UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-2213
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Castle Convertible Fund, Inc.
-----------------------------
(Exact name of registrant as specified in charter)
111 Fifth Avenue, New York, New York 10003
------------------------------------------
(Address of principal executive offices) (Zip code)
Mr. Gregory S. Duch
Fred Alger Management, Inc.
111 Fifth Avenue
New York, New York 10003
------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-806-8800
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Date of fiscal year end: October 31
Date of reporting period: April 30, 2003
Item 1. Reports to Stockholders
-----------------------
Dear Shareholder:
Slow, steady economic growth; reliable consumers; tentative corporations;
and war. That is the short answer to the question: what happened during the
six months ended April 30? The last two months of 2002 saw the equity
markets recover from their lows of October 9, though a significant portion
of those gains were in technology stocks and were then given up in the
first weeks of 2003 because the fundamentals had not yet improved.
However, throughout this period, the economy remained in a steady growth
pattern. It was not a dramatic period. Consumer spending accounted for most
of the economic growth. Consumers were aided by historically low interest
rates, already well below 4% on the 10-year note by April and continually
decreasing thereafter. Low rates led to another wave of mortgage
refinancing, which put more money in people's pockets. That refinancing
boom, combined with increased federal spending, tax cuts, and a Federal
Reserve that has kept short-term rates very low, buoyed consumer spending
during a time of weak employment, tentative companies, and tumultuous
international affairs.
A cold and snowy February of 2003 combined with rising tension and concern
about Iraq dampened economic activity across the board. Consumers pared
back purchases on certain items, and companies were loathe to undertake
capital expenditures ahead of the war. As a result, the economy grew at an
annual rate of less than 2% for the first quarter of 2003. However, when it
became clear in early March that war was inevitable, the markets rallied.
It is often said that the markets hate uncertainty. The rally that began in
March was certainly a testament to that notion. The markets seesawed during
the uncertain first days of the war, but then resumed their upward movement
as Saddam Hussein's regime crumbled. The result was that from November 1,
2002 through April 30, 2003, the Dow rose 2.1%, the S&P 500 was up 4.5%,
and the NASDAQ gained 10.1%.
Now, for the first time in over two years, Wall Street has begun to look to
the future. Companies that can show healthy balance sheets and an ability
to improve productivity and expand their businesses are becoming attractive
to investors. That is as it should be, but it has not been the case for
quite a while. The markets and the country in general are beginning to
emerge from two years that included a recession, terrorism, war, and
corporate scandals. Sentiment has slowly been shifting away from fear and
toward guarded hope. That shift should lead to support for higher levels
for the equity markets. That does not mean a return to irrational
exuberance, but it does mean a more balanced market where good companies
and good stock picking are rewarded.
Respectfully submitted,
/s/ Dan C. Chung
Dan C. Chung
Chief Investment Officer
June 16, 2003
CASTLE CONVERTIBLE FUND, INC.
SCHEDULE OF INVESTMENTS (Unaudited)
April 30, 2003
Principal Corporate Convertible
Amount Bonds-63.4% Value
- ------------------------------------------------------------------------
<s> <c> <c> <c>
AEROSPACE & DEFENSE-2.1%
$ 500,000 EDO Corporation, Cv. Sub.
Notes, 5.25%, 4/15/07(a) $ 516,900
500,000 L-3 Communications Holdings,
Inc., Senior Sub. Cv. Contingent
Debt Securities, 4.40%, 9/15/11 547,500
-----------
1,064,400
-----------
AIR FREIGHT & LOGISTICS-1.0%
500,000 United Parcel Service, Inc.,
Senior Cv. Notes, 1.75%,
9/27/07 515,600
-----------
BIOTECHNOLOGY-1.3%
650,000 Aviron, Cv. Sub. Notes,
5.25%, 2/1/08 683,735
-----------
COMMERCIAL SERVICES &
SUPPLIES-1.6%
750,000 First Data Corporation, Senior
Cv. Contingent Debt Securities,
2.00%, 3/1/08 840,975
-----------
COMMUNICATIONS EQUIPMENT-5.4%
850,000 Adaptec, Inc., Cv. Sub. Notes,
3.00%, 3/5/07 779,875
1,000,000 Brocade Communications
Systems, Inc., Cv. Sub. Notes,
2.00%, 1/1/07 805,000
1,000,000 CIENA Corporation, Cv. Notes,
3.75%, 2/1/08 796,200
500,000 Nortel Networks Corporation,
Cv. Senior Notes, 4.25%,
9/1/08 423,750
-----------
2,804,825
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COMPUTER SOFTWARE-4.8%
550,000 BEA Systems, Inc., Cv.
Sub. Notes, 4.00%,
12/15/06 523,875
950,000 Juniper Networks, Inc., Cv. Sub.
Notes, 4.75%, 3/15/07 862,125
500,000 Mercury Interactive Corporation,
Cv. Sub. Notes, 4.75%,
7/1/07 495,650
650,000 VERITAS Software Corporation,
Cv. Sub. Notes, 1.856%,
8/13/06 582,530
-----------
2,464,180
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DIVERSIFIED FINANCIALS-1.5%
800,000 E*TRADE Group, Inc., Cv. Sub.
Notes, 6.75%, 5/15/08 784,960
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Principal Corporate Convertible
Amount Bonds-(Continued) Value
- ------------------------------------------------------------------------
<s> <c> <c> <c>
ELECTRONIC EQUIPMENT &
INSTRUMENTS-2.5%
$ 500,000 Jabil Circuit, Inc., Cv. Sub.
Notes, 1.75%, 5/15/21 $ 494,900
850,000 Tech Data Corporation, Cv. Sub.
Deb., 2.00%, 12/15/21 775,965
-----------
1,270,865
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ENERGY EQUIPMENT & SERVICES-4.4%
555,000 AES Corporation, Cv. Jr. Sub.
Deb., 4.50%, 8/15/05 497,391
650,000 BJ Services Company, Cv. Senior
Notes, 0.3954%, 4/24/22(a) 547,625
650,000 Kerr-McGee Corporation, Cv.
Sub. Deb., 5.25%, 2/15/10 693,875
450,000 Pride International Inc., Cv.
Senior Notes, 2.50%, 3/1/07 525,375
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2,264,266
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FOOD & DRUG RETAILING-1.3%
700,000 Rite Aid Corporation, Cv. Notes,
4.75%, 12/1/06 686,070
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HEALTH CARE-8.6%
500,000 AmeriSource Health
Corporation, Cv. Sub.
Notes, 5.00%, 12/1/07 658,975
750,000 Medtronic, Inc., Senior Cv.
Deb., 1.25%, 9/15/21 794,212
1,250,000 Omnicare, Inc., Cv. Sub. Deb.,
5.00%, 12/1/07 1,264,000
375,000 Province Healthcare Company,
Cv. Sub. Notes, 4.50%,
11/20/05 360,938
1,000,000 Quest Diagnostics Incorporated,
Contingent Cv. Deb., 1.75%,
11/30/21 1,046,200
250,000 WebMD Corporation, Cv. Sub.
Notes, 3.25%, 4/1/07 321,250
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4,445,575
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HOTELS, RESTAURANTS &
LEISURE-1.4%
750,000 Hilton Hotels Corp., Cv. Sub.
Notes, 3.375%, 4/15/23(a) 745,350
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INDUSTRIAL CONGLOMERATES-1.0%
500,000 TYCO International Group,
Cv. Senior Deb., 2.75%,
1/15/18(a) 508,125
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MEDIA-4.5%
1,000,000 Echostar Communications
Corporation, Cv. Sub. Notes,
5.75%, 5/15/08 1,062,500
750,000 Liberty Media Corporation,
Senior Exchangeable Deb.,
0.75%, 3/30/23(a) 800,362
2
Principal Corporate Convertible
Amount Bonds-(Continued) Value
- ------------------------------------------------------------------------
<s> <c> <c> <c>
MEDIA-(Continued)
$ 500,000 Mediacom Communications
Corporation, Cv. Senior Notes,
5.25%, 7/1/06 $ 485,600
-----------
2,348,462
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METALS & MINING-1.5%
750,000 Freeport-McMoran Copper &
Gold, Inc., Cv. Senior Notes,
7.00%, 2/11/11(a) 791,250
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PHARMACEUTICALS-1.2%
650,000 IVAX Corporation, Cv. Senior
Sub. Notes, 4.50%, 5/15/08 607,750
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RETAIL-8.4%
750,000 Barnes & Noble, Inc., Cv. Sub.
Notes, 5.25%, 3/15/09 742,500
900,000 Best Buy Co. Inc., Cv. Sub.
Deb., 2.25%, 1/15/22 874,170
500,000 Gap, Inc., (The) Senior Cv.
Notes, 5.75%, 3/15/09 657,500
250,000 Gap, Inc., (The) Senior Cv.
Notes, 5.75%, 3/15/09(a) 328,750
1,000,000 Penney (J.C.) Company, Inc.,
Cv. Sub. Notes, 5.00%,
10/15/08 978,300
750,000 Venator Group, Inc., Cv. Sub.
Notes, 5.50%, 6/1/08 792,225
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4,373,445
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SEMICONDUCTOR EQUIPMENT
& PRODUCTS-8.0%
1,150,000 Fairchild Semiconductor
Corporation, Senior Cv. Sub.
Notes, 5.00%, 11/1/08 1,092,500
1,000,000 General Semiconductor, Inc.,
Cv. Sub. Notes, 5.75%,
12/15/06 993,800
1,150,000 International Rectifier
Corporation, Cv. Sub. Notes,
4.25%, 7/15/07 1,052,250
375,000 Lam Research Corporation, Cv.
Sub. Notes, 4.00%, 6/1/06 357,525
725,000 LSI Logic Corporation, Cv. Sub.
Notes, 4.00%, 11/1/06 638,000
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4,134,075
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SOFTWARE-.9%
300,000 Symantec Corporation, Cv.
Sub. Notes, 3.00%, 11/1/06 440,250
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WIRELESS TELECOMMUNICATION
SERVICES-2.0%
1,025,000 Nextel Communications, Inc.,
Cv. Senior Notes, 4.75%,
7/1/07 1,018,645
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Total Corporate Convertible
Bonds (Cost $31,437,400) 32,792,803
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Shares Preferred Stock-.8%
- ----------
<s> <c> <c> <c>
INSURANCE
15,000 XL Capital Ltd., Cl. A, 7.625%,
Series B (Cost $375,000) 399,000
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Convertible Preferred
Shares Securities-9.1% Value
- ------------------------------------------------------------------------
<s> <c> <c> <c>
BANKS-2.4%
21,700 Washington Mutual, Capital
Trust 2001, 5.375%, Cv. Pfd.
Income Equity Redeemable
Securities $ 1,239,721
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HOUSEHOLD DURABLES-1.0%
10,500 Newell Financial Trust I, 5.25%,
Cv. Quarterly Income Pfd. 504,000
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INFORMATION TECHNOLOGY
CONSULTING & SERVICES-1.0%
11,000 Titan Capital Trust, 5.75%,
Cv. Pfd. 499,180
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INSURANCE-1.0%
22,000 Travelers Property Casualty
Corp., 4.50%, Cv. Jr. Sub.
Notes 539,000
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MEDIA-1.3%
25,000 Comcast Corporation, 2.00%,
Exch. Sub. Deb., 10/15/29 665,750
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PAPER PACKAGING & FOOD
PRODUCTS-1.0%
10,600 International Paper Capital
Trust, 5.25%, Cv. Pfd. 519,930
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RETAIL-1.4%
25,000 United Rental Trust I, 6.50%,
Cv. Quarterly Income Pfd. 748,500
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Total Convertible
Preferred Securities
(Cost $4,562,350) 4,716,081
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Mandatory Convertible
Securities-11.3%
AEROSPACE & DEFENSE-1.5%
7,550 Northrop Grumman Corp., Equity
Security Units, 7.25%,
11/16/04(b) 767,850
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COMMUNICATIONS EQUIPMENT-1.0%
17,000 Motorola Inc., 7.00% Equity
Security Units, 11/16/04(b) 487,900
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DIVERSIFIED TELECOMMUNICATION
SERVICES-2.1%
12,000 ALLTEL Corporation, 7.75%,
Equity Units, 5/17/05(b) 581,400
20,000 CenturyTel, Inc., 6.875%,
Corporate Units, 5/15/05(b) 511,000
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1,092,400
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ELECTRIC UTILITIES-1.2%
24,200 DTE Energy Company, 8.75%,
Equity Security Units,
8/16/05(b) 612,502
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ENERGY-3.6%
14,000 Cinergy Corp., 9.50%, Feline
Income (PRIDES), 2/16/05(b) 800,100
10,500 Dominion Resources Inc.,
8.75%, Upper DECS Equity
Income Securities, 5/15/06(b) 542,745
3
Mandatory Convertible
Shares Securities-(Continued) Value
- ------------------------------------------------------------------------
<s> <c> <c> <c>
ENERGY-(Continued)
17,500 Valero Energy Corp., Trust I,
7.75%, Premium Equity
Participating Security Units,
8/18/03(b) $ 494,025
-----------
1,836,870
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HEALTH CARE-1.0%
6,375 Anthem, Inc., 6.00%, Equity
Security Units, 11/15/04(b) 535,500
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INSURANCE-.9%
10,000 Chubb Corporation (The), 7.00%,
Equity Units, 11/16/05(b) 241,200
4,400 PartnerRe Ltd., 8.00%,
Premium Equity Participating
Security Units, 12/31/04(b) 238,744
-----------
479,944
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Total Mandatory Convertible
Securities (Cost $5,825,458) 5,812,966
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Common Stocks-11.2%
DIVERSIFIED FINANCIALS-2.4%
7,500 Bank of America Corporation 555,375
17,500 Citigroup Inc. 686,875
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1,242,250
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ELECTRIC UTILITIES-2.0%
15,000 FirstEnergy Corp. 505,950
27,500 TXU Corp. 547,800
-----------
1,053,750
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GAS COMPANIES-1.0%
15,500 KeySpan Corporation 524,985
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Common
Shares Stocks-(Continued) Value
- ------------------------------------------------------------------------
<s> <c> <c> <c>
INSURANCE-.5%
8,500 Lincoln National Corporation $ 271,660
-----------
OIL & GAS-2.0%
10,000 ConocoPhillips 503,000
12,000 Royal Dutch Petroleum
Company 498,736
-----------
1,001,736
-----------
PHARMACEUTICALS-2.5%
20,000 Bristol-Myers Squibb
Company 510,800
6,800 Merck & Co., Inc. 395,624
22,000 Schering-Plough Corporation 398,200
-----------
1,304,624
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WIRELESS TELECOMMUNICATION
SERVICES-.8%
11,000 Verizon Communications Inc. 411,180
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Total Common Stocks
(Cost $5,506,975) 5,810,185
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Principal Short-Term
Amount Investments-2.6%
- ----------
<s> <c> <c> <c>
$1,325,000 Federal National Mortgage
Association, 1.25%, 5/1/03
(Cost $1,325,000) 1,325,000
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Total Investments
(Cost $49,032,183)(c) 98.4% 50,856,035
Other Assets in Excess of Liabilities 1.6 829,557
---------------------
Net Assets 100.0% $51,685,592
=====================
<FN>
- --------------------
(a) Pursuant to Securities and Exchange Commission Rule 144A, these
securities may be sold prior to their maturity only to qualified
institutional buyers.
(b) These securities are required to be converted on the date listed;
they generally may be converted prior to this date at the option of
the holder.
(c) At April 30, 2003, the net unrealized appreciation on investments,
based on cost for federal income tax purposes of $49,453,887 amounted
to $1,402,148 which consisted of aggregate gross unrealized
appreciation of $2,290,283 and aggregate gross unrealized
depreciation of $888,135.
</FN>
See Notes to Financial Statements.
4
CASTLE CONVERTIBLE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2003 (Unaudited)
<s> <c> <c>
ASSETS:
Investments in securities, at value (cost $49,032,183),
see accompanying schedule of investments $50,856,035
Cash 21,209
Receivable for investment securities sold 948,144
Dividends and interest receivable 501,218
Prepaid expenses 31,841
-----------
Total Assets 52,358,447
LIABILITIES:
Payable for investment securities purchased $595,103
Investment advisory fees payable 31,088
Directors' fees payable 3,297
Accrued expenses 43,367
--------
Total Liabilities 672,855
-----------
NET ASSETS applicable to 2,236,003 outstanding shares
of $0.01 par value (10,000,000 shares authorized) $51,685,592
===========
NET ASSET VALUE PER SHARE $ 23.12
===========
See Notes to Financial Statements.
5
CASTLE CONVERTIBLE FUND, INC.
STATEMENT OF OPERATIONS
For the six months ended April 30, 2003 (Unaudited)
<s> <c> <c>
INVESTMENT INCOME:
Income:
Interest $ 668,965
Dividends 564,815
Total Income 1,233,780
Expenses:
Investment advisory fees-Note 2(a) $ 189,086
Directors' fees 21,012
Shareholder reports 31,274
Custodian and transfer agent fees 13,044
Professional fees 27,841
Bookkeeping fees 9,000
Miscellaneous 15,636
-----------
Total Expenses 306,893
----------
NET INVESTMENT INCOME 926,887
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (2,487,886)
Net change in unrealized appreciation (depreciation)
on investments 3,897,241
-----------
Net realized and unrealized gain (loss) on investments 1,409,355
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,336,242
==========
See Notes to Financial Statements.
6
CASTLE CONVERTIBLE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended
April 30, 2003 Year Ended
(Unaudited) October 31, 2002
------------------------------------
<s> <c> <c>
FROM INVESTMENT ACTIVITIES:
Net investment income $ 926,887 $ 2,428,488
Net realized loss on investments (2,487,886) (2,201,495)
Net change in unrealized appreciation (depreciation)
on investments 3,897,241 (4,870,976)
-------------------------------
Net increase (decrease) in net assets resulting from
operations 2,336,242 (4,643,983)
-------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (1,095,641) (2,526,683)
-------------------------------
Net increase (decrease) in net assets 1,240,601 (7,170,666)
NET ASSETS:
Beginning of period 50,444,991 57,615,657
-------------------------------
End of period (including undistributed net investment
income of $441,481 and $610,235, respectively) $51,685,592 $ 50,444,991
===============================
See Notes to Financial Statements.
7
CASTLE CONVERTIBLE FUND, INC.
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
Six
Months
Ended Year Ended October 31,
April 30, --------------------------------------------------
2003(a) 2002 2001 2000 1999 1998
---------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c>
Net asset value, beginning of period $22.56 $25.77 $28.22 $26.20 $25.32 $30.08
---------------------------------------------------------------
Net investment income 0.41 1.09 1.34 1.40 1.32 1.39
Net realized and unrealized gain (loss) on
investments 0.64 (3.17) (1.80) 2.24 1.07 (2.36)
---------------------------------------------------------------
Total from investment operations 1.05 (2.08) (0.46) 3.64 2.39 (0.97)
---------------------------------------------------------------
Dividends from net investment income (0.49) (1.13) (1.33) (1.32) (1.46) (1.49)
Distributions from net realized gains - - (0.66) (0.30) (0.05) (2.30)
---------------------------------------------------------------
Total Distributions (0.49) (1.13) (1.99) (1.62) (1.51) (3.79)
---------------------------------------------------------------
Net asset value, end of period $23.12 $22.56 $25.77 $28.22 $26.20 $25.32
===============================================================
Market value, end of period $21.51 $20.57 $24.25 $22.75 $21.00 $22.75
===============================================================
Total investment return based on market
value per share 6.93% (11.05%) 15.83% 16.51% (1.29%) 1.66%
===============================================================
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $51,686 $50,445 $57,616 $63,107 $58,583 $56,627
===============================================================
Ratio of expenses to average net assets 1.22% 1.09% 1.03% 1.06% 1.02% 1.04%
===============================================================
Ratio of net investment income to average
net assets 3.68% 4.30% 4.89% 5.05% 5.05% 5.00%
===============================================================
Portfolio Turnover Rate 87.50% 186.48% 53.81% 68.55% 60.65% 52.99%
===============================================================
<FN>
- --------------------
(a) Unaudited. Ratios have been annualized; total investment return has
not been annualized.
</FN>
8
CASTLE CONVERTIBLE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1-Summary of Significant Accounting
Policies:
Castle Convertible Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as a diversified, closed-end management
investment company. The Fund's investment adviser is Fred Alger Management,
Inc. (the "Adviser").
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
(a) Investment Valuation-Investments in securities are valued at 4:00 p.m.
Eastern time. Listed and unlisted securities for which such information is
regularly reported are valued at the last reported sales price or, in the
absence of reported sales, at the mean between the bid and asked price or,
in the absence of a recent bid or asked price, the equivalent as obtained
from one or more of the major market makers for the securities to be
valued. Securities for which market quotations are not readily available
are valued at fair value, as determined in good faith pursuant to
procedures established by the Board of Directors. Short-term investments
are valued at amortized cost which approximates market value.
(b) Securities Transactions and Investment Income-Securities transactions
are recorded on a trade date basis. Realized gains and losses from
securities transactions are recorded on the basis of the first-in, first-
out method. Dividend income is recognized on the ex-dividend date and
interest income is recognized on the accrual basis.
Effective November 1, 2001, premiums and discounts on debt securities
purchased are amortized or accreted over the lives of the respective
securities. This change in accounting policy which has been applied
retroactively had no material effect on the accompanying financial
statements.
(c) Dividends to Shareholders-Dividends payable to shareholders are
recorded by the Fund on the ex-dividend date. Dividends from net investment
income are declared and paid quarterly. Distributions from net realized
gains are declared and paid annually after the end of the fiscal year in
which earned.
The characterization of distributions to shareholders for financial
reporting purposes is determined in accordance with federal income tax
rules. Therefore, the source of the Fund's distributions may be shown in
the accompanying financial statements as either from, or in excess of net
investment income, net realized gain on investment transactions or paid-in
capital, depending on the type of book/tax differences that may exist.
At October 31, 2002, the Fund reclassified $99,216 to undistributed
net investment income (accumulated loss) and $105,288 from undistributed
net realized gain (accumulated loss) to paid-in capital. Reclassifications
result primarily from the difference in tax treatment of certain debt
instruments. The reclassification had no impact on the net asset value of
the Fund and is designed to present the Fund's capital accounts on a tax
basis.
(d) Federal Income Taxes-It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income, including
net realized capital gains, to its shareholders. Therefore, no federal
income tax provision is required. At October 31, 2002, the net capital loss
carryforward of the Fund which may be used to offset future net realized
gains was approximately $1,688,291, and expires in 2009 and 2010.
(e) Other-These financial statements have been prepared using estimates and
assumptions that affect the reported amounts therein. Actual results may
differ from those estimates.
NOTE 2-Investment Advisory Fees and Other
Transactions with Affiliates:
(a) Investment Advisory Fees-Fees incurred by the Fund, pursuant to the
provisions of an Investment Advisory Contract (the "Contract") with the
Adviser, are payable monthly and computed at an annual rate of .75% based
on the Fund's average weekly net asset value.
9
CASTLE CONVERTIBLE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
NOTE 2-Investment Advisory Fees and Other
Transactions with Affiliates (continued):
The Contract further provides that if in any fiscal year the
aggregate expenses of the Fund (excluding interest, brokerage commissions,
taxes and extraordinary expenses) should exceed 1.5% of the first $30
million of average net assets and 1.0% of the average net assets of the
Fund over $30 million, the Adviser will reimburse the Fund for such excess
expenses. For the six months ended April 30, 2003, no reimbursement was
required pursuant to the Contract. For the six months ended April 30, 2003,
the total investment advisory fee charged to the Fund amounted to $189,086,
and the Adviser received $9,000 for bookkeeping services supplied to the
Fund at cost.
(b) Transfer Agent Fees-Alger Shareholder Services, Inc. ("Alger
Services"), an affiliate of the Adviser, serves as transfer agent for the
Fund. During the six months ended April 30, 2003, the Fund incurred fees of
approximately $4,000 for services provided by Alger Services and reimbursed
Alger Services approximately $2,000 for transfer agent related expenses
paid by Alger Services on behalf of the Fund.
(c) Directors' Fees-Certain directors and officers of the Fund are
directors and officers of the Adviser and Alger Services. The Fund pays
each director who is not affiliated with the Adviser or its affiliates an
annual fee of $8,000, payable quarterly, which is reduced proportionately
by any meetings not attended during the quarter.
(d) Other Transactions With Affiliates-At April 30, 2003, the Adviser and
its affiliates owned 445,226 shares of the Fund.
NOTE 3-Securities Transactions:
During the six months ended April 30, 2003, purchases and sales of
investment securities, excluding short-term securities, aggregated
$45,127,812 and $40,337,826, respectively.
NOTE 4-Components of Net Assets:
At April 30, 2002, the Fund's net assets consisted of:
<s> <c>
Paid-in capital $54,018,140
Undistributed net investment income 441,481
Undistributed net realized gain (4,597,881)
Net unrealized appreciation 1,823,852
-----------
NET ASSETS $51,685,592
===========
NOTE 5-Distributions to Shareholders:
Distributions paid from ordinary income during the six months ended
April 30, 2003 and the year ended October 31, 2002 were $1,095,641 and
$2,526,683, respectively.
As of October 31, 2002 the components of distributable earnings on a
tax basis were as follows:
<s> <c>
Undistributed ordinary income $ 556,036
Undistributed long-term gain -
Capital loss carrryforward 1,688,921
Unrealized appreciation
(depreciation) (2,439,894)
The difference between book basis and tax-basis undistributed long-
term gain is attributable primarily to the tax deferral of losses on wash
sales.
10
Castle Convertible Fund, Inc. Castle Convertible Fund, Inc.
Investment Adviser
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
- -------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Alger Shareholder Services, Inc.
30 Montgomery Street, Box 2001
Jersey City, N.J. 07302-9811
- -------------------------------------------------------------
Results of Annual Meeting of Shareholders
The annual meeting of the shareholders of the Fund was
held on December 3, 2002. The following matters were
submitted to a shareholder vote and approved:
(i) the election or reelection of the following directors of
the Fund: Fred M. Alger, James P. Connelly, Jr., Charles
F. Baird, Jr., Roger P. Cheever, Lester L. Colbert, Jr.,
Stephen E. O'Neil, Nathan E. Saint-Amand, and B.
Joseph White. Each of the candidates elected or reelected
received at least 2,028,510 affirmative votes and no more
than 41,453 votes were withheld for any candidate. There
were 12,963 abstentions.
(ii) The ratification of the selection of Ernst & Young LLP
as the Fund's independent public accountants for the fis-
cal year ending October 31, 2002: For-2,046,622;
Against-32,569; Abstain-21,740
- -------------------------------------------------------------
This report was prepared for distribution to shareholders
and to others who may be interested in current informa-
tion concerning the Fund. It was not prepared for use,
nor is it circulated in connection with any offer to sell, or
solicitation of any offer to buy, any securities.
Item 2. Code of Ethics
--------------
Not applicable.
Item 3. Audit Committee Financial Expert
--------------------------------
Not applicable.
Item 4. Principal Accountant Fees and Services
--------------------------------------
Not applicable.
Item 5. Audit Committee of Listed Registrants
-------------------------------------
Not applicable.
Item 6. Reserved
--------
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
-----------------------------------------------------------------
Management Investment Companies
- -------------------------------
Not applicable.
Item 8. Reserved
--------
Item 9. Controls and Procedures
-----------------------
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940, as amended) are effective based on their evaluation of the disclosure
controls and procedures as of a date within 90 days of the filing date of
this document.
(b) In the last 90 days, there have been no significant changes in the
registrant's internal controls or in other factors that could significantly
affect these controls.
Item 10. Exhibits
--------
(a) Not applicable.
(b) Attached hereto
Exhibit 99.CERT Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Castle Convertible Fund, Inc.
By: /s/Fred M. Alger
Fred M. Alger
Chairman and President
Date: July 8, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/Fred M. Alger
Fred M. Alger
Chairman and President
Date: July 8, 2003
By: /s/Gregory S. Duch
Gregory S. Duch
Treasurer
Date: July 8, 2003
CERTIFICATIONS
--------------
I, Fred M. Alger, certify that:
1. I have reviewed this report on Form N-CSR of the Castle Convertible
Fund, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations, changes in net
assets, and cash flows (if the financial statements are required to include
a statement of cash flows) of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-2(c) under the Investment Company Act of 1940) for the
registrant and have:
a. designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
report (the "Evaluation Date"); and
c. presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize, and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: July 8, 2003
/s/Fred M. Alger
- ----------------
Fred M. Alger
Chairman and President
I, Gregory S. Duch, certify that:
1. I have reviewed this report on Form N-CSR of the Castle Convertible
Fund, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations, changes in net
assets, and cash flows (if the financial statements are required to include
a statement of cash flows) of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-2(c) under the Investment Company Act of 1940) for the
registrant and have:
a. designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
report (the "Evaluation Date"); and
c. presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize, and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: July 8, 2003
/s/Gregory S. Duch
- ------------------
Gregory S. Duch
Treasurer