CASTLE |
CONVERTIBLE | Meeting the challenge
FUND,| of investing
INC.|
Semi-Annual Report
April 30, 1995
Dear Shareholder:
How the times have changed! The markets are now focused on the
unambiguous signs of a significant economic slowdown. Expectations for an
imminent easing of monetary policy are intensifying. The change in sentiment
has fueled rallies in both the bond and stock markets.
The stock and fixed income markets produced a splendid performance for
the first five months of 1995. The stock market, as measured by the S&P 500,
had gains of 17.49% for the five months ended May 31, 1995. As we suggested in
our last letter, Castle's portfolio is not tailored to fully participate in a
major stock market advance. However, we are pleased to report that Castle's
total return of 11.65% (based on net asset value) represented fully two-thirds
of the stock market's move and handily exceeded the total return of 10.90%
produced by the Lehman Corporate/Government Bond Index. Castle's advance has
continued into June. Contributing to Castle's performance were strong gains in
our technology holdings. The rally in interest-sensitive industries such as
housing, savings and loans, and electric utilities also played a role in
Castle's gains.
While the landing may be bumpy, we do not believe the economy runs the
risk of a "hard" landing. None of the classic signs preceding a recession is
present. Debt levels are not burdensome; the levels of inventories being
worked down are not alarmingly high; consumer and business confidence are not
eroding; inflation is not accelerating. Furthermore, the drop in long-term
interest rates will, in time, give the economy a boost and corporate earnings
will not weaken by a troubling amount. We expect that the stock market will
focus on the upturn and continue to reward investors in the months ahead.
Respectfully submitted,
/s/ DAVID D. ALGER
David D. Alger
President
June 22, 1995
CASTLE CONVERTIBLE FUND, INC.
SCHEDULE OF INVESTMENTS (Unaudited)
April 30, 1995
<TABLE>
<CAPTION>
Principal
Amount Corporate Bonds--60.3% Value
<C> <S> <C>
BUILDING & CONSTRUCTION--2.7%
$ 1,000,000 Continental Homes Holding Corp.,
Cv. Notes, 6.875%, 3/15/02 $ 810,000
1,075,000 Hechinger Co., Cv. Sub. Deb.,
5.50%, 4/1/12 722,938
-----------
1,532,938
-----------
COMPUTER RELATED & BUSINESS
EQUIPMENT--11.4%
1,750,000 Bay Networks, Cv. Sub. Deb.,
5.25%, 5/15/03(a) 1,513,750
1,500,000 Network Equipment Technologies,
Cv. Sub. Deb., 7.25%, 5/15/14 1,331,250
1,500,000 Seagate Technology Corp., Cv.
Sub. Deb., 6.75%, 5/1/12 1,413,750
1,000,000 Storage Technology Corp., Cv.
Sub. Deb., 8.00%, 5/31/15 870,000
1,250,000 3 Com Corp., Cv. Sub. Notes,
10.25%, 11/1/01(a) 1,453,125
-----------
6,581,875
-----------
ENERGY--9.7%
1,250,000 Amoco Canada Petroleum Company
LTD., Sub. Exch. Series A Deb.,
7.375%, 9/1/13 1,559,375
600,000 Ashland Oil Inc., Cv. Sub. Deb.,
6.75%, 7/1/14 580,500
1,000,000 Consolidated Natural Gas, Cv. Sub.
Deb., 7.25%, 12/15/15 1,020,000
2,450,000 Enron Corporation, Sr. Notes,
10.75%, 6/1/98 2,465,312
-----------
5,625,187
-----------
HEALTH CARE--6.6%
3,050,000 Beverly Enterprises, Cv. Sub. Deb.,
7.625%, 3/15/03 2,905,125
1,000,000 Medical Care International,
Eurodollar, Cv. Sub. Deb., 6.75%,
10/1/06 907,500
-----------
3,812,625
-----------
INSURANCE--3.8%
2,000,000 Cigna Corp., Cv. Sub. Deb., 8.20%,
7/10/10 2,170,000
-----------
LEISURE & ENTERTAINMENT--3.3%
1,910,000 Time Warner Inc., Cv. Sub. Deb.,
8.75%, 1/10/15 1,914,775
-----------
POLLUTION CONTROL--6.0%
2,250,000 Browning-Ferris Industries,
Eurodollar, Cv. Sub. Deb., 6.75%,
7/18/05 2,154,375
1,100,000 USA Waste Services, Inc., Cv. Sub.
Deb., 8.50%, 10/15/02 1,295,250
-----------
3,449,625
-----------
RETAILING--12.2%
$ 1,240,000 Fabri-Centers of America, Inc.,
Cv. Sub. Deb., 6.25%, 3/1/02 $ 1,029,975
1,500,000 Federated Dept. Stores, Sr. Cv.
Discount Notes, 9.72%, 2/15/04 1,513,125
1,500,000 Price/Costco Inc., Cv. Sub. Deb.,
6.75%, 3/1/01 1,466,250
1,500,000 Tiffany & Co., Eurodollar, Cv. Sub.
Deb., 6.375%, 3/15/01 1,447,500
1,750,000 Waban Inc., Cv. Sub. Deb., 6.50%,
7/1/02 1,618,750
-----------
7,075,600
-----------
TRANSPORTATION--4.6%
1,500,000 Airborne Freight Corp., Cv. Sub.
Deb., 6.75%, 8/15/01 1,417,500
1,250,000 GenCorp Inc., Cv. Sub. Deb.,
8.00%, 8/1/02 1,243,750
-----------
2,661,250
-----------
Total Corporate Bonds
(Cost $34,389,205) 34,823,875
-----------
Convertible Preferred
Shares Stocks--22.1%
AIRLINES--.7%
7,000 Delta Air Lines Inc., $3.50 Dep.
Shrs., Series C. 383,250
-----------
COMMUNICATIONS--3.4%
15,000 Evergreen Media Corp., Cv. 6.00%
Exch. Pfd. 645,000
40,000 Mobile Telecommunication
Technologies Corp., $2.25 Conv.
Pfd.(a) 1,360,000
-----------
2,005,000
-----------
COMPUTER RELATED & BUSINESS
EQUIPMENT--3.3%
30,000 General Motors Corporation, $3.25
Series C Dep. Shrs. 1,878,750
-----------
MANUFACTURING--1.6%
60,000 Westinghouse Electric Corp.,
$1.30 Depository Shrs. (a) 915,000
-----------
RAW MATERIAL PROCESSING--7.6%
20,000 Bethlehem Steel Corporation, $5.00
Cum. Pfd. 1,012,500
15,000 Howell Corp., $3.50 Cum. Pfd 731,250
60,000 James River Corp., Dep. Shrs.,
$3.50 Exch. Pfd., Series L. 2,640,000
-----------
4,383,750
-----------
REAL ESTATE--1.1%
35,400 Wellsford Residential Property
Trust, 7.00% Cum. Cv. Pfd.,
Series A 659,325
-----------
SAVINGS & LOANS--1.5%
15,000 Great Western Financial Corp.,
Dep. Shrs., 8.75% Cum. Cv.
Dep. Pfd. $ 853,125
-----------
MISCELLANEOUS--2.9%
30,000 SCI Finance LLC, $3.125 Term Cv.
Shares, Series A 1,665,000
-----------
Total Convertible Preferred Stocks
(Cost $12,132,656) 12,743,200
-----------
Common Stocks--11.0%
UTILITIES
52,000 American Electric Power Co., Inc. 1,703,000
65,000 Public Service Colorado 1,958,125
50,000 Public Service Enterprise
Group Inc. 1,375,000
40,000 Texas Utilities Co. 1,305,000
-----------
Total Common Stocks
(Cost $6,008,584) 6,341,125
-----------
Principal Short-Term Corporate
Amount Notes--5.2% Value
$ 2,100,000 American Express Credit Corp.,
5.86%, 5/9/95 $ 2,100,000
532,000 Ford Motor Credit Company,
5.92%, 5/2/95 532,000
393,000 Ford Motor Credit Company,
5.95%, 5/9/95 393,000
-----------
Total Short-Term Corporate Notes
(Cost $3,025,000) 3,025,000
-----------
Total Investments
(Cost $55,555,445)(b) 98.6% 56,933,200
Other Assets in Excess of Liabilities 1.4% 786,141
---------------------
Total Net Assets 100.0% $57,719,341
=====================
<FN>
<F1> (a) Pursuant to Securities and Exchange Commission Rule 144A, these
securities may be sold prior to their maturity only to qualified
institutional buyers.
<F2> (b) At April 30, 1995, the net unrealized appreciation on investments,
based on cost for Federal income tax purposes of $55,555,445, amounted
to $1,377,755 which consisted of aggregate gross unrealized
appreciation of $3,428,226 and aggregate gross unrealized depreciation
of $2,050,471.
</FN>
</TABLE>
CASTLE CONVERTIBLE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $55,555,445),
see accompanying schedule of investments $56,933,200
Cash 50,452
Dividends and interest receivable 801,395
Prepaid expenses 8,225
-----------
Total Assets 57,793,272
LIABILITIES:
Investment advisory fees payable $35,098
Directors' fees payable 2,571
Accrued expenses 36,262
-------
Total Liabilities 73,931
-----------
NET ASSETS applicable to 2,236,003 outstanding shares of
$0.01 par value (10,000,000 shares authorized) $57,719,341
===========
NET ASSET VALUE PER SHARE $ 25.81
===========
</TABLE>
See Notes to Financial Statements.
CASTLE CONVERTIBLE FUND, INC.
STATEMENT OF OPERATIONS
for the six months ended April 30, 1995 (Unaudited)
<TABLE>
<S> <S> <S>
INVESTMENT INCOME:
Income:
Interest $1,438,788
Dividends 701,864
----------
Total Income 2,140,652
Expenses:
Investment advisory fees--Note 2(a) $ 209,119
Custodian and transfer agent fees 15,799
Directors' fees 19,393
Professional fees 12,526
Shareholder reports 12,411
Bookkeeping fees 9,000
Miscellaneous 13,782
----------
Total Expenses 292,030
----------
NET INVESTMENT INCOME 1,848,622
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 2,016,823
Net (decrease) in unrealized appreciation of investments (159,216)
----------
Net realized and unrealized gain on investments 1,857,607
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,706,229
==========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Four Months Ended Year Ended
April 30, 1995* October 31, 1994 June 30, 1994
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income $ 1,848,622 $ 1,156,972 $ 3,602,809
Net realized gain (loss) on investments 2,016,823 (76,208) 2,327,503
Net change in unrealized appreciation (depreciation) of
investments (159,216) 1,349,199 (5,888,039)
------------------------------------------------------
Net increase in net assets resulting from operations 3,706,229 2,429,963 42,273
------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (1,782,401) (888,000) (3,700,320)
Net realized gain (1,798,201) -- (1,260,762)
------------------------------------------------------
Total dividends (3,580,602) (888,000) (4,961,082)
------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Shares issued to shareholders from reinvestment of
dividends (16,002 shares, 0 shares and 8,138 shares,
respectively) 386,445 -- 219,312
------------------------------------------------------
Net increase (decrease) in net assets 512,072 1,541,963 (4,699,497)
NET ASSETS:
Beginning of period 57,207,269 55,665,306 60,364,803
------------------------------------------------------
End of period (including undistributed net investment
income of $592,307, $526,086 and $257,114, respectively) $57,719,341 $57,207,269 $55,665,306
======================================================
<FN>
<F1> * Unaudited.
</FN>
</TABLE>
See Notes to Financial Statements.
CASTLE CONVERTIBLE FUND, INC.
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
Six Four
Months Months
Ended Ended Year Ended June 30,
April 30, October 31, ----------------------------------------------------
1995* 1994*** 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $25.77 $25.07 $27.29 $24.20 $22.18 $21.65 $21.59
------------------------------------------------------------------------------
Net investment income 0.83 0.52 1.62 1.68 1.70 1.61 1.70
Net realized and unrealized gain (loss) on
investments 0.82 0.58 (1.60) 3.23 2.02 0.58 0.03
------------------------------------------------------------------------------
Total from investment operations 1.65 1.10 0.02 4.91 3.72 2.19 1.73
------------------------------------------------------------------------------
Dividends from net investment income (0.80) (0.40) (1.67) (1.82) (1.70) (1.66) (1.67)
Distributions from net realized gains (0.81) -- (0.57) -- -- -- --
------------------------------------------------------------------------------
Total Distributions (1.61) (0.40) (2.24) (1.82) (1.70) (1.66) (1.67)
------------------------------------------------------------------------------
Net asset value, end of period $25.81 $25.77 $25.07 $27.29 $24.20 $22.18 $21.65
==============================================================================
Market value, end of period $23.50 $24.38 $22.25 $26.50 $21.25 $18.75 $18.88
==============================================================================
Total investment return based on market
value per share 2.95% 11.28% (8.41%) 34.26% 22.78% 9.00% 10.53%**
==============================================================================
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $57,719 $57,207 $55,665 $60,365 $53,537 $49,058 $47,883
==============================================================================
Ratio of expenses to average net
assets 1.05% 1.04% 1.05% 1.06% 1.10% 1.15% 1.16%
==============================================================================
Ratio of net investment income to
average net assets 6.62% 6.02% 6.02% 6.50% 7.24% 7.79% 7.84%
==============================================================================
Portfolio Turnover Rate 21.41% 8.65% 29.38% 52.63% 68.69% 48.37% 64.93%
==============================================================================
<FN>
<F1> * Unaudited. Ratios have been annualized; total return has not been
annualized.
<F2> ** Information with respect to total investment return for 1990 has not
been audited.
<F3> *** Ratios have been annualized; total return has not been annualized.
</FN>
</TABLE>
See Notes to Financial Statements.
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").
Effective October 31, 1994, the Fund changed
its fiscal year end from June 30 to October 31.
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
corporate notes 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.
(c) Dividends to ShareholdersDividends payable to
shareholders are recorded by the Fund on the ex-
dividend date. Dividends from net investment income
are declared and paid quarterly. Dividends from net
realized gain are declared and paid annually after
the end of the fiscal year in which earned.
(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, 1994, the net
capital loss carryforward of the Fund was
approximately $82,000 and expires in 2002.
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 average of the Fund's weekly
net asset value.
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, 1995, no reimbursement was required pursuant to
the Contract. For the six months ended April 30,
1995, the total investment advisory fee charged to
the Fund amounted to $209,119, 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, 1995, the Fund
incurred fees of approximately $6,900 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,
1995, the Adviser and its affiliates owned 308,756
shares of the Fund.
NOTE 3--Securities Transactions:
During the six months ended April 30, 1995,
purchases and sales of investment securities,
excluding short-term securities, aggregated
$11,298,000 and $14,771,114, respectively.
NOTE 4--Components of Net Assets:
At April 30, 1995, the Fund's net assets
consisted of:
<TABLE>
<S> <C>
Paid-in capital $54,012,068
Undistributed net investment income 592,307
Undistributed net realized gain 1,737,211
Net unrealized appreciation 1,377,755
-----------
NET ASSETS $57,719,341
===========
</TABLE>
CASTLE |
CONVERTIBLE | Meeting the challenge
FUND,| of investing
INC. |
Board of Directors
Fred M. Alger, Chairman
David D. Alger
Lester L. Colbert, Jr.
Arthur M. Dubow
Stephen E. O'Neil
Nathan Saint-Amand
John T. Sargent
- ------------------------------------------------
Investment Adviser
Fred Alger Management, Inc.
75 Maiden Lane
New York, N.Y. 10038
- ------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Alger Shareholder Services, Inc.
30 Montgomery Street, Box 2001
Jersey City, N.J. 07302-9811
- ------------------------------------------------
Custodian
NatWest Bank National Association
10 Exchange Place
Jersey City, N.J. 07302
- ------------------------------------------------
This report was prepared for distribution to
shareholders and to others who may be interested
in current information 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.
