the "Plan Agent"). You may also obtain additional
information about the Plan by calling the Plan Agent toll free at (800)
937-5449. 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.

         Stockholders may participate in the Plan whereby all dividends and
distributions are automatically invested in additional Fund shares. Depending on
the circumstances, shares may either be issued by the Fund or acquired through
open market purchases 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 Plan 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 Plan Agent, to be combined with other Plan monies, for
purchase of additional Fund 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 Plan Agent in your dividend reinvestment account.

         At any time, a Plan participant may instruct the Plan Agent to
liquidate all or any portion of such Plan participant's account. To do so, a
Plan participant must deliver written notice to the Plan Agent prior to the
record date of any dividend or distribution requesting either liquidation or a
stock certificate. The

                                       29
<PAGE>

Plan Agent or the Fund may terminate the Plan for any reason at any time by
sending written notice addressed to Plan participant's address as shown on the
Plan Agent's records. Such termination shall 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. Following the date of termination,
the Plan Agent shall send the Plan participant at such participant's address
shown on Plan Agent's records either the proceeds of liquidation, or a stock
certificate or certificates for the full shares held by Plan Agent in Plan
participant's account and a check for the value of any fractional interest in
Plan participant's account based on the market price of the Fund's Common Stock
on that date.

         The Plan Agent will combine all liquidation requests it receives from
Plan participants on a particular day and will then sell shares of the Fund that
are subject to liquidation requests in the open market. The amount of proceeds a
Plan participant will receive shall be determined by the average sales price per
share, after deducting brokerage commissions, of all shares sold by the Plan
Agent for all Plan participants who have given the Plan Agent liquidation
requests.

         You may deposit with the Plan Agent any Fund stock certificates you
hold, for a one-time fee of $7.50.

         Participation in the Plan does not relieve a Plan participant of any
income tax which may be payable by a Plan participant on such dividends and
distributions and on expenses incurred by the Fund on a Plan participant's
behalf.

                                    TAXATION

         The Fund has qualified and intends to continue to qualify as a
regulated investment company under the Code. The Fund currently intends to
distribute all or substantially all its investment company taxable income (all
taxable net investment income and net short-term capital gains) and its net
capital gains each year, thereby avoiding the imposition on the Fund of Federal
income and excise taxes on such distributed income and gain.

         Dividends paid by the Fund from its ordinary income or from an excess
of net short-term capital gains over net long-term capital losses (together
"ordinary income dividends") are taxable to stockholders as ordinary income.
However, certain ordinary income dividends paid to individual and other
noncorporate shareholders and constituting qualified dividend income are taxable
at lower rates. Distributions made from an excess of net long-term gains over
net short-term losses (including gains or losses from certain transactions in
warrants and options) ("capital gain dividends") are taxable to stockholders as
long-term capital gains, regardless of the length of time the stockholder has
owned Fund shares. After the end of each taxable year, the Fund will notify
stockholders of the Federal income tax status of any distributions or deemed
distributions made by the Fund during such year.

         Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or such cash is
reinvested in additional shares of the Fund through open market purchases, or
whether such distributions are paid in newly issued shares of the Fund. Plan
participants receiving distributions in the form of newly issued shares will be
treated as receiving an amount equal to the fair market value of such shares,
determined as of the reinvestment date. Accordingly, a stockholder may incur a
tax liability even though such stockholder has not received a cash distribution
with which to pay the tax.

         Ordinary income dividends paid to stockholders who are nonresident
aliens or foreign entities will be subject to a 30% United States withholding
tax under existing provisions of the Code applicable to

                                       30
<PAGE>

foreign individuals and entities unless a reduced rate of withholding or a
withholding exemption is provided under applicable treaty law. Nonresident
stockholders are urged to consult their own tax advisors concerning the
applicability of the United States withholding tax.

         It is anticipated that stockholders that hold shares of the Fund's
Common Stock as capital assets and have such shares repurchased by the Fund will
generally recognize capital gain or loss. Stockholders should, however, consult
with their tax advisers to determine the tax consequences of such share
repurchases in their particular circumstances.

         Any capital gain or loss recognized by a stockholder with respect to a
share repurchase by the Fund will be long-term capital gain or loss if the
shares repurchased have been held for more than one year.

         Under certain Code provisions, some stockholders may be subject to a
backup withholding tax on certain ordinary income dividends and on capital gain
dividends ("backup withholding"). Generally, stockholders subject to backup
withholding are those for whom no certified taxpayer identification number is on
file with the Fund or who, to the Fund's knowledge, have furnished an incorrect
number.

         This section summarizes some of the consequences under current Federal
income tax law of an investment in the Fund. It is not a substitute for personal
tax advice. Fund stockholders are urged to consult their own tax advisors to
determine the Federal income tax as well as state and local tax consequences to
them of the ownership of stock of the Fund. See "Taxation" in the Statement of
Additional Information.

                     CUSTODIAN, TRANSFER AGENT AND REGISTRAR

         The Bank of New York, 100 Church Street, 10th Floor, New York, NY
10286, acts as custodian of the cash and other assets of the Fund. American
Stock Transfer & Trust Company, 59 Maiden Lane, New York, NY 10038, acts as
transfer agent and registrar for the Fund's shares and as Plan Agent under the
Fund's Plan. Stockholder inquiries should be directed to American Stock Transfer
& Trust Company, P.O. Box 922, Church Street Station, New York, NY 10269-0560
(Tel. No. (800) 937-5449).

                                     EXPERTS

         PricewaterhouseCoopers LLP ("PwC") are the independent auditors of the
Fund. The audited financial statements of the Fund and certain of the
information appearing under the caption "Financial Highlights" included in this
Prospectus have been audited by PwC for the periods indicated in their reports
with respect thereto, and are included in reliance upon such reports and upon
the authority of such firms as experts in accounting and auditing. PwC has an
office at 1177 Avenue of the Americas, New York, NY 10036-2798, and also
performs limited tax services for the Fund.

                                       31
<PAGE>

                             ADDITIONAL INFORMATION

         A Statement of Additional Information dated October 16, 2003 has been
filed with the SEC and is incorporated by reference in this Prospectus. The
Table of Contents of the Statement of Additional Information is as follows:

                                                                           Page
                                                                           ----

Risk Factors and Special Considerations......................................2
Investment Restrictions......................................................8
Portfolio Turnover..........................................................10
Principal Stockholders......................................................10
Directors and Officers......................................................11
Code of Ethics..............................................................18
Proxy Voting................................................................19
Taxation ...................................................................19
Custodian...................................................................21
Independent Accountants.....................................................21
Brokerage Allocation and Other Practices....................................21
Net Asset Value.............................................................23
Financial Statements........................................................23

                                       32
<PAGE>
<TABLE>
<CAPTION>

===========================================================    ========================================================


<S>                                                                         <C>
         You should rely only on the information                                 1,754,826 Shares of
contained in this Prospectus and the related Statement of                       Common Stock Issuable
Additional Information.  We have not authorized any other                         Upon Exercise of
person to provide you with different information.  If                          Non-Transferable Rights
anyone provides you with different or inconsistent                              to Subscribe for such
information, you should not rely on it.  We are not                            Shares of Common Stock
making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this
Prospectus and the related Statement of Additional
Information is accurate only as of the date on the front
covers of this Prospectus and the related Statement of
Additional Information. Our business, financial condition,
results of operations and prospects may have changed since
that date.

                   --------------------

                    Table of Contents                                       Ellsworth Convertible Growth
                                                                                and Income Fund, Inc.
                                              Page
                                              ----

Prospectus Summary..............................1
Fund Expenses...................................7
Financial Highlights............................8
Investment Performance.........................10
The Offer......................................11
Risk Factors and Special Considerations........18
Use of Proceeds................................21
Investment Objectives and Policies.............21
Management of the Fund.........................24                                  _______________
Description of Capital Stock...................26
Certain Charter Provisions.....................27                                    PROSPECTUS
Repurchases of Securities......................28                                  _______________
Dividends, Distributions and Reinvestment Plan.29
Taxation.......................................30
Custodian, Transfer Agent and Registrar........31
Experts........................................31
Additional Information.........................32

                                                                                  October 16, 2003

===========================================================    ========================================================
</TABLE>
<PAGE>

               Ellsworth Convertible Growth and Income Fund, Inc.

                       Statement of Additional Information


         Ellsworth Convertible Growth and Income Fund, Inc. (the "Fund") is a
closed-end, diversified management investment company, whose shares of Common
Stock are listed on the American Stock Exchange under the symbol "ECF." The Fund
invests primarily in convertible securities with the objectives of providing
income and the potential for capital appreciation (which objectives the Fund
considers to be relatively equal due to the nature of the securities in which it
invests).

         This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the Fund's Prospectus dated October 16, 2003.
Please retain this document for future reference. To obtain a copy of the
Prospectus or the Fund's Annual Report to Stockholders for the fiscal year ended
September 30, 2002, Semi-Annual Report to Stockholders for the six months ended
March 31, 2003 or Annual Report to Stockholders for the fiscal year ended
September 30, 2003 (which is expected to be mailed to stockholders and available
on the Fund's website (http://www.ellsworthfund.com) on or around November 26,
2003), please call the Fund collect at (973) 631-1177.


                                TABLE OF CONTENTS

                                                                            Page

Risk Factors and Special Considerations.......................................2
Investment Restrictions.......................................................8
Portfolio Turnover...........................................................10
Principal Stockholders.......................................................10
Directors and Officers.......................................................11
Code of Ethics...............................................................18
Proxy Voting.................................................................19
Taxation.....................................................................19
Custodian....................................................................21
Independent Accountants......................................................21
Brokerage Allocation and Other Practices.....................................21
Net Asset Value..............................................................23
Financial Statements.........................................................23


                                October 16, 2003
<PAGE>

                     RISK FACTORS AND SPECIAL CONSIDERATIONS

Other Investment Techniques

         Although at least 80% of the Fund's investments will normally be
invested in convertible securities, the Fund may from time to time use any of
the following investment techniques to increase income and reduce risk.

         Short Sales

         Although the Fund does not generally do so, the Fund may make short
sales of securities which it owns or which it has the right to acquire through
conversion or exchange of other securities it owns. In a short sale the Fund
does not immediately deliver the securities sold and does not receive the
proceeds from the sale. The Fund is said to have a short position in the
securities sold until it delivers the securities sold, at which time it receives
the proceeds of the sale. The Fund may not make short sales or maintain a short
position if, after giving effect to such short sale, or if, as a result of
maintaining such short position, more than 25% of the Fund's total assets, taken
at market value, are held as collateral for such sales.

         To secure its obligation to deliver the securities sold short, the Fund
will deposit in escrow in a separate account with its custodian an equal amount
of the securities sold short or securities convertible or exchangeable into such
securities. The Fund will normally close out a short position by purchasing and
delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund. The Fund may, however, close out
any short sale of common stock through the conversion or exchange of securities
or the exercise of warrants or rights it owns, or through the delivery of common
stock already held by the Fund.

         The Fund may make a short sale in order to hedge against market risks
when it believes that the price of a security may decline, causing a decline in
the value of a long position the Fund may have in such security or a security
convertible into or exchangeable for such security, or when, for tax or other
reasons, the Fund does not want to sell the security it owns. In such case, any
future losses in the Fund's long position should be reduced by a gain in the
short position. Conversely, any gain in the long position should be reduced by a
loss in the short position. The extent to which such gains or losses are reduced
will depend upon the amount of the security sold short relative to the amount
the Fund owns, either directly or indirectly, and, in the case where the Fund
owns convertible securities, changes with the conversion premiums.

         Lending of Portfolio Securities

         Although the Fund does not presently intend to do so, the Fund may lend
securities representing up to 10% of its total assets, taken at market value, to
securities firms and financial institutions such as banks and trust companies,
and receive therefor collateral in cash or securities issued or guaranteed by
the United States Government ("Government Securities") which are maintained at
all times in an amount equal to at least 100% of the current market value of the
loaned securities. The purpose of such loans, generally, is to permit the
borrower to use such securities for delivery to purchasers when such borrower
has sold short. If cash collateral is received by the Fund, it is invested in
short-term money market securities, and a portion of the yield received in
respect of such investment is retained by the Fund. Alternatively, if securities
are delivered to the Fund as collateral, the Fund and the borrower negotiate a
rate for the loan premium to be received by the Fund for lending its portfolio
securities. In either event, the total yield on the Fund's portfolio is
increased by loans of its portfolio securities. The Fund intends to retain
record ownership of loaned securities in order to exercise beneficial rights
such as voting rights, subscription rights and rights to dividends, interest or
other distributions. Such loans are terminable at

                                        2
<PAGE>

any time. The Fund may pay reasonable finder's, administrative and custodial
fees in connection with such loans. The risks in lending portfolio securities,
as with other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. In determining whether the Fund will lend securities to a
particular borrower, the Fund will consider all relevant facts and
circumstances, including the creditworthiness of the borrower.

Other Investments

         In addition to investing in convertible securities and employing the
investment techniques discussed above, the Fund may acquire other securities,
including non-convertible equity and debt securities, Government Securities or
short-term repurchase agreements and other money market instruments. The Fund is
restricted in its ability to invest in some of these securities, which involve
special risks.

         Common Stock

         The Fund may invest in common stock received upon conversion or
exchange of securities. Common stock is issued by companies principally to raise
cash for business purposes and represents a residual interest in the issuing
company. The Fund participates in the success or failure of any company in which
it holds stock. The prices of equity securities change in response to many
factors including the historical and prospective earnings of the issuer, the
value of its assets, general economic conditions, interest rates, investor
perceptions and market liquidity.

         Preferred Stock

         The Fund may invest in preferred stock. Preferred stock, unlike common
stock, often offers a stated dividend rate payable from a corporation's
earnings. If interest rates rise, the fixed dividend on preferred stocks may be
less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid before dividends are paid on the
issuer's common stock. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases. In
some cases an issuer may offer auction rate preferred stock, which means that
the interest to be paid is set by auction and will often be reset at stated
intervals. The rights of preferred stocks on the distribution of a corporation's
assets in the event of a liquidation are generally subordinate to the rights
associated with a corporation's debt securities.

         U.S. Government Obligations

         The Fund may invest in securities of the U.S. Government, its agencies,
and instrumentalities. Obligations issued or guaranteed by the U.S. Government,
its agencies and instrumentalities include bills, notes and bonds issued by the
U.S. Treasury, as well as "stripped" or "zero coupon" U.S. Treasury obligations
representing future interest or principal payments on U.S. Treasury notes or
bonds. Stripped securities are sold at a discount to their "face value," and may
exhibit greater price volatility than interest-bearing securities since
investors receive no payment until maturity. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association ("GNMA"), are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Federal National Mortgage
Association ("FNMA"), are supported by the right of the issuer to borrow from
the U.S. Treasury; others, such as those of the Student Loan Marketing
Association ("SLMA"), are

                                        3
<PAGE>

supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; still others, though issued by an instrumentality
chartered by the U.S. Government, like the Federal Farm Credit Bureau ("FFCB"),
are supported only by the credit of the instrumentality. The U.S. Government may
choose not to provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not legally obligated to do so.

         Investment Grade Debt Securities

         The Fund may also invest in higher rated investment grade
non-convertible debt securities. Such securities include those rated Aaa by
Moody's Investor's Services, Inc. ("Moody's") or AAA by Standard and Poor's
Corporation ("S&P") (which are considered to be of the highest credit quality
and where the capacity to pay interest and repay principal is extremely strong),
those rated Aa by Moody's or AA by S&P (where the capacity to pay interest and
repay principal is considered very strong, although elements may exist that make
risks appear somewhat larger than expected with securities rated Aaa or AAA),
securities rated A by Moody's or A by S&P (which are considered to possess
adequate factors giving security to principal and interest) and securities rated
Baa by Moody's or BBB by S&P (which are considered to have an adequate capacity
to pay interest and repay principal, but may have some speculative
characteristics).

         Unseasoned Issuers

         The Fund may invest in unseasoned issuers (issuers which, with their
predecessors, have less than three years' continuous operations) so long as such
purchase would not cause more than 5% of the market value of the Fund's total
assets to be invested in the securities of such companies. Investments in the
equity securities of unseasoned companies involve more risk than investments in
the securities of more established companies because unseasoned issuers have
only a brief operating history and may have more limited markets and financial
resources. As a result, securities of unseasoned issuers tend to be more
volatile than securities of more established companies.

         Options

         Although the Fund does not presently intend to do so, the Fund may from
time to time, to a limited extent, (i) sell (write) covered call options on
common stocks which it owns or has an immediate right to acquire through
conversion or exchange of other securities; or (ii) purchase put options on such
common stocks or on broadly based stock market indices. The Fund may also enter
into closing transactions with respect to such options. All options written or
purchased by the Fund must be listed on a national securities exchange.

         Many currently traded convertible securities are convertible into
common stocks against which call options may be written. A call option gives the
purchaser the right to buy, and the writer has the obligation to sell, the
underlying security at the exercise price during the option period. The Fund may
only write "covered" call options, that is, options on common stock which it
holds in its portfolio or which it has an immediate right to acquire through
conversion or exchange of securities currently held in its portfolio. The Fund
may write call options on up to 25% of its total assets, taken at market value,
determined as of the date the options are written.

         The Fund will write covered call options in order to receive additional
income in the form of premiums which it is paid for writing options, and for
hedging purposes in order to protect against possible declines in the market
values of the stocks or convertible securities held in its portfolio. If, for
example, the market price of a common stock underlying a convertible security
held by the Fund declines and the convertible security also declines in value,
such decline will be offset in part (or wholly) by the

                                        4
<PAGE>

receipt of the premium for writing the call options on such stock. However, if
the market price of the underlying common stock increases and the convertible
security held by the Fund also increases in value, such increase will be offset
in part (or wholly) by any loss resulting from the cancellation of the Fund's
position through closing purchase transactions on covered call options written
by the Fund or through the lost opportunity for additional capital appreciation
if the option is exercised.

         In addition to writing covered call options, the Fund may invest up to
2% of its total assets, taken at market value, determined as of the date the
options are written, in the purchase of put options on common stock which it
owns or which it may acquire through the conversion or exchange of other
securities which it owns, or in the purchase of put options on one or more
broadly based stock market indices.

         The Fund may purchase put options on particular securities in order to
protect against a decline in the market value of the underlying security below
the exercise price less the premium paid for the option. The ability to purchase
put options will allow the Fund to protect the unrealized gain in an appreciated
security in its portfolio without actually selling the security. In addition,
the Fund will continue to receive interest or dividend income on the security.
The Fund may sell a put option which it has previously purchased prior to the
sale of the securities underlying such option. Such sales will result in a net
gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which
is sold.

         The Fund may also purchase put options on one or more broadly based
stock market indices when it wishes to protect all or part of its portfolio
securities against a general market decline. The put on the index will increase
in value if the level of the index declines; any such increase in value would
serve to offset in whole or in part any decline in the value of the Fund's
portfolio.

         The Fund's purchase and sale of put options on stock indices will be
subject to the same risks described above with respect to transactions in stock
options on individual stocks. In addition, the distinctive characteristics of
options on indices create certain risks that are not present with stock options.

         The Fund's ability to effectively hedge all or a portion of the
securities in its portfolio in anticipation of or during a market decline
through transactions in put options on stock indices depends on the degree to
which price movements in the underlying index correlate with the price movements
in the Fund's portfolio securities. Since the Fund's portfolio securities will
not duplicate the components of an index, the correlation will not be perfect.
Consequently, the Fund will bear the risk that the prices of its portfolio
securities being hedged will not move in the same amount as the prices of the
Fund's put options on the stock indices. It is also possible that there may be a
negative correlation between the index and the Fund's portfolio securities which
would result in a loss on both such portfolio securities and the put options on
stock indices acquired by the Fund. Successful use by the Fund of put options on
stock indices will be subject to the ability of the Fund's investment adviser,
Davis-Dinsmore Management Company (the "Adviser") to correctly predict movements
in the directions of the stock market. This requires different skills and
techniques than predicting changes in the price of individual securities.

         Warrants

         The Fund may invest in warrants. Warrants are, in effect, longer-term
call options. They give the holder the right to purchase a given number of
shares of a particular company at specified prices within certain periods of
time. The purchaser of a warrant expects that the market price of the security
will exceed the purchase price of the warrant plus the exercise price of the
warrant, thus giving him a profit. Since the market price may never exceed the
exercise price before the expiration date of the warrant, the purchaser of the
warrant risks the loss of the entire purchase price of the warrant. Warrants
generally

                                        5
<PAGE>

trade in the open market and may be sold rather than exercised. Warrants are
sometimes sold in unit form with other securities of an issuer. Units of
warrants and common stock may be employed in financing young, unseasoned
companies. The purchase price of a warrant varies with the exercise price of the
warrant, the current market value of the underlying security, the life of the
warrant and various other investment factors.

         Foreign Securities

         Although the Fund does not frequently do so, the Fund may invest up to
10% of its total assets, taken at market value, in securities of foreign
issuers. Securities convertible or exchangeable for common stock of U.S.
companies, and U.S. dollar-denominated securities convertible or exchangeable
for American Depositary Receipts that at the time of purchase (i) are listed on
the New York Stock Exchange, the American Stock Exchange or the NASDAQ National
Market, or (ii) the underlying issuers of which meet the then prevailing
earnings requirement for listing on the New York Stock Exchange are not subject
to this limitation. Foreign investments may be affected favorably or unfavorably
by changes in currency rates and in exchange control regulations. There may be
less publicly available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those applicable to
U.S. companies. Securities of some foreign companies may be less liquid or more
volatile than securities of U.S. companies, and foreign brokerage commissions
and custodian fees are generally higher than in the United States. Investments
in foreign securities may also be subject to other risks different from those
affecting U.S. investments, including local political or economic developments,
expropriation or nationalization of assets and imposition of withholding taxes
on dividend or interest payments.

         Repurchase Agreements

         Although the Fund does not presently intend to do so, as part of its
strategy for the temporary investment of cash balances, the Fund may enter into
"repurchase agreements" with maturities of not more than seven days, pertaining
to Government Securities with member banks of the Federal Reserve System or
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
such securities. A repurchase agreement arises when the Fund purchases a
security and simultaneously agrees to resell it to the vendor at an agreed upon
future date. The resale price is greater than the purchase price, reflecting an
agreed upon market rate of return which is effective for the period of time the
Fund's money is invested in the security and which is not related to the coupon
rate on the purchased security. Such agreements permit the Fund to earn interest
on all of its assets while retaining "overnight" flexibility in pursuit of
investments of a longer term nature. The Fund requires continuous maintenance by
its Custodian for its account in the Federal Reserve/Treasury Book Entry System
of collateral in an amount equal to, or in excess of, the market value of the
securities which are the subject of a repurchase agreement. In the event a
vendor defaults on its repurchase obligation, the Fund could suffer delays,
collection expenses and losses to the extent that the proceeds from the sale of
the collateral are less than the repurchase price. The Fund will not invest more
than 5% of its total assets, taken at market value, in repurchase agreements
with any single vendor. The Fund will consider all relevant facts and
circumstances, including the creditworthiness of the vendor, in determining
whether to enter into a repurchase agreement. Under the Investment Company Act
of 1940, as amended (the "1940 Act"), repurchase agreements are considered loans
by the Fund.

                                        6
<PAGE>

         Illiquid Securities

         The Fund may invest up to 20% of its net assets in securities that are
illiquid. Illiquid securities include securities that have no readily available
market quotations and cannot be disposed of promptly (within seven days) in the
normal course of business at a price at which they are valued. Illiquid
securities may include securities that are subject to restrictions on resale
("restricted securities") because they have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"). Restricted securities
may, in certain circumstances, be resold pursuant to Rule 144A of the Securities
Act, and thus may or may not constitute illiquid securities. The Fund's Board of
Directors is generally responsible for determining the liquidity of a restricted
security, although the Adviser has been delegated responsibility for determining
the liquidity of securities that qualify for resale pursuant to Rule 144A.
Limitations on the resale of restricted securities may have an adverse effect on
their marketability, which may prevent the Funds disposing of them promptly at
reasonable prices. The Fund may have to bear the expense of registering such
securities for resale, and bear the risk of substantial delays in effecting such
registrations.

         American Depositary Receipts

         The Fund may invest in American Depositary Receipts ("ADRs"). The
Fund's investment in ADRs is subject to its overall limitation on investing in
foreign securities (limited to 10% of total assets), unless certain conditions
pertaining to ADRs are met. Such investments may entail certain risks similar to
foreign securities. ADRs are certificates representing an ownership interest in
a security or a pool of securities issued by a foreign issuer and deposited with
the depositary, typically a bank, and held in trust for the investor. The
economies of many of the countries in which the issuer of a security underlying
an ADR principally engages in business may not be as developed as the United
States' economy and may be subject to significantly different forces. Political
or social instability, expropriation or confiscatory taxation, and limitations
on the removal of funds or other assets could adversely affect the value of the
Fund's investments in such securities. The value of the securities underlying
ADRs could fluctuate as exchange rates change between U.S. dollars and the
currency of the country in which the foreign company is located. In addition,
foreign companies are not registered with the Securities and Exchange Commission
("SEC") and are generally not subject to the regulatory controls imposed on
United States issuers and, as a consequence, there is generally less publicly
available information about foreign companies than is available about domestic
companies. Foreign companies are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies.

         Loans, Participation Interests and Assignments

         Although the Fund does not presently intend to do so, the Fund may
invest in loans, including assignments and participation interests. A loan in
which the Fund may invest typically is originated, negotiated and structured by
a syndicate of lenders consisting of commercial banks, thrift institutions,
insurance companies, finance companies or other financial institutions, which is
administered on behalf of the syndicate by an agent bank. The investment by the
Fund in a loan may take the form of participation interests or assignments.
Participation interests may be acquired from a lender or other participants. If
the Fund purchases a participation interest either from a lender or a
participant, the Fund will not have established any direct contractual
relationship with the borrower. The Fund would be required to rely on the lender
or the participant that sold the participation interest not only for the
enforcement of the Fund's rights against the borrower but also for the receipt
and processing of payments due to the Fund under the loans. The Fund is thus
subject to the credit risk of both the borrower and a participant. Lenders and
participants interposed between the Fund and a borrower, together with agent
banks, are referred to herein as "Intermediate Participants."

                                        7
<PAGE>

         On the other hand, if the Fund purchases an assignment from a lender,
the Fund will generally become a "lender" for purposes of the relevant loan
agreement, with direct contractual rights thereunder and under any related
collateral security documents in favor of the lenders. An assignment from a
lender gives the Fund the right to receive payments of principal and interest
and other amounts directly from the borrower and to enforce its rights as a
lender directly against the borrower. The Fund will not act as an agent bank
guarantor, sole negotiator or sole structurer with respect to a loan.

         Because it may be necessary to assert through an Intermediate
Participant such rights as may exist against the borrower, in the event the
Borrower fails to pay principal and interest when due, the Fund may be subject
to delays, expenses and risks that are greater than those that would be involved
if the Fund could enforce its rights directly against the borrower. Moreover,
under the terms of a participation, the Fund may be regarded as a creditor of
the Intermediate Participant (rather than of the borrower), so that the Fund may
also be subject to the risk that the Intermediate Participant may become
insolvent. Further, in the event of the bankruptcy or insolvency of the
borrower, the obligation of the borrower to repay the loan may be subject to
certain defenses that can be asserted by such borrower as a result of improper
conduct by the agent bank or Intermediate Participant.

                             INVESTMENT RESTRICTIONS

         Fundamental Restrictions and Policies. The Fund has adopted the
following fundamental restrictions and policies which may not be changed without
the approval of the holders of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act). The Fund will not:

         1.       with respect to 85% of its total assets, taken at market
                  value, invest in securities of any one issuer (other than the
                  United States or its agencies or instrumentalities) if
                  immediately after and as a result of such investment more than
                  5% of the total assets of the Fund, taken at market value,
                  would be invested in the securities of such issuer, or more
                  than 10% of the outstanding securities, or more than 10% of
                  the outstanding voting securities, of such issuer would be
                  owned by the Fund.

         2.       invest more than 25% of its total assets, taken at market
                  value, in the securities of issuers in any particular
                  industry. This restriction does not apply to Government
                  Securities, which the Fund may purchase temporarily and for
                  defensive purposes.

         3.       make personal loans or loans to persons who control or are
                  under common control with the Fund, or lend its portfolio
                  securities in excess of 10% of its total assets, taken at
                  market value. This restriction does not prevent the Fund from
                  purchasing debt obligations, entering into repurchase
                  agreements, or investing in loans, including assignments and
                  participation interests.

         4.       invest in repurchase agreements maturing in more than seven
                  days or invest more than 5% of its total assets, taken at
                  market value, in repurchase agreements with any single vendor.

         5.       purchase any securities on margin, except that the Fund may
                  obtain such short-term credits as may be necessary for the
                  clearance of purchases and sales of portfolio securities.

         6.       borrow money or issue senior securities (as defined in the
                  1940 Act), except that the Fund may borrow from banks for
                  temporary or emergency purposes in amounts not exceeding 5% of
                  the value of its total assets (not including the amount
                  borrowed). Subject to this

                                        8
<PAGE>

                  limitation the Fund may borrow for the purpose of financing
                  repurchases of its shares. See "Repurchase of Securities" in
                  the Prospectus.

         7.       underwrite securities of other issuers except insofar as the
                  Fund may be deemed an underwriter under the Securities Act in
                  selling portfolio securities.

         8.       sell (write) call options on more than 25% of its total
                  assets, taken at market value, and then only if such options
                  are "covered," i.e., they are written on common stocks owned
                  by the Fund or which the Fund has an immediate right to
                  acquire through conversion or exchange of other securities; or
                  invest more than 2% of its total assets, taken at market
                  value, in the purchase of put options on common stocks owned
                  by the Fund or which it has an immediate right to acquire
                  through conversion or exchange of other securities and in the
                  purchase of put options on one or more broadly based stock
                  market indices. The Fund may enter into closing transactions
                  with respect to call options which it has written. The Fund
                  may only write or purchase options listed on a national
                  securities exchange. Except as stated above the Fund may not
                  engage in options transactions.

         9.       make short sales of securities or maintain a short position,
                  unless at all times when a short position is open the Fund
                  owns, or has the immediate right to acquire through conversion
                  or exchange, an equal amount of such securities, and not more
                  than 25% of its total assets, taken at market value, are held
                  as collateral for such sales.

         10.      invest more than 10% of its total assets, taken at market
                  value, in the securities of foreign issuers, except that this
                  limitation shall not apply to (a) securities convertible into
                  or exchangeable for common stock of U.S. companies, or (b)
                  U.S. dollar-denominated securities convertible into or
                  exchangeable for American Depositary Receipts that at the time
                  of purchase (i) are listed on the New York Stock Exchange, the
                  American Stock Exchange or the NASDAQ National Market, or (ii)
                  the underlying issuers of which met the then prevailing
                  earnings requirement for listing on the New York Stock
                  Exchange and also file Form 20-F (or comparable form) with the
                  SEC.

         11.      make investments for the purpose of exercising control or
                  management, except in connection with a merger of the Fund and
                  another investment company or the acquisition by the Fund of
                  all or substantially all of the assets or voting securities of
                  another investment company.

         12.      purchase securities (i) of companies which, with their
                  predecessors, or (ii) which are guaranteed by companies which,
                  with their predecessors, have a record of less than three
                  years' continuous operations, if such purchase would cause
                  more than 5% of the market value of the Fund's total assets to
                  be invested in the securities of such companies. This
                  restriction does not apply to Government Securities.

         13.      purchase or sell commodities or commodity contracts.

                                        9
<PAGE>

         14.      purchase real estate or sell real estate unless acquired as a
                  result of ownership of securities or other instruments. This
                  restriction does not prevent the Fund from investing in
                  issuers that invest, deal or otherwise engage in transactions
                  in real estate or interests therein, including without
                  limitation real estate investment trusts, or investing in
                  securities that are secured by real estate or interests
                  therein.

         The percentage restrictions on investments set forth above apply only
at the time an investment is made. Thus, a later increase or decrease in
percentage resulting from a change in values of portfolio securities or amount
of total assets will not be considered a violation of any of the foregoing
restrictions.

         Non-Fundamental Restrictions and Policies. The Fund has adopted the
following non-fundamental restrictions and policies which may be changed by the
Fund's Board of Directors without the approval of a majority of the Fund's
outstanding voting securities as defined in the 1940 Act. The Fund will:

         1.       not purchase the securities of an issuer if, after giving
                  effect to such purchase, more than 20% of its net assets would
                  be invested in illiquid securities.

         2.       not purchase or sell interests in oil, gas or other mineral
                  exploration or development programs. This policy does not
                  prevent the Fund from investing in issuers that invest, deal
                  or otherwise engage in transactions involving oil, gas or
                  other mineral exploration or development programs or interests
                  therein, or investing in securities that are secured by oil,
                  gas or other mineral exploration or development programs or
                  interests therein.

         3.       not make loans to any persons. This policy does not prevent
                  the Fund from lending its portfolio securities to the extent
                  permitted by its fundamental restrictions and policies, or
                  prevent the Fund from purchasing debt obligations, entering
                  into repurchase agreements, or investing in loans, including
                  assignments and participation interests.

         The percentage restrictions on investments set forth above apply only
at the time an investment is made. Thus, a later increase or decrease in
percentage resulting from a change in values of portfolio securities or amount
of total assets will not be considered a violation of any of the foregoing
restrictions.

                               PORTFOLIO TURNOVER

         For the fiscal years ended September 30, 2003, 2002 and 2001, the
Fund's portfolio turnover rates were 86%, 89% and 82%, respectively.

                             PRINCIPAL STOCKHOLDERS

         As of October 3, 2003, there were 10,461,994 shares of Common Stock of
the Fund outstanding. There are no persons known to the Fund to be control
persons of the Fund. The following persons were known to the Fund to be
beneficial owners or owners of record of 5% or more of its outstanding shares of
Common Stock as of October 3, 2003:

                                       10
<PAGE>

<TABLE>
<CAPTION>
     Name and Address                                     Amount and Nature      Percent of
         of Owner               Class/Series of Stock        of Ownership       Class/Series
     ----------------           ---------------------     -----------------     ------------

<S>                                 <C>                   <C>                        <C>
Cede & Co.*                         Common Stock          9,786,036 shares           94%
   Depository Trust Company                               Held of Record
   P.O. Box #20
   Bowling Green Station
   New York, NY 10028
</TABLE>

---------------
*        Shares held by brokerage firms, banks and other financial
         intermediaries on behalf of beneficial owners are registered in the
         name of Cede & Co.

                             DIRECTORS AND OFFICERS

Structure of the Board of Directors

         The Fund's Board of Directors is divided into three classes. One class
is elected at each annual meeting of shareholders. Directors in each class serve
for a three year term.

         The Board of Directors currently consists of nine persons. Seven of the
directors are independent, meaning they are not "interested persons" of the
Company within the meaning of the 1940 Act. Two of the Fund's directors are
"interested persons" because of their business and financial relationships with
the Fund and the Adviser.

Directors and Officers

         The business address of each director and officer is 65 Madison Avenue,
Suite 550, Morristown, NJ 07960-7308. Each director is also a director of
Bancroft Convertible Fund, Inc. (the "Bancroft Fund") (a closed-end diversified
management investment company). The Adviser is also the investment adviser to
the Bancroft Fund. Because of this connection, the Fund and the Bancroft Fund
make up a Fund Complex. Therefore, each director oversees two investment
companies in the Fund Complex.

Directors

         Interested Directors. Certain biographical and other information
concerning the Directors who are "interested persons," as defined in the 1940
Act, of the Fund is set forth below.


<TABLE>
<CAPTION>
                                  Term of Office and                                          Other
                                    Length of Time         Principal Occupation(s)       Directorship(s)
        Name and Age                    Served               During Past 5 Years         Held by Director
        ------------                    ------               -------------------         ----------------

<S>                              <C>                      <C>                                  <C>
Thomas H. Dinsmore (1)(2)(3)       Term as Director          Chairman and Chief                None
            (50)                     expires 2005.        Executive Officer of the
                                 Director since 1986.     Fund, the Bancroft Fund
                                                              and the Adviser.

 Jane D. O'Keeffe (1)(2)(3)        Term as Director       President of the Fund, the           None
            (48)                     expires 2006.          Bancroft Fund and the
                                 Director since 1995.              Adviser.
</TABLE>

                                       11
<PAGE>

---------------
1        Mr. Dinsmore and Ms. O'Keeffe are considered interested persons because
         they are officers and directors of the Adviser.

2        Thomas H. Dinsmore and Jane D. O'Keeffe are brother and sister.

3        H. Tucker Lake, Jr., an officer of the Fund, is the cousin of Thomas H.
         Dinsmore and Jane D. O'Keeffe.


                                       12
<PAGE>

         Independent Directors. Certain biographical and other information
concerning the Fund Directors who are not "interested persons," as defined in
the 1940 Act, of the Fund is set forth below.

<TABLE>
<CAPTION>
                             Term of Office and                                                 Other
                               Length of Time         Principal Occupation(s)              Directorship(s)
   Name and Age                    Served               During Past 5 Years                Held by Director
   ------------                    ------               -------------------                ----------------

<S>                         <C>                      <C>                                   <C>
  Gordon F. Ahalt             Term as Director       Retired. Prior to 2001, President          CalDive
        (75)                    expires 2004.            of G.F.A. Inc. (petroleum         International and
                            Director since 1986.       industry consulting company).          The Houston
                                                      Prior to 1999,  Consultant with         Exploration
                                                          W.H. Reaves & Co. (asset              Company
                                                            management company).

 William A. Benton            Term as Director       Retired. Prior to 2001, Partner of          None
        (70)                    expires 2006.            BE Partners (small options
                            Director since 1986.        market maker). Prior to 2000,
                                                      Limited Partner of Gavin, Benton
                                                          & Co. (NYSE specialist).

 Elizabeth C. Bogan,          Term as Director        Senior Lecturer in Economics at            None
        Ph.D.                   expires 2004.              Princeton University.
        (59)                Director since 1986.

Donald M. Halsted, Jr.        Term as Director          Retired Business Executive.              None
        (76)                    expires 2005.
                            Director since 1986.

George R. Lieberman           Term as Director         Retired Advertising Executive.            None
        (81)                    expires 2006.
                            Director since 1990.

  Duncan O. McKee             Term as Director                Retired Attorney.                  None
        (72)                    expires 2005.
                            Director since 1996.

  Nicolas W. Platt            Term as Director       Since January 2003, President of            None
        (50)                    expires 2004.            CNC-US (an international
                            Director since 1997.      consulting company). Prior to
                                                     January 2003, Senior Partner of
                                                        Platt & Rickenbach (public
                                                      relations firm). Prior to May
                                                       2001, with WPP Group, UK, as
                                                     Exec. Vice Pres. of Ogilvy Public
                                                          Relations Worldwide and
                                                         Managing Director of the
                                                      Corporate Financial Practice at
                                                         Burson-Marsteller (public
                                                              relations firm).
</TABLE>

                                       13
<PAGE>

Officers

         Certain biographical and other information concerning the officers of
the Fund is set forth below. Officers are elected by and serve at the pleasure
of the Board of Directors. Each officer holds office until the annual meeting to
be held in 2004, and thereafter until his or her respective successor is duly
elected and qualified.

<TABLE>
<CAPTION>
                                                                                Principal Occupation(s)
      Name and Age              Positions with the Fund       Officer Since     During Past 5 Years
      ------------              -----------------------       -------------     -------------------

<S>                             <C>                               <C>           <C>
Thomas H. Dinsmore (1)(2)       Director, Chairman and            1986          Chairman and Chief Executive
          (50)                  Chief Executive Officer                         Officer of the Fund, the
                                                                                Bancroft Fund and the Adviser

 Jane D. O'Keeffe (1)(2)        Director and President            1994          President of the Fund, the
          (48)                                                                  Bancroft Fund and the Adviser

 H. Tucker Lake, Jr. (1)             Vice President               1994          Since 2002, Vice President, and
          (56)                                                                  prior thereto, Vice President,
                                                                                Trading, of the Fund, the
                                                                                Bancroft Fund and the Adviser

   Gary I. Levine (3)          Vice President, Treasurer          1993          Since 2002, Vice President,
          (46)                    and Chief Financial                           Treasurer and Chief Financial
                                        Officer                                 Officer, and prior thereto,
                                                                                Treasurer and Assistant
                                                                                Secretary of the Fund, the
                                                                                Bancroft Fund and the Adviser

     Germaine Ortiz                  Vice President               1996          Since 1999, Vice President, and
          (33)                                                                  prior thereto, Assistant Vice
                                                                                President of the Fund, the
                                                                                Bancroft Fund and the Adviser

   Sigmund Levine (3)                   Secretary                 1986          Senior Vice President and
          (79)                                                                  Secretary of the Fund, the
                                                                                Bancroft Fund and the Adviser
</TABLE>

---------------
1        H. Tucker Lake, Jr. is the cousin of Thomas H. Dinsmore and Jane D.
         O'Keeffe.

2        Thomas H. Dinsmore and Jane D. O'Keeffe are brother and sister.

3        Sigmund Levine is the father of Gary I. Levine.


                                       14
<PAGE>

Ownership of Securities

         The Adviser is also the investment adviser to the Bancroft Fund.
Because of this connection, the Bancroft Fund and the Fund make up a "fund
complex." Set forth below is the dollar range of equity securities beneficially
owned in both the Fund and Fund Complex by each director of the Fund as of
December 31, 2002.

<TABLE>
<CAPTION>
                                                                Aggregate Dollar Range
                                                                of Equity Securities in
                                                                 All Funds Overseen or
                                           Dollar Range of       to be Overseen by the
                                          Equity Securities       Director or Nominee
         Name                            in the Fund(1)(2)(3)      in Fund Complex(4)
         ----                            --------------------   -----------------------

<S>                                        <C>                      <C>
Interested Directors
    Thomas H. Dinsmore ...............      over $100,000            over $100,000
    Jane D. O'Keeffe .................     $50,001-$100,000          over $100,000

Independent Directors
    Gordon F. Ahalt ..................     $10,001-$50,000          $10,001-$50,000
    William A. Benton ................     $10,001-$50,000          $50,001-$100,000
    Elizabeth C. Bogan, Ph.D .........     $50,001-$100,000         $50,001-$100,000
    Donald M. Halsted, Jr ............     $10,001-$50,000          $50,001-$100,000
    George R. Lieberman ..............     $10,001-$50,000           over $100,000
    Duncan O. McKee ..................     $10,001-$50,000          $50,001-$100,000
    Nicolas W. Platt .................        $1-$10,000            $10,001-$50,000
</TABLE>

1        Beneficial ownership has been determined based upon the director's
         direct or indirect pecuniary interest in the equity securities.

2        The dollar ranges are: None, $1-$10,000, $10,001-$50,000,
         $50,001-$100,000, or over $100,000.

3        The dollar range of equity securities owned in the Fund is based on the
         closing price of $7.45 on December 31, 2002 on the American Stock
         Exchange.

4        The dollar range of equity securities owned in the Fund Complex is
         based on the closing price of $7.45 for the Fund and $17.69 for the
         Bancroft Fund on December 31, 2002 on the American Stock Exchange.

Committees of the Board of Directors

         The Board of Directors has three committees: an Audit Committee, a
Nominating and Administration Committee and a Pricing Committee.

         Audit Committee

         The Audit Committee is comprised entirely of independent directors (Mr.
Benton, Dr. Bogan, Mr. Halsted and Mr. Lieberman, with Dr. Bogan serving as
Chairperson). All such members are independent as such term is defined by the
American Stock Exchange's listing standards and the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Committee oversees the Fund's
accounting and financial reporting policies and practices, as well as the
quality and objectivity of the Fund's financial statements and the independent
audit of the financial statements. Among other duties, the Committee

                                       15
<PAGE>

selects independent accountants for the Fund, evaluates their independence and
meets with them to review the scope and results of the audit.

         Nominating and Administration Committee

         The Nominating and Administration Committee is also comprised entirely
of independent directors (Mr. Ahalt, Mr. Halsted and Mr. Lieberman, with Mr.
Halsted serving as Chairman). In accordance with its charter, the Committee,
among other duties, recommends nominees as independent directors for the Fund
and nominees for Board committees, reviews Board governance issues and Board
compensation and monitors the performance of legal counsel. In recommending
nominees, the Committee considers the diversity of experience and backgrounds of
nominees and directors. The Nominating and Administration Committee will
consider a stockholder's suggestion for a nominee for director, but the final
decision for all nominees will be made by the Committee.

         A stockholder may nominate an individual for election to the Board of
Directors at the 2004 Annual Meeting of shareholders if the stockholder: (1) is
a stockholder of record at the time of giving notice to the Fund; (2) is a
stockholder of record at the time of the 2004 Annual Meeting; (3) is entitled to
vote at the 2004 Annual Meeting; and (4) has complied with the notice procedures
in the Fund's Bylaws. The notice procedures require that a stockholder submit
the nomination in writing to the Secretary of the Fund no earlier than September
12, 2003 but no later than October 12, 2003. The notice must contain all
information relating to the nominee required for proxy solicitations by
Regulation 14A under the Exchange Act (including the individual's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected). The notice must also contain the stockholder's name and
address as they appear on the Fund's books (and the name and address of any
beneficial owner, on whose behalf the nomination is made) and the number of
shares of stock owned beneficially and of record by such stockholder and
beneficial owner.

         Pricing Committee

         The Pricing Committee is comprised of three members, two of whom are
independent directors (Mr. Ahalt and Mr. Platt, with Mr. Ahalt serving as
Chairman) and one of whom is an interested person (Mr. Dinsmore). In accordance
with its charter, the Committee assists the Adviser in its valuation of the
Fund's portfolio of securities when pricing anomalies arise and the full Board
is not available to assist the Adviser in making a fair value determination.

         It is anticipated that the Committee will meet only as pricing
anomalies or issues arise that cannot be resolved by the entire Board due to
time constraints.

Board and Committee Meetings

         During the 2003 fiscal year, the Board of Directors met eight times,
the Audit Committee met three times and the Nominating and Administration
Committee met three times. The Pricing Committee did not meet.

                                       16
<PAGE>

Directors' Compensation

         Mr. Dinsmore and Ms. O'Keeffe are the only officers of the Fund or the
Adviser who serve on the Board of Directors. Each director who is not an officer
of the Fund or the Adviser currently receives (1) an annual fee of $5,000, (2)
$1,000 plus expenses for each Board meeting attended, (3) $1,000 for each
stockholders' meeting attended, (4) $1,000 plus expenses for each committee
meeting attended that is not held in conjunction with a Board meeting, and (5)
$500 for each committee meeting attended that is held in conjunction with a
Board meeting. The chairperson of each committee receives an additional $200 per
committee meeting.

         The Adviser is also the investment adviser to the Bancroft Fund.
Because of this connection, the Bancroft Fund and the Fund make up a "fund
complex." The following table shows the compensation that was paid to the
directors solely by the Fund as well as by the fund complex as a whole during
the 2003 fiscal year.

<TABLE>
<CAPTION>
                                                   Pension or
                                                   Retirement                                 Total
                                Aggregate       Benefits Accrued     Estimated Annual     Compensation
                               Compensation     as Part of Fund       Benefits upon         From Fund
Name of Director              From the Fund          Expense            Retirement           Complex
----------------              -------------     ----------------     ----------------     ------------
<S>                              <C>                  <C>                  <C>               <C>
Thomas H. Dinsmore(1)            None                 None                 None               None

Jane D. O'Keeffe(2)              None                 None                 None               None

Gordon F. Ahalt                  $14,500              None                 None              $29,000

William A. Benton                $15,500              None                 None              $31,500

Elizabeth C. Bogan, Ph.D.        $15,100              None                 None              $30,700

Donald M. Halsted, Jr.           $17,600              None                 None              $35,700

George R. Lieberman              $17,000              None                 None              $34,500

Duncan O. McKee                  $14,000              None                 None              $28,000

Nicolas W. Platt                 $14,000              None                 None              $28,000
</TABLE>

---------------
1        Thomas H. Dinsmore is also Chairman and Chief Executive Officer of the
         Fund. Mr. Dinsmore receives no compensation from the Fund for serving
         in such positions.

2        Jane D. O'Keeffe is also President of the Fund. Ms. O'Keeffe receives
         no compensation from the Fund for serving in such position.

Directors' Consideration of Investment Advisory Agreement

         At a meeting in person held on November 18, 2002, the Board of
Directors, including a majority of the directors who are not "interested
persons" of the Fund, voted to continue the Fund's current Investment Advisory
Agreement for a one-year term ending December 31, 2003. In considering whether
to continue such Agreement, the directors reviewed a wide range of information
provided by the Adviser, including the detailed Statement of Income and Expense
of the Adviser for its most recent fiscal year ended June 30, 2002, as well as
an analysis of the performance and the investment advisory fees of the Fund and
of comparable investment companies, and information regarding the Adviser's
personnel. Prior

                                       17
<PAGE>

to approving the continuance of the Investment Advisory Agreement, the directors
considered the following factors:

         o        the nature and extent of the advisory and administrative
                  services provided by the Adviser.

                  Directors considered the fact that the Adviser provides all
                  advisory and administrative services required for the Fund's
                  operations.

         o        the quality of past services rendered by the Adviser.

                  Directors considered the Adviser's adherence to its and the
                  Fund's compliance procedures, as well as the Fund's investment
                  objectives, policies and restrictions. Directors also
                  considered the performance of the Fund relative to its
                  benchmarks, and the fact that the Fund has outperformed its
                  benchmarks both over the short-term and the long-term.

         o        the value of benefits received by the Adviser.

                  Directors considered the fact that the Adviser has not entered
                  into any third party soft dollar arrangements and does not
                  receive benefits from the Fund other than advisory fees.

         o        the profitability and financial condition of the Adviser.

                  Directors considered the financial results of the Adviser and
                  the fact that the Adviser's income is based upon advisory fees
                  that it receives from the Fund and the Bancroft Fund.

         o        the performance of the Fund, particularly in light of recent
                  market conditions.

                  Directors considered the fact that the Fund outperformed
                  Lipper Inc.'s Closed-end Convertible Fund average, the
                  Standard & Poor's Composite Stock Price 500 Index and the
                  Russell 2000(R) Index for the nine months, one year, five
                  years and ten years ended September 30, 2002.

         o        the advisory fees paid by the Fund in comparison to other
                  closed-end investment companies with comparable investment
                  objectives and policies.

                  Directors considered the fact that the advisory fee rate for
                  the Fund was comparable to the advisory fee rates of other
                  closed-end convertible funds.

         o        the structure of the Adviser's fee schedule, including its
                  breakpoints.

                  Directors considered the fact that, if the net assets of the
                  Fund exceed $100,000,000, the advisory fee payable by the Fund
                  on net assets in excess of $100,000,000 will be reduced by
                  0.25%.


                                 CODE OF ETHICS

         The Adviser and the Fund have each adopted a separate Code of Ethics
under which directors, officers, employees and other affiliated persons of the
Adviser, and directors, directors emeritus, officers

                                       18
<PAGE>

and employees of the Fund are generally prohibited from personal trading in any
security which is then being purchased or sold or considered for purchase or
sale by the Fund (collectively, the "Codes of Ethics"). The Codes of Ethics
permit such persons to engage in other personal securities transactions if (i)
the securities involved are certain debt securities, money market instruments,
shares of registered open-end investment companies or shares acquired from an
issuer in a rights offering or under an automatic dividend reinvestment, (ii)
the transactions are either non-volitional, or with respect to the Adviser's
Code of Ethics only, are effected in an account over which such person has no
direct or indirect influence or control, or (iii) under certain circumstances,
they first obtain permission to trade from the appropriate Compliance Officer.
The Codes of Ethics contain standards for the granting of such permission, and
permission to trade will usually be granted only in accordance with such
standards.

         The Codes of Ethics can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-202-942-8090. In
addition, such Codes of Ethics are available on the EDGAR Database on the SEC's
Internet site at http://www.sec.gov. Copies of the Codes of Ethics may be
obtained, after paying a duplicating fee, by electronic request at the following
E-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

                                  PROXY VOTING

         The Fund's Board of Directors has adopted Proxy Voting Guidelines (the
"Guidelines") in accordance with Rule 30b1-4 under the 1940 Act. The Guidelines
have been designed with the overall goal of maximizing the value of the Fund's
investments. The Guidelines generally assign proxy voting responsibilities for
the Fund to the Adviser. The portfolio managers at the Adviser oversee the
voting policies and decisions for the Fund. If a conflict of interest arises
with respect to a proxy voting matter, the portfolio manager will promptly
notify the Fund's Audit Committee and counsel for the Fund's independent
directors and the proxies will be voted in accordance with the direction
received from the Audit Committee.

         The Guidelines are available without charge, by calling the Fund
collect at (973) 631-1177. The Guidelines are also posted on the Fund's website
at http://www.ellsworthfund.com and are available on the SEC's website at
http://www.sec.gov.

                                    TAXATION

         The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue Code
of 1986, as amended (the "Code"). As long as it so qualifies, the Fund (but not
its stockholders) will not be subject to Federal income tax to the extent that
it distributes its net investment income and net realized capital gains. The
Fund intends to distribute substantially all of such income.

         The Code requires a RIC to pay a nondeductible 4% excise tax to the
extent the RIC does not distribute, during each calendar year, 98% of its
ordinary income, determined on a calendar year basis, and 98% of its capital
gains, determined, in general, on an October 31 year end, plus certain
undistributed amounts from previous years. While the Fund intends to distribute
its income and capital gains in the manner necessary to minimize imposition of
the 4% excise tax, there can be no assurance that sufficient amounts of the
Fund's taxable income and capital gains will be distributed to avoid entirely
the imposition of the tax. In such event, the Fund will be liable for the tax
only on the amount by which it does not meet the foregoing distribution
requirements.

                                       19
<PAGE>

         Dividends paid by the Fund from its ordinary income or from an excess
of net short-term capital gains over net long-term capital losses (together
referred to hereafter as "ordinary income dividends") are taxable to
stockholders as ordinary income. Ordinary income dividends paid to individual
and other noncorporate stockholders will be treated as qualified dividend income
(currently subject to tax at a maximum rate of 15%) to the extent of the
dividends received by the Fund in any taxable year from domestic corporations
and certain qualified foreign corporations. However, if the qualified dividends
received by the Fund are 95% (or more) of the Fund's gross income (exclusive of
any net capital gain) in any taxable year, then all of the ordinary income
dividends paid by the Fund for that taxable year will be treated as qualified
dividend income. A portion of the Fund's ordinary income dividends may be
eligible for the dividends received deduction allowed to corporations under the
Code, if certain requirements are met.

         Distributions made from an excess of net long-term capital gains over
net short-term capital losses (including gains or losses from certain
transactions in warrants and options) ("capital gain dividends") are taxable to
stockholders as long-term capital gains, regardless of the length of time the
stockholder has owned Fund shares. Any loss upon the sale or exchange of Fund
shares held for twelve months or less will be treated as long-term capital loss
to the extent of any capital gain dividends received by the stockholder.
Distributions in excess of the Fund's earnings and profits will first reduce the
adjusted tax basis of a holder's shares and, after such adjusted tax basis is
reduced to zero, will constitute capital gains to such holder (assuming the
shares are held as a capital asset). Certain categories of capital gains are
taxable at different rates.

         Generally not later than 60 days after the close of its taxable year,
the Fund will provide its stockholders with a written notice designating the
amounts of ordinary income dividends constituting qualified dividend income, the
amount of ordinary income dividends eligible for the dividends received
deduction, and the amounts of any capital gain dividends including designation
of any amounts of capital gain dividends in the different categories of capital
gain referred to above. Dividends are taxable to stockholders even though they
are reinvested in additional shares of the Fund.

         A loss realized on a sale or exchange of shares of the Fund will be
disallowed under the wash sale rules if other Fund shares are acquired (whether
through the automatic reinvestment of dividends or otherwise) within a 61-day
period beginning 30 days before and ending 30 days after the date that the
shares are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss.

         Ordinary income dividends paid to stockholders who are non-resident
aliens or foreign entities will be subject to a 30% United States withholding
tax under existing provisions of the Code applicable to foreign individuals and
entities unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Non-resident stockholders are urged to
consult their own tax advisers concerning the applicability of the United States
withholding tax.

         Under certain provisions of the Code, some stockholders may be subject
to a withholding tax on ordinary income dividends and capital gain dividends
("backup withholding"). Generally, stockholders subject to backup withholding
will be those for whom no certified taxpayer identification number is on file
with the Fund or who, to the Fund's knowledge, have furnished an incorrect
number. When establishing an account, an investor must certify under penalty of
perjury that such number is correct and that such investor is not otherwise
subject to backup withholding.

         Dividends and interest received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.

                                       20
<PAGE>

         The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.

         Ordinary income and capital gain dividends may also be subject to state
and local taxes.

         Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on United States Government obligations. State
law varies as to whether dividend income attributable to United States
Government obligations is exempt from state income tax.

         Stockholders are urged to consult their own tax advisers regarding
specific questions as to Federal, foreign, state or local taxes. Foreign
investors should consider applicable foreign taxes in their evaluation of an
investment in the Fund.

                                    CUSTODIAN

         The Bank of New York ("Custodian"), 100 Church Street, 10th Floor, New
York, NY 10286, is the custodian of the portfolio securities and cash of the
Fund. As such, the Custodian holds the Fund's portfolio securities and cash in
separate accounts on the Fund's behalf and receives and delivers portfolio
securities and cash in connection with portfolio transactions initiated by the
Fund's portfolio managers, collects income due on its portfolio securities and
disburses funds in connection with the payment of distributions and expenses.

                             INDEPENDENT ACCOUNTANTS

         PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, 21st Floor,
New York, NY 10036-2798, are the independent accountants of the Fund. The
independent accountants audit and report on the annual financial statements and
also perform limited tax services for the Fund.

                    BROKERAGE ALLOCATION AND OTHER PRACTICES

         In placing orders for the purchase and sale of securities for the Fund,
the Adviser is guided by the Fund's investment objectives, policies and
limitations as delineated by statements contained in the various documents filed
by the Fund with the SEC, as such documents may, from time to time, be amended.

         The Adviser is obligated, in placing orders for the purchase and sale
of securities for the Fund, to obtain the most favorable price and execution
available under the circumstances and to keep true, accurate and current books
and records containing sufficient detail to demonstrate compliance with this
obligation. In determining the most favorable price and execution in each
transaction the determinative factor is not necessarily the lowest possible
commission cost. The Adviser may consider the full range and quality of the
services of broker-dealers in placing orders including, but not by way of
limitation, the value of research provided as well as execution capability,
commission rate, financial responsibility and responsiveness of the
broker-dealer to the Adviser. Accordingly, to the extent provided by law, in
executing portfolio transactions, the Adviser may pay a broker-dealer which
provides brokerage or research services a commission in excess of that which
another broker-dealer would have charged for the same transaction.

                                       21
<PAGE>

         The Adviser currently places portfolio transactions for the Bancroft
Fund (together with the Fund, the "Funds"), and may in the future place
portfolio transactions for other investment companies and advised accounts. The
Adviser seeks to allocate portfolio transactions equitably whenever concurrent
decisions are made to purchase or sell securities by the Fund and such other
advisory accounts. In some cases this procedure could have an adverse effect on
the price or amount of securities available to the Fund.

         The Funds have established procedures that are intended to apply
whenever the Funds simultaneously purchase or sell the same securities. The
Adviser may, but is under no obligation to, aggregate securities sold or
purchased in order to obtain the best price and execution. In such event,
allocation of the securities purchased or sold, as well as the expenses incurred
in the transaction, will be made by the Adviser as follows:

         (a)      the Funds will pay or receive the average of the prices paid
or received by the Funds;

         (b)      the Funds will share pro-rata the transaction costs incurred
based on the dollar amount of each fund's trade.

         (c)      if an aggregated order is partially filled, the amount of
shares that the Funds purchase or sell will be allocated pro-rata based on the
dollar amount of each fund's intended trade or, if the aggregated order is
subject to a minimum lot size, as closely as practicable to pro rata.

         (d)      the Adviser may allocate an order on a basis different from
that specified above if (i) the Funds are treated fairly and equitably, (ii)
neither of the Funds is given preferential treatment, and (iii) the procedures
set forth in Paragraph (b) are followed.

         When entering an aggregated order, the portfolio manager for the Funds
will indicate on the transaction order for each fund how the portfolio manager
intends to allocate the order between the Funds. An aggregated order may be
allocated on a basis different from that set forth in Paragraphs (a)-(d) hereof
only if the portfolio manager includes a written explanation of such deviation
in each fund's transaction order. Each such transaction order shall be submitted
to the chief compliance officer, Chairman or other designated officer for review
no later than one hour after the opening of the applicable market on the trading
day following the day the order was executed.

         In the case of securities that are not traded on a national securities
exchange, purchases and sales are made through firms that regularly make a
market in such securities, unless, in the Fund's opinion, another firm can
obtain the best price and make the best execution of the order. Portfolio
transactions placed through dealers serving as primary market makers are
effected at net prices, without commissions as such, but which include
compensation in the form of mark up or mark down. In certain instances, the Fund
purchases underwritten issues at prices which include underwriting fees.

         Brokerage commissions paid by the Fund during its fiscal years ended
September 30, 2001, 2002 and 2003 were $23,000, $25,000, and $28,000,
respectively.

         During the fiscal year ended September 30, 2003, the Fund purchased
securities issued by Goldman Sachs and Co. and Prudential Securities, Inc., two
of the Fund's regular brokers. The aggregate value of the securities of these
issuers held at September 30, 2003, was $2,298,843 and $0, respectively.

                                       22
<PAGE>

                                 NET ASSET VALUE

         The Net Asset Value (the "NAV") of the Fund's shares of Common Stock is
calculated at the close of regular trading on the New York Stock Exchange
("NYSE") (generally 4:00 p.m. Eastern time) every day that the NYSE is open. The
Fund makes this information available daily, via its web site
(http://www.ellsworthfund.com) and through electronic distribution for media
publication, including major internet-based financial services web sites and
portals (e.g., bloomberg.com, yahoo.com, cbsmarketwatch.com). Currently, The
Wall Street Journal, The New York Times and Barron's publish NAVs for closed-end
investment companies weekly.

         The NAV per share of the Common Stock is calculated by dividing the
value of the Fund's assets (including interest and dividends accrued but not
collected), less its liabilities (including accrued expenses), by the number of
outstanding shares. Each listed security is valued at the last sale price or the
mean of the reported closing bid and asked prices if there are no sales.
Unlisted securities are valued at the mean of the latest available bid and asked
prices. Securities for which quotations are not readily available, restricted
securities and other assets are valued at fair value as determined in good faith
by the Board of Directors. Notwithstanding the foregoing, short-term debt
securities with maturities of 60 days or less are valued at amortized cost.

         Shares of closed-end investment companies frequently trade at a
discount from net asset value, but in some cases trade at a premium. Since the
market price of the Fund's shares will be determined by factors including
trading volume of such shares, general market and economic conditions and other
factors beyond the control of the Fund, the Fund cannot predict whether its
shares will trade at, below or above net asset value, although historically the
Fund's shares have generally traded at a discount from net asset value.

                              FINANCIAL STATEMENTS

         The audited financial statements included in the Annual Report to the
Fund's Stockholders for the fiscal year ended September 30, 2002, together with
the report of PricewaterhouseCoopers LLP thereon, and the unaudited financial
statements included in the Semi-Annual Report to the Fund's Stockholders for the
six months ended March 31, 2003, are incorporated herein by reference. It is
expected that the audited financial statements included in the Annual Report to
the Fund's Stockholders for the fiscal year ended September 30, 2003, together
with the report of PricewaterhouseCoopers LLP thereon, will be mailed to
stockholders and available on the Fund's website (http://www.ellsworthfund.com)
on or around November 26, 2003.


                                       23

</TEXT>
</DOCUMENT>
