CASTLE CONVERTIBLE FUND, INC.
75 Maiden Lane
New York, New York 10038
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
The 1997 Annual Meeting of Shareholders of Castle Convertible Fund, Inc.
(the "Fund") will be held in the offices of the Fund, 75 Maiden Lane, New York,
New York 10038, 12th Floor, on December 9, 1997 at 11:00 A.M. for the following
purposes:
1. To elect seven (7) Directors for the ensuing year.
2. To ratify or reject the selection of Arthur Andersen LLP as the
independent public accountants for the Fund for the fiscal year
ending October 31, 1998.
3. To consider the removal of an investment restriction of the Fund.
4. To consider and act upon such other matters as may properly come
before the meeting or any adjournments thereof.
Shareholders of record as of the close of business on October 20, 1997
will be entitled to vote at the meeting. The enclosed proxy is being solicited
on behalf of Management of the Fund.
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY TO ALGER SHAREHOLDER SERVICES,
INC., 30 MONTGOMERY STREET, JERSEY CITY, NEW JERSEY 07302, IN THE POSTPAID
RETURN ENVELOPE ENCLOSED FOR YOUR USE.
By order of the Board of Directors
DAVID D. ALGER
President
Dated: October 21, 1997
New York, New York
PROXY STATEMENT
for
THE 1997 ANNUAL MEETING OF SHAREHOLDERS
of
CASTLE CONVERTIBLE FUND, INC.
To be held on December 9, 1997
INTRODUCTION
The accompanying Proxy is being solicited by the Management of Castle
Convertible Fund, Inc. (the "Fund") for use at the Annual Meeting of
Shareholders to be held at 11:00 A.M.on December 9, 1997 and at any
adjournments thereof. All costs of solicitation, including printing and mailing
of this Proxy Statement and the accompanying Notice of Meeting and Proxy, the
reimbursement of brokerage firms and others for their expenses in forwarding
solicitation material to the beneficial owners of stock, and supplementary
solicitations to submit proxies, which may be made by mail, telephone,
telegraph and personal interviews by officers of the Fund, will be borne by the
Fund. It is anticipated that the cost of such supplementary solicitation, if
any, will be nominal.
If the enclosed Proxy is properly executed and returned in time to be
voted at the meeting, the full and fractional shares represented thereby (each
full share is entitled to one vote and each fractional share is entitled to
proportionate voting rights) will be voted in accordance with the instructions
marked thereon. Unless instructions to the contrary are marked thereon with
respect to Proposals 1, 2 and 3, the Proxy will be voted FOR the proposals
stated in the accompanying Notice of Meeting. All proxies not voted, including
broker non-votes, will not be counted toward establishing a quorum.
Shareholders should note that while votes to ABSTAIN will count toward
establishing a quorum, passage of any proposal being considered at the meeting
will occur only if a sufficient number of votes are cast FOR the proposal.
Accordingly, votes to ABSTAIN and votes AGAINST will have the same effect in
determining whether the proposal is approved. On any motion for adjournment of
the meeting, even if a quorum is present, Management will vote all Proxies in
its discretion pursuant to Item 4 thereof. Any shareholder giving a Proxy has
the right to attend the meeting to vote his shares in person (thereby revoking
any prior Proxy) and also the right to revoke the Proxy at any time by written
notice received by the Fund prior to its exercise.
This Proxy Statement is being mailed to shareholders on or about October
21, 1997. The address of the principal executive office of the Fund is 75
Maiden Lane, New York, New York 10038.
A copy of the Fund's most recent semi-annual and annual reports will be
sent to you without charge upon written request to the Fund, 75 Maiden Lane,
New York, NY 10038 or by calling 800-223-3810 toll-free.
INFORMATION REGARDING VOTING SECURITIES
The Fund has only one class of shares, of which 2,236,032 shares were
issued and outstanding as of the close of business on October 20, 1997, the
record date for determining shareholders entitled to receive notice of, and to
vote at the meeting and all adjournments thereof. Each share is entitled to one
vote at the Annual Meeting.
The following table sets forth those persons known to the Fund to be
beneficial owners of more than 5% of the outstanding voting shares of the Fund
as of October 20, 1997:
Amount of
Title of Name and Address Beneficial Percent of
Class of Beneficial Owners Ownership Class
------------ ----------------------- -------------- ----------
Common Stock Alger Associates, Inc. 306,350 shs.* 13.70%
75 Maiden Lane
New York City, NY 10038
Common Stock All Directors and 315,408 shs.** 14.11%
Officers as a Group
<FN>
- -------------------
<F*> Included in this figure are 71,844 shares owned by Fred Alger & Company,
Incorporated, and 294 shares owned by Alger Shareholder Services, Inc.,
wholly-owned subsidiaries of Alger Associates, Inc.
<F**> Included in this figure are 2,700 shares beneficially owned by Fred M.
Alger III, 1,441 shares beneficially owned by Lester L. Colbert, Jr.,
4,517 shares beneficially owned by Arthur M. Dubow, 300 shares
beneficially owned by John T. Sargent and 100 shares beneficially owned
by Nathan E. Saint-Amand, M.D. Also included are the 306,350 shares
listed in the table above as being held by Alger Associates, Inc., which
may be deemed to be beneficially owned by Fred M. Alger III and David D.
Alger by virtue of their control of Alger Associates, Inc.
</FN>
INFORMATION REGARDING THE ADVISER
Fred Alger Management, Inc. (the "Adviser") has served as the investment
adviser to the Fund since February 1974. The Adviser is a wholly-owned
subsidiary of Fred Alger & Company, Incorporated ("Alger"). Alger, which is a
wholly-owned subsidiary of Alger Associates, Inc. ("Alger Associates"), is a
securities broker-dealer and member firm of the New York Stock Exchange, Inc.
The principal place of business of the Adviser and Alger Associates is 75
Maiden Lane, New York, New York 10038. The principal place of business of Alger
is 30 Montgomery Street, Jersey City, New Jersey 07302. Alger Associates and
Alger are Delaware corporations and the Adviser is a New York corporation.
The Adviser has been engaged in the business of rendering investment
advisory services since 1964 and the Adviser had approximately $9.22 billion of
assets, including those of the Fund, under management as of September 30, 1997.
The names and principal occupations of the directors and principal
executive officers of the Adviser are as follows:
Name Principal Occupations
- -------------------- ------------------------------------------------------
Fred M. Alger III Chairman of the Board of Alger Associates, the
Age: 62 Adviser, Alger, Alger Properties, Inc. ("Properties"),
Alger Shareholder Services, Inc. ("Services"), Alger
Life Insurance Agency, Inc. ("Agency"), the Fund, The
Alger Fund, The Alger American Fund, The Alger
Retirement Fund, Spectra Fund, Fred Alger
International Advisory S.A. ("International"), The
Alger American Asset Growth Fund ("Asset Growth") and
Analysts Resources, Inc. ("ARI").
David D. Alger President and Director of Alger Associates, the
Age: 53 Adviser, Alger, Proper- ties, Services, Agency, and
the Fund; President and Trustee of The Alger Fund, The
Alger American Fund, The Alger Retirement Fund, and
Spectra Fund; President and Director of International;
Executive Vice President and Director of ARI.
Gregory S. Duch Executive Vice President, Treasurer and Director of
Age: 46 Alger Associates, the Adviser and Properties;
Executive Vice President and Treasurer of Alger,
Services, Agency and ARI; Treasurer of the Fund, The
Alger Fund, The Alger American Fund, The Alger
Retirement Fund and Spectra Fund; Treasurer and
Director of International.
Mary Marsden-Cochran General Counsel and Secretary of Alger Associates, the
Age: 44 Adviser, Alger, Properties, Services, Agency and ARI;
Secretary of the Fund, The Alger Fund, The Alger
American Fund, The Alger Retirement Fund,
International and Spectra Fund.
With the exception of Ms. Marsden-Cochran, all of the above have been
employed by the Adviser for more than the past five years and where noted, the
individuals have served as officers of the Fund, of Spectra Fund (and its
predecessor Spectra Fund, Inc.), of The Alger American Fund and of The Alger
Fund for at least five years; and as officers of The Alger Retirement Fund
since 1993. The business address of each of the foregoing is 75 Maiden Lane,
New York, New York 10038. Ms. Marsden-Cochran has been Secretary of Alger
Associates, the Adviser, Alger, Properties, Services, Agency, ARI, the Fund,
The Alger Fund, The Alger American Fund, The Alger Retirement Fund,
International and Spectra Fund since February, 1996. She was Associate General
Counsel and Vice President of Smith Barney Inc. from December 1994 through
February 1996. From January 1994 through November 1994 she was a Blue Sky
Attorney for AMT Capital.
Mr. Fred M. Alger III owns approximately 42.2% of Alger Associates'
outstanding voting securities. Mr. David D. Alger owns approximately 21.2% of
Alger Associates' outstanding voting securities.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
It is proposed to elect as directors the nominees shown below to serve
until the next annual meeting of shareholders and until their successors are
elected and qualified. The nominees have indicated an intention to serve if
elected and have consented to be named in this Proxy Statement.
Shares of the
Fund Beneficially
Owned Directly
Name, Age and Business Director of or Indirectly, Percent
Experience for the the Fund as of of Shares
Last Five Years Since October 20, 1997 Outstanding
- ------------------------------------------------- ------------- ----------------- -----------
* Fred M. Alger III, 62 February 1974 309,050 Shs.** 13.82%
Chairman of the Boards of Alger Associates,
the Adviser, Alger, Properties, Services,
Agency, ARI, the Fund, The Alger Fund, The
Alger American Fund, The Alger Retirement
Fund, International, Asset Growth and
Spectra Fund. Formerly also President of
Alger Associates, the Adviser, Alger,
Properties, Services, Agency, the Fund,
Spectra Fund, Inc., The Alger Fund, The
Alger American Fund and The Alger
Retirement Fund.
* David D. Alger, 53 February 1993 306,350 Shs.** 13.70%
President and Director of Alger Associates,
the Adviser, Alger, Properties, Services,
Agency, and the Fund; President and Trustee
of The Alger Fund, The Alger American Fund,
The Alger Retirement Fund, International
and Spectra Fund; Executive Vice President
and Director of ARI. Formerly Executive
Vice President and Director of Alger
Associates, the Adviser, Alger, Properties,
Services, Agency and ARI; Vice President
and Director of Spectra Fund, Inc.; Vice
President and Trustee of The Alger Fund,
The Alger American Fund and The Alger
Retirement Fund.
Lester L. Colbert, Jr., 63 September 1974 1,441 Shs. 0.06%
Private investor since 1988. Formerly
Chairman of the Board, President and Chief
Executive Officer of Xidex Corporation.
Arthur M. Dubow, 64 February 1974 4,517 Shs. 0.20%
Trustee of the Arthur Dubow Foundation;
Director of Coolidge Investment
Corporation; Trustee of The Alger Fund, The
Alger American Fund, The Alger Retirement
Fund and Spectra Fund; private investor
since 1985, formerly Chairman of the Board
of Institutional Shareholder Services, Inc;
formerly Director of Spectra Fund, Inc.;
formerly President of Fourth Estate, Inc.
Stephen E. O'Neil, 65 January 1973 0 Shs. 0.00%
Of Counsel to the law firm of Kohler &
Barnes; private investor since 1981;
Director of Nova Care, Inc. and
Brown-Forman Corporation; Trustee of The
Alger Fund, The Alger American Fund, The
Alger Retirement Fund and Spectra Fund;
formerly President and Vice Chairman of
City Investing Company and Director of
Centerre Bancorporation; formerly Director
of Spectra Fund, Inc. and Syntro
Corporation.
Nathan Emile Saint-Amand, M.D., 59 September 1986 100 Shs. 0.00%
Medical doctor in private practice; Trustee
of The Alger Fund, The Alger American Fund,
The Alger Retirement Fund and Spectra Fund;
formerly Director of Spectra Fund, Inc.
John T. Sargent, 73 May 1986 300 Shs. 0.01%
Private investor since 1987; Director of
Atlantic Mutual Insurance Co., Trustee of
The Alger Fund, The Alger American Fund,
The Alger Retirement Fund and Spectra Fund;
formerly Director of Spectra Fund, Inc.,
and River Bank America.
<FN>
- -------------------
<F*> Fred M. Alger III and David D. Alger may be considered "interested
persons" of the Fund as such term is defined in the Investment Company
Act of 1940 because they are "interested persons" of the Adviser and
officers of the Fund. Fred M. Alger III and David D. Alger are brothers.
<F**> Includes 306,350 shares of the Fund beneficially owned by Alger
Associates, Inc. directly or through wholly-owned subsidiaries. Fred M.
Alger III and David D. Alger may be deemed beneficially to own such
shares by virtue of their control of Alger Associates, Inc.
</FN>
Officers, Directors and Related Matters
No director, officer or employee of Alger Management or its affiliates
will receive any compensation from the Fund for serving as an officer or
Director of the Fund. Each Director of the Fund who is not an "interested
person" of the Fund as defined in the Investment Company Act of 1940 receives
from the Fund a quarterly fee of $2,000 for his services as Director, but such
fee is reduced proportionately for each meeting of the Board of Directors which
such Director does not attend during the quarter. During the fiscal year ended
October 31, 1996, all such Directors received an aggregate of $40,000 of such
fees. The Fund has no bonus, profit sharing, pension or retirement plans. The
following table provides compensation amounts paid to Disinterested Directors
of the Fund during the fiscal year ended October 31, 1996.
COMPENSATION TABLE
Total Compensation Paid to Directors from
The Alger Retirement Fund,
Aggregate The Alger Fund,
Compensation The Alger American Fund,
from Castle Convertible Fund, Inc. and
Name of Person, Position Castle Convertible Fund, Inc. Spectra Fund.
- -------------------------------- ----------------------------- -----------------------------------------
Lester L. Colbert, Jr., Director $8,000 $ 8,000
Arthur M. Dubow, Director $8,000 $28,250
Stephen E. O'Neil, Director $8,000 $28,250
Nathan E. Saint-Amand, Director $8,000 $28,250
John T. Sargent, Director $8,000 $28,250
Four regular meetings and two special meetings of the Board of Directors
were held during the fiscal year ended October 31, 1996. During that period,
with the exception of Fred M. Alger III, each of the Directors attended at
least 75% of the meetings of the Board.
The Fund's Audit Committee consists of the following independent
Directors: Mr. Sargent, Mr. Dubow and Mr. O'Neil. The Fund's Board of Directors
has no nominating or compensation committee or any committee performing similar
functions.
Management recommends that shareholders vote FOR Proposal No. 1.
PROPOSAL NO. 2: RATIFICATION OF THE SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, including a majority of the Directors who are
not "interested persons" of the Fund or the Adviser, have selected and approved
Arthur Andersen LLP as the independent public accountants to examine the
financial statements of the Fund for the fiscal year ending October 31, 1998.
The Fund has been advised that no member of such firm has a material direct or
indirect interest in the Fund. Pursuant to Section 32(a) of the Investment
Company Act of 1940, such selection is subject to ratification or rejection by
shareholders of the Fund. A representative of Arthur Andersen LLP is expected
to be present at the meeting to answer any questions which the Fund's
shareholders may have. The representative will have an opportunity to make a
statement if he so desires.
Management recommends that shareholders vote FOR Proposal No. 2.
PROPOSAL NO. 3: APPROVAL OF THE REMOVAL OF AN
INVESTMENT RESTRICTION OF THE FUND.
The Board of Directors recommends that the shareholders of the Fund
approve the removal of the following investment restriction:
The Fund will not . . . . . invest in securities that are not readily
marketable without a registration statement or a filing of a notification
under federal or state securities laws if at the time of such investment
more than 10% of the Fund's net assets (taken at market or other fair
value) is invested in such securities.
The Board believes that the restriction provides little significant
benefit. While its apparent goal is to limit the Fund's investment in illiquid
securities, the restriction applies only to securities that are illiquid for
the reason specified in the restriction; it places no limit on securities that
are illiquid for other reasons. Furthermore, because the Fund, unlike an
open-end mutual fund, is not required to redeem its securities on demand, the
principal reason for narrowly limiting portfolio illiquidity--the need to be
prepared to meet heavy redemptions--does not apply.
The restriction has often proven difficult to apply in particular cases
because of the difficulty of determining whether a security is "readily"
marketable. For this reason, the Adviser has often been reluctant to invest on
behalf of the Fund in otherwise attractive "restricted" securities (i.e.,
securities whose trading is legally restricted because they have not been
registered under the Securities Act of 1933) that are governed by Rule 144A
under the 1933 Act, which permits restricted securities to be freely traded
among qualified institutional buyers. The number of issues of Rule 144A
securities has risen to the point where a substantial part of today's
convertible securities market, including securities with markedly
higher-than-average yields, consists of Rule 144A convertibles. Thus the
investment restriction, while providing little benefit to the Fund, has tended
to discourage the Fund's participation in an increasingly important sector of
the convertible securities market.
Accordingly, the Board of Directors recommends that the shareholders
approve the removal of the restriction so as to afford the Adviser greater
flexibility in pursuing the Fund's investment objectives. The Board will
regularly monitor the Fund's investments in Rule 144A securities.
Removal of the investment restriction will require approval by the
holders of a "majority" of the Fund's outstanding voting securities, which is
defined in the Investment Company Act of 1940 as the lesser of (a) 67% or more
of the shares of the Fund present at the meeting or represented by proxy if the
holders of more than 50% of such shares are so present or represented, or (b)
more than 50% of the outstanding shares of the Fund.
Management recommends that shareholders vote FOR Proposal No. 3.
LITIGATION
The Fund is not a party to any material litigation.
OTHER MATTERS
Management knows of no other matters to be brought before the meeting;
however, if any other matters come before the meeting, the persons named in the
enclosed Proxy will vote proxies that do not contain specific restrictions in
accordance with their best judgment on such matters.
SHAREHOLDERS' PROPOSALS
A shareholder proposal intended to be presented at the Fund's 1998
Annual Meeting of Shareholders must be received by the Fund a reasonable time
before the solicitation is made in order to be included in the Fund's proxy
statement and form of proxy relating to that meeting.
75 Maiden Lane
New York, New York
Dated: October 21, 1997
If you cannot attend the meeting, you are urged to fill in, sign and date
the enclosed Proxy and return it as promptly as possible. An addressed envelope
is enclosed for your convenience.
[PROXY CARD]
CASTLE CONVERTIBLE FUND, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS DECEMBER 9, 1996
The undersigned shareholder of Castle Convertible Fund, Inc. hereby appoints
David D. Alger, Gregory S. Duch and Stephen E. O'Neil, and each of them, the
attorneys and proxies of the undersigned, with power of substitution, to vote,
as indicated herein, all of the shares of common stock of Castle Convertible
Fund, Inc. standing in the name of the undersigned at the close of business on
October 20, 1997, at the Annual Meeting of Shareholders of the Fund to be held
at the offices of the Fund, 75 Maiden Lane, New York, New York 10038 at 11:00
a.m. on December 9, 1997, and at all adjournments thereof, with all of the
powers the undersigned would possess if then and there personally present and
especially (but without limiting the general authorization and power hereby
given) to vote as indicated on the proposals, as more fully described in the
Proxy Statement for the meeting, and to vote and act on any other matter which
may properly come before the meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH INSTRUCTIONS GIVEN BY THE SHAREHOLDERS, BUT IF NO INSTRUCTIONS
ARE GIVEN IT WILL BE VOTED FOR THE PROPOSALS LISTED.
(Continued and to be signed on the reverse side)
Please mark boxes [*] or [X] in blue or black ink.
1. ELECTION OF DIRECTORS FOR all nominees listed
below (except WITHHOLD AUTHORITY to vote for as
marked to the contrary below) [ ] all nominees
listed below [ ]
INSTRUCTIONS: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.
Fred M. Alger III, David D. Alger, Lester L. Colbert, Jr., Arthur M. Dubow,
Stephen E. O'Neil, Nathan E. Saint-Amand, John T. Sargent
2. PROPOSAL TO RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP as independent
public accountants of the Fund.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. PROPOSAL TO CONSIDER REMOVAL OF AN INVESTMENT RESTRICTION OF THE FUND.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. PROPOSAL TO CONSIDER AND ACT UPON such other matters as may properly come
before the meeting or any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY. Signature(s) should
be exactly as name or names appear on this
proxy. If stock is held jointly, each
holder should sign. If signing is by
attorney, executor, administrator, trustee
or guardian, please give full title.
-----------------------------------------
Signature(s) Signature(s)
-----------------------------------------
Dated Social Security or
Tax Identification Number
This proxy, when dated and signed, should
be mailed promptly to Alger Shareholder
Services, Inc., 30 Montgomery Street,
Jersey City, NJ 07302. No postage is
required if mailed in the United States in
the enclosed envelope.