As filed with the Securities and Exchange Commission
on December 20, 1996
Securities Act File No. 33-4959
Investment Company Act File No. 811-6880
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 22 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 24 [X]
(Check appropriate box or boxes)
THE ALGER FUND
-------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
75 MAIDEN LANE
NEW YORK, NEW YORK 10038
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 212-806-8800
MR. GREGORY S. DUCH
FRED ALGER MANAGEMENT, INC.
75 MAIDEN LANE
NEW YORK, NY 10038
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Page 1 of _____ Pages
Exhibit Index at Page ______
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b), or
[X] on [December 31, 1996] pursuant to paragraph (b), or
[ ] 60 days after filing pursuant to paragraph (a), or
[ ] on [date] pursuant to paragraph (a) of Rule 485
---------------
DECLARATION PURSUANT TO RULE 24f-2
Registrant has registered an indefinite number or amount of securities
under the Securities Act of 1933, as amended, pursuant to Rule 24f-2(a)(1) under
the Investment Company Act of 1940, as amended. The Rule 24f-2 Notice for
Registrant's fiscal year ended October 31, 1996 was filed on December 20, 1996.
<PAGE>
THE ALGER FUND
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A
Item No. Prospectus Heading
- -------- ------------------
<S> <C>
1. Cover Page..................................... Front Cover Page
2. Synopsis ...................................... Portfolio Expenses
3. Condensed Financial Information ............... Financial Highlights
4. General Description of Registrant ............. Front Cover Page; Investment Objectives
and Policies; Investment Practices; Man-
agement of the Fund
5. Management of the Fund ........................ Management of the Fund
6. Capital Stock and Other Securities ............ Front Cover Page; Management of the
Fund; Dividends and Taxes
7. Purchase of Securities Being Offered .......... How to Purchase Shares; Special Investor
Services--Exchange Privilege
8. Redemption or Repurchase ...................... How to Sell Shares; How to Exchange
Shares
9. Pending Legal Proceedings ..................... Not Applicable
Part B Heading in Statement of
Item No. Additional Information
- -------- ----------------------
10. Cover Page .................................... Front Cover Page
11. Table of Contents ............................. Contents
12. General Information and History ............... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
13. Investment Objectives and Policies ............ Investment Objectives and Policies;
Appendix
14. Management of the Fund ........................ Management
15. Control Persons and Principal Holders of
Securities .................................. Certain Shareholders
16. Investment Advisory and Other Services ........ Management; Custodian and Transfer
Agent; Purchases; See in the Prospectus
"Management of the Fund"
17. Brokerage Allocation and Other Practices ...... Investment Objectives and Policies
18. Capital Stock and Other Securities ............ Organization; See in the Prospectus "Div-
idends and Taxes" and "Management of
the Fund"
19. Purchase, Redemption and Pricing of Secu-
rities Being Offered ......................... Net Asset Value; Purchases; Redemp-
tions
20. Tax Status .................................... Taxes; See in the Prospectus "Taxes"
21. Underwriters .................................. Purchases
22. Calculation of Performance Data ............... Determination of Performance; See
in the Prospectus "Performance"
23. Financial Statements .......................... Financial Statements
Part C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
</TABLE>
<PAGE>
PROSPECTUS
- ----------
THE|75 Maiden Lane
ALGER|New York, New York 10038
FUND|(1-800)992-FUND (992-3863)
The Alger Fund offers interests in six Portfolios. Each Portfolio has distinct
investment objectives and policies which are discussed starting on page 7. The
six Portfolios are:
o Alger Money Market Portfolio
o Alger Small Capitalization Portfolio
o Alger MidCap Growth Portfolio
o Alger Growth Portfolio
o Alger Balanced Portfolio
o Alger Capital Appreciation Portfolio
With the exception of the Alger Money Market Portfolio, each Portfolio offers
two classes of shares, each with a different combination of sales charges,
ongoing fees and other features.
This Prospectus, which should be retained for future reference,
contains important information that you should know before investing.
A Statement of Additional Information dated December 31, 1996
containing further information about The Alger Fund has been filed
with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. It is available at no charge by
contacting The
Alger Fund at the address
or phone number above.
TABLE OF CONTENTS
Page
-----
Introduction.................................................... i
Portfolio Expenses.............................................. ii
Financial Highlights............................................ iv
How to Purchase Shares.......................................... 1
How to Sell Shares.............................................. 4
Special Investor Services....................................... 5
Investment Objectives and Policies.............................. 6
Investment Practices............................................ 9
Management of the Fund.......................................... 11
Net Asset Value................................................. 12
Dividends and Taxes............................................. 13
Performance..................................................... 13
SHARES OF THE ALGER MONEY MARKET PORTFOLIO ARE
NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE IS NO ASSURANCE THAT
THE ALGER MONEY MARKET PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE.
SHARES OF THE FUND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY ANY BANK, AND THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECUR-
ITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
DECEMBER 31, 1996
<PAGE>
INTRODUCTION
The Alger Fund's portfolios, other than the Alger Money Market Portfolio,
offer a choice of two classes of shares having different sales charges, ongoing
fees and other features. You can choose the method of purchasing shares of a
portfolio that is most beneficial in terms of the amount of the purchase, the
length of time you expect to hold shares and other circumstances.
CLASS A SHARES
An investor purchasing Class A shares may pay a sales charge at the time of
purchase. Class A shares are not subject to a charge when they are redeemed
(except for shares purchased for total proceeds of $1 million or more, which
have no initial sales charge and which may be subject to a contingent deferred
sales charge ["CDSC"]). The initial sales charge may be reduced or waived for
certain purchases. Class A shares are subject to a shareholder servicing fee
equal to an annual rate of .25% of the Portfolio's average daily net assets
attributable to its Class A shares. See "How to Purchase Shares--Class A Share
Information".
CLASS B SHARES
Class B shares have no initial sales charge, but may be subject to a CDSC of
up to 5% if you redeem within six years of purchase. They are subject to a 12b-1
fee of .75% of the Portfolio's average daily net assets attributable to Class B
shares. Class B shares also pay a shareholder servicing fee calculated at an
annual rate of .25% of the Portfolio's average daily net assets attributable to
its Class B shares. Class B shares provide an investor the benefit of putting
all of the investor's dollars to work from the time the investment is made but
will have a higher expense ratio and generally will pay lower dividends than
Class A shares due to the higher Rule 12b-1 fee. See "How to Purchase
Shares--Class B Share Information".
i
<PAGE>
PORTFOLIO EXPENSES
The Table below is designed to assist you in understanding the direct and
indirect costs and expenses that you will bear as a shareholder. The Example on
the next page shows the amount of expenses you would pay on a $1,000 investment
in each class of shares of the Portfolios. These amounts assume the reinvestment
of all dividends and distributions, payment of any applicable initial sales
charge or contingent deferred sales charge and payment by the Portfolios of
operating expenses as shown in the Table under Annual Fund Operating Expenses.
The Example is an illustration only and actual expenses may be greater or less
than those shown.
<TABLE>
<CAPTION>
ALGER ALGER
MONEY ALGER ALGER MIDCAP
MARKET BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------- --------------- -------------- --------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a percentage of
<S> <C> <C> <C> <C> <C> <C> <C>
offering price)(a)(b)................. None 4.75% None 4.75% None 4.75% None
Maximum Sales Load Imposed on
Reinvested Dividends.................. None None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage of
redemption proceeds)(b) None None 5.00% None 5.00% None 5.00%
Redemption Fees......................... None None None None None None None
Exchange Fees........................... None None None None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees......................... .50% .75% .75% .75% .75% .80% .80%
12b-1 Fees(c)........................... 0 None .75% None .75% None .75%
Other Expenses (d)(e)(f)................ .29% 1.20% 1.20% .58% .58% .72% .72%
--- ---- ---- ---- ---- ---- ----
Total Fund Expenses (c)(d).............. .79% 1.95% 2.70% 1.33% 2.08% 1.52% 2.27%
=== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Alger
Small Alger
Capitaliza- Capital
tion Appreciation
Portfolio Portfolio
------------- --------------
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed
on Purchases (as a percentage of
offering price)(a)(b)................. 4.75% None 4.75% None
Maximum Sales Load Imposed on
Reinvested Dividends.................. None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage of
redemption proceeds)(b) None 5.00% None 5.00%
Redemption Fees......................... None None None None
Exchange Fees........................... None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees......................... .85% .85% .85% .85%
12b-1 Fees(c)........................... None .75% None .75%
Other Expenses (after expense
reimbursements)(d).................... .53% .53% .86% .86%
---- ---- ---- ----
Total Fund Expenses (c)(d).............. 1.38% 2.13% 1.71% 2.46%
==== ==== ==== ====
</TABLE>
(a) The sales charge applicable to Class A shares set forth in the above table
is the maximum charge imposed upon the purchase of shares. Shareholders may
pay less than 4.75% depending on the amount invested in Class A shares of
the Fund. See "How to Purchase Shares--Class A Share Information."
(b) Class A purchases of $1 million or more are not subject to an initial sales
charge; however a contingent deferred sales charge of 1% may be imposed on
certain redemptions within one year following such purchases. See "How to
Purchase Shares--Class A Share Information." For Class B purchases, the
amount of the contingent deferred sales charge, if applicable, will depend
on the number of years since the shareholder made the purchase payment. See
"How to Purchase Shares--Contingent Deferred Sales Charge."
(c) The Fund reimburses Fred Alger & Company, Incorporated for the expenses it
incurs in distributing Class B shares of each portfolio other than the
Alger Money Market Portfolio at the maximum annual rate of .75% of the
class' average daily net assets. Such reimbursement includes interest on
the unreimbursed carryforward. Long-term shareholders paying 12b-1 fees
pursuant to the Fund's plan of distribution may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of
the National Association of Securities Dealers, Inc.
(d) Included in Other Expenses of the Alger Capital Appreciation Portfolio is
0.02% of interest expense.
(e) Other expenses for the Alger Money Market Portfolio has been restated to
reflect current fees.
(f) "Other Expenses" for a Portfolio's Class A shares are estimated on the
basis of amounts incurred by the Portfolio's Class B shares during its most
recent fiscal year.
ii
<PAGE>
PORTFOLIO EXPENSES (CONTINUED)
<TABLE>
<CAPTION>
Alger Alger
Money Alger Alger MidCap
Market Balanced Growth Growth
Portfolio Portfolio Portfolio Portfolio
-------- ------------ ----------- -------------
Class A Class B Class A Class B Class A Class B
Example
You would pay the following
expenses on a $1,000
investment including
the maximum sales
charges and assuming
(1) 5% annual return and
(2) redemption at the end of
each time period:
<S> <C> <C> <C> <C> <C> <C> <C>
One Year .................................. $ 8 $ 66 $ 77 $ 60 $ 71 $ 62 $ 73
Three Years................................ 25 106 114 88 95 93 101
Five Years................................. 44 148 163 117 132 126 142
Ten Years.................................. 98 264 303 200 241 220 261
You would pay the following
expenses on the same investment,
assuming no redemption at the
end of each time period:
One Year................................... $ 8 $ 66 $ 27 $ 60 $ 21 $ 62 $ 23
Three Years................................ 25 106 84 88 65 93 71
Five Years................................. 44 148 143 117 112 126 122
Ten Years.................................. 98 264 303 200 241 220 261
</TABLE>
Small Alger
Capitaliza- Capital
tion Appreciation
Portfolio Portfolio
------------ -----------
Class A Class B Class A Class B
Example
You would pay the following
expenses on a $1,000
investment including
the maximum sales
charges and assuming
(1) 5% annual return and
(2) redemption at the end of
each time period:
One Year ................................. $ 61 $ 72 $ 64 $ 75
Three Years............................... 89 97 99 107
Five Years................................ 119 134 136 151
Ten Years................................. 205 246 240 280
You would pay the following
expenses on the same investment,
assuming no redemption at the
end of each time period:
One Year.................................. $ 61 $ 22 $ 64 $ 25
Three Years............................... 89 67 99 77
Five Years................................ 119 114 136 131
Ten Years................................. 205 246 240 280
iii
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended October 31, 1990 through 1996 have
been audited by Arthur Andersen LLP, The Alger Fund's ("the Fund") independent
public accountants. This information should be read in conjunction with the
financial statements of the Fund contained in its Annual Report, which financial
statements are hereby incorporated by reference. An Annual Report of the Fund is
available by contacting the Fund at (1-800) 992-3863. In addition to financial
statements, the Annual Report contains further information about performance of
the Fund. The Financial Highlights, with the exception of the total return
information, for the two years ended October 31, 1989 and the period from
November 11, 1986 (commencement of operations) to October 31, 1987 have been
audited by other independent accountants, who have expressed an unqualified
opinion thereon.
THE ALGER FUND
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year Ended October 31,
- --------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- -------- -------- -------- -------
Net investment income...................... .0521 .0573 .0374 .0304 .0424 .0671
Dividends from net investment income....... (.0521) (.0573) (.0374) (.0304) (.0424) (.0671)
------- ------- -------- -------- -------- -------
Net asset value, end of year............... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======== ======== ======== =======
Total Return .............................. 5.3% 5.9% 3.8% 3.1% 4.3% 6.9%
======= ======= ======== ======== ======== =======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) ................ $285,702 185,822 $163,170 $126,567 $135,288 $160,898
======= ======= ======== ======== ======== ========
Ratio of expenses to average net assets... .41%(ii) .29%(ii) .27%(iii) .41%(iii) .25%(iii) .18%(iii)
======= ======= ======== ======== ======== ========
Decrease reflected in above
expense ratios due to expense
reimbursements and management
fee waivers ..................... 38% .50% .50% .50% .60% .63%
======= ======= ======== ======== ======== =======
Ratio of net investment income to
average net assets...................... 5.18% 5.73% 3.78% 3.04% 4.30% 6.76%
======= ======= ======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,
- --------------------------------------------------------------------------------
1990 1989 1988 1987*
---- ----- ----- -----
<S> <C> <C> <C> <C>
Net asset value, beginning of year........ $1.0000 $1.0000 $1.0000 $1.0000
------- ------- -------- --------
Net investment income...................... .0844 .0927 .0732 .0541
Dividends from net investment income....... (.0844) (.0927) (.0732) (.0541)
------- ------- -------- --------
Net asset value, end of year............... $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======== ========
Total Return .............................. 8.8% 9.7%(i) 7.6%(i) 5.6%(i)
======= ======= ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) ....................... $143,420 $69,581 $11,509 $4,247
======== ======= ======== ========
Ratio of expenses to average net assets.. .03%(iii) --(iii --(iii) .64%(iii)
======== ======= ======== ========
Decrease reflected in above
expense ratios due to expense
reimbursements and management
fee waivers ........................... .84% .93% 1.73% 1.88%
======= ======= ======== ========
Ratio of net investment income to
average net assets..................... 8.37% 9.45% 7.16% 5.82%
======= ======= ======== ========
</TABLE>
*FromNovember 11, 1986 (commencement of operations) through October 31,
1987. Ratios have been annualized; total return has not been annualized.
(i)Unaudited.
(ii)Reflects total expenses including fees offset by earnings credits. The
expense ratios net of earnings credits would have been 0.40%, and 0.27% for
the years ended October 31, 1996 and 1995, respectively.
(iii)Expense ratios for the periods ended prior to October 31, 1995 do not
reflect the effect of fees offset by earnings credits, if any.
iv
<PAGE>
THE ALGER FUND
BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS--CLASS B SHARES (i)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
Net asset value, beginning
<S> <C> <C> <C> <C>
of year......................................... $13.59 $10.65 $11.18 $ 9.95
--------- --------- --------- ---------
Net investment income (loss)...................... .12 (.02)(iv) (.05) (.01)
Net realized and unrealized
gain (loss) on investments...................... .72 2.96 (.39) 1.24
--------- --------- --------- ---------
Total from investment operations.................. .84 2.94 (.44) 1.23
Dividends from net investment
income......................................... (.01) -- -- --
Distributions from net realized
gains.......................................... (.21) -- (.09) --
--------- --------- --------- ---------
Total Distributions............................... (.22) -- (.09) --
--------- --------- --------- ---------
Net asset value, end of year...................... $14.21 $13.59 $10.65 $11.18
========= ========= ========= =========
Total Return (iii)................................ 6.3% 27.6% (4.0%) 12.4%
========= ========= ========= =========
Ratios and Supplemental Data:
Net assets, end of year (000's
omitted)..................................... $13,492 $ 6,214 $ 3,073 $ 3,125
========= ========= ========= =========
Ratio of expenses to average
net assets.................................... 2.70%(v) 3.34%(v) 3.18%(vi) 3.82%(vi)
========= ========= ========= =========
Decrease reflected in above
expense ratios due to
expense reimbursements........................ -- .24% -- .75%
========= ========= ========= =========
Ratio of net investment income
(loss) to average net assets................. .47% (.13%) (.41%) (.97%)
========= ========= ========= =========
Portfolio Turnover Rate......................... 85.51% 84.06% 84.88% 115.17%
========= ========= ========= =========
Average Commission Rate Paid................... $.0700
=========
</TABLE>
<TABLE>
<CAPTION>
From June 1, 1992
(commencement
of operations)
to October 31, 1992(ii)
----------------------
Net asset value, beginning
<S> <C>
of year ............................................. $ 10.00
---------
Net investment income (loss) .......................... (.12)
Net realized and unrealized
gain (loss) on investments .......................... .07
---------
Total from investment operations ...................... (.05)
Dividends from net investment
income ............................................. --
Distributions from net realized
gains .............................................. --
---------
Total Distributions ................................... --
---------
Net asset value, end of year .......................... $ 9.95
=========
Total Return (iii) .................................... (0.5%)
=========
Ratios and Supplemental Data:
Net assets, end of year (000's
omitted) .......................................... $ 1,370
=========
Ratio of expenses to average
net assets ........................................ 5.62%(vi)
=========
Decrease reflected in above
expense ratios due to
expense reimbursements ............................ .75%
=========
Ratio of net investment income
(loss) to average net assets ..................... (3.07%)
=========
Portfolio Turnover Rate ............................. 17.07%
=========
Average Commission Rate Paid
</TABLE>
(i) Class A shares were not offered during the periods shown.
(ii) Ratios have been annualized; total return has not been annualized.
(iii) Does not reflect contingent deferred sales charge.
(iv) Amount was computed based on average shares outstanding during the period.
(v) Reflects total expenses, including fees offset by earnings credits. The
expense ratios net of earnings credits would have been 2.69% and 3.25%
for the years ended October 31, 1996 and 1995, respectively.
(vi) Expense ratios for the periods ended prior to October 31, 1995, do not
reflect the effect of fees offset by earnings credits, if any.
v
<PAGE>
THE ALGER FUND
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS--CLASS B SHARES (i)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (ii)
YEAR ENDED OCTOBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year....... $ 9.38 $ 6.97 $ 7.43 $5.76 $5.77 $4.25
------- ------ ------- ------- ------- -------
Net investment income (loss)............. (.08)(v) (.02) (.07)(v) (.02) (.06)(v) (.02)
Net realized and unrealized gains
(loss) on investments.................. .78 2.59 .35 1.70 .61 1.86
------- ------- ------- ------- ------- -------
Total from investment operations......... .70 2.57 .28 1.68 .55 1.84
Distributions from net realized gains.... (.59) (.16) (.74) (.01) (.56) (.32)
------- ------- ------- ------- ------- -------
Net asset value, end of year............. $9.49 $ 9.38 $ 6.97 $ 7.43 $5.76 $5.77
======= ======= ======= ======= ======= =======
Total Return (iv) ................. 8.1% 37.8% 4.1% 29.2% 9.7% 45.8%
======= ======= ======= ======= ======= =======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) ............. $266,207 $154,284 $76,390 $37,988 $19,379 $10,213
======= ======= ======= ======= ======= =======
Ratio of expenses to average
net assets ............ 2.08%(vi) 2.09%(vi) 2.20%(vii) 2.20%(vii) 2.32%(vii) 2.70%(vii)
======= ======= ======= ======= ======= =======
Decrease reflected in above
expense ratios due to expense
reimbursements .................... -- -- -- -- -- --
======= ======= ======= ======= ======= =======
Ratio of net investment
income (loss)
to average net assets................ (.84%) (1.03%) (1.01%) (1.16%) (1.07%) (1.06%)
======= ======= ======= ======= ======= =======
Portfolio Turnover Rate................ 94.91% 118.16% 103.86% 108.54% 69.28% 76.06%
======= ======= ======= ======= ======= =======
Average Commission Rate Paid........... $.0715
=======
</TABLE>
<TABLE>
<CAPTION>
1990 1989 1988 1987*
----- ----- ---- ----
<S> <C> <C> <C> <C>
Net asset value, beginning of year....... $4.42 $3.48 $3.23 $3.33
------- ------- ------- -------
Net investment income (loss)............. (.02) (.05) (.04) (.03)
Net realized and unrealized gains
(loss) on investments.................. (.15) .99 .29 (.07)
------- ------- ------- -------
Total from investment operations......... (.17) .94 .25 (.10)
Distributions from net realized gains.... -- -- -- --
------- ------- ------- -------
Net asset value, end of year............. $4.25 $4.42 $3.48 $3.23
======= ======= ======= =======
Total Return (iv) ....................... (4.0%) 27.0%(iii) 7.7%(iii) (3.0%)(iii)
======= ======= ======= =======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) ............. $5,667 $5,463 $5,294 $5,305
======= ======= ======= =======
Ratio of expenses to average
net assets ............ 3.09%(vii) 3.32%(vii) 3.01%(vii) 3.00%(vii)
======= ======= ======= =======
Decrease reflected in above
expense ratios due to expense
reimbursements .................... -- -- .43% .83%
======= ======= ======= =======
Ratio of net investment
income (loss)
to average net assets................ (.68%) (.70%) (.99%) (1.08%)
======= ======= ======= =======
Portfolio Turnover Rate................ 86.06% 106.73% 151.30% 135.50%
======= ======= ======= =======
Average Commission Rate Paid
</TABLE>
* From November 11, 1986 (commencement of operations) through October 31,
1987. Ratios have been annualized; total return has not been annualized.
(i) Class A shares were not offered during the periods shown.
(ii) Per share data has been adjusted to reflect the effect of a 3 for 1 stock
split which occurred September 27, 1995.
(iii) Unaudited.
(iv) Does not reflect contingent deferred sales charge.
(v) Amount was computed based on average shares outstanding during the
period.
(vi) Reflects total each of expenses, including fees offset by earnings
credits. The expense ratios net of earnings credits would have been 2.07%
for each of the years ended October 31, 1996 and 1995, respectively.
(vii) Expense ratios for the periods ended prior to October 31, 1995 do not
reflect the effect of fees offset by earnings credits, if any.
vi
<PAGE>
THE ALGER FUND
MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS--CLASS B SHARES (i)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------------------
1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
Net asset value, beginning of year ...................... $ 18.94 $ 12.77 $ 12.48
------------- ---------- ----------
Net investment (loss) ................................... (.25)(v) (.08) (.11)
Net realized and unrealized gain on
investments ........................................... 1.35 6.25 .68
------------- ---------- ----------
Total from investment operations ...................... 1.10 6.17 .57
Distribution from net realized gains .................... (1.17) -- (.28)
------------- ---------- ----------
Net asset value, end of year ............................ $ 18.87 $ 18.94 $ 12.77
============= ========== ==========
Total Return (iii) ...................................... 6.4% 48.3% 4.7%
============= ========== ==========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) ............... $ 125,686 $ 54,016 $ 18,516
============= ========== ==========
Ratio of expenses to average net assets ............... 2.27%(iv) 2.39%(iv) 3.20%(vi)
============= ========== ==========
Decrease reflected in above expense
ratio due to expense
reimbursements ...................................... -- -- .07%
============= ========== ==========
Ratio of net investment income (loss)
to average net assets ............................... (1.33%) (1.71%) (2.32%)
============= ========== ==========
Portfolio Turnover Rate ............................... 113.95% 121.60% 127.40%
============= ========== ==========
Average Commission Rate Paid .......................... $ .0690
=============
</TABLE>
May 24, 1993
(commencement
of operations)
to October 31, 1993(ii)
---------------------
Net asset value, beginning of year ...................... $ 10.00
---------
Net investment (loss) ................................... (.09)
Net realized and unrealized gain on
investments ........................................... 2.57
---------
Total from investment operations ...................... 2.48
Distribution from net realized gains .................... --
---------
Net asset value, end of year ............................ $ 12.48
=========
Total Return (iii) ...................................... 24.8%
=========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) ............... $ 3,836
=========
Ratio of expenses to average net assets ............... 3.73%(vi)
=========
Decrease reflected in above expense
ratio due to expense
reimbursements ...................................... 0.80%
=========
Ratio of net investment income (loss)
to average net assets ............................... (2.86%)
=========
Portfolio Turnover Rate ............................... 57.64%
=========
Average Commission Rate Paid
(i) Class A shares were not offered during the periods shown.
(ii) Ratios have been annualized; total return has not been annualized.
(iii) Does not reflect contingent deferred sales charge.
(iv) Reflects total expenses, including fees offset by earnings credits. The
expense ratios net of earnings credits would have been 2.26% and 2.34%
for the years ended October 31, 1996 and 1995, respectively.
(v) Amount was computed based on average shares outstanding during the
period.
(vi) Expense ratios for the periods ended prior to October 31, 1995 do not
reflect the effect of fees offset by earnings credits, if any.
vii
<PAGE>
THE ALGER FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS--CLASS B SHARES (i)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (ii)
<TABLE>
<CAPTION>
Year Ended October 31,
- --------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
----- ----- ----- ----- ----- -----
Net asset value, beginning
<S> <C> <C> <C> <C> <C> <C>
of year...................... $11.13 $7.62 $8.65 $6.88 $6.97 $4.33
------- ------- ------- ------- ------- ------
Net investment income
(loss)....................... (.09) (.13) (.09) (.08) (.11)(v) (.03)
Net realized and unrealized
gains (loss) on investments.. .42 3.64 (.02) 1.85 .37 2.76
------- ------- ------- ------- ------- ------
Total from investment
operations................... .33 3.51 (.11) 1.77 .26 2.73
Distributions from net
realized gains............... (.60) -- (.92) -- (.35) (.09)
------- ------- ------- ------- ------- ------
Net asset value, end
of year...................... $10.86 $11.13 $7.62 $8.65 $6.88 $6.97
======= ======= ======= ======= ======= ======
Total Return (iv)............... 3.2% 46.2% (1.1%) 25.8% 3.4% 63.7%
======= ======= ======= ======= ======= ======
Ratios and Supplemental
Data:
Net assets, end of year
(000's omitted)............ $553,872 $463,718 $294,890 $300,108 $182,432 $61,273
======= ======= ======= ======= ======= ======
Ratio of expenses to
average net assets......... 2.13%(vi) 2.11%(vi) 2.18%(vii) 2.13%(vii) 2.17%(vii) 2.23%(vii)
======= ======= ======= ======= ======= ======
Decrease reflected in
above expense ratios
due to expense
reimbursements............. -- -- -- -- -- --
======= ======= ======= ======= ======= ======
Ratio of net investment
income (loss) to
average net assets.......... (1.59%) (1.75%) (1.51%) (1.52%) (1.64%) (1.37%)
======= ======= ======= ======= ======= =======
Portfolio Turnover Rate....... 153.35% 97.37% 131.86% 148.49% 121.00% 171.04%
======= ======= ======= ======= ======= =======
Average Commission Rate Paid $.0611
=======
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,
- --------------------------------------------------------------------------------
1990 1989 1988 1987*
----- ----- ----- -----
Net asset value, beginning
<S> <C> <C> <C> <C>
of year...................... $5.91 $3.58 $3.00 $3.33
------ ------ ----- -----
Net investment income
(loss)....................... (.06)(v) -- (.07) (.06)
Net realized and unrealized
gains (loss) on investments.. (.25) 2.33 .65 (.27)
------ ------ ----- -----
Total from investment
operations................... (.31) 2.33 .58 (.33)
Distributions from net
realized gains............... (1.27) -- -- --
------ ------ ------ -----
Net asset value, end
of year...................... $4.33 $5.91 $3.58 $3.00
====== ====== ======= ======
Total Return (iv)............... (7.1%) 65.1%(iii) 19.3%(iii) (10.0%)(iii)
====== ====== ======= ======
Ratios and Supplemental
Data:
Net assets, end of year
(000's omitted)............ $23,628 $11,990 $3,709 $3,190
====== ======= ====== ======
Ratio of expenses to
average net assets......... 2.66%(vii) 3.25%(vii) 3.01%(vii) 3.00%(vii)
====== ====== ===== ======
Decrease reflected in
above expense ratios
due to expense
reimbursements............. -- -- 1.33% 1.62%
====== ====== ======= ======
Ratio of net investment
income (loss) to
average net assets.......... (1.17%) (1.92%) (2.07%) (2.02%)
====== ====== ======= =======
Portfolio Turnover Rate....... 252.66% 441.42% 228.32% 267.55%
======= ======= ======= =======
Average Commission Rate Paid
</TABLE>
* From November 11, 1986 (commencement of operations) through October 31,
1987. Ratios have been annualized; total return has not been annualized.
(i) Class A shares were not offered during the periods shown.
(ii) Per share data has been adjusted to reflect the effect of a 3 for 1 stock
split which occurred September 27, 1995.
(iii) Unaudited.
(iv) Does not reflect contingent deferred sales charge.
(v) Amount was computed based on average shares outstanding during the
period.
(vi) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been the same for the
years ended October 31, 1996 and 1995, respectively.
(vii) Expense ratios for the periods ended prior to October 31, 1995 do not
reflect the effect of fees offset by earnings credits, if any.
viii
<PAGE>
THE ALGER FUND
CAPITAL APPRECIATION PORTFOLIO (i)
FINANCIAL HIGHLIGHTS--CLASS B SHARES (ii)
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Net asset value, beginning of year......................... $ 18.62 $ 11.11 $ 10.00
---------- --------- --------
Net investment (loss)...................................... (.34)(iii) (0.47)(iii) (0.47)
Net realized and unrealized gain on investments............ 3.88 7.98 1.58
---------- --------- --------
Total from investment operations......................... 3.54 7.51 1.11
Distributions from net realized gains...................... (.54) -- --
---------- --------- --------
Net asset value, end of year............................... $ 21.62 $ 18.62 $ 11.11
========== ========= ========
Total Return (iv).......................................... 19.5% 67.6% 11.1%
========== ========= ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted).................. $ 150,258 $ 33,640 $ 2,369
========== ========= ========
Ratio of expenses excluding interest to
average net assets..................................... 2.44% 3.26% 4.13%
========== ========= ========
Ratio of expenses including interest to
average net assets..................................... 2.46%(v) 3.54%(v) 5.53%(vii)
========== ========= ========
Decrease reflected in above expense ratios due to
expense reimbursements (vi)............................ -- -- 0.85%
========== ========= ========
Ratio of net investment income (loss) to average
net assets............................................. (1.61%) (3.02%) (5.12%)
========== ========= ========
Portfolio Turnover Rate.................................. 162.37% 197.65% 231.99%
========== ========= ========
Average Commission Rate Paid............................. $ .0647
==========
Debt outstanding at end of year.......................... $7,700,000 -- $651,000
========== ========= ========
Average amount of debt outstanding during the year....... $ 239,966 $ 293,153 $406,864
========== ========= ========
Average daily number of shares outstanding
during the year........................................ 4,852,286 543,270 191,676
========== ========= ========
Average amount of debt per share during the year......... $ 0.05 $ 0.54 $ 2.12
========== ========= ========
</TABLE>
(i) Prior to March 27, 1995, the Capital Appreciation Portfolio was the
Leveraged AllCap Portfolio.
(ii) Class A shares were not offered during the periods shown.
(iii) Amount was computed based on average shares outstanding during the year.
(iv) Does not reflect contingent deferred sales charge.
(v) Reflects total expenses, including fees offset by earnings credits. The
expense ratios net of earnings credits would have been 2.45% and 3.43%
for the years ended October 31, 1996 and 1995, respectively.
(vi) Represents expense reimbursements made pursuant to applicable state
expense limits.
(vii) Expense ratio does not reflect the effect of fees offset by earnings
credits.
ix
<PAGE>
HOW TO PURCHASE SHARES
IN GENERAL
The Fund offers Class A and Class B shares (except for the Alger Money
Market Portfolio which has a single class of shares) for investors. The offering
price for Class A shares is net asset value plus an initial sales charge that
declines for larger purchases (see "Class A Share Information" below). Purchases
of Class A shares of $1 million or more are sold without an initial sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if held for
less than one year. The offering price for Class B shares is net asset value
with no initial sales charge but such shares may be subject to a CDSC if held
for less than six years (see "Contingent Deferred Sales Charge" below). The
Alger Money Market Portfolio is sold without an initial or contingent deferred
sales charge. The minimum initial investment for each Portfolio is $500, and
subsequent investments must be at least $25. These minimums may be waived under
certain circumstances. The Fund or the transfer agent may reject any purchase
order.
METHODS OF PURCHASING SHARES
MAIL
You can buy shares through Alger Shareholder Services, Inc., the Fund's
transfer agent ("Transfer Agent"), by filling out the New Account Application
and returning it with a check drawn on a U.S. bank to Alger Shareholder
Services, Inc. at 30 Montgomery Street, Box 2001, Jersey City, NJ 07302.
WIRE TRANSFERS
Investors establishing new accounts by wire transfer should forward their
completed New Account Applications to the Transfer Agent, stating that the
account was established by wire transfer and the date and amount of the
transfer. Further information regarding wire transfers is available by calling
(800) 992-3863.
BROKERS
You can buy shares of the Portfolios through brokers who have signed sales
agreements with Fred Alger & Company, Incorporated ("Alger Inc.")
PROCESSING ORGANIZATIONS
You can buy shares through a "Processing Organization", which is a
broker-dealer, bank or other financial institution that purchases shares for its
customers. Processing Organizations may impose charges and restrictions in
addition to or different from those applicable if you invest with the Fund
directly. Therefore, you should read the materials provided by the Processing
Organization in conjunction with this Prospectus. Certain Processing
Organizations may receive compensation from the Fund, Alger Inc., or any of its
affiliates.
CLASS A SHARE INFORMATION
Class A shares are available in all portfolios except the Money Market
Portfolio. These shares may be subject to an initial sales charge (indicated
below) on purchases less than $1 million. Purchases of Class A shares in the
amount of $1 million or more avoid the initial sales charge, but are subject to
a CDSC of 1% if they are redeemed within 12 months of purchase. With the
exception of differing applicable holding periods, the same procedures and
conditions will apply to the CDSC for $1 million purchases of Class A shares as
apply to the CDSC for Class B shares. See "Class B Share Information--Contingent
Deferred Sales Charge" below.
INITIAL SALES CHARGE
The sales charges applicable to the purchase of Class A shares of the
Portfolios (other than the Alger Money Market Portfolio) are:
SALES CHARGE SALES CHARGE DEALER ALLOWANCE
PURCHASE AS % OF AS % OF AS % OF
AMOUNT OFFERING PRICE NET ASSET VALUE OFFERING PRICE
- ----------------------- ------------- ---------------- ----------------
Less than $100,000 4.75% 4.99% 4.00%
$100,000 - $249,999 4.00% 4.17% 3.25%
$250,000 - $499,999 3.00% 3.09% 2.50%
$500,000 - $999,999 2.25% 2.30% 1.75%
$1,000,000 and over * * 1.00%
- ------------------
* Purchases of Class A shares, which when combined with current holdings of
Class A shares offered with a sales charge equal or exceed $1,000,000 in the
aggregate, may be made at net asset value without any initial sales charge,
but will be subject to a CDSC of 1.00% on redemptions made within 12 months of
purchase. The CDSC is waived in the same circumstances in which the CDSC
applicable to Class B shares is waived. See "Waiver of Sales Charges".
1
<PAGE>
The reduced sales charges shown above apply to the aggregate of purchases of
Class A shares of the Fund made at one time (unless a Letter of Intent is on
file with the Fund) by "any person," which includes an individual, his or her
spouse and children, or a trustee or other fiduciary of a single trust, estate
or single fiduciary account. See "Letter of Intent".
From time to time Alger Inc. may reallow to brokers or financial
intermediaries all or substantially all of the initial sales charge. To the
extent that it does so, such persons may be deemed to be underwriters of the
Fund as defined in the Securities Act of 1933, as amended.
RIGHT OF ACCUMULATION
Class A shares of the Fund may be purchased by "any person" (as defined
above) at a reduced sales charge as determined by aggregating the dollar amount
of the new purchase and the current value (at offering price) of all Class A
shares of the Fund then held by such person and applying the sales charge
applicable to such aggregate. In order to obtain such discount, the purchaser
must provide sufficient information at the time of purchase to permit
verification that the purchase qualifies for the reduced sales charge. The right
of accumulation is subject to modification or discontinuance at any time with
respect to all shares purchased thereafter.
LETTER OF INTENT
A Letter of Intent ("LOI") contemplating aggregate purchases of $100,000 or
more provides an opportunity for an investor to obtain a reduced sales charge by
aggregating investments over a 13-month period, provided that the investor
refers to such LOI when placing orders. For purposes of a LOI, the "Purchase
Amount" as referred to in the preceding sales charge table includes purchases of
all Class A shares of the Fund offered with a sales charge over the following 13
months.
An alternative is to compute the 13-month period starting up to 90 days
before the date of execution of the LOI. The minimum initial investment under
the LOI is 5% of the total LOI amount. Each investment made during the period
receives the reduced sales charge applicable to the total amount of the
investment goal. Shares purchased with the first 5% of the total LOI amount will
be held in escrow by the Transfer Agent to assure any necessary payment of a
higher applicable sales charge if the investment goal is not met. If the goal is
not achieved within the period, the investor must pay the difference between the
sales charges applicable to the purchases made and the charges previously paid,
or an appropriate number of escrowed shares will be redeemed.
CLASS B SHARE INFORMATION
Class B shares are sold at net asset value with no initial sales charge.
This provides investors the benefit of putting all of their dollars to work at
the time the investment is made. However, a CDSC of up to 5% may be imposed if
you redeem your shares within six years of purchase. Class B shares are subject
to certain Rule 12b-1 fees as well, which are described below.
CONTINGENT DEFERRED SALES CHARGE
With respect to Class B shares, there is no initial sales charge on
purchases of shares of any Portfolio, but a CDSC may be charged on certain
redemptions. The CDSC is imposed on any redemption that causes the current value
of your account in the Class B shares of any Portfolio other than the Alger
Money Market Portfolio to fall below the amount of purchase payments made during
a six-year holding period. There is no CDSC on redemptions of (i) shares that
represent appreciation on your original investment, or (ii) shares purchased
through reinvestment of dividends and capital gains. No CDSC is imposed on the
redemption of shares of the Alger Money Market Portfolio, except for redemption
of shares acquired in exchange for Class B shares (and certain Class A
shares--see "How to Purchase Shares--Class A Share Information") of the other
Portfolios. The amount of the charge is based on the length of time shares are
held, according to the following table:
2
<PAGE>
CONTINGENT
DEFERRED SALES
YEARS SHARES WERE HELD CHARGE
---------------------------------- ----------
Less than one..................................... 5%
One but less than two............................. 4%
Two but less than three........................... 3%
Three but less than four.......................... 2%
Four but less than five........................... 2%
Five but less than six............................ 1%
Six and greater................................... 0%
For purposes of the CDSC, it is assumed that the Class B shares of the
Portfolio from which the redemption is made are the Class B shares of that
Portfolio held the longest and which result in the lowest charge.
Redemptions of shares of each of the Portfolios are deemed to be made first
from amounts, if any, to which the charge does not apply. Since no charge is
imposed on shares purchased and retained in the Alger Money Market Portfolio,
you may wish to consider redeeming those shares, if any, before redeeming Class
B shares of the other Portfolios. Please see the Statement of Additional
Information for examples of how the CDSC is calculated when shares are
exchanged.
DISTRIBUTION PLAN
With respect to Class B shares, the Fund has adopted an Amended and
Restated Distribution Plan (the "Plan") under which Class B shares of each
Portfolio other than the Alger Money Market Portfolio may reimburse Alger Inc.
for the expenses it incurs in promoting sales of that Portfolio's Class B
shares--at a maximum annual rate of .75% of its average daily net assets
represented by such shares (Rule 12b-1 fees). This fee is sometimes described as
an "asset-based sales charge" and allows investors to buy shares without an
initial sales charge while allowing Alger Inc. to compensate dealers that sell
Class B shares of the Portfolios. Alger Inc. pays sales commissions of up to
4.75% of the amount invested to dealers from its own resources at the time of
sale. Alger Inc. retains the asset-based sales charge to recoup the sales
commissions and other sales related expenses its pays. Any CDSCs on Class B
shares received by Alger Inc. will reduce the amount to be reimbursed under the
Plan. Any excess distribution expenses may be carried forward, with interest,
and reimbursed in future years.
WAIVERS OF SALES CHARGES
No Initial Sales Charge (Class A) or CDSC (Class A or B) is imposed on (1)
purchases or redemptions by (i) employees of Alger Inc. and its affiliates, (ii)
IRAs, Keogh Plans and employee benefit plans for those employees and (iii)
spouses, children, siblings and parents of those employees and trusts of which
those individuals are beneficiaries, as long as orders for the shares on behalf
of those individuals and trusts were placed by the employees; (2) purchases or
redemptions by (i) accounts managed by investment advisory affiliates of Alger
Inc. that are registered under the Investment Advisers Act of 1940, as amended,
(ii) employees, participants and beneficiaries of those accounts, (iii) IRAs,
Keogh Plans and employee benefit plans for those employees, participants and
beneficiaries and (iv) spouses and minor children of those employees,
participants and beneficiaries as long as orders for the shares were placed by
the employees, participants and beneficiaries; (3) purchases or redemptions by
directors or trustees of any investment company for which Alger Inc. or any of
its affiliates serves as investment adviser or distributor; (4) purchases or
redemptions of shares held through defined contribution plans as defined by
ERISA; (5) purchases or redemptions by an investment company registered under
the Investment Company Act of 1940 in connection with the combination of the
investment company with the Fund by merger, acquisition of assets or by any
other transaction; (6) purchases or redemptions by registered investment
advisers, banks, trust companies and other financial institutions exercising
discretionary authority with respect to the money invested in Fund shares; (7)
purchases or redemptions by registered investment advisers for their own
accounts; (8) purchases or redemptions by a Processing Organization, as
shareholder of record, on behalf of (i) investment advisers or financial
planners trading for their own accounts or the accounts of their clients and who
charge a management, consulting or other fee for their
3
<PAGE>
services ("wrap" accounts); and clients of such investment advisers or financial
planners trading for their own accounts if the accounts are linked to the master
account of such investment adviser or financial planner on the books and records
of the Processing Organization, and (ii) retirement and deferred compensation
plans and trusts used to fund those plans; and (9) purchases or redemptions by
registered representatives of broker-dealers which have entered into Selected
Dealer Agreements with Alger Inc., and their spouses, children, siblings and
parents.
The CDSC is also waived on (1) Systematic Withdrawal Plan payments (2)
redemptions of shares in connection with certain required post-retirement
withdrawals from an IRA or other retirement plan or (3) following the death or
disability of a shareholder.
Investors purchasing Class A shares subject to one of the foregoing waivers
are required to claim and substantiate their eligibility for the waiver at the
time of purchase. It is also the responsibility of shareholders redeeming shares
otherwise subject to a CDSC but qualifying for a waiver of the charge to assert
this status at the time of redemption. Information regarding these procedures is
available by contacting the Fund at (1-800) 992-3863.
HOW TO SELL SHARES
You can sell (redeem) some or all of your shares on any business day. Your
shares will be sold at the next net asset value calculated after your redemption
request is received and accepted by the Transfer Agent and your payment will be
made by check within seven days. A CDSC may be charged on certain redemptions.
See How to Purchase Shares--Class A Share Information --Class B Share
Information for details. Redemptions may be suspended and payments delayed under
certain emergency circumstances as determined by the Securities and Exchange
Commission. The Fund's Transfer Agent will reject any redemption request made
within 15 days after receipt of the purchase check or the TelePurchase order
against which such redemption is requested. You can sell your shares in any of
the following ways: by mail, by telephone, by check or through your broker.
Please note that, although the Fund is authorized to charge a fee of $17.00 for
each wire redemption, it does not currently intend to do so.
MAIL
You should send a letter of instruction to the Transfer Agent that includes
your name, account number, Portfolio name, the Class of shares (if applicable),
the number of shares or dollar amount and where you want the money to be sent.
The letter must be signed by all authorized signers and, if the redemption is
for more than $5,000 or if the proceeds are to be sent to an address other than
the address of record, the signature must be guaranteed. In addition, any
request for redemption proceeds to be sent to the address of record must have
the signature(s) guaranteed if made within 60 days of changing your address. The
Transfer Agent will accept a signature guarantee by the following financial
institutions: a U.S. bank, trust company, broker, dealer, municipal securities
broker or dealer, government securities broker or dealer, credit union which is
authorized to provide signature guarantees, national securities exchange,
registered securities association or clearing agency.
TELEPHONE
If you wish to use this service, you should mark the appropriate box on the
New Account Application or send a written request with a guaranteed signature.
To sell shares by telephone, please call (1-800) 992-3863. If your redemption
request is received before 12:00 noon Eastern time for the Alger Money Market
Portfolio, your redemption proceeds will be wired the same day. Redemption
requests for Portfolios other than the Alger Money Market Portfolio received
prior to the close of business of the New York Stock Exchange (normally 4:00
p.m. Eastern time) and requests received after 12:00 noon for the Alger Money
Market Portfolio will be paid on the next business day. If your proceeds are
less than $2,500, they will be mailed to your address of record. If the proceeds
are more than $2,500 they will be mailed to your address of record or wired to
your designated bank
4
<PAGE>
account. Telephone requests for a check to be mailed to the address of record is
not available within 60 days of changing your address. Redemption requests made
before 12:00 noon Eastern time for the Alger Money Market Portfolio will not
receive a dividend for that day.
The Fund, the Transfer Agent and their affiliates are not liable for acting
in good faith on telephone instructions relating to your account, so long as
they follow reasonable procedures to determine that the telephone instructions
are genuine. Such procedures may include recording the telephone calls and
requiring some form of personal identification. You should verify the accuracy
of telephone transactions immediately upon receipt of your confirmation
statement.
CHECK (ALGER MONEY MARKET PORTFOLIO ONLY)
You may redeem shares in your Alger Money Market Portfolio account by
writing a check for at least $500. Dividends are earned until the check clears.
If you mark the appropriate box on the New Account Application and sign the
signature card, the Fund will send you redemption checks. There is no charge for
the first five checks you write in any one calendar year. You will be charged
$2.50 for each additional check you write.
Your redemption may be reduced by any applicable CDSC (see "How to Purchase
Shares--Class A Share Information" and "How to Purchase Shares --Class B Share
Information"). If your account is not adequate to cover the amount of your check
and any applicable CDSC, the check will be returned marked insufficient funds.
As a result, checks should not be used to close an account.
The use of the check redemption procedure does not give rise to a banking
relationship between the shareholder and the Transfer Agent, which will be
acting solely as transfer agent for the Portfolio.
REDEMPTION IN KIND
Under unusual circumstances, shares of a Portfolio may be redeemed "in
kind", which means that the redemption proceeds will be paid with securities
which are held by the Portfolio. Please refer to the Statement of Additional
Information for more details.
SPECIAL INVESTOR SERVICES
EXCHANGE PRIVILEGE
Except as limited below, shareholders may exchange some or all of their
Portfolio shares for shares of another Portfolio of the Fund. Class A
shareholders may exchange their shares for Class A shares of another Portfolio
or for shares of the Money Market Portfolio. Class B shareholders may exchange
their shares for Class B shares of another Portfolio or for shares of the Money
Market Portfolio. Money Market Portfolio shares acquired by direct purchase may
be exchanged for Class A or Class B shares of another Portfolio; however, any
applicable sales charge will apply to the shares acquired, depending upon their
Class. Shares of the Money Market Portfolio acquired by exchange rather than by
direct purchase may be exchanged for shares of another Portfolio, but only for
shares of the same Class as those originally exchanged for the Money Market
Portfolio shares. The period of time shares are held in the Money Market
Portfolio shall not be considered in the calculation of a CDSC.
If you want to authorize exchanges by telephone, you should mark the
appropriate box on the New Account Application. For tax purposes, an exchange of
shares is treated as a sale of the shares exchanged and, therefore, you may
realize a taxable gain or loss when you exchange shares. Shares exchanged prior
to the close of business of the New York Stock Exchange (normally 4:00 p.m.
Eastern time) from the Alger Money Market Portfolio to any other Portfolio will
receive dividends from the Alger Money Market Portfolio for the day of the
exchange. Shares of the Alger Money Market Portfolio received in exchange for
shares of any other Portfolio will earn dividends beginning on the next business
day after the exchange.
You may make up to six exchanges annually by telephone or in writing. The
Fund may charge a $5.00 transaction fee for each exchange, although it does not
intend to do so at present. You will be notified at least 60 days in advance if
the Fund decides to impose this fee. The Fund reserves the right to terminate or
modify the exchange privilege upon notice to shareholders.
5
<PAGE>
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan which permits you to make
regular transfers to your Fund account from your bank account on the last
business day of every month. Your bank must be a member of the Automated
Clearing House.
AUTOMATIC EXCHANGE PLAN
The Fund also offers an Automatic Exchange Plan which permits you to
exchange a specified amount from your Alger Money Market Portfolio account into
one or all of the other Portfolios on or about the fifteenth day of the month.
For more information on any of the services discussed above, please call the
Fund toll-free at (800) 992-3863.
TELEPURCHASE AND TELEREDEMPTION PRIVILEGE
The TelePurchase Privilege allows you to purchase Fund shares by telephone
(minimum $500, maximum $50,000) by filling out the appropriate section of the
New Account Application or sending an Additional Services Form to the Transfer
Agent. Your funds will be transferred from your designated bank account to your
Fund account normally within one business day.
The TeleRedemption Privilege allows you to transfer funds (minimum $500,
maximum $50,000) between your Fund account and your designated bank account.
Redemption proceeds will be transferred to your bank account, generally within
two business days after your redemption request is received. Although the Fund
is authorized to charge a fee of $17.00 for each Automated Clearing House
redemption, it does not currently intend to do so.
To use this privilege, your bank must be a member of the Automated Clearing
House. Shares held in any Alger retirement plan and shares issued in certificate
form are not eligible for this service.
RETIREMENT PLANS
Shares of the Portfolios are available as an investment for your retirement
plans, including IRAs, Keogh Plans, corporate pension and profit-sharing plans,
Simplified Employee Pension IRAs, 401(k) Plans and 403(b) Plans. Please call the
Fund at (800) 992-3863 to receive the appropriate documents which contain
important information and applications.
SYSTEMATIC WITHDRAWAL PLAN
If your account is $10,000 or more in any Portfolio, you can establish a
Systematic Withdrawal Plan to receive payments of at least $50 on a monthly,
quarterly or annual basis, without payment of the CDSC. The maximum monthly
withdrawal is one percent of the current account value in the Portfolio at the
time you begin participation in the Plan.
REINSTATEMENT PRIVILEGE
A shareholder who has redeemed either Class A or Class B shares of a
Portfolio may, within 30 days of the redemption, reinstate any portion or all of
the net proceeds of such redemption in Portfolio shares of the same class by
exercise of the Reinstatement Privilege. Reinvestment will be at the net asset
value of the Portfolio next determined upon receipt of the proceeds and letter
requesting this privilege be exercised, subject to confirmation of the
shareholder's status or holdings, as the case may be. You will also receive a
pro rata credit for any CDSC imposed. This privilege may be exercised only once
by a shareholder. Exercising the Reinstatement Privilege will not alter any tax
payable on the redemption and a loss may not be allowed for tax purposes.
INVESTMENT OBJECTIVES
AND POLICIES
The investment objectives and restrictions summarized below are fundamental
which means that they may not be changed without shareholder approval. All
investment policies and practices described elsewhere in this Prospectus are not
fundamental, so the Fund's Board of Trustees may change them without shareholder
approval. There is no guarantee that any Portfolio's objectives will be
achieved.
As a matter of fundamental policy, no Portfolio will: (1) with respect to
75% of its total assets, invest more than 5% of its total assets in any one
issuer, except for obligations issued or guaranteed by the U.S. Government,
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its agencies or instrumentalities ("U.S. Government securities"); (2) own more
than 10% of the outstanding voting securities of any company; (3) invest more
than 10% (15% for the Alger Capital Appreciation Portfolio) of its net assets in
securities that are not readily marketable and in repurchase agreements with
maturities of more than seven days; (4) invest more than 25% of its total assets
in any one industry, except for U.S. Government securities and, with respect to
the Alger Money Market Portfolio, bank and thrift obligations; (5) borrow money
or pledge its assets, except for temporary or emergency purposes, in an amount
not exceeding 10% of its total assets; except that the Alger Capital
Appreciation Portfolio may borrow for investment purposes. The Statement of
Additional Information contains additional investment restrictions as well as
additional information on the Portfolios' investment practices.
In order to permit sales of shares in certain jurisdictions, the Fund may
commit to policies more restrictive than those stated above, and the Fund may
terminate any such commitment by discontinuing sales of shares in the applicable
jurisdiction.
ALGER MONEY MARKET PORTFOLIO
The investment objective of the Portfolio is to earn high current income
consistent with preservation of principal and maintenance of liquidity. The
Portfolio may invest in "money market" instruments including, certificates of
deposit, time deposits and bankers' acceptances; U.S. Government securities;
corporate bonds having less than 397 days remaining to maturity; and commercial
paper, including variable rate master demand notes. The Portfolio may also enter
into repurchase agreements, reverse repurchase agreements and firm commitment
agreements. The Statement of Additional Information contains more information on
these instruments.
The Portfolio will invest at least 95% of its total assets in money market
securities which are rated within the highest credit category assigned by at
least two established rating agencies (or one rating agency if the security is
rated by only one) and will only invest in money market securities rated at the
time of purchase within the two highest credit categories or, if not rated of
equivalent investment quality as determined by Fred Alger Management, Inc.
("Alger Management"), the Fund's investment manager. Alger Management subjects
all securities eligible for investment to its own credit analysis and considers
all securities purchased by the Portfolio to present minimal credit risks.
The Portfolio has a policy of maintaining a stable net asset value of $1.00.
This policy has been maintained since its inception; however, the $1.00 price is
not guaranteed or insured, nor is its yield fixed. The Portfolio generally
purchases securities which mature in 13 months or less. The average maturity of
the Portfolio will not be greater than 90 days. A discussion of rating agencies
is included in the Appendix to the Statement of Additional Information.
ALGER BALANCED PORTFOLIO
The investment objective of the Portfolio is current income and long-term
capital appreciation. The Portfolio intends to invest based on combined
considerations of risk, income, capital appreciation and protection of capital
value. Normally, it will invest in common stocks and investment grade fixed
income securities (preferred stock and debt securities), as well as securities
convertible into common stocks. Except during temporary defensive periods, the
Portfolio will maintain at least 25% of its net assets in fixed income (senior)
securities. With respect to debt securities, the Portfolio will invest only in
instruments which are rated in one of the four highest rating categories by any
established rating agency, or if not rated, which are determined by Alger
Management to be of comparable quality to instruments so rated.
The Portfolio may invest up to 35% of its total assets in money market
instruments and repurchase agreements and in excess of that amount (up to 100%
of its assets) during temporary defensive periods.
ALGER GROWTH PORTFOLIO
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of purchase
of the securities, have
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total market capitalization--present market value per share multiplied by the
total number of shares outstanding--of $1 billion or greater. The Portfolio may
invest up to 35% of its total assets in equity securities of companies that, at
the time of purchase, have total market capitalization of less than $1 billion.
ALGER MIDCAP GROWTH PORTFOLIO
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of purchase
of the securities, have total market capitalization within the range of
companies included in the S&P MidCap 400 Index, updated quarterly. The S&P
MidCap 400 Index is designed to track the performance of medium capitalization
companies. As of September 30, 1996, the range of market capitalization of these
companies was $177 million to $6.26 billion. The Portfolio may invest up to 35%
of its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization outside the range of companies
included in the S&P MidCap 400 Index and in excess of that amount (up to 100% of
its assets) during temporary defensive periods.
ALGER SMALL CAPITALIZATION PORTFOLIO
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of purchase
of the securities, have total market capitalization within the range of
companies included in the Russell 2000 Growth Index ("Russell Index") or the S&P
SmallCap 600 Index ("S&P Index"), updated quarterly. Both indexes are designed
to track the performance of small capitalization companies. As of September 30,
1996, the range of market capitalization of the companies in the Russell Index
was $50 million to $1.78 billion; the range of market capitalization of the
companies in the S&P Index at that date was $36 million to $2.44 billion. The
combined range as of that date was $36 million to $2.44 billion. The Portfolio
may invest up to 35% of its total assets in equity securities of companies that,
at the time of purchase, have total market capitalization outside this combined
range, and in excess of that amount (up to 100% of its assets) during temporary
defensive periods.
ALGER CAPITAL APPRECIATION PORTFOLIO
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 85% of
its net assets in equity securities of companies of any size.
The Portfolio may purchase put and call options and sell (write) covered
call and put options on securities and securities indexes to increase gain and
to hedge against the risk of unfavorable price movements, and may enter into
futures contracts on securities indexes and purchase and sell call and put
options on these futures contracts. The Portfolio may also borrow money
(leverage) for the purchase of additional securities. The Portfolio may borrow
only from banks and may not borrow in excess of one-third of the market value of
its total assets, less liabilities other than such borrowing. These practices
are deemed to be speculative and may cause the Portfolio's net asset value to be
more volatile than the net asset value of a fund that does not engage in these
activities. See "Investment Practices."
IN GENERAL
The Alger Small Capitalization Portfolio, Alger MidCap Growth Portfolio,
Alger Growth Portfolio, Alger Capital Appreciation Portfolio, and the equity
portion of Alger Balanced Portfolio seek to achieve their objectives by
investing in equity securities, such as common or preferred stocks, or
securities convertible into or exchangeable for equity securities, including
warrants and rights. The Portfolios will invest primarily in companies whose
securities are traded on domestic stock exchanges or in the over-the-counter
market. These companies may still be in the developmental stage, may be older
companies that appear to be entering a new stage of growth progress owing to
factors such as management changes or development of new technology, products or
markets or may be companies providing products or
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services with a high unit volume growth rate. In order to afford the Portfolios
the flexibility to take advantage of new opportunities for investments in
accordance with their investment objectives, they may hold up to 15 percent of
their net assets in money market instruments and repurchase agreements and in
excess of that amount (up to 100% of their assets) during temporary defensive
periods. This amount may be higher than that maintained by other funds with
similar investment objectives.
Investing in smaller, newer issuers generally involves greater risk than
investing in larger, more established issuers. Companies in which the Alger
Small Capitalization Portfolio is likely to invest may have limited product
lines, markets or financial resources and may lack management depth. The
securities in such companies may have limited marketability and may be subject
to more abrupt or erratic market movements than securities of larger, more
established companies or the market averages in general. Accordingly, an
investment in the Portfolio may not be appropriate for all investors. These
risks may also apply to investments in developmental stage companies by the
Alger MidCap Growth Portfolio, the Alger Growth Portfolio and the Alger Capital
Appreciation Portfolio.
INVESTMENT PRACTICES
The Portfolios may use the investment strategies and invest in the types of
securities described below, which may involve certain risks. The Statement of
Additional Information contains more detailed information about these practices
and information about other investment practices of the Portfolios.
REPURCHASE AGREEMENTS
In a repurchase agreement, a Portfolio buys a security at one price and
simultaneously agrees to sell it back at a higher price. In the event of a
bankruptcy or default of the other party to the repurchase agreement, the
Portfolio could experience costs and delays in liquidating the underlying
security, which is held as collateral, and the Portfolio might incur a loss if
the value of the collateral held declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
Under the policies and procedures established by the Fund's Board of
Trustees, Alger Management determines the liquidity of the Portfolios'
investments. Investments may be illiquid because of the absence of an active
trading market, making it difficult to sell promptly at an acceptable price.
Each Portfolio may purchase securities eligible for resale under Rule 144A of
the Securities Act of 1933. This rule permits otherwise restricted securities to
be sold to certain institutional buyers. The Fund will limit its purchases of
these securities to those which Alger Management, under the supervision of the
Fund's Board of Trustees, determines to be liquid. A restricted security is one
that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933.
LENDING OF PORTFOLIO SECURITIES
In order to generate income and to offset expenses, each Portfolio may lend
portfolio securities with a value up to 331/3% of the Portfolio's total assets
to brokers, dealers and other financial organizations. Any such loan will be
continuously secured by collateral at least equal to the value of the securities
loaned. Such lending could result in delays in receiving additional collateral
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
FOREIGN SECURITIES
Each Portfolio other than the Alger Money Market Portfolio may invest up to
20% of its total assets in foreign securities. Investing in securities of
foreign companies and foreign governments, which generally are denominated in
foreign currencies, may involve certain risk and opportunity considerations not
typically associated with investing in domestic companies and could cause the
Portfolio to be affected favorably or unfavorably by changes in currency
exchange rates and revaluations of currencies.
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Each Portfolio may purchase American Depositary Receipts ("ADRs") or U.S.
dollar-denominated securities of foreign issuers that are not included in the
20% foreign securities limitation. ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of foreign issuers held on deposit for
use in the U.S. securities markets. While ADRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted, many of the risks associated with foreign securities may also apply
to ADRs.
LEVERAGE THROUGH BORROWING
The Alger Capital Appreciation Portfolio may borrow money from banks and use
it to purchase additional securities. This borrowing is known as leveraging.
Leverage increases both investment opportunity and investment risk. If the
investment gains on securities purchased with borrowed money exceed the interest
paid on the borrowing, the net asset value of the Portfolio's shares will rise
faster than would otherwise be the case. On the other hand, if the investment
gains fail to cover the cost (including interest) of borrowings, or if there are
losses, the net asset value of the Portfolio's shares will decrease faster than
would otherwise be the case. The Portfolio is required to maintain continuous
asset coverage (that is, total assets including borrowings, less liabilities
exclusive of borrowings) of 300% of the amount borrowed. If such asset coverage
should decline below 300% as a result of market fluctuations or other reasons,
the Portfolio may be required to sell some of its portfolio holdings within
three days to reduce the debt and restore the 300% asset coverage, even though
it may be disadvantageous from an investment standpoint to sell securities at
that time.
OPTIONS
The Alger Capital Appreciation Portfolio may buy and sell (write) exchange
listed options in order to obtain additional return or to hedge the value of its
portfolio. The Portfolio may write covered call options only if the Portfolio
owns the securities on which the call is written or owns securities which are
exchangeable or convertible into such securities. Although the Portfolio will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option. The Portfolio will not
purchase options if, as a result, the aggregate cost of all outstanding options
exceeds 10% of the Portfolio's total assets, although no more than 5% will be
committed to transactions entered into for non-hedging purposes. The Portfolio
may purchase and sell put and call options on stock indexes in order to increase
its gross income or to hedge its portfolio against price fluctuations.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Additional discussion of these risks
and techniques is included in the Statement of Additional Information.
STOCK INDEX FUTURES AND OPTIONS ON
STOCK INDEX FUTURES
The Alger Capital Appreciation Portfolio may purchase and sell stock index
futures contracts and options on stock index futures contracts. These
investments may be made only for hedging, not speculative, purposes. Hedging
transactions are made to reduce the risk of price fluctuations.
There can be no assurance of the Portfolio's successful use of stock index
futures as a hedging device. If Alger Management uses a hedging instrument at
the wrong time or judges market conditions incorrectly, hedging strategies may
reduce the Portfolio's return. The Portfolio could also experience losses if the
prices of its futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option.
PORTFOLIO TURNOVER
Portfolio changes will generally be made without regard to the length of
time a security has been held or whether a sale would result in a profit or
loss. Higher levels of portfolio activity generally result in higher transaction
costs and may also result in taxes on realized capital gains to be borne by the
Portfolio's shareholders.
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MANAGEMENT OF THE FUND
ORGANIZATION
The Fund was organized on March 20, 1986 as a multi-series Massachusetts
business trust. The Fund offers an unlimited number of shares of six series,
representing the shares of the Portfolios. With the exception of the Money
Market Portfolio, each Portfolio offers two classes of shares.
Although the Fund is not required by law to hold annual shareholder
meetings, it may hold meetings from time to time on important matters, and
shareholders have the right to call a meeting to remove a Trustee or to take
other action described in the Trust's Declaration of Trust. Shareholders of one
Portfolio may vote only on matters that affect that Portfolio. Shareholders of a
Class have exclusive voting rights with respect to a matters affecting only that
Class, and shareholders vote separately by Class on matters in which the
interests of one Class differ from those of another.
BOARD OF TRUSTEES
The Fund is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders under Massachusetts law. The Statement
of Additional Information contains general background information about each
Trustee and officer of the Fund.
INVESTMENT MANAGER
Alger Management is the Fund's investment manager and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees. Alger Management makes investment decisions for the Portfolios, places
orders to purchase and sell securities on behalf of the Portfolios and selects
broker-dealers that, in its judgment, provide prompt and reliable execution at
favorable prices and reasonable commission rates. It is anticipated that Alger
Inc. will serve as the Fund's broker in effecting substantially all of the
Portfolios' transactions on securities exchanges and will retain commissions in
accordance with certain regulations of the Securities and Exchange Commission.
The Fund will consider sales of its shares as a factor in the selection of
broker-dealers to execute over-the-counter portfolio transactions, subject to
the requirements of best price and execution. In addition, Alger Management
employs professional securities analysts who provide research services
exclusively to the Portfolios and other accounts for which Alger Management or
its affiliates serve as investment adviser or subadviser.
Alger Management has been in the business of providing investment advisory
services since 1964 and, as of November 30, 1996, had approximately $7.2 billion
under management, $4.5 billion in mutual fund accounts and $2.7 billion in other
advisory accounts. Alger Management is owned by Alger Inc. which in turn is
owned by Alger Associates, Inc., a financial services holding company. Fred M.
Alger, III and his brother, David D. Alger, are the majority shareholders of
Alger Associates, Inc.
and may be deemed to control that company and its subsidiaries.
PORTFOLIO MANAGERS
David D. Alger, Seilai Khoo and Ronald Tartaro are primarily responsible for
the day-to-day management of the Portfolios of the Fund. Mr. Alger has been
employed by Alger Management as Executive Vice President and Director of
Research since 1971 and as President since 1995. Ms. Khoo has been employed by
Alger Management as a senior research analyst since 1989 and as a Senior Vice
President since 1995. Mr. Tartaro has been employed by Alger Management as a
senior research analyst since 1990 and as a Senior Vice President since 1995.
Mr. Alger, Ms. Khoo and Mr. Tartaro also serve as portfolio managers for other
mutual funds and investment accounts managed by Alger Management. Steven R.
Thumm serves as co-manager of the Alger Balanced Portfolio. He has been employed
by Alger Management as a fixed income analyst since 1991 and prior to that he
was employed by Marine Midland Bank as Assistant Vice President.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
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the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 992-3863.
FEES AND EXPENSES
Each Portfolio pays Alger Management a management fee computed daily and
paid monthly at annual rates based on a percentage of the value of the relevant
Portfolio's average daily net assets, as follows: Alger Money Market
Portfolio-.50%; Alger Small Capitalization Portfolio and Alger Capital
Appreciation Portfolio-.85%; Alger MidCap Growth Portfolio-.80%; Alger Growth
Portfolio and Alger Balanced Portfolio-.75%. The management fees paid by the
Alger Small Capitalization Portfolio, the Alger MidCap Growth Portfolio, the
Alger Growth Portfolio, the Alger Balanced Portfolio and the Alger Capital
Appreciation Portfolio are higher than those paid by most other investment
companies.
Each Portfolio pays other expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing costs.
More information about each Portfolio's investment management agreement and
other expenses paid by the Portfolios is included in the Statement of Additional
Information.
The Statement of Additional Information contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves
as transfer agent for the Fund. Certain record-keeping services that would
otherwise be performed by Alger Shareholder Services, Inc. may be performed by
other entities providing similar services to their customers who invest in the
Portfolios. The Fund, Alger Shareholder Services, Inc., Alger Inc. or any of its
affiliates may elect to enter into a contract to pay them for such services.
SHAREHOLDER SERVICING AGREEMENT
The Fund pays Alger Inc. a shareholder servicing fee of .25% of the average
daily net assets of each Portfolio other than the Alger Money Market Portfolio
for ongoing service and maintenance of shareholder accounts. Alger Inc. will
compensate dealers from this fee who provide personal service and maintenance of
customer accounts.
NET ASSET VALUE
The price of one share of a Class is based on its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets allocable to the Class, deducting liabilities and then
dividing the result by the number of its shares outstanding. The net asset value
of each Portfolio is calculated on each day the New York Stock Exchange is open
as of the close of business (normally 4:00 p.m. Eastern time) or, for the Alger
Money Market Portfolio, as of 12:00 noon Eastern time.
Purchases for the Alger Money Market Portfolio will be processed at the net
asset value calculated after your order is received and accepted. If your
purchase is made by wire and is received by 12:00 noon Eastern time, your
account will be credited and begin earning dividends on the day of receipt. If
your wire purchase is received after 12:00 noon Eastern time, it will be
credited and begin earning dividends the next business day. Exchanges are
credited the day the request is received by mail or telephone, and begin earning
dividends the next business day. If your purchase is made by check, and received
by the close of business of the New York Stock Exchange (normally 4:00 p.m.
Eastern time), it will be credited and begin earning dividends the next business
day.
Purchases for the other Portfolios will be based upon the next net asset
value calculated for each class after your order is received and accepted. If
your
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purchase is made by check, wire or exchange and is received by the close of
business of the New York Stock Exchange (normally 4:00 p.m. Eastern time), your
account will be credited on the day of receipt. If your purchase is received
after such time, it will be credited the next business day.
Third-party checks will not be honored except in the case of
employer-sponsored retirement plans. You will be charged a fee for any check
returned by your bank.
DIVIDENDS AND TAXES
DIVIDENDS
Each Class will be treated separately in determining the amounts of
dividends of investment income and distributions of capital gains payable to
holders of its shares. Dividends and distributions will be automatically
reinvested on the payment date in additional shares of the Class that paid the
dividend or distribution at net asset value, unless you elected in writing to
have all dividends and distributions paid in cash or reinvested at net asset
value into another identically registered Alger Portfolio account you have
established. Shares purchased through reinvestment of dividends and
distributions are not subject to the contingent deferred sales charge or
front-end sales charge. Dividends of the Alger Money Market Portfolio are
declared daily and paid monthly and those of the other Portfolios are declared
and paid annually. Distributions of any net realized short-term and long-term
capital gains earned by a Portfolio usually will be made annually after the
close of the fiscal year in which the gains are earned.
The Classes of a Portfolio generally will have different dividends and
distribution rates. Class A dividends generally will be greater than those of
Class B due to the 12b-1 expenses associated with Class B shares. However,
dividends paid to each class of shares in a Portfolio will be declared and paid
at the same time and will be determined in the same manner as those paid to each
other class.
TAXES
Each Portfolio intends to qualify and elect to be treated each year as a
"regulated investment company" for federal income tax purposes. A regulated
investment company is not subject to regular income tax on any income or capital
gains distributed to its shareholders if it, among other things, distributes at
least 90 percent of its investment company taxable income to them within
applicable time periods. Each Portfolio is treated as a separate taxable entity,
with the result that taxable dividends and distributions from a Portfolio
reflect only the income and gains, net of losses, of that Portfolio.
For federal income tax purposes dividends and distributions from a Portfolio
are taxable to you whether paid in cash or reinvested in additional shares. You
may also be liable for tax on any gain realized upon the redemption or exchange
of shares in the Portfolios.
Shortly after the close of each calendar year, you will receive a statement
setting forth the dollar amounts of dividends and any distributions for the
prior calendar year and the tax status of the dividends and distributions for
federal income tax purposes. You should consult your tax adviser to assess the
federal, state and local tax consequences of investing in each Portfolio. This
discussion is not intended to address the tax consequences of an investment by a
nonresident alien.
PERFORMANCE
The Portfolios and their underlying classes advertise different types of
yield and total return performance. All performance figures are based on
historical earnings and are not intended to indicate future performance.
However, both yield and total return figures for Class A shares ordinarily will
be different from those of Class B shares of a portfolio. Further information
about the Fund's performance is contained in its Annual Report to Shareholders,
which may be obtained without charge by contacting the Fund.
The Alger Money Market Portfolio may advertise its "yield" and "effective
yield." The "yield" of the Portfolio refers to the income generated by an
investment in the Portfolio over a particular base period. This income is then
"annualized." That is, the amount of income generated by the investment during
the period is assumed to be generated over a
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13 52 week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in the Portfolio is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect on
this assumed reinvestment.
Each of the classes of the Portfolios other than the Alger Money Market
Portfolio may also include quotations of their "total return" in advertisements
or reports to shareholders or prospective investors. Total return figures show
the aggregate or average percentage change in value of an investment in a class
from the beginning date of the measuring period to the end of the measuring
period. These figures reflect changes in the price of the Class' shares and
assume that any income dividends and/or capital gains distributions made by the
Class during the period were reinvested in shares of the Class. Figures will be
given for recent 1, 5, and 10 year periods, and may be given for other periods
as well (such as from commencement of the Class' operations, or on a
year-by-year basis) and may utilize dollar cost averaging. The Class may also
use "aggregate" total return figures for various periods, representing the
cumulative change in value of an investment in the Class for the specific period
(again reflecting changes in Class share price and assuming reinvestment of
dividends and distributions) as well as "actual annual" and "annualized" total
return figures. Total returns may be calculated either with or without the
effect of the CDSC or initial sales charge to which the shares are subject and
may be shown by means of schedules, charts or graphs, and may indicate subtotals
of the various components of total return (i.e., change in value of initial
investment, income dividends and capital gains distributions). "Total return"
and "yield" for a Class will vary based on changes in market conditions. In
addition, since the deduction of a Class' expenses is reflected in the total
return and yield figures, "total return" and "yield" will also vary based on the
level of the Class' expenses.
The Statement of Additional Information, which is incorporated by reference,
further describes the method used to determine the yields and total return
figures. Current yield and/or total return quotations may be obtained by
contacting the Fund.
14
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the Statement of
Additional Information or the Fund's official sales literature in connection
with the offering of the Fund's shares, and if given or made, such other
information or representations must not be relied on as having been authorized
by the Fund. This Prospectus does not constitute an offer in any state in which,
or to any person to whom, such offer may not be lawfully made.
INVESTMENT MANAGER:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
DISTRIBUTOR:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
TRANSFER AGENT:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
AUDITORS:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
AS197
THE |
ALGER |MEETING THE CHALLENGE
FUND |OF INVESTING
Alger Money Market Portfolio
Alger Small Capitalization Portfolio
Alger MidCap Growth Portfolio
Alger Growth Portfolio
Alger Balanced Portfolio
Alger Capital Appreciation Portfolio
PROSPECTUS | December 31, 1996
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
THE |
ALGER| 75 MAIDEN LANE
FUND | NEW YORK, NY 10038
| (800)992-FUND (992-3863)
================================================================================
The Alger Fund (the "Fund") is a registered investment company--a mutual
fund--that presently offers interests in the following six portfolios (the
"Portfolios"):
* Alger Money Market Portfolio
* Alger Balanced Portfolio
* Alger Growth Portfolio
* Alger MidCap Growth Portfolio
* Alger Small Capitalization Portfolio
* Alger Capital Appreciation Portfolio
With the exception of the Alger Money Market Portfolio, each Portfolio
offers two classes of shares, each with a different combination of sales
charges, ongoing fees and other features.
This Statement of Additional Information is not a Prospectus. This document
contains additional information about The Alger Fund and supplements information
in the Prospectus dated December 31, 1996. It should be read together with the
Prospectus which may be obtained free of charge by writing or calling the Fund
at the address or toll-free number shown above.
CONTENTS
Investment Objectives and Policies.............................. 2
Net Asset Value................................................. 10
Purchases....................................................... 11
Redemptions..................................................... 12
Exchanges....................................................... 14
Management...................................................... 15
Taxes........................................................... 17
Custodian and Transfer Agent.................................... 19
Certain Shareholders............................................ 19
Organization.................................................... 20
Determination of Performance.................................... 20
Appendix........................................................ A-1
DECEMBER 31, 1996
SAI17
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INVESTMENT OBJECTIVES AND POLICIES
CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The Prospectus discusses the investment objectives of each Portfolio and the
policies to be employed to achieve those objectives. This section contains
supplemental information concerning the types of securities and other
instruments in which the Portfolios may invest, the investment policies and
portfolio strategies that the Portfolios may utilize and certain risks attendant
to those investments, policies and strategies.
U.S. GOVERNMENT OBLIGATIONS
Bills, notes, bonds, and other debt securities issued by the U.S. Treasury are
direct obligations of the U.S. Government and differ mainly in the length of
their maturities.
U.S. GOVERNMENT AGENCY SECURITIES
These securities are issued or guaranteed by U.S. Government sponsored
enterprises and federal agencies. These include securities issued by the Federal
National Mortgage Association, Government National Mortgage Association, Federal
Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Financing Bank, Farm
Credit Banks, the Small Business Administration, Federal Housing Administration
and Maritime Administration. Some of these securities are supported by the full
faith and credit of the U.S. Treasury; and the remainder are supported only by
the credit of the instrumentality, which may or may not include the right of the
issuer to borrow from the Treasury.
BANK OBLIGATIONS
These are certificates of deposit, bankers' acceptances, and other short-term
debt obligations. Certificates of deposit are short-term obligations of
commercial banks. A bankers' acceptance is a time draft drawn on a commercial
bank by a borrower, usually in connection with international commercial
transactions. Certificates of deposit may have fixed or variable rates.
The Portfolios will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, or, in the case of domestic banks which do not have total
assets of at least $1 billion, the aggregate investment made in any one such
bank is limited to $100,000 and the principal amount of such investment is
insured in full by the Federal Deposit Insurance Corporation (ii) in the case of
U.S. banks, it is a member of the Federal Deposit Insurance Corporation, and
(iii) in the case of foreign banks, the security is, in the opinion of the
Fund's investment manager, of an investment quality comparable to other debt
securities which may be purchased by the Portfolios. These limitations do not
prohibit investments in securities issued by foreign branches of U.S. banks,
provided such U.S. banks meet the foregoing requirements.
FOREIGN BANK OBLIGATIONS
Investments by the Portfolios in foreign bank obligations and obligations of
foreign branches of domestic banks present certain risks, including the impact
of future political and economic developments, the possible imposition of
withholding taxes on interest income, the possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls and/or the
addition of other foreign governmental restrictions that might affect adversely
the payment of principal and interest on these obligations. In addition, there
may be less publicly available and reliable information about a foreign bank
than about domestic banks owing to different accounting, auditing, reporting and
recordkeeping standards. In view of these risks, Alger Management will carefully
evaluate these investments on a case-by-case basis.
SHORT-TERM CORPORATE DEBT SECURITIES
These are outstanding nonconvertible corporate debt securities (e.g., bonds and
debentures) which have one year or less remaining to maturity. Corporate notes
may have fixed, variable, or floating rates.
COMMERCIAL PAPER
These are short-term promissory notes issued by corporations primarily to
finance short-term credit needs.
VARIABLE RATE MASTER DEMAND NOTES
These are unsecured instruments that permit the indebtedness thereunder to vary
and provide for periodic adjustments in the interest rate. Because these notes
are direct lending arrangements between the Portfolio and the issuer, they are
not normally traded. Although no active secondary market may exist for these
notes, the Portfolio may demand payment of principal and accrued interest at any
time or may resell the note to a third party. While the notes are not typically
rated by credit rating agencies, issuers of variable rate master demand notes
must satisfy Fred Alger Management, Inc. ("Alger Management") that the same
criteria for issuers of commercial paper are met. In addition, when purchasing
variable rate master demand notes, Alger Management will consider the earning
power, cash flows and other liquidity ratios of the issuers of the notes and
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will continuously monitor their financial status and ability to meet payment on
demand. In the event an issuer of a variable rate master demand note defaulted
on its payment obligations, the Portfolio might be unable to dispose of the note
because of the absence of a secondary market and could, for this or other
reasons, suffer a loss to the extent of the default.
REPURCHASE AGREEMENTS
Under the terms of a repurchase agreement, a Portfolio would acquire a high
quality money market instrument for a relatively short period (usually not more
than one week) subject to an obligation of the seller to repurchase, and the
Portfolio to resell, the instrument at an agreed price (including accrued
interest) and time, thereby determining the yield during the Portfolio's holding
period. Repurchase agreements may be seen to be loans by the Portfolio
collateralized by the underlying instrument. This arrangement results in a fixed
rate of return that is not subject to market fluctuations during the Portfolio's
holding period and not necessarily related to the rate of return on the
underlying instrument. The value of the underlying securities, including accrued
interest, will be at least equal at all times to the total amount of the
repurchase obligation, including interest. A Portfolio bears a risk of loss in
the event that the other party to a repurchase agreement defaults on its
obligations and the Portfolio is delayed in or prevented from exercising its
rights to dispose of the collateral securities, including the risk of a possible
decline in the value of the underlying securities during the period in which the
Portfolio seeks to assert these rights, the risk of incurring expenses
associated with asserting these rights and the risk of losing all or part of the
income from the agreement. Alger Management, acting under the supervision of the
Fund's Board of Trustees, reviews the credit worthiness of those banks and
dealers with which the Portfolios enter into repurchase agreements to evaluate
these risks and monitors on an ongoing basis the value of the securities subject
to repurchase agreements to ensure that the value is maintained at the required
level.
REVERSE REPURCHASE AGREEMENTS (ALGER MONEY MARKET PORTFOLIO AND ALGER BALANCED
PORTFOLIO)
Reverse repurchase agreements are the same as repurchase agreements except that,
in this instance, the Portfolio would assume the role of seller/borrower in the
transaction. The Portfolio will maintain segregated accounts with the Fund's
custodian consisting of U.S. Government securities, cash or money market
instruments that at all times are in an amount equal to their obligations under
reverse repurchase agreements. The Portfolio will invest the proceeds in other
money market instruments or repurchase agreements maturing not later than the
expiration of the reverse repurchase agreement. Reverse repurchase agreements
involve the risk that the market value of the securities sold by the Portfolio
may decline below the repurchase price of the securities. Under the Investment
Company Act of 1940, as amended (the "Act"), reverse repurchase agreements may
be considered borrowings by the seller; accordingly, the Portfolio will limit
its investments in reverse repurchase agreements and other borrowings to no more
than one-third of its total assets.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED PURCHASES (ALGER MONEY MARKET
PORTFOLIO AND THE ALGER BALANCED PORTFOLIO)
Firm commitment agreements and "when-issued" purchases call for the purchase of
securities at an agreed price on a specified future date and would be used, for
example, when a decline in the yield of securities of a given issuer is
anticipated and a more advantageous yield may be obtained by committing
currently to purchase securities to be issued later. When the Portfolio
purchases a security under a firm commitment agreement or on a when-issued basis
it assumes the risk of any decline in value of the security occurring between
the date of the agreement or purchase and the settlement date of the
transaction. The Portfolio will not use these transactions for leveraging
purposes and, accordingly, will segregate with the Fund's custodian cash or high
quality money market instruments in an amount sufficient at all times to meet
its purchase obligations under these agreements.
WARRANTS AND RIGHTS
Each Portfolio may invest in warrants and rights. A warrant is a type of
security that entitles the holder to buy a proportionate amount of common stock
at a specified price, usually higher than the market price at the time of
issuance, for a period of years or to perpetuity. In contrast, rights, which
also represent the right to buy common shares, normally have a subscription
price lower than the current market value of the common stock and a life of two
to four weeks. Warrants are freely transferable and are traded on the major
securities exchanges.
RESTRICTED SECURITIES
Each Portfolio may invest in restricted securities issued under Rule 144A of the
Securities Act of 1933. In adopting Rule 144A, the Securities and Exchange
Commission specifically stated that restricted securities traded under Rule 144A
may be treated as liquid
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for purposes of investment limitations if the board of trustees (or the fund's
adviser acting subject to the board's supervision) determines that the
securities are in fact liquid. Examples of factors that the Fund's Board of
Trustees will take into account in evaluating the liquidity of a Rule 144A
security, both with respect to the initial purchase and on an ongoing basis,
will include, among others: (1) the frequency of trades and quotes for the
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer). In accordance with Rule
144A, the Board has delegated its responsibility to Alger Management to
determine the liquidity of each restricted security purchased pursuant to the
Rule, subject to the Board's oversight and review. Because institutional trading
in restricted securities is relatively new, it is not possible to predict how
institutional markets will develop. If institutional trading in restricted
securities were to decline to limited levels, the liquidity of the Fund's
Portfolio could be adversely affected.
SHORT SALES
Each Portfolio other than the Alger Money Market Portfolio may sell securities
"short against the box." While a short sale is the sale of a security the
Portfolio does not own, it is "against the box" if at all times when the short
position is open the Portfolio owns an equal amount of the securities or
securities convertible into, or exchangeable without further consideration for,
securities of the same issue as the securities sold short.
LENDING OF PORTFOLIO SECURITIES
Each Portfolio may lend securities to brokers, dealers and other financial
organizations. The Portfolios will not lend securities to Alger Management or
its affiliates. By lending its securities, a Portfolio can increase its income
by continuing to receive interest or dividends on the loaned securities as well
as by either investing the cash collateral in short-term securities or by
earning income in the form of interest paid by the borrower when U.S. Government
securities are used as collateral. Each Portfolio will adhere to the following
conditions whenever its securities are loaned: (a) the Portfolio must receive at
least 100 percent cash collateral or equivalent securities from the borrower;
(b) the borrower must increase this collateral whenever the market value of the
securities including accrued interest exceeds the value of the collateral; (c)
the Portfolio must be able to terminate the loan at any time; (d) the Portfolio
must receive reasonable interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities and any increase in market
value; (e) the Portfolio may pay only reasonable custodian fees in connection
with the loan; and (f) voting rights on the loaned securities may pass to the
borrower; provided, however, that if a material event adversely affecting the
investment occurs, the Fund's Board of Trustees must terminate the loan and
regain the right to vote the securities. A Portfolio bears a risk of loss in the
event that the other party to a stock loan transaction defaults on its
obligations and the Portfolio is delayed in or prevented from exercising its
rights to dispose of the collateral including the risk of a possible decline in
the value of the collateral securities during the period in which the Portfolio
seeks to assert these rights, the risk of incurring expenses associated with
asserting these rights and the risk of losing all or a part of the income from
the transaction.
FOREIGN SECURITIES
Each Portfolio other than the Alger Money Market Portfolio may invest up to 20%
of the value of its total assets in foreign securities (not including American
Depositary Receipts ("ADRs")). Foreign securities investments may be affected by
changes in currency rates or exchange control regulations, changes in
governmental administration or economic or monetary policy (in the United States
and abroad) or changed circumstances in dealing between nations. Dividends paid
by foreign issuers may be subject to withholding and other foreign taxes that
may decrease the net return on these investments as compared to dividends paid
to the Portfolio by domestic corporations. It should be noted that there may be
less publicly available information about foreign issuers than about domestic
issuers, and foreign issuers are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those of domestic
issuers. Securities of some foreign issuers are less liquid and more volatile
than securities of comparable domestic issuers and foreign brokerage commissions
are generally higher than in the United States. Foreign securities markets may
also be less liquid, more volatile and less subject to government supervision
than those in the United States. Investments in foreign countries could be
affected by other factors not present in the United States, including
expropriation, confiscatory taxation and potential difficulties in enforcing
contractual obligations. Securities purchased on foreign exchanges may be held
in custody by a foreign branch of a domestic bank.
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OPTIONS (ALGER CAPITAL APPRECIATION PORTFOLIO)
A call option is a contract that gives the holder of the option the right to buy
from the writer (seller) of the call option, in return for a premium paid, the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option has the obligation upon
exercise of the option to deliver the underlying security upon payment of the
exercise price during the option period. A put option is a contract that, in
return for the premium, gives the holder of the option the right to sell to the
writer (seller) the underlying security at a specified price during the term of
the option. The writer of the put, who receives the premium, has the obligation
to buy the underlying security upon exercise at the exercise price during the
option period.
A call option is "covered" if the Portfolio owns the underlying security covered
by the call or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Portfolio
holds a call on the same security as the call written where the exercise price
of the call held is (1) equal to or less than the exercise price of the call
written or (2) greater than the exercise price of the call written if the
difference is maintained by the Portfolio in cash, U.S. Government securities or
other high grade short-term obligations in a segregated account held with its
custodian. A put option is "covered" if the Portfolio maintains cash or other
high grade short-term obligations with a value equal to the exercise price in a
segregated account held with its custodian, or else holds a put on the same
security as the put written where the exercise price of the put held is equal to
or greater than the exercise price of the put written.
If the Portfolio has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Portfolio has been assigned an exercise notice, the Portfolio will be unable to
effect a closing purchase transaction. Similarly, if the Portfolio is the holder
of an option it may liquidate its position by effecting a closing sale
transaction. This is accomplished by selling an option of the same series as the
option previously purchased. There can be no assurance that either a closing
purchase or sale transaction can be effected when the Portfolio so desires.
The Portfolio will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or is
more than the premium paid to purchase the option; the Portfolio will realize a
loss from a closing transaction if the price of the transaction is less than the
premium paid to purchase the option. Since call option prices generally reflect
increases in the price of the underlying security, any loss resulting from the
repurchase of a call option may also be wholly or partially offset by unrealized
appreciation of the underlying security. Other principal factors affecting the
market value of a put or a call option include supply and demand, interest
rates, the current market price and price volatility of the underlying security
and the time remaining until the expiration date.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although the Portfolio will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option. In such event it might not be
possible to effect closing transactions in particular options, so that the
Portfolio would have to exercise its option in order to realize any profit and
would incur brokerage commissions upon the exercise of the options. If the
Portfolio, as a covered call option writer, is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise or otherwise covers the position.
In addition to options on securities, the Portfolio may also purchase and sell
call and put options on securities indexes. A stock index reflects in a single
number the market value of many different stocks. Relative values are assigned
to the stocks included in an index and the index fluctuates with changes in the
market values of the stocks. The options give the holder the right to receive a
cash settlement during the term of the option based on the difference between
the exercise price and the value of the index. By writing a put or call option
on a securities index, the Portfolio is obligated, in return for the premium
received, to make delivery of this amount. The Portfolio may offset its position
in stock index options prior to expiration by entering into a closing
transaction on an exchange or it may let the option expire unexercised.
Use of options on securities indexes entails the risk that trading
in the options may be interrupted if trading in certain securities included in
the index is interrupted. The Portfolio will not purchase these options unless
Alger Management is satisfied with the development,
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depth and liquidity of the market and Alger Management believes the options can
be closed out.
Price movements in the Portfolio's securities may not correlate precisely with
movements in the level of an index and, therefore, the use of options on indexes
cannot serve as a complete hedge and will depend, in part, on the ability of
Alger Management to predict correctly movements in the direction of the stock
market generally or of a particular industry. Because options on securities
indexes require settlement in cash, Alger Management may be forced to liquidate
portfolio securities to meet settlement obligations.
The Portfolio has qualified and intends to continue to qualify as a "Regulated
Investment Company" under the Internal Revenue Code. One requirement for such
qualification is that the Portfolio must derive less than 30% of its gross
income from gains from the sale or other disposition of securities held for less
than three months. Therefore, the Portfolio may be limited in its ability to
engage in options transactions.
Although Alger Management will attempt to take appropriate measures to minimize
the risks relating to the Portfolio's writing of put and call options, there can
be no assurance that the Portfolio will succeed in any option-writing program it
undertakes.
STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES (ALGER CAPITAL
APPRECIATION PORTFOLIO)
Futures are generally bought and sold on the commodities exchanges where they
are listed with payment of initial and variation margin as described below. The
sale of a futures contract creates a firm obligation by the Portfolio, as
seller, to deliver to the buyer the net cash amount called for in the contract
at a specific future time. Put options on futures might be purchased to protect
against declines in the market values of securities occasioned by a decline in
stock prices and securities index futures might be sold to protect against a
general decline in the value of securities of the type that comprise the index.
Options on futures contracts are similar to options on securities except that an
option on a futures contract gives the purchaser the right in return for the
premium paid to assume a position in a futures contract and obligates the seller
to deliver such position.
A stock index future obligates the seller to deliver (and the purchaser to take)
an amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. No physical delivery of
the underlying stocks in the index is made. With respect to stock indexes that
are permitted investments, the Portfolio intends to purchase and sell futures
contracts on the stock index for which it can obtain the best price with
considerations also given to liquidity. While incidental to its securities
activities, the Portfolio may use index futures as a substitute for a comparable
market position in the underlying securities.
The risk of imperfect correlation increases as the composition of the Portfolio
varies from the composition of the stock index. In an effort to compensate for
the imperfect correlation of movements in the price of the securities being
hedged and movements in the price of the stock index futures, the Portfolio may
buy or sell stock index futures contracts in a greater or lesser dollar amount
than the dollar amount of the securities being hedged if the historical
volatility of the stock index futures has been less or greater than that of the
securities. Such "over hedging" or "under hedging" may adversely affect the
Portfolio's net investment results if market movements are not as anticipated
when the hedge is established.
An option on a stock index futures contract, as contrasted with the direct
investment in such a contract, gives the purchaser the right, in return for the
premium paid, to assume a position in a stock index futures contract at a
specified exercise price at any time prior to the expiration date of the option.
The Portfolio will sell options on stock index futures contracts only as part of
closing purchase transactions to terminate its options positions. No assurance
can be given that such closing transactions can be effected or that there will
be correlation between price movements in the options on stock index futures and
price movements in the Portfolio's securities which are the subject of the
hedge. In addition, the Portfolio's purchase of such options will be based upon
predictions as to anticipated market trends, which could prove to be inaccurate.
The Portfolio's use of stock index futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the Commodity Futures Trading Commission and will be
entered into only for bona fide hedging, risk management or other portfolio
management purposes. Typically, maintaining a futures contract or selling an
option thereon requires the Portfolio to deposit with a financial intermediary
as security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 10% of the face amount of
the contract (but may be higher in some circumstances). Additional cash or
assets (variation margin) may be required to be deposited thereafter on a daily
basis as the mark to market value of the contract fluctuates. The purchase of an
option on stock index futures involves payment of a premium for the
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option without any further obligation on the part of the Portfolio. If the
Portfolio exercises an option on a futures contract it will be obligated to post
initial margin (and potential subsequent variation margin) for the resulting
futures position just as it would for any position. Futures contracts and
options thereon are generally settled by entering into an offsetting transaction
but there can be no assurance that the position can be offset prior to
settlement at an advantageous price, nor that delivery will occur.
The Portfolio will not enter into a futures contract or related option (except
for closing transactions) if, immediately thereafter, the sum of the amount of
its initial margin and premiums on open futures contracts and options thereon
would exceed 5% of the Portfolio's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 12 below have been adopted by the
Fund with respect to each of the Portfolios as fundamental policies. Under the
Investment Company Act of 1940, as amended (the "Act"), a "fundamental" policy
may not be changed without the vote of a "majority of the outstanding voting
securities" of the Fund, which is defined in the Act as the lesser of (a) 67
percent or more of the shares present at a Fund meeting if the holders of more
than 50 percent of the outstanding shares of the Fund are present or represented
by proxy or (b) more than 50 percent of the outstanding shares. A fundamental
policy affecting a particular Portfolio may not be changed without the vote of a
majority of the outstanding voting securities of the affected Portfolio.
Investment restrictions 13 through 19 may be changed by vote of a majority of
the Fund's Board of Trustees at any time.
The investment policies adopted by the Fund prohibit each Portfolio from:
1. Purchasing the securities of any issuer, other than U.S. Government
securities, if as a result more than five percent of the value of the
Portfolio's total assets would be invested in the securities of the issuer,
except that up to 25 percent of the value of the Portfolio's (other than the
Alger Money Market Portfolio's) total assets may be invested without regard to
this limitation.
2. Purchasing more than 10 percent of the voting securities of any one issuer or
more than 10 percent of the securities of any class of any one issuer. This
limitation shall not apply to investments in U.S. Government securities.
3. Selling securities short or purchasing securities on margin, except that the
Portfolio may obtain any short-term credit necessary for the clearance of
purchases and sales of securities. These restrictions shall not apply to
transactions involving selling securities "short against the box."
4. Borrowing money, except that (a) all Portfolios other than the Alger Capital
Appreciation Portfolio may borrow for temporary or emergency (but not
leveraging) purposes including the meeting of redemption requests that might
otherwise require the untimely disposition of securities, in an amount not
exceeding 10 percent of the value of the Portfolio's total assets (including the
amount borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made; (b) the Alger
Money Market Portfolio and the Alger Balanced Portfolio may engage in
transactions in reverse repurchase agreements; and (c) the Alger Capital
Appreciation Portfolio may borrow from banks for investment purposes as set
forth in the Prospectus. Whenever borrowings described in (a) exceed five
percent of the value of the Portfolio's total assets, the Portfolio other than
the Alger Capital Appreciation Portfolio will not make any additional
investments. Immediately after any borrowing, including reverse repurchase
agreements, the Portfolio will maintain asset coverage of not less than 300
percent with respect to all borrowings.
5. Pledging, hypothecating, mortgaging or otherwise encumbering more than 10
percent of the value of the Portfolio's total assets except in connection with
borrowings as noted in 4(c) above. These restrictions shall not apply to
transactions involving reverse repurchase agreements or the purchase of
securities subject to firm commitment agreements or on a when-issued basis.
6. Issuing senior securities, except that the Alger Capital Appreciation
Portfolio may borrow from banks for investment purposes so long as the Portfolio
maintains the required asset coverage.
7. Underwriting the securities of other issuers, except insofar as the Portfolio
may be deemed to be an underwriter under the Securities Act of 1933, as amended,
by virtue of disposing of portfolio securities.
8. Making loans to others, except through purchasing qualified debt obligations,
lending portfolio securities or entering into repurchase agreements.
9. Investing in securities of other investment companies, except as they may be
acquired as part of a merger,
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consolidation, reorganization, acquisition of assets or offer of exchange.
10. Purchasing any securities that would cause more than 25 percent of the value
of the Portfolio's total assets to be invested in the securities of issuers
conducting their principal business activities in the same industry; provided
that (a) there shall be no limit on the purchase of U.S. Government securities,
and (b) there shall be no limit on the purchase by the Alger Money Market
Portfolio of obligations issued by bank and thrift institutions described in the
Prospectus and this Statement of Additional Information.
11. Investing in commodities, except that the Alger Capital Appreciation
Portfolio may purchase or sell stock index futures contracts and related options
thereon if, thereafter, no more than 5 percent of its total assets are invested
in margin and premiums.
12. Investing more than 10 percent (15 percent in the case of the Alger Capital
Appreciation Portfolio) of its net assets in securities which are illiquid by
virtue of legal or contractual restrictions on resale or the absence of a
readily available market. However, securities with legal or contractual
restrictions on resale may be purchased by the Alger Money Market Portfolio if
they are determined to be liquid, and such purchases would not be subject to the
10 percent limit stated above. The Board of Trustees will in good faith
determine the specific types of securities deemed to be liquid and the value of
such securities held in the Alger Money Market Portfolio. The Alger Money Market
Portfolio will not purchase time deposits maturing in more than seven calendar
days and will limit to no more than 10 percent of its assets its investment in
time deposits maturing in excess of two business days, together with all other
illiquid securities.
13. Purchasing or selling real estate or real estate limited partnerships,
except that the Portfolio may purchase and sell securities secured by real
estate, mortgages or interests therein and securities that are issued by
companies that invest or deal in real estate.
14. Writing or selling puts, calls, straddles, spreads or combinations thereof,
except that the Alger Capital Appreciation Portfolio may invest in options.
15. Investing in oil, gas or other mineral, exploration or development programs,
except that the Portfolio may invest in the securities of companies that invest
in or sponsor those programs.
16. Purchasing any security if, as a result, the Portfolio would then have more
than five percent of its total assets invested in securities of issuers
(including predecessors) that have been in continual operation for less than
three years. This limitation shall not apply to investments in U.S. Government
securities.
17. Making investments for the purpose of exercising control or management.
18. Investing in warrants, except that the Portfolio may invest in warrants if,
as a result, the investments (valued at the lower of cost or market) would not
exceed five percent of the value of the Portfolio's net assets, of which not
more than two percent of the Portfolio's net assets may be invested in warrants
not listed on a recognized domestic stock exchange. Warrants acquired by the
Portfolio as part of a unit or attached to securities at the time of acquisition
are not subject to this limitation.
19. Purchasing or retaining the securities of any issuer if, to the knowledge of
the Fund, any of the officers, directors or trustees of the Fund or Alger
Management individually owns more than .5 percent of the outstanding securities
of the issuer and together they own beneficially more than five percent of the
securities.
As of April 29, 1994, shares of the Alger Growth Portfolio, Alger Small
Capitalization Portfolio and Alger MidCap Growth Portfolio were registered for
sale in Germany. As long as the Alger Growth Portfolio, Alger Small
Capitalization Portfolio and Alger MidCap Growth Portfolio are registered in
Germany, these Portfolios may not without prior approval of their shareholders:
a. Invest in the securities of any other domestic or foreign investment
company or investment fund except in connection with a plan of merger or
consolidation with or acquisition of substantially all the assets of such
other investment company or investment fund;
b. Purchase or sell real estate or any interest therein, and real estate
mortgage loans, except that the Portfolios may invest in securities of
corporate or governmental entities secured by real estate or marketable
interests therein or securities issued by companies (other than real
estate limited partnerships, real estate investment trusts and real
estate funds) that invest in real estate or interests therein;
c. Borrow money, except for temporary or emergency (but not leveraging)
purposes including the meeting of redemption requests that might
otherwise require the untimely disposition of securities, in an amount
not exceeding 10 percent of the value of the Portfolio's total assets
(including the amount
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borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made;
d. Pledge, hypothecate, mortgage or otherwise encumber their assets except
to secure indebtedness permitted under section c.;
e. Purchase securities on margin or make short sales; or;
f. Redeem their securities in kind.
These Portfolios will comply with the more restrictive policies required by the
German regulatory authorities, as stated above, as long as such Portfolios are
registered in Germany.
Except in the case of the 300 percent limitation set forth in Investment
Restriction No. 4, the percentage limitations contained in the foregoing
restrictions apply at the time of the purchase of the securities and a later
increase or decrease in percentage resulting from a change in the values of the
securities or in the amount of the Portfolio's assets will not constitute a
violation of the restriction.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities and other financial instruments for a
Portfolio are made by Alger Management, which also is responsible for placing
these transactions, subject to the overall review of the Fund's Board of
Trustees. Although investment requirements for each Portfolio are reviewed
independently from those of the other accounts managed by Alger Management and
those of the other Portfolios, investments of the type the Portfolios may make
may also be made by these other accounts or Portfolios. When a Portfolio and one
or more other Portfolios or accounts managed by Alger Management are prepared to
invest in, or desire to dispose of, the same security or other financial
instrument, available investments or opportunities for sales will be allocated
in a manner believed by Alger Management to be equitable to each. In some cases,
this procedure may affect adversely the price paid or received by a Portfolio or
the size of the position obtained or disposed of by a Portfolio.
Transactions in equity securities are in many cases effected on U. S. stock
exchanges and involve the payment of negotiated brokerage commissions. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the prices of those securities include undisclosed
commissions or mark-ups. Purchases and sales of money market instruments and
debt securities usually are principal transactions. These securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. The cost of securities purchased from underwriters
includes an underwriting commission or concession and the prices at which
securities are purchased from and sold to dealers include a dealer's mark-up or
mark-down. U. S. Government securities are generally purchased from underwriters
or dealers, although certain newly-issued U. S. Government securities may be
purchased directly from the U. S. Treasury or from the issuing agency or
instrumentality.
To the extent consistent with applicable provisions of the Act and the rules and
exemptions adopted by the Securities and Exchange Commission (the "SEC")
thereunder, as well as other regulatory requirements, the Fund's Board of
Trustees has determined that portfolio transactions will be executed through
Fred Alger & Company, Incorporated ("Alger Inc.") if, in the judgment of Alger
Management, the use of Alger Inc. is likely to result in price and execution at
least as favorable as those of other qualified broker-dealers and if, in
particular transactions, Alger Inc. charges the Portfolio involved a rate
consistent with that charged to comparable unaffiliated customers in similar
transactions. Such transactions will be fair and reasonable to the Portfolio's
shareholders. Over-the-counter purchases and sales are transacted directly with
principal market makers except in those cases in which better prices and
executions may be obtained elsewhere. Principal transactions are not entered
into with affiliates of the Fund except pursuant to exemptive rules or orders
adopted by the SEC.
In selecting brokers or dealers to execute portfolio transactions on behalf of a
Portfolio, Alger Management seeks the best overall terms available. In assessing
the best overall terms available for any transaction, Alger Management will
consider the factors it deems relevant, including the breadth of the market in
the investment, the price of the investment, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis. In
addition, Alger Management is authorized, in selecting parties to execute a
particular transaction and in evaluating the best overall terms available, to
consider the brokerage and research services, as those terms are defined in
section 28(e) of the Securities Exchange Act of 1934, provided to the Portfolio
involved, the other Portfolios and/or other accounts over which Alger Management
or its affiliates exercise investment discretion. The Fund will consider sales
of its shares as a factor in the selection of broker-dealers to execute
over-the-counter transactions, subject to the requirements of best price and
execution. Alger Management's fees under
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its agreements with the Portfolios are not reduced by reason of its receiving
brokerage and research service. The Fund's Board of Trustees will periodically
review the commissions paid by the Portfolios to determine if the commissions
paid over representative periods of time are reasonable in relation to the
benefits inuring to the Portfolios. During the fiscal years ended October 31,
1994, 1995, and 1996, the Fund paid an aggregate of approximately $765,940,
$799,446 and $1,691,123 respectively, in commissions to broker-dealers in
connection with portfolio transactions, 100% of which was paid to Alger Inc.,
except that $2,156 was paid to other brokers in 1994 and $136,862 was paid to
Instinet in 1996. Alger Inc. does not engage in principal transactions with the
Fund and, accordingly, received no compensation in connection with securities
purchased or sold in that manner, which include securities traded in the
over-the-counter markets, money market investments and most debt securities.
NET ASSET VALUE
The Prospectus discusses the time at which the net asset values of the classes
of each Portfolio are determined for purposes of sales and redemptions. The New
York Stock Exchange is currently open on each Monday through Friday, except (i)
January 1st, Presidents' Day (the third Monday in February), Good Friday,
Memorial Day (the last Monday in May), July 4th, Labor Day (the first Monday in
September), Thanksgiving Day (the fourth Thursday in November) and December 25th
and (ii) the preceding Friday when any one of those holidays falls on a
Saturday, or the subsequent Monday when any one of those holidays falls on a
Sunday. The following is a description of the procedures used by the Fund in
valuing the Portfolios' assets. The assets of the Portfolios other than the
Alger Money Market Portfolio are generally valued on the basis of market
quotations. Securities whose principal market is on an exchange or in the
over-the-counter market 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. Bonds and
other fixed income securities may be valued on the basis of prices provided by a
pricing service when the Fund's Board of Trustees believes that these prices
reflect the fair market value of the securities. Other investments and other
assets, including restricted securities and securities for which market
quotations are not readily available, are valued at fair value under procedures
approved by the Fund's Board of Trustees. Short-term securities with maturities
of 60 days or less are valued at amortized cost, as described below, which
constitutes fair value as determined by the Fund's Board of Trustees.
The valuation of the securities held by the Alger Money Market Portfolio, as
well as money market instruments with maturities of 60 days or less held by the
other Portfolios, is based on their amortized cost which does not take into
account unrealized capital gains or losses. Amortized cost valuation involves
initially valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. Although this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price a
Portfolio would receive if it sold the instrument.
The Alger Money Market Portfolio's use of the amortized cost method of valuing
its securities is permitted by a rule adopted by the SEC. Under this rule, the
Portfolio must maintain a dollar-weighted average portfolio maturity of 90 days
or less, purchase only instruments having remaining maturities of less than 397
days, as determined in accordance with the provisions of the rule, and invest
only in securities determined by Alger Management, acting under the supervision
of the Fund's Board of Trustees, to be of high quality with minimal credit
risks.
Pursuant to the rule, the Fund's Board of Trustees also has established
procedures designed to stabilize, to the extent reasonably possible, the Alger
Money Market Portfolio's price per share as computed for the purpose of sales
and redemptions at $1.00. These procedures include review of the Portfolio's
holdings by the Fund's Board of Trustees, at such intervals as it deems
appropriate, to determine whether the Portfolio's net asset value calculated by
using available market quotations or market equivalents deviates from $1.00 per
share based on amortized cost.
The rule also provides that the extent of any deviation between the Portfolio's
net asset value based on available market quotations or market equivalents and
$1.00 per share net asset value based on amortized cost must be examined by the
Fund's Board of Trustees. In the event the Fund's Board of Trustees determines
that a deviation exists that may result in material dilution or other unfair
results to investors or existing shareholders, pursuant to the rule the Fund's
Board of Trustees must cause the Portfolio to take such corrective action as the
Fund's Board of Trustees regards as necessary
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<PAGE>
and appropriate, including: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends or paying distributions from capital or capital gains,
redeeming shares in kind or establishing net asset value per share by using
available market quotations.
PURCHASES
Shares of the Portfolios are offered continuously by the Fund and are
distributed on a best efforts basis by Alger Inc. as principal underwriter for
the Fund pursuant to a distribution agreement (the "Distribution Agreement").
Under the Distribution Agreement, Alger Inc. bears all selling expenses,
including the costs of advertising and of printing prospectuses and distributing
them to prospective shareholders.
DISTRIBUTION PLAN
To reimburse Alger Inc. for the distribution expenses it bears in respect of the
Fund's Class B shares, the Fund has adopted an Amended and Restated Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act.
Distribution expenses covered under the Plan may include payments made to and
expenses of persons who are engaged in, or provide support services in
connection with, the distribution of the class' shares, such as answering
routine telephone inquiries for prospective shareholders; compensation in the
form of sales concessions and continuing compensation paid to securities dealers
whose customers hold shares of the class; costs related to the formulation and
implementation of marketing and promotional activities, including direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; costs of printing and distributing prospectuses and reports to
prospective shareholders of the class; costs involved in preparing, printing and
distributing sales literature for the class; and costs involved in obtaining
whatever information, analyses and reports with respect to marketing and
promotional activities on behalf of the class that the Fund deems advisable.
It is anticipated that distribution expenses incurred by Alger Inc. during the
early years of a Portfolio's Class B share operations will exceed the assets of
the class available for reimbursement under the Plan, while it is possible that
in later years the converse may be true. Distribution expenses incurred in a
year in respect of Class B shares of a Portfolio in excess of contingent
deferred sales charges received by Alger Inc. relating to redemptions of shares
of the class during that year and .75 percent of the class' average daily net
assets may be carried forward and sought to be reimbursed in future years.
Interest at the prevailing broker loan rate may be charged to the applicable
Portfolio's Class B shares on any expenses carried forward and those expenses
and interest will be reflected as current expenses on the Portfolio's statement
of operations for the year in which the amounts become accounting liabilities,
which is anticipated to be the year in which these amounts are actually paid.
Although the Fund's Board of Trustees may change this policy, it is currently
anticipated that payments under the Plan in a year will be applied first to
distribution expenses incurred in that year and then, up to the maximum amount
permitted under the Plan, to previously incurred but unreimbursed expenses
carried forward plus interest thereon.
Alger Inc. has acknowledged that payments under the Plan are subject to the
approval of the Fund's Board of Trustees and that no Portfolio is contractually
obligated to make payments in any amount or at any time, including payments in
reimbursement of Alger Inc. for expenses and interest thereon incurred in a
prior year.
Under its terms, the Plan remains in effect from year to year, provided such
continuance is approved annually by vote of the Fund's Board of Trustees,
including a majority of the Trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan ("Independent Trustees"). The Plan may not be amended to increase
materially the amount to be spent for the services provided by Alger Inc.
without the approval of Class B shareholders, and all material amendments of the
Plan must also be approved by the Trustees in the manner described above. The
Plan may be terminated at any time, without penalty, by vote of a majority of
the Independent Trustees or, with respect to the Class B shares of any Portfolio
to which the Plan relates, by a vote of a majority of the outstanding voting
securities of the class, on not more than thirty days' written notice to any
other party to the Plan. If the Plan is terminated, or not renewed with respect
to any one or more Portfolios, it may continue in effect with respect to the
Class B shares of any Portfolio as to which it has not been terminated, or has
been renewed. Alger Inc. will provide to the Board of Trustees quarterly reports
of amounts expended under the Plan and the purpose for which such expenditures
were made. During the fiscal year ended October 31, 1996, the Fund reimbursed
$7,124,099 to Alger Inc. as the Fund's underwriter, under the provisions of the
Plan. Alger Inc.'s selling expenses during that period totaled $20,969,782 which
consisted of $1,150,159 in printing and mailing of prospectuses and other sales
literature to prospective investors; $2,136,299 in advertising; $15,253,965 in
compensation to dealers; $638,216 in compensation
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to sales personnel; $63,496 in other marketing expenses; and $1,727,647 in
interest, carrying or other financing charges. If in any month, the costs
incurred by Alger Inc. are in excess of the distribution expenses charged to
Class B shares of the Portfolios, the excess may be carried forward, with
interest, and sought to be reimbursed in future periods. As of October 31, 1996,
such excess carried forward was approximately $7,877,000, $16,225,000, $282,000,
$3,069,000 and $2,130,000 for the Class B shares of Alger Growth Portfolio, the
Alger Small Capitalization Portfolio, the Alger Balanced Portfolio, the Alger
MidCap Growth Portfolio and the Alger Capital Appreciation Portfolio,
respectively.
SHAREHOLDER SERVICING AGREEMENT
Payments under the Shareholder Servicing Agreement are not tied exclusively to
the shareholder servicing expenses actually incurred by Alger Inc. and the
payments may exceed expenses actually incurred by Alger Inc. The Fund's Board of
Trustees evaluates the appropriateness of the Shareholder Servicing Agreement
and its payment terms on a continuing basis and in doing so considers all
relevant factors, including expenses borne by Alger Inc. and the amounts it
receives under the Shareholder Servicing Agreement.
EXPENSES OF THE FUND
Each Portfolio will bear its own expenses. Operating expenses for each Portfolio
generally consist of all costs not specifically borne by Alger Management,
including investment management fees, fees for necessary professional and
brokerage services, costs of regulatory compliance and costs associated with
maintaining legal existence and shareholder relations. In addition, Class B of
each Portfolio other than the Money Market Portfolio may reimburse Alger Inc.
for expenses incurred in distributing Class B shares and may compensate Alger
Inc. for servicing shareholder accounts. Fundwide expenses not identifiable to
any particular Portfolio or Class will be allocated in a manner deemed fair and
equitable by the Board of Trustees. From time to time, Alger Management, in its
sole discretion and as it deems appropriate, may assume certain expenses of one
or more of the Portfolios while retaining the ability to be reimbursed by the
applicable Portfolio for such amounts prior to the end of the fiscal year. This
will have the effect of lowering the applicable Portfolio's overall expense
ratio and of increasing yield to investors, or the converse, at the time such
amounts are assumed or reimbursed, as the case may be.
PURCHASES THROUGH PROCESSING ORGANIZATIONS
When shares are purchased this way, the Processing Organization, rather than its
customer, may be the shareholder of record of the shares. The minimum initial
and subsequent investments in classes of the Portfolios for shareholders who
invest through a Processing Organization will be set by the Processing
Organization. Processing Organizations may charge their customers a fee in
connection with services offered to customers.
TELEPURCHASE PRIVILEGE
The price the shareholder will receive will be the price next computed after the
Transfer Agent receives the investment from the shareholder's bank, which is
normally one banking day. While there is no charge to shareholders for this
service, a fee will be deducted from a shareholder's Fund account in case of
insufficient funds. This privilege may be terminated at any time without charge
or penalty by the shareholder, the Fund, the Transfer Agent or Alger Inc. Class
A share purchases will remain subject to the front-end load.
AUTOMATIC INVESTMENT PLAN
While there is no charge to shareholders for this service, a fee will be
deducted from a shareholder's Fund account in the case of insufficient funds. A
shareholder's Automatic Investment Plan may be terminated at any time without
charge or penalty by the shareholder, the Fund, the Transfer Agent or Alger Inc.
Class A share purchases will remain subject to the front-end load.
AUTOMATIC EXCHANGE PLAN
There is no charge to shareholders for this service. A shareholder's Automatic
Exchange Plan may be terminated at any time without charge or penalty by the
shareholder, the Fund, the Transfer Agent or Alger Inc. The Plan will
automatically be terminated if the automatic exchange amount exceeds the Money
Market Portfolio balance. Shares held in certificate form are not eligible for
this service. Class A share purchases will remain subject to the front-end load.
REDEMPTIONS
The right of redemption of shares of a Portfolio may be suspended or the date of
payment postponed for more than seven days (a) for any periods during which the
New York Stock Exchange (the "NYSE") is closed (other than for customary weekend
and holiday closings), (b) when trading in the markets the Portfolio normally
utilizes is restricted, or an emergency, as defined by the rules and regulations
of the SEC, exists, making disposal of the Portfolio's investments or
determination of its net asset values not reasonably practicable or (c) for such
other periods as the SEC by order may permit for protection of the Fund's
shareholders.
CHECK REDEMPTION PRIVILEGE
Unless investors elect otherwise, checks drawn on jointly-owned accounts will be
honored with the signa-
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ture of either of the joint owners. Shareholders should be aware that use of the
check redemption procedure does not give rise to a banking relationship between
the shareholder and the Transfer Agent, which will be acting solely as transfer
agent for the Portfolio; nor does it create a banking relationship between the
shareholder and the Fund. When a check is presented to the Transfer Agent for
payment, the Transfer agent, as the investor's agent, will cause the Fund to
redeem a sufficient number of shares from the investor's account to cover the
amount of the check.
An investor may expedite a redemption of shares by delivering redemption checks
directly to Alger Shareholder Services, Inc., 30 Montgomery Street, Jersey City,
New Jersey, in which case a check issued by the Transfer Agent will be mailed or
made available on the next business day. In order for an investor to have a
proceeds check mailed or made available at the Transfer Agent, a letter
requesting the redemption, or a properly executed stock power form, with the
investor's signature guaranteed as described in the Prospectus must be delivered
to the Transfer Agent with the redemption check. Shares for which stock
certificates have been issued may not be redeemed by check. An investor's
account with the Alger Money Market Portfolio will be reduced by any contingent
deferred sales charge applicable to any redemption, including a redemption by
check. The check redemption privilege may be modified or terminated at any time
by the Fund or by the Transfer Agent.
REDEMPTIONS IN KIND
The Prospectus states that payment for shares tendered for redemption is
ordinarily made in cash. However, if the Board of Trustees of the Fund
determines that it would be detrimental to the best interest of the remaining
shareholders of the Portfolio to make payment of a redemption order wholly or
partly in cash, the Portfolio may pay the redemption proceeds in whole or in
part by a distribution "in kind" of securities from the Portfolio, in lieu of
cash, in conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the Act,
pursuant to which a Portfolio is obligated to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net assets of the Portfolio during any
90-day period for any one shareholder. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage or other costs in selling the
securities for cash. The method of valuing securities used to make redemptions
in kind will be the same as the method the Fund uses to value its portfolio
securities and such valuation will be made as of the time the redemption price
is determined.
CERTAIN WAIVERS OF THE CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales change ("CDSC") which may be imposed on
redemptions of Fund shares will be waived in certain instances, including (a)
redemptions of shares held at the time a shareholder becomes disabled or dies,
including the shares of a shareholder who owns the shares with his or her spouse
as joint tenants with right of survivorship, provided that the redemption is
requested within one year after the death or initial determination of
disability, (b) redemptions in connection with the following retirement plan
distributions: (i) lump-sum or other distributions from a qualified corporate or
Keogh retirement plan following retirement, termination of employment, death or
disability (or in the case of a five percent owner of the employer maintaining
the plan, following attainment of age 70l/2); (ii) required distributions from
an Individual Retirement Account ("IRA") or custodial account under Section
403(b)(7) of the Internal Revenue Code of 1986, following attainment of age
70l/2; and (iii) a tax-free return of an excess contribution to an IRA, and (c)
systematic withdrawal payments. For purposes of the waiver described in (a)
above, a person will be deemed "disabled" if the person is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or to be
of long-continued and indefinite duration.
REINSTATEMENT PRIVILEGE
A shareholder who has redeemed shares in the Fund may reinvest all or part of
the redemption proceeds in the Fund without an initial sales charge and receive
a credit for any contingent deferred sales charge paid on the redemption,
provided the reinvestment is made within 30 days after the redemption. This
reinstatement privilege may be exercised only once by a shareholder.
Reinstatement will not alter any capital gains tax payable on the redemption and
a loss may not be allowed for tax purposes.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan (the "Withdrawal Plan") is available to
shareholders who own shares of a Portfolio with a value exceeding $10,000 and
who wish to receive specific amounts of cash periodically. Withdrawals of at
least $50 monthly (but no more than one percent of the value of a shareholder's
shares in the Portfolio) may be made under the Withdrawal Plan by redeem-
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ing as many shares of the Portfolio as may be necessary to cover the stipulated
withdrawal payment. To the extent that withdrawals exceed dividends,
distributions and appreciation of a shareholder's investment in the Portfolio,
there will be a reduction in the value of the shareholder's investment and
continued withdrawal payments may reduce the shareholder's investment and
ultimately exhaust it. Withdrawal payments should not be considered as income
from investment in a Portfolio.
Shareholders who wish to participate in the Withdrawal Plan and who hold their
shares in certificated form must deposit their share certificates of the
Portfolio from which withdrawals will be made with Alger Shareholder Services,
Inc., as agent for Withdrawal Plan members. All dividends and distributions on
shares in the Withdrawal Plan are automatically reinvested at net asset value in
additional shares of the Portfolio involved. For additional information
regarding the Withdrawal Plan, contact the Fund.
EXCHANGES
IN GENERAL
Class A shares may not be exchanged for Class B shares. Class B shares may not
be exchanged for Class A shares.
FOR SHAREHOLDERS MAINTAINING AN ACTIVE ACCOUNT ON OCTOBER 17, 1992. Shares
acquired in an exchange are deemed to have been purchased on the date on which
the shares given in exchange were purchased; thus, an exchange would not affect
the running of the six-year holding period. The initial sales charge and CDSC
would not apply to an exchange of shares of a class of one of the Alger Small
Capitalization Portfolio, the Alger Midcap Portfolio, the Alger Growth
Portfolio, the Alger Balanced Portfolio or the Alger Capital Appreciation
Portfolio (collectively, the "Charge Portfolios") for shares of the Alger Money
Market Portfolio, but redemptions of shares of that Portfolio acquired by
exchange of Class B shares from one or more of the Charge Portfolios are subject
to the charge on the same terms as the shares given in exchange. If shares of
the Alger Money Market Portfolio are exchanged for Class B shares of any of the
Charge Portfolios, any later redemptions of those shares would be subject to the
charge based on the period of time since the shares given in exchange were
purchased.
The following example illustrates the operation of the CDSC prior to October 17,
1992. Assume that on the first day of year 1 an investor purchases $1,000 of
shares of each of the Alger Money Market Portfolio and the Alger Growth
Portfolio, Class B. The shareholder may at any time redeem the shares of the
Alger Money Market Portfolio without imposition of the charge. If in year 3 the
shareholder redeems all the Class B shares of the Alger Growth Portfolio
purchased in year 1, a charge of three percent of the current net asset value of
those shares would be imposed on the redemption. The shareholder could redeem
without imposition of the charge any of his or her shares of that Portfolio that
were purchased through reinvestment of dividends and capital gains distributions
as well as an amount of shares not exceeding any increase in the net asset value
of the $1,000 of shares originally purchased. The shareholder could also at any
time exchange the Class B shares of the Alger Growth Portfolio for Class B
shares of any other Portfolio without imposition of the charge. If those shares
were later redeemed, however, the redemption would be subject to the charge
based on the current net asset value of the shares and the period of time since
the original purchase payment was made (with adjustments for partial exchanges
and redemptions and any accretions in the shareholder's account by reason of
increases in net asset value and reinvestment of dividends and capital gains
distributions). If the foregoing exchange were made by the shareholder for
additional shares of the Alger Money Market Portfolio, any subsequent redemption
of shares of that Portfolio would be deemed to have been made first from the
$1,000 of shares of the Alger Money Market Portfolio originally purchased in
year 1, which are not subject to the charge, and then from the shares acquired
in the exchange, which are subject to the charge. If instead the shareholder
exchanged the shares of the Alger Money Market Portfolio originally purchased in
year 1 for additional Class B shares of the Alger Growth Portfolio (or of the
other Charge Portfolios) any later redemption of those shares would be subject
to the charge in accordance with the foregoing rules based on the period of time
since the original purchase payment was made. Thus, the period of time shares
were held in the Alger Money Market Portfolio would be counted toward the
six-year holding period.
FOR NEW SHAREHOLDERS OPENING AN ACCOUNT AFTER OCTOBER 17, 1992. Effective
October 17, 1992, new shareholders of the Fund are subject to the following
terms and conditions regarding the exchange of shares of the Fund's Portfolios.
Once an initial sales charge has been imposed on a purchase of Class A shares,
no additional charge is imposed in connection with their exchange. For example,
a purchase of Alger Money Market Portfolio shares and
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<PAGE>
subsequent exchange to Class A shares of a Charge Portfolio would result in the
imposition of an initial sales charge at the time of exchange. If the initial
purchase had been of Class A shares in a Charge Portfolio, an exchange to any
other Portfolio would not result in an additional initial sales charge. No CDSC
is assessed in connection with exchanges at any time. In addition, no charge is
imposed on the redemption of reinvested dividends or capital gains distributions
or on increases in the net asset value of shares of a Portfolio above purchase
payments made with respect to that Portfolio during the six-year holding period.
A CDSC is assessed on redemptions of Class B shares of the Charge Portfolios and
of shares of the Alger Money Market Portfolio that have been acquired in
exchange for Class B shares of a Charge Portfolio, based solely on the period of
time the Class B shares are retained in the Charge Portfolio. Thus, the period
of time shares are held in the Alger Money Market Portfolio will not be counted
towards the six-year holding period in the calculation of a CDSC.
The following examples illustrate the operation of the CDSC for accounts opened
after October 17, 1992: (1) An investor purchases Class B shares of the Alger
Growth Portfolio on the first day of year 1 and exchanges those shares for
shares of the Alger Money Market Portfolio in year 2. No charge is assessed at
the time of the exchange. If in year 4 the shareholder redeems all the shares, a
charge of four percent of the current net asset value of those shares would be
imposed on the redemption based on the period of time the shares were retained
in Class B of the Alger Growth Portfolio. The time period during which the
shares of the Alger Money Market Portfolio are held is not included when the
amount of the charge is calculated. The shareholder could redeem without
imposition of the charge any of his shares that were purchased through
reinvestment of dividends and capital gains distributions as well as an amount
of shares not exceeding any increase in the net asset value of the original
purchase. (2) An investor purchases shares of the Alger Money Market Portfolio
on the first day of year 1 and exchanges those shares for Class B shares of the
Alger Growth Portfolio on the first day of year 2. No charge is assessed at the
time of the exchange. If in year 4 the shareholder redeems all the shares, a
charge of three percent of the current net asset value of those shares would be
imposed on the redemption based on the period of time the shares were retained
in Class B of the Alger Growth Portfolio. The time period during which the
shares of the Alger Money Market Portfolio are held is not included when the
amount of the charge is calculated. The shareholder could redeem without
imposition of the charge any of his shares that were purchased through
reinvestment of dividends and capital gains distributions as well as an amount
of shares not exceeding any increase in the net asset value of the original
purchase.
CONVERSION OF CLASS B SHARES
Record holders of "Qualified Class B Shares" (as defined below) will be entitled
to convert those shares to Class A Shares, on the basis of the relative net
asset values per share of the two classes, at any time prior to March 31, 1997.
For this purpose, "Qualified Class B Shares" shall mean Class B Shares held of
record by a Processing Organization on behalf of (i) investment advisers or
financial planners trading for their own accounts or the accounts of their
clients and who charge a management, consulting or other fee for their services,
and clients of such investment advisers or financial planners trading for their
own accounts if the accounts are linked to the master account of such investment
adviser or financial planner on the books and records of the record holder; and
(ii) retirement and deferred compensation plans and trusts used to fund those
plans. The Fund has obtained an opinion of counsel that such conversions will
not constitute taxable events under current federal income tax law, and the
conversion right may be suspended if such an opinion is no longer available at
the time of conversion.
MANAGEMENT
TRUSTEES AND OFFICERS OF THE FUND
The names of the Trustees and officers of the Fund, together with information
concerning their principal business occupations, are set forth below. Each of
the officers of the Fund is also an officer, and each of the Trustees is also a
director or trustee, as the case may be, of Castle Convertible Fund, Inc.
("Castle"), a registered closed-end investment company, The Alger American Fund,
The Alger Retirement Fund and Spectra Fund, registered open-end management
investment companies, for which Alger Management serves as investment adviser.
Fred M. Alger III and David D. Alger are "interested persons" of the Fund, as
defined in the Act. Fred M. Alger III and David D. Alger are brothers. Unless
otherwise noted, the address of each person named below is 75 Maiden Lane, New
York, New York 10038.
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<PAGE>
NAME, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
<TABLE>
<CAPTION>
<S> <C>
Fred M. Alger III Chairman of the Boards of Alger
Chairman of the Board Associates, Inc. ("Associates"), Alger Inc.,
Alger Management, Alger Properties, Inc.
("Properties"), Alger Shareholder Services, Inc.
("Services"), Alger Life Insurance Agency, Inc.
("Agency"), Analysts Resources, Inc. ("ARI"),
The Alger American Asset Growth Fund ("Asset
Growth") and Fred Alger International Advisory
S. A. ("International").
David D. Alger President and Director of Associates, Alger
President and Trustee Management, Alger Inc., Properties, Services,
International and Agency; Executive Vice
President and Director of ARI.
Gregory S. Duch Executive Vice President, Treasurer and Director
Treasurer of Alger Management and Properties; Executive
Vice President and Treasurer of Associates,
Alger Inc., ARI, Services and Agency; Treasurer
and Director of International.
Mary E. Marsden-Cochran General Counsel and Secretary, Associates, Alger Management,
Secretary Alger Inc., Properties, ARI, Services, International and Agency (2/96-present);
Associate General Counsel and Vice President, Smith Barney Inc.
(12/94-2/96); Blue Sky Attorney, AMT Capital (1/94-11/94).
Frederick A. Blum Senior Vice President of Associates, Alger Management, Alger Inc.,
Assistant Secretary Properties, ARI, Services and Agency.
and Assistant Treasurer
Arthur M. Dubow President of Fourth Estate, Inc.; private investor since 1985;
Trustee Director of Coolidge Investment Corporation; formerly
P.O. Box 969 Chairman of the Board of Institutional Shareholder Services, Inc.,
Wainscott, NY 11975
Stephen E. O'Neil Of Counsel to the law firm of Baker, Nelson, Mishkin & Kohler;
Trustee Private investor since 1981; Director of NovaCare, Inc., Syntro
460 Park Avenue Corporation and Brown-Forman Corporation; formerly
New York, NY 10022 President and Vice Chairman of City Investing Company
and Director of Centerre Bancorporation.
Nathan Emile Saint-Amand, M. D. Medical doctor in private practice.
Trustee
2 East 88th Street
New York, NY 10128
John T. Sargent Private investor since 1987; Director of River Bank America
Trustee and Atlantic Mutual Insurance Co.
14 E. 69th Street
New York, NY 10021
</TABLE>
No director, officer or employee of Alger Management or its affiliates will
receive any compensation from the Fund for serving as an officer or Trustee of
the Fund. The Fund pays each Trustee who is not a director, officer or employee
of Alger Management or its affiliates a quarterly fee of $2,000, which is
reduced by the proportion of the meetings not attended by the Trustee during the
quarter.
The Fund did not offer its Trustees any pension or retirement benefits during or
prior to the fiscal year ended October 31, 1996. The following table provides
compensation amounts paid to Disinterested Trustees of the Fund for the fiscal
year ended October 31, 1996.
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<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Compensation Paid to Trustees from
The Alger Retirement Fund,
Aggregate The Alger Fund,
Compensation The Alger American Fund,
from Castle Convertible Fund, Inc. and
Name of Person, Position The Alger Fund Spectra Fund
------------------------ ---------------- ---------------------------------------
<S> <C> <C>
Arthur M. Dubow, Trustee $8,000 $28,250
Stephen E. O'Neil, Trustee $8,000 $28,250
Nathan E. Saint-Amand, Trustee $8,000 $28,250
John T. Sargent, Trustee $8,000 $28,250
</TABLE>
INVESTMENT MANAGER
Alger Management serves as investment manager to each of the Portfolios pursuant
to separate written agreements (the "Management Agreements"). Certain of the
services provided by, and the fees paid by the Portfolios to, Alger Management
under the Management Agreements are described in the Prospectus. Alger
Management pays the salaries of all officers who are employed by it . Alger
Management has agreed to maintain office facilities for the Fund, furnish the
Fund with statistical and research data, clerical, accounting and bookkeeping
services, and certain other services required by the Fund, and to compute the
net asset values, net income and realized capital gains or losses of the
Portfolios. Alger Management prepares semi-annual reports to the SEC and to
shareholders, prepares federal and state tax returns and filings with state
securities commissions, maintains the Fund's financial accounts and records and
generally assists in all aspects of the Fund's operations. Alger Management
bears all expenses in connection with the performance of its services under the
Management Agreements.
Each Management Agreement provides that if, in any fiscal year, the aggregate
expenses of the Portfolio (exclusive of certain specified categories of expense)
exceed the expense limitation of any state having jurisdiction over the
Portfolio, Alger Management will reimburse the Portfolio for that excess expense
to the extent required by state law. At the date of this Statement of Additional
Information, there is no state expense limitation applicable to any Portfolio.
During the fiscal years ended October 31, 1994, 1995, and 1996, Alger Management
earned under the terms of the Management Agreements $711,113, $830,000, and
$1,214,904 respectively, in respect of the Alger Money Market Portfolio;
$2,359,000, $3,118,000, and $4,478,467 respectively, in respect of the Alger
Small Capitalization Portfolio; $444,000, $760,000, and $1,654,488 respectively,
in respect of the Alger Growth Portfolio; $26,000, $27,000, and $82,116
respectively, in respect of the Alger Balanced Portfolio; $92,000, $244,000, and
$720,696 respectively, in respect of the Alger MidCap Growth Portfolio; and
$17,000, $77,000, and $861,617 respectively, in respect of the Alger Capital
Appreciation Portfolio. Some of these fees, however, were offset in whole or in
part by various expense reimbursements and waivers. The expense reimbursements
and waivers for the fiscal year ended October 31, 1996 are described in the
Notes to the Financial Statements which Financial Statements are hereby
incorporated by reference.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountants for the Fund.
TAXES
The following is a summary of selected federal income tax considerations that
may affect the Fund and its shareholders. The summary is not intended to
substitute for individual tax advice and investors are urged to consult their
own tax advisers as to the federal, state and local tax consequences of
investing in the Fund.
Each Portfolio intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). If
qualified as a regulated investment company, a Portfolio will pay no federal
income taxes on its taxable net investment income (that is, taxable income other
than net realized capital gains) and its net realized capital gains that are
distributed to shareholders. To qualify under Subchapter M, a Portfolio must,
among other things: (1) distribute to its shareholders at least 90% of its
taxable net investment income and net realized short-term capital gains; (2)
derive at least 90% of its gross income from dividends, interest, payments with
respect to loans of securities, gains from the sale or other disposition of
securities, or other income (including, but not limited to, gains from options,
futures and forward contracts) derived with respect to the Portfolio's business
of investing in securities; (3) derive less than 30% of its annual gross income
from the sale or other disposition of securities, options, futures or forward
contracts held for less than three months; and (4) diversify its holdings so
that, at the end of each fiscal quarter of the Portfolio (a) at least 50% of the
market value of the Portfolio's assets is represented by cash, U.S. Government
securities and other securities, with those other securities limited, with
respect to any one issuer, to an amount no greater in value than 5% of the
Portfolio's total assets and to not more than 10% of the outstanding voting
securities of the issuer, and (b) not more than
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<PAGE>
25% of the market value of the Portfolio's assets is invested in the securities
of any one issuer (other than U.S. Government securities or securities of other
regulated investment companies) or of two or more issuers that the Portfolio
controls and that are determined to be in the same or similar trades or
businesses or related trades or businesses. In meeting these requirements, a
Portfolio may be restricted in the selling of securities held by the Portfolio
for less than three months and in the utilization of certain of the investment
techniques described above and in the Fund's prospectus. As a regulated
investment company, each Portfolio is subject to a non-deductible excise tax of
4% with respect to certain undistributed amounts of income and capital gains
during the calendar year. The Fund expects each Portfolio to make additional
distributions or change the timing of its distributions so as to avoid the
application of this tax. Although the Fund expects each Portfolio to make such
distributions as are necessary to avoid the application of this tax, certain of
such distributions, if made in January, might be included in the taxable income
of shareholders in the year ended in the previous December.
Payments reflecting the dividend income of the Portfolios will not qualify for
the dividends-received deduction for corporations if the Portfolio sells the
underlying stock before satisfying a 46-day holding period requirement (91 days
for certain preferred stock). Dividends-received deductions will be allowed to a
corporate shareholder only if similar holding period requirements with respect
to shares of the Portfolio have been met.
In general, any gain or loss on the redemption or exchange of Portfolio shares
will be long-term capital gain or loss if held by the shareholder for more than
one year, and will be short-term capital gain or loss if held for one year or
less. However, if a shareholder receives a distribution taxable as long-term
capital gain with respect to Portfolio shares, and redeems or exchanges the
shares before holding them for more than six months, any loss on the redemption
or exchange up to the amount of the distribution will be treated as a long-term
capital loss.
Dividends of a Portfolio's net investment income and distributions of its
short-term capital gains will be taxable as ordinary income. Distributions of
long-term capital gains will be taxable as such at the appropriate rate,
regardless of the length of time you have held shares of the Portfolio. If you
receive a distribution treated as long-term capital gain with respect to Fund
shares, and you redeem or exchange the shares before holding them for more than
six months, any loss on the redemption or exchange up to the amount of the
distribution will be treated as long-term capital loss. Only dividends that
reflect a Portfolio's income from certain dividend-paying stocks will be
eligible for the federal dividends-received deduction for corporate
shareholders. None of the dividends paid by the Alger Money Market Portfolio
will be eligible for the dividends-received deduction.
If a Portfolio is the holder of record of any stock on the record date for any
dividends payable with respect to such stock, such dividends are included in the
Portfolio's gross income as of the later of (a) the date such stock became
ex-dividend with respect to such dividends (i.e., the date on which a buyer of
the stock would not be entitled to receive the declared, but unpaid, dividends)
or (b) the date the Portfolio acquired such stock. Accordingly, in order to
satisfy its income distribution requirements, a Portfolio may be required to pay
dividends based on anticipated earnings and shareholders may receive dividends
in an earlier year than would otherwise be the case.
Investors considering buying shares of a Portfolio just prior to a record date
for a taxable dividend or capital gain distribution should be aware that,
regardless of whether the price of the Portfolio shares to be purchased reflects
the amount of the forthcoming dividend or distribution payment, any such payment
will be a taxable dividend or distribution payment.
If a shareholder fails to furnish a correct taxpayer identification number,
fails to fully report dividend or interest income, or fails to certify that he
or she has provided a correct taxpayer identification number and that he or she
is not subject to such withholding, then the shareholder may be subject to a 31
percent "backup withholding tax" with respect to (i) any taxable dividends and
distributions and (ii) any proceeds of any redemption of Fund shares. An
individual's taxpayer identification number is his or her social security
number. The 31 percent backup withholding tax is not an additional tax and may
be credited against a shareholder's regular federal income tax liability.
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<PAGE>
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
serves as custodian for the Fund pursuant to a custodian agreement under which
it holds the Portfolios' assets. Alger Shareholder Services, Inc., 30 Montgomery
Street, Jersey City, New Jersey 07302, serves as transfer agent for the Fund
pursuant to a transfer agency agreement. Under the transfer agency agreement
Alger Shareholder Services, Inc. processes purchases and redemptions of shares
of the Fund, maintains the shareholder account records for each Portfolio,
handles certain communications between shareholders and the Fund and distributes
any dividends and distributions payable by the Fund.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders of the
Portfolios.
The following table contains information regarding persons who own beneficially
or of record five percent or more of the shares of any Portfolio. Unless
otherwise noted, the address of each owner is 75 Maiden Lane, New York, New York
10038. All holdings are expressed as a percentage of a Portfolio's outstanding
shares as of December 16, 1996 and record and beneficial holdings are in each
instance denoted as follows: record/beneficial.
<TABLE>
<CAPTION>
ALGER ALGER ALGER
ALGER SMALL MIDCAP ALGER CAPITAL
BALANCED CAPITALIZATON GROWTH GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(RECORD/ (RECORD/ (RECORD/ (RECORD/ (RECORD/
BENEFICIAL) BENEFICIAL) BENEFICIAL) BENEFICIAL) BENEFICIAL)
----------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Boston & Co. A/C ISPF1956532
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198 */* */* */* 8.46%/* */*
Merrill Lynch Tr Co
Ttee fbo Qualified
Retirement Plans
265 Davidson Avenue */*
Somerset, NJ 08873 */* */* 6.49%/* */*
Paine Webber FBO
Herndon Y. Robinson
Family Trust #1
P.O. Box 362
Brenham, TX 77834 6.99%/6.99% */* */* */* */*
Charles Schwab & Co., Inc.
Special Custody Account
Att. Mutual Funds
101 Montgomery St.
San Francisco, CA 94101 */* */* */* 5.13%/* */*
Officers & Trustees
as a Group **/** **/1.17% */3.26% */2.20% */2.41%
</TABLE>
* Indicates shareholder owns less than 5% of the Portfolio's shares.
**Indicates Officers & Trustees as a group own less than 1% of the Portfolio's
shares.
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<PAGE>
ORGANIZATION
The Fund has been organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust dated March 20, 1986 (the "Trust Agreement"). The Alger Money Market
Portfolio, Alger Small Capitalization Portfolio and Alger Growth Portfolio
commenced operations on November 11, 1986. The Alger Balanced Portfolio
commenced operations on June 1, 1992, the Alger MidCap Growth Portfolio
commenced operations on May 24, 1993 and the Alger Capital Appreciation
Portfolio commenced operations on November 1, 1993. Prior to March 27, 1995 the
Alger Capital Appreciation Portfolio was known as the Alger Leveraged AllCap
Portfolio. The word "Alger" in the Fund's name has been adopted pursuant to a
provision contained in the Agreement and Declaration of Trust. Under that
provision, Alger Management may terminate the Fund's license to use the word
"Alger" in its name when Alger Management ceases to act as the Fund's investment
manager. On December 31, 1996, Class A shares were added to all portfolios of
the Fund except the Alger Money Market Portfolio. Class A shares have a
front-end load. The previously existing shares in those portfolios, subject to a
CDSC, were designated Class B shares on that date.
Shares of each Portfolio other than the Money Market Portfolio are divided into
two classes, Class A and Class B. The classes differ in that: (a) each class has
a different class designation; (b) only the Class A Shares are subject to a
front-end sales charge ("FESC"); (c) only the Class B Shares are subject to a
contingent deferred sales charge ("CDSC"), except that certain Class A Shares
may also be subject to a CDSC different from that to which the Class B Shares
are subject; (d) only the Class B Shares (as described below) are subject to
distribution fees under a plan adopted pursuant to Rule 12b-1 under the 1940 Act
(a "Rule 12b-1 Plan"); (e) to the extent that one class alone is affected by a
matter submitted to a vote of the shareholders, then only that class has voting
power on the matter; (f) the exchange privileges of each class differ from those
of the other; and (g) record holders of certain Class B Shares will be entitled
to convert those shares to Class A Shares at any time prior to March 31, 1997.
Shares do not have cumulative voting rights, which means that holders of more
than 50 percent of the shares voting for the election of Trustees can elect all
Trustees. Shares are transferable but have no preemptive, conversion or
subscription rights. Shareholders generally vote by Portfolio, except with
respect to the election of Trustees and the ratification of the selection of
independent accountants, and by class within a Portfolio on matters in which the
interests of one class differ from those of another; see also item (e) in the
preceding paragraph with respect to exclusive voting rights of classes. In the
interest of economy and convenience, certificates representing shares of a
Portfolio are physically issued only upon specific written request of a
shareholder.
Meetings of shareholders normally will not be held for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Under the Act, shareholders of record of no less than two-thirds of the
outstanding shares of the Fund may remove a Trustee through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. Under the Trust Agreement, the Trustees are required to call a meeting
of shareholders for the purpose of voting on the question of removal of any such
Trustee when requested in writing to do so by the shareholders of record of not
less than 10 percent of the Fund's outstanding shares.
Massachusetts law provides that shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Trustee. The
Trust Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility that the
Fund believes is remote. Upon payment of any liability incurred by the Fund, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Fund. The Trustees intend to conduct the operations of the
Fund in a manner so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.
DETERMINATION OF PERFORMANCE
MONEY MARKET PORTFOLIO
The Alger Money Market Portfolio's "yield" and "effective yield" described in
the Prospectus are calculated according to formulas prescribed by the SEC. The
Portfolio's seven-day "yield" is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account in the Portfolio having a balance of one share at the beginning of
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<PAGE>
the period, dividing the net change in account value by the value of the account
at the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7). The Portfolio's "effective yield"
is computed by compounding the unannualized base period return (calculated as
above), by adding one to it, raising the sum to a power equal to 365 divided by
seven, and subtracting one from the result. When the Alger Money Market
Portfolio includes quotations of "yield" and "effective yield" that are based on
the income generated by an investment in the Portfolio over a thirty-day, or one
month, period, it will calculate the "yield" and "effective yield" in the manner
described above except that, in annualizing the "yield" and "effective yield,"
the formula will be adjusted to reflect the proper period.
For the seven-day period ended October 31, 1996, the annualized yield was 4.70%,
and the compounded effective yield was 4.81%.
OTHER PORTFOLIOS
The "total return" and "yield" described in the Prospectus as to each of the
Classes of the Portfolios, other than the Alger Money Market Portfolio, are also
computed according to formulas prescribed by the SEC. These performance figures
are calculated in the following manner:
A. Total Return--A Class' average annual total return described in the
Prospectus is computed according to the following formula:
P (1+T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5, or 10 year periods at the end
of the 1, 5 and 10 year periods (or fractional portion
thereof);
The average annual total returns for the B Classes of the Portfolios, other than
the Money Market Portfolio, for the periods indicated below were as follows:
PERIOD
FIVE FROM
YEARS INCEPTION
YEAR-ENDED ENDED THROUGH
10/31/96 10/31/96 10/31/96
-------- -------- --------
Alger Small Capitalization
Portfolio*--Class B (1.71)% 13.95% 18.05%
Alger Growth Portfolio*
--Class B 3.08 16.82 15.13
Alger Balanced Portfolio**
--Class B 1.26 n/a 8.53
Alger MidCap Growth
Portfolio***--Class B 1.43 n/a 23.05
Alger Capital Appreciation
Portfolio+--Class B 14.48 n/a 29.95
* Commenced operations on November 11, 1986.
** Commenced operations on June 1, 1992.
*** Commenced operations on May 24, 1993.
+ Commenced operations on November 1, 1993.
B. Yield--a Class' net annualized yield described in the Prospectus is
computed according to the following formula:
a-b
YIELD = 2[(----- + 1)6 - 1]
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
IN GENERAL
Current performance information for the Classes of the Portfolios may be
obtained by calling the Fund at the telephone number provided on the cover page
of this Statement of Additional Information. Quoted performance may not be
indicative of future performance. The performance of a class will depend upon
factors such as its expenses and the types and maturities of securities held by
the Portfolio.
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<PAGE>
From time to time, advertisements or reports to shareholders may compare the
yield or performance of a Portfolio to that of other mutual funds with a similar
investment objective. The yield of the Alger Money Market Portfolio might be
compared with, for example, averages compiled by IBC/Donoghue's Money Fund
Report, a widely recognized, independent publication that monitors the
performance of money market mutual funds. The yield of the Alger Money Market
Portfolio might also be compared with the average yield reported by the Bank
Rate Monitor for money market deposit accounts offered by the 50 leading banks
and thrift institutions in the top five standard metropolitan areas. Similarly,
the performance of the other Portfolios, for example, might be compared to
rankings prepared by Lipper Analytical Services Inc., which is a widely
recognized, independent service that monitors the performance of mutual funds,
as well as to various unmanaged indices, such as the S&P 500, the Russell 2000
Growth Index, the Wilshire Small Company Growth Index, the Lehman
Government/Corporate Bond Index or the S&P MidCap 400 Index. In addition,
evaluations of the Portfolios published by nationally recognized ranking
services or articles regarding performance, rankings and other Portfolio
characteristics may appear in national publications including, but not limited
to, Barron's, Business Week, Forbes, Institutional Investor, Investor's Business
Daily, Kiplinger's Personal Finance, Money, Morningstar, The New York Times, USA
Today and The Wall Street Journal and may be included in advertisements or
communications to shareholders. Any given performance comparison should not be
considered as representative of such Portfolio's performance for any future
period.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended October 31, 1996, which are
contained in the Annual Report to Shareholders for that fiscal year, are hereby
incorporated by reference and a copy may be obtained by telephoning
(800)992-3863.
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<PAGE>
APPENDIX
Description of the highest commercial paper, bond and other short and long
term rating categories assigned by Standard & Poor's Corporation ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), "Fitch" Investors Service, Inc.
("Fitch") and Duff and Phelps, Inc. ("Duff").
COMMERCIAL PAPER AND SHORT-TERM RATINGS
The designation A-l by S&P indicates that the degree of safety reading
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-l.
The rating Prime-l (P-l) is the highest commercial paper rating assigned
by Moody's. Issuers of P-l paper must have a superior capacity for repayment of
short term promissory obligations and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return of funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by many of the
characteristics cited above but to a lesser degree Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The rating Fitch-l (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-l is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-l is the highest commercial paper rating assigned by Duff.
Paper rated Duff-l is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
BOND AND LONG-TERM RATINGS
Bonds rated AA by S&P are judged by S&P to be high-grade obligations and
in the majority of instances differ only in small degree from issues rated AAA
(S&P's highest rating). Bonds rated AAA are considered by S&P to be the highest
grade obligations and possess the ultimate degree of protection as to principal
and interest. With AA bonds, as with AAA bonds, prices move with the long-term
money market. Bonds rated A by S&P have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
S&P's BBB rated bonds, or medium-grade category bonds, are borderline
between definitely sound obligations and those where the speculative elements
begin to predominate. These bonds have adequate asset coverage and normally are
protected by satisfactory earnings. Their susceptibility to changing conditions,
particularly to depressions, necessitates constant watching. These bonds
generally are more responsive to business and trade conditions than to interest
rates. This group is the lowest that qualifies for commercial bank investment.
Bonds rated Aa by Moody's are judged to be of high quality by all
standards. Together with bonds rated Aaa (Moody's highest rating) they comprise
what are generally known as high-grade bonds. Aa bonds are rated lower than Aaa
bonds because margins of protection may not be as large as those of Aaa bonds,
or fluctuation of protective elements may be of greater amplitude, or there may
be other elements present that make the long-term risks appear somewhat larger
than those applicable to Aaa securities. Bonds that are
A-1
<PAGE>
APPENDIX
(continued)
rated A by Moody's possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment in the future.
Moody's Baa rated bonds are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.
Bonds rated Duff-l are judged by Duff to be of the highest credit quality
with negligible risk factors; only slightly more than U.S. Treasury debt. Bonds
rated Duff-2, 3 and 4 are judged by Duff to be of high credit quality with
strong protection factors. Risk is modest but may vary slightly from time to
time because of economic conditions.
A-2
<PAGE>
INVESTMENT MANAGER:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
- --------------------------------------------------------------------------------
DISTRIBUTOR:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
Transfer Agent:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
- --------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial Statements included in Part A:
Condensed Financial Information
(2) Financial Statements incorporated in Part B by reference to
the Annual Report to Shareholders for the fiscal year ended
October 31, 1996:
(i) Report of Independent Accountants;
(ii) Financial Statements as of October 31, 1996 and for
the period then ended.
(b) Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
1(a) Agreement and Declaration of Trust (1)
1(b) Certificate of Designation relating to the Alger High Yield
Portfolio (3)
1(c) Certificate of Designation relating to the Alger Income and
Growth Portfolio (3)
1(d) Certificate of Designation relating to the Alger Balanced
Portfolio (8)
1(e) Certificate of Designation relating to the Alger MidCap Growth
Portfolio (9)
1(f) Certificate of Designation relating to the Alger Leveraged AllCap
Portfolio (10)
2 By-laws of Registrant (1)
3 Not applicable
4 Specimen Share Certificates (3)
<PAGE>
Exhibit No. Description of Exhibit
----------- ----------------------
4(a) Specimen Share Certificate for the Alger Balanced Portfolio (8)
4(b) Specimen Share Certificate for the Alger MidCap Growth
Portfolio (9)
4(c) Specimen Share Certificate for the Alger Leveraged AllCap
Portfolio (10)
5 Investment Management Agreements (6)
5(a) Investment Management Agreement for the Alger Balanced
Portfolio (8)
5(b) Investment Management Agreement for the Alger MidCap Growth
Portfolio (9)
5(c) Investment Management Agreement for the Alger Leveraged AllCap
Portfolio (11)
6(a) Distribution Agreement (6)
6(b) Selected Dealer and Shareholder Servicing Agreement (4)
7 Not applicable
8 Custody Agreement (7)
9 Not applicable
10 Opinion and Consent of Willkie Farr & Gallagher (3)
10(a) Opinion and Consent of Sullivan & Worcester (8)
11 Consent of Arthur Andersen LLP
12 Not applicable
13 Form of Subscription Agreement (2)
13(a) Purchase Agreement for theAlger Balanced Portfolio (8)
13(b) Purchase Agreement for the Alger MidCap Growth Portfolio (9)
13(c) Purchase Agreement for the Alger Leveraged AllCap Portfolio (11)
14 Retirement Plans (5)
<PAGE>
Exhibit No. Description of Exhibit
----------- ----------------------
15 Plan of Distribution (2)
15(a) Amended and Restated Plan of Distribution (Form Of)
16 Schedule for computation of performance quotations provided in
the Statement of Additional Information
17 Certificate of Amendment
18 Amendment to Distribution Contract (Form Of)
19 Rule 18f-3 Plans
- ----------
(1) Incorporated by reference to Registrant's Registration Statement (the
"Registration Statement") filed with the Securities and Exchange Commission
(the "SEC") on April 18, 1986.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement filed with the SEC on October 14, 1986.
(3) Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registration Statement filed with the SEC on November 3, 1986.
("Pre-Effective Amendment No. 2").
(4) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement filed with the SEC on May 7, 1987.
(5) Incorporated by reference to Exhibit No. 12 to Pre-Effective Amendment No.
2.
(6) Incorporated by reference to Post-Effective Amendment No. 4 filed with the
SEC on February 28, 1989.
(7) Incorporated by reference to Post-Effective Amendment No. 5 filed with the
SEC on February 2, 1990.
(8) Incorporated by reference to Post-Effective Amendment No. 8 filed with the
SEC on April 3, 1992.
(9) Incorporated by reference to Post-Effective Amendment No. 10 filed with the
SEC on March 24, 1993.
(10) Incorporated by reference to Post-Effective Amendment No. 11 filed with the
SEC on August 31, 1993.
(11) Incorporated by reference to Post-Effective Amendment No. 12 filed with the
SEC on October 29, 1993.
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
Set forth below is information regarding the number of record holders of
each class of Registrant's securities as of November 5, 1996.
Title or Class Number of Record Holders
-------------- ------------------------
Alger Money Market Portfolio 22,769
Alger Small Capitalization Portfolio 52,864
Alger Growth Portfolio 27,428
Alger Balanced Portfolio 2,445
Alger Midcap Growth Portfolio 16,864
Alger Capital Appreciation Portfolio 26,154
<PAGE>
Item 27. Indemnification
Under Section 8.4 of Registrant's Agreement and Declaration of Trust, any
past or present Trustee or officer of Registrant (including persons who serve at
Registrant's request as directors, officers or Trustees of another organization
in which Registrant has any interest as a shareholder, creditor or
otherwise[hereinafter referred to as a "Covered Person"]) is indemnified to the
fullest extent permitted by law against liability and all expenses reasonably
incurred by him in connection with any action, suit or proceeding to which he
may be a party or otherwise involved by reason of his being or having been a
Covered Person. This provision does not authorize indemnification when it is
determined, in the manner specified in the Agreement and Declaration of Trust,
that such Covered Person has not acted in good faith in the reasonable belief
that his actions were in or not opposed to the best interests of Registrant.
Moreover, this provision does not authorize indemnification when it is
determined , in the manner specified in the Agreement and Declaration of Trust,
that such Covered Person would otherwise be liable to Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties. Expenses may be paid by Registrant in advance
of the final disposition of any action, suit or proceeding upon receipt of an
undertaking by such Covered Person to repay such expenses to Registrant in the
event that it is ultimately determined that indemnification of such expenses is
not authorized under the Agreement and Declaration of Trust and either (i) the
Covered Person provides security for such undertaking, (ii) Registrant is
insured against losses from such advances, or (iii) the disinterested Trustees
or independent legal counsel determines, in the manner specified in the
Agreement and Declaration of Trust, that there is reason to believe the Covered
Person will be found to be entitled to indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to Trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission (the "SEC") such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Alger Management, which serves as investment manager to Registrant, is
generally engaged in rendering investment advisory services to institutions and,
to a lesser extent, individuals. Alger Management presently serves as investment
adviser to two closed-end investment companies and to two other open-end
investment companies. The list required by this Item 28 regarding any other
business, profession, vocation or employment of a substantial nature engaged in
by officers and directors of Alger Management during the past two years is
incorporated by reference to Schedules A and D of Form ADV filed by Alger
Management pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-06709).
Item 29. Principal Underwriter
(a) Alger Inc. acts as principal underwriter for Registrant, The Alger
American Fund, Spectra Fund and The Alger Retirement Fund and has acted as
subscription agent for Castle Convertible Fund, Inc. and Spectra Fund, Inc.
(b) The information required by this Item 29 with respect to each director,
officer or partner of Alger Inc. is incorporated by reference to Schedule A of
Form BD filed by Alger Inc. pursuant to the Securities Exchange Act of 1934 (SEC
File No. 8-6423).
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts and records of Registrant are maintained by Mr. Gregory S.
Duch, Fred Alger & Company, Incorporated, 30 Montgomery Street, Jersey City, NJ
07302.
<PAGE>
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to provide its annual report without
charge to any recipient of its Prospectus who requests the
information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, Registrant has duly caused this
Amendment to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York and State of New York on the 20th day of
December, 1996.
THE ALGER FUND
By: /s/ David D. Alger
----------------------------
David D. Alger, President
ATTEST: /s/ Gregory S. Duch
------------------------------
Gregory S. Duch, Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated:
Signature Title Date
--------- ----- ----
/s/ Fred M. Alger III* Chairman of the Board December 20, 1996
- ------------------------------
Fred M. Alger III
/s/ David D. Alger President and Trustee December 20, 1996
- ------------------------------ (Chief Executive Officer)
David D. Alger
/s/ Gregory S. Duch Treasurer December 20, 1996
- ------------------------------ (Chief Financial and
Gregory S. Duch Accounting Officer
/s/ Nathan E. Saint-Amand* Trustee December 20, 1996
- ------------------------------
Nathan E. Saint-Amand
/s/ Stephen E. O'Neil Trustee December 20, 1996
- ------------------------------
Stephen E. O'Neil
/s/ Arthur M. Dubow* Trustee December 20, 1996
- ------------------------------
Arthur M. Dubow
/s/ John T. Sargent* Trustee December 20, 1996
- ------------------------------
John T. Sargent
*By: Gregory S. Duch
- ------------------------------
Gregory S. Duch
Attorney-in-Fact
<PAGE>
Securities Act File No. 33-4959
Investment Company Act File No. 811-6880
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
Registration Statement Under the Securities Act of 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 22 [ ]
and/or
Registration Statement Under the Investment Company Act of 1940 [ ]
Amendment No. 24 [ ]
(Check appropriate box or boxes)
THE ALGER FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
--------------------------
E X H I B I T S
--------------------------
<PAGE>
INDEX TO EXHIBITS
Exhibit Page Number in Sequential
No. Number System
- ------- -------------------------
11 Consent of Arthur Andersen LLP ..........................
15(a) Amended and Restated Plan of Distribution (Form Of)......
16 Schedule for computation of performance quotations
provided in the Statement of Additional Informa-
tion ....................................................
17 Certificate of Amendment of Declaration of Trust to
create a new class of shares ............................
18 Amendment to Distribution Contract (Form Of) ............
19 Rule 18f-3 Plans ........................................
<PAGE>
]
ARTHUR
ANDERSEN
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated December 4, 1996 on the financial statements of
The Alger Fund for the period ended October 31, 1996 and to all references to
our Firm included in or made a part of the registration statement of The Alger
Fund filed on Form N-1A (Amendment No. 24), Investment Company Act File No.
811-6880 with the Securities and Exchange Commission.
/s/ Arthur Andersen LLP
--------------------------
ARTHUR ANDERSEN LLP
New York, New York
December 20, 1996
THE ALGER FUND
AMENDED AND RESTATED PLAN OF DISTRIBUTION
This Plan of Distribution (the "Plan") was adopted and subsequently amended
and restated in accordance with Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "Act"), by the Alger Fund, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund").
SECTION 1. REIMBURSEMENT OF EXPENSES
The Fund will reimburse the distributor of its shares, Fred Alger &
Company, Incorporated ("Alger"), for certain expenses incurred by
Alger in connection with the offering and sale of Class B shares of
beneficial interest of each of the fund's portfolios other than the
Alger Money Market Portfolio (each a "Portfolio") and, collectively,
the "Portfolios"). The Fund may reimburse Alger for distribution
expenses at an annual rate not to exceed .75% of the average daily net
assets represented by Class B shares of each of the Portfolios. Such
reimbursements shall be made only out of the assets of a Portfolio
allocable to its Class B shares. Any contingent deferred sales charges
received by Alger with respect to Class B shares will also be used in
defraying expenses related to the distribution of Class B shares of
the Portfolios. Amounts so received will reduce the amount of total
expenses for which reimbursement may be sought under the Plan.
Distribution expenses incurred in a year in excess of contingent
deferred sales charges received by Alger relating to redemptions of
Class B shares of a Portfolio during that year and .75 percent of the
Portfolio's average daily net assets represented by Class B shares may
be carried forward and sought to be reimbursed in future years.
Interest at the prevailing broker loan rate may be charged to the
Portfolios on any expenses carried forward.
SECTION 2. EXPENSES COVERED BY THE PLAN.
The Fund may reimburse Alger under Section 1 of the Plan for any
expenses primarily intended to result in the sale of the Portfolios'
Class B shares, including, but not limited to: (a) costs relating to
the formulation and implementation of marketing and promotional
activities, including but not limited to, direct mail promotions and
television, radio, newspaper, magazine and other mass media
advertising, (b) compensation in the form of sales concessions and
continuing compensation to securities dealers whose customers hold
Class B shares of the Portfolio, (c) costs of printing and
distributing prospectuses, statements of additional information and
reports of the Fund to prospective Class B shareholders of the
Portfolios, (d) costs involved in preparing, printing and distributing
sales literature pertaining to Class B shares of the Portfolios, (e)
costs involved in obtaining whatever information, analyses and reports
with respect to marketing and promotional activities with respect to
Class B shares, on behalf of the Portfolios that the Fund may, from
time to time, deem advisable, and (f) costs related to an allocable
portion of overhead and other Alger Inc. expenses relating to persons
who are engaged in, or provide support services in connection with,
the distribution of the Portfolios' Class B shares.
<PAGE>
SECTION 3. APPROVAL BY SHAREHOLDERS.
The Plan will not take effect with respect to a Portfolio, and no fee
will be payable in accordance with Section 1 of the Plan, until the
Plan has been approved by a vote of at least a majority of the
outstanding Class B voting securities of the Portfolio. This Amendment
and restatement of the Plan shall not require approval by shareholders
of any Portfolio that previously approved the Plan prior to this
amendment and restatement of the Plan.
SECTION 4. APPROVAL BY TRUSTEES.
Neither the Plan nor any related agreements will take effect until
approved by a majority vote of both (a) the full Board of Trustees and
the Fund and (b) those Trustees who are not interested persons of the
Fund an who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related to it (the
"Qualified Trustees"), cast in person at a meeting called for the
purpose of voting on the Plan and the related agreements.
SECTION 5. CONTINUANCE OF THE PLAN.
The Plan will continue in effect for so long as its continuance is
specifically approved at least annually by the Fund's Board of
Trustees in the manner described in Section 4 above.
SECTION 6. TERMINATION.
The Plan may be terminated with respect to a Portfolio at any time by
a majority vote of the Qualified Trustees or by vote of a majority of
the outstanding Class B voting securities of the Portfolio.
SECTION 7. AMENDMENTS.
The Plan may not be amended so as to increase materially the amount of
reimbursement described in Section 1 above, unless the amendment is
approved by a vote of at least a majority of the outstanding Class B
voting securities of the affected Portfolio. In addition, no material
amendment to the Plan may be made unless approved by the fund's Board
of Trustees in the manner described in Section 2 above.
SECTION 8. SELECTION OF CERTAIN TRUSTEES.
While the Plan is in effect, the selection and nomination of the
Fund's Trustees who are not interested persons of the Fund will be
committed to the discretion of the Trustees then in office who are not
interested persons of the Fund.
<PAGE>
SECTION 9. WRITTEN REPORTS.
In each year during which the Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the
Portfolios pursuant to the Plan or any related agreement will prepare
and furnish to the Fund's Board of Trustees, and the Board will
review, at least quarterly, written reports, complying with the
requirements of the Rule, which set forth the amounts expended under
the Plan and the purposes for which those expenditures were made.
SECTION 10. PRESERVATION OF MATERIALS.
The Fund will preserve copies of this Plan and any report made
pursuant to Section 9 above for a period of not less than six years
(the first two years in an easily accessible place) from the date of
this Plan or such report.
SECTION 11. MEANINGS OF CERTAIN TERMS.
As used in the Plan, the terms "interested person" and "majority of
the outstanding voting securities" will be deemed to have meanings
that those terms have under the Act and the thereunder subject to any
exemption that may be granted to the Fund under the Act by the
Securities and Exchange Commission.
SECTION 12. FILING OF DECLARATION OF TRUST.
The Fund represents that a copy of its Declaration of Trust dated as
of March 20, 1986, as amended from time to time (the "Declaration of
Trust"), is on file with the Secretary of the Commonwealth of
Massachusetts and with the Boston City Clerk.
SECTION 13. LIMITATION OF LIABILITY.
No obligation of the Fund under this Plan will be binding upon any of
the Trustees, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Fund, individually, but will
bind only the assets and property of the fund, as provided in the
Declaration of Trust. The execution of this Plan has been authorized
by the Trustees of the fund, and signed by an authorized officer of
the Fund, acting as such, and neither the authorization by the
Trustees nor the execution by the officer will be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, but will bind only the trust property of the Fund as
provided in the Declaration of Trust. No Series of the Fund will be
liable for any claims against any other Series.
IN WITNESS WHEREOF, the Fund has executed the Plan as of December 31,
1996.
THE ALGER FUND
By:----------------------------
Authorized Officer
AVERAGE ANNUAL RETURN COMPUTATION
The Average Annual Return for each Portfolio except the
Alger Money Market Portfolio was computed according to the following
formula:
n
FORMULA: P(1+T) =ERV
Where: P= a hypothetical investment of $1,000
T= average annual total return
n= number of years
ERV= Ending Redeemable Value of a hypothetical
$1,000 payment made at the beginning of
the 1, 5, or 10 year (or other) periods at the
end of the 1, 5 or 10 year (or other)
periods (or fractional portion thereof)
<TABLE>
<CAPTION>
ENDING AVERAGE
PERIOD REDEEMABLE ANNUAL RATE
PORTFOLIO COVERED VALUE OF RETURN FORMULA*
- --------- ------- ----- --------- --------
<S> <C> <C> <C> <C>
ALGER SMALL
CAPITALIZATION (Class B): 11/11/86 (commencement
of operations)
through 10/31/96** 5,236.30 18.05% @RATE(5236.30,1000,9.97)
5 YEARS ENDED 10/31/96 1,921.15 13.95% @RATE(1921.15,1000,5)
YEAR ENDED 10/31/96 982.92 (1.71%) @RATE(982.92,1000,1)
ALGER GROWTH (Class B): 11/11/86 (commencement
of operations)
through 10/31/96** 4,077.72 15.13% @RATE(4077.72,1000,9.97)
5 YEARS ENDED 10/31/96 2,175.39 16.82% @RATE(2175.39,1000,5)
YEAR ENDED 10/31/96 1,030.83 3.08% @RATE(1030.83,1000,1)
ALGER BALANCED (Class B): 6/1/92 (commencement
of operations)
through 10/31/96*** 1,435.76 8.53% @RATE(1435.76,1000,4.42)
YEAR ENDED 10/31/96 1,012.58 1.26% @RATE(1012.58,1000,1)
ALGER MIDCAP (Class B): 5/24/93 (commencement
of operations)
through 10/31/96**** 2,041.80 23.05% @RATE(2041.80,1000,3.44)
YEAR ENDED 10/31/96 1,014.27 1.43% @RATE(1014.27,1000,1)
ALGER CAPITAL
APPRECIATION (Class B): 11/1/93 (commencement
of operations)
through 10/31/96***** 2,194.65 29.95% @RATE(2194.65,1000,3)
YEAR ENDED 10/31/96 1,144.76 14.48% @RATE(1144.76,1000,1)
*LOTUS 123 @RATE FUNCTION:
@RATE(FV,PV,TERM) The periodic interest rate necessary for
present value "pv", to grow to future
value "fv", over the number of compounding periods in "term".
</TABLE>
**Period equals 9.97 years.
***Period equals 4.42 years.
****Period equals 3.44 years.
*****Period equals 3 years.
<PAGE>
ALGER MONEY MARKET PORTFOLIO YIELD COMPUTATION
The Alger Money Market Portfolio's yield for the 7 days ended 10/31/96
was computed according to the following formula:
yield=a*(365/7)
Where: a=$.000900732 (which equals the net change, exclusive
of capital changes, in the value of a
hypothetical pre-existing account in the
Portfolio having a balance of one share at the
beginning of the 7 day period)
yield= 4.70%
The Alger Money Market Portfolio's effective yield for the 7 days ended
10/31/96 was computed according to the following formula:
365/7
effective yield=((a+1) )-1
Where: a=$.000900732 (which equals the net change, exclusive
of capital changes, in the value of a
hypothetical pre-existing account in the
Portfolio having a balance of one share at the
beginning of the 7 day period)
effective yield: 4.81%
THE ALGER FUND
CERTIFICATE OF AMENDMENT
The undersigned, being the Secretary of The Alger Fund (hereinafter
referred to as the "TRUST"), a trust with transferable shares of the type
commonly called a Massachusetts business trust, DOES HEREBY CERTIFY that,
pursuant to the authority conferred upon the Trustees of the Trust by SECTION
9.3 of the Agreement and Declaration of Trust, dated March 20, 1986, as amended
to date (hereinafter, as so amended, referred to as the "DECLARATION OF TRUST"),
and by the affirmative vote of a Majority of the Trustees at a meeting duly
called and held on December 10, 1996, the Certificates of Designation referenced
in paragraph 1 below and the Declaration of Trust are amended as follows:
1. The Certificates of Designation dated (i) September 11, 1986,
establishing the Alger High Yield Portfolio, (ii) March 19, 1992, establishing
the Alger Balanced Portfolio, (iii) February 24, 1993, establishing the Alger
MidCap Growth Portfolio, and (iv) August 16, 1993, as amended March 27, 1995,
establishing the Alger Capital Appreciation Portfolio, are each hereby amended
by deleting the fourth sentence of the introductory paragraph and inserting the
following in lieu thereof:
"The Shares of such Portfolio, and the series thereof, shall have the
additional relative rights and preferences, shall be subject to the
liabilities, shall have the other characteristics, and shall be subject
to the powers of the Trustees, all as set forth in ARTICLE VI of the
Declaration of Trust, as from time to time in effect. Without
limitation of the foregoing sentence, each Share of such Series shall
be redeemable, shall be entitled to one vote, or a ratable fraction of
one vote in respect of a fractional Share, as to matters on which
Shares of such Series shall be entitled to vote, and shall represent a
share of the beneficial interests in such Portfolio, all as provided in
the Declaration of Trust."
and by deleting SUBSECTIONS (1)(A) through (1)(L), inclusive, and redesignating
SUBSECTIONS (M) and (N) as SUBSECTIONS (A) and (B).
2. SECTION 1.4 of the Declaration of Trust is hereby amended by adding
thereto the following new definitions, "CLASS," "EXISTING PORTFOLIO" and
"EXISTING SERIES," each of which shall read in its entirety as follows:
"'CLASS' or 'CLASSES' shall mean, with respect to any Series,
any unissued Shares of such Series in respect of which the Trustees
shall from time to time fix and determine any special provisions
relating to sales charges, any rights of redemption and the price,
terms and manner of redemption, special and relative rights as to
dividends and other distributions and on liquidation, sinking or
purchase fund provisions, conversion rights, and conditions under which
the Shareholders of such Class shall have separate voting rights or no
voting rights."
<PAGE>
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"'EXISTING PORTFOLIO' or 'EXISTING PORTFOLIOS' shall have the
meaning designated in SECTION 6.1(A) hereof."
"'EXISTING SERIES' shall have the meaning designated in
SECTION 6.1(A) hereof."
3. SECTION 1.4 of the Declaration of Trust is hereby amended by
amending and restating the definitions of "MAJORITY SHAREHOLDER VOTE" and
"SINGLE CLASS VOTING" to read in their entirety as follows:
"'MAJORITY SHAREHOLDER VOTE,' as used with respect to the
election of any Trustee at a meeting of Shareholders, shall mean the
vote for the election of such Trustee of a plurality of all outstanding
Shares of the Trust, without regard to Series or Class, represented in
person or by proxy and entitled to vote thereon, provided that a quorum
(determined as provided in SECTION 7.5 hereof) is present, and as used
with respect to any other action required or permitted to be taken by
Shareholders, shall mean the vote for such action of the holders of
that majority of all outstanding Shares (or, where a separate vote of
Shares of any particular Series or Class is to be taken, the
affirmative vote of that majority of the outstanding Shares of that
Series or Class) of the Trust which consists of: (I) a majority of all
Shares (or of Shares of the particular Series or Class) represented in
person or by proxy and entitled to vote on such action at the meeting
of Shareholders at which such action is to be taken, provided that a
quorum (determined as provided in SECTION 7.5 hereof) is present; or
(II) if such action is to be taken by written consent of Shareholders,
a majority of all Shares (or of Shares of the particular Series or
Class) issued and outstanding and entitled to vote on such action;
PROVIDED, that (III) as used with respect to any action requiring the
affirmative vote of 'a majority of the outstanding voting securities,'
as the quoted phrase is defined in the 1940 Act, of the Trust or of any
Fund, 'MAJORITY SHAREHOLDER VOTE' means the vote for such action at a
meeting of Shareholders of the smallest majority of all outstanding
Shares of the Trust (or of Shares of the particular Series or Class)
entitled to vote on such action which satisfies such 1940 Act voting
requirement."
"'SINGLE CLASS VOTING,' as used with respect to any matter to
be acted upon at a meeting or by written consent of Shareholders, shall
mean a style of voting in which each holder of one or more Shares shall
be entitled to one vote on the matter in question for each Share
standing in his name on the records of the Trust, irrespective of
Series or Class, and all outstanding Shares of all Series or Class vote
as a single class."
4. PARAGRAPH (C) of SECTION 5.2 of the Declaration of Trust is hereby
amended and restated in its entirety to read as follows:
"(c) DISTRIBUTION. One or more agreements, each with a broker
or dealer in securities, providing for the sale of Shares of any one or
more Series, or Classes of any Series, to net the Trust not less than
the net asset value per Share (as described in SECTION 6.2(G) hereof)
and pursuant to which the Trust may appoint the other party to such
agreement as its principal underwriter or sales agent for the
distribution of such Shares. The agreement shall contain such terms and
conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the
1940 Act and any
<PAGE>
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applicable provisions of the By-Laws (any such underwriter or sales
agent being herein referred to as a 'PRINCIPAL UNDERWRITER,' or a
'DISTRIBUTOR,' as the case may be)."
5. SECTIONS 6.1 and 6.2 of the Declaration of Trust are hereby amended
and restated in their entirety to read as follows:
"SECTION 6.1 SHARES OF BENEFICIAL INTEREST; PORTFOLIOS OF THE TRUST;
SERIES AND CLASSES OF SHARES. The beneficial interest in the Trust shall be
divided into Shares having a nominal or par value of one mill ($.001) per Share,
of which an unlimited number may be issued, and may be divided into Series and
Classes as provided in this ARTICLE VI.
"(a) EXISTING PORTFOLIOS AND THE SHARES THEREOF. The assets
held by the Trust on the date on which the amendment of this
Declaration first providing for separate Classes of Shares within
Series became effective (the 'EFFECTIVE DATE') are divided into nine
(9) sepa rate portfolios or funds (each, a 'FUND') of the Trust,
designated as the Alger Money Market Portfolio, the Alger Tax-Exempt
Money Portfolio, the Alger Fixed Income Portfolio, the Alger Small
Capitalization Portfolio, the Alger Growth Portfolio, the Alger High
Yield Port folio, the Alger Balanced Portfolio, the Alger MidCap Growth
Portfolio, and the Alger Capi tal Appreciation Portfolio (collectively,
the 'EXISTING PORTFOLIOS', and each singly, an 'EXIST ING PORTFOLIO').
The beneficial interests in each Existing Portfolio are at the
Effective Date represented by a separate series of Shares named the
Alger Money Market Series, the Alger Tax-Exempt Money Series, the Alger
Fixed Income Series, the Alger Small Capitalization Series, the Alger
Growth Series, the Alger High Yield Series, the Alger Balanced Series,
the Alger MidCap Growth Series, and the Alger Capital Appreciation
Series, each representing the beneficial interest in the Portfolio of
the same name (collectively, the 'EXISTING SERIES', and each singly, an
'EXISTING SERIES'). An unlimited number of Shares of each Existing Ser
ies may be issued. The Shares of any Existing Series may at any time be
divided into two or more Classes pursuant to SUBSECTION (C) of this
SECTION 6.1.
"(b) ADDITIONAL PORTFOLIOS AND SERIES OF SHARES. The Trustees
shall have the power and authority, at any time or from time to time,
and without any requirement of Shareholder approval, (I) to establish
and designate one or more additional distinct and independent
Portfolios, in addition to the Existing Portfolios (each such Portfolio
an 'ADDITIONAL PORTFO LIO') for the purpose of holding one or more
separate and distinct portfolios of assets, (II) to authorize a
separate Series of Shares to represent the beneficial interests in each
such Additional Portfolio (each such Series for an Additional
Portfolio, an 'ADDITIONAL SERIES'), and to fix and determine the rights
and preferences of Shares of each Series as to rights of redemption,
the price, terms and manner of redemption, rights as to dividends and
other dis tributions and on liquidation, sinking or purchase fund
provisions, conversion rights, and conditions under which the
Shareholders of the several Series shall have separate voting rights or
no voting rights, and to provide that any such Series shall consist of
a single Class of Shares, or of two or more separate Classes of Shares,
as they deem necessary or desirable, and (III) to classify or
reclassify any unissued Shares, or any Shares of any Series previously
issued and reacquired by the Trust, into Shares of one or more other
Series that may be established and designated from time to time. The
establishment and designation of any Portfolio (in addition to the
Existing Portfolios) and of the Series of Shares representing the
<PAGE>
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beneficial interests therein shall be effective upon the execution by a
Majority of the Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees) of an instru ment setting forth
such establishment and designation and the relative rights and
preferences of the Shares of such Series, and the manner in which the
same may be amended (a 'CERTIFICATE OF DESIGNATION'), which may provide
that the number of Shares of such Series or any Class thereof that may
be issued is unlimited, or may limit the number issuable. At any time
that there are no Shares outstanding of any Series previously
established and designated, including any Initial Series, the Trustees
may, by vote of a Majority of the Trustees, terminate such Series and
the Portfolio to which it pertains, by executing, or causing an officer
of the Trust to execute, an instrument so providing (a 'CERTIFICATE OF
TER MINATION'). Each Certificate of Designation or Certificate of
Termination, and any instru ment amending a Certificate of Designation,
shall have the status of an amendment to this Declaration of Trust,
shall set forth the information and shall become effective and be filed
as provided in SECTION 9.4 hereof. Except as otherwise provided as to a
particular Portfolio herein or in the Certificate of Designation
therefor or in the Prospectus with respect to such Portfolio, the
Trustees shall have all the rights and powers, and be subject to all
the duties and obligations, with respect to each such Portfolio and the
assets and affairs thereof as they have under this Declaration with
respect to the Trust and the Trust Property in general.
"(c) CLASSES OF SHARES. Without limitation of any other powers
accorded to them by this Declaration or otherwise, the Trustees shall
have power, at any time or from time to time, and without the necessity
for any Shareholder approval, by vote of a Majority of the Trustees, to
authorize two or more separate Classes of Shares of any Existing
Series, or any Additional Series initially authorized without Classes,
or to classify or reclassify any unis sued Shares of any Series, or any
Shares of any Series previously issued and reacquired by the Trust
(including in either case Shares of the Existing Portfolios) into any
number of additional Classes of such Series, as they deem necessary or
desirable, and in either such connection to fix and determine the
relative rights and burdens of Shares of the respective Classes of such
Series as to sales charges, redemption charges or other fees and
charges, allocations of expenses, conversion rights, and conditions
under which Shareholders of the several Classes shall have separate
voting rights or (subject to ARTICLE VII hereof) no voting rights. Any
such authorization of Classes or reclassification of Shares shall be
effective upon the execution by a Majority of the Trustees (or by an
officer of the Trust pursuant to the vote of a Majority of the
Trustees) and the deposit among the records of the Trust of an
instrument setting forth such provisions and the manner in which the
same may be amended. At any time at which no Shares of a particular
Class and no Shares of any other Class which are con vertible into
Shares of such Class are outstanding, the Trustees may terminate such
Class. Any such termination of a Class shall be effective upon the
execution by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees) and the deposit
among the records of the Trust of an instrument stating that such Class
is termi nated. The differing rights and obligations of each Class of
Shares shall be set forth in the Prospectus under which the Shares of
such Class are sold, and the Trustees may not change such rights and
obligations in a manner adverse to the holders of outstanding Shares of
such Class, or grant any preferences over such Class to the holders of
shares of any other Class without the affirmative vote or consent of
the holders of 'a majority of the outstanding voting securities' of
such Class, as the quoted phrase is used in the 1940 Act.
<PAGE>
-5-
"(d) CHARACTER OF SEPARATE PORTFOLIOS AND SHARES THEREOF. Each
Portfolio established hereunder shall be a separate component of the
assets of the Trust, and the holders of Shares of the Series
representing the beneficial interests in that Portfolio, and of each
Class of such Series, if any, shall be considered Shareholders of such
Portfolio, and also as Shareholders of the Trust for purposes of
receiving reports and notices and (except as otherwise provided herein
or in the Certificate of Designation of a particular Portfolio as to
such Portfolio, in a vote of the Trustees as to any Class of a Series,
or as required by the 1940 Act or other ap plicable law) the right to
vote, all without distinction by Series or Class.
"(e) CONSIDERATION FOR SHARES. The Trustees may issue Shares
of any Series or Class for such consideration (which may include
property subject to, or acquired in connection with the assumption of,
liabilities) and on such terms as they may determine (or for no con
sideration if pursuant to a Share dividend or split-up), all without
action or approval of the Shareholders. All Shares when so issued on
the terms determined by the Trustees shall be fully paid and
non-assessable (but may be subject to mandatory contribution back to
the Trust as provided in SECTION 6.2(G) hereof).
"SECTION 6.2 GENERAL PROVISIONS FOR ALL PORTFOLIOS AND SERIES. Subject
to the power of the Trustees to classify or reclassify unissued Shares of a
Series or Class pursuant to SECTION 6.1(B) or (C), the Existing Portfolios, and
any Additional Portfolios that may from time to time be estab lished and
designated by the Trustees, and the Shares representing the beneficial interests
therein, shall (unless the Trustees otherwise determine with respect to an
Additional Portfolio at the time of establishing and designating the same) have
the following relative rights and preferences:
"(a) ASSETS BELONGING TO PORTFOLIOS. Any portion of the Trust
Property allocated to a particular Portfolio, and all consideration
received by the Trust for the issue or sale of Shares of such
Portfolio, together with all assets in which such consideration is
invested or reinvested, all interest, dividends, income, earnings,
profits and gains therefrom, and pro ceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of that
Portfolio and shall irrevocably belong to that Portfolio for all pur
poses, and shall be so recorded upon the books of account of the Trust,
and the Shareholders of such Portfolio shall not have, and shall be
conclusively deemed to have waived, any claims to the assets of any
Portfolio of which they are not Shareholders. Such consideration,
assets, interest, dividends, income, earnings, profits, gains and
proceeds, together with any General Items allocated to that Portfolio
as provided in the following sentence, are herein referred to
collectively as 'PORTFOLIO ASSETS' of such Portfolio, and as assets
'BELONGING TO' that Portfolio. If the Trust shall have or realize any
assets, income, interest, dividends, earn ings, profits, gains or
proceeds which are not readily identifiable as belonging to any
particular Portfolio (collectively, 'GENERAL ITEMS'), the Trustees
shall allocate such General Items to and among any one or more of the
Portfolios of the Trust in such manner and on such basis as they, in
their sole discretion, deem fair and equitable; and any General Items
so allocated to a particular Portfolio shall belong to and be part of
the Portfolio Assets of that Portfolio. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all
Portfolios for all purposes.
<PAGE>
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"(b) LIABILITIES OF PORTFOLIOS. The assets belonging to each
Portfolio shall be charged with the liabilities incurred by or arising
in respect of that Portfolio and all expenses, costs, charges and
reserves attributable to that Portfolio, and at any time at which the
Trust shall have more than one Portfolio, any general liabilities,
expenses, costs, charges or reserves which are not readily identifiable
as pertaining to any particular Portfolio shall be allocated and
charged by the Trustees to and among any one or more of the Portfolios
of the Trust in such manner and on such basis as the Trustees in their
sole discretion deem fair and equit able. The liabilities, expenses,
costs, charges and reserves so allocated and so charged to a particular
Portfolio are herein referred to as 'LIABILITIES OF' that Portfolio.
Each allocation of liabilities, expenses, costs, charges and reserves
by the Trustees shall be conclusive and binding upon the Shareholders
of all Portfolios for all purposes. The creditors of a particular
Portfolio may look only to the assets of that Portfolio to satisfy such
creditors' claims, and the creditors of a particular Class of a
Portfolio may look only to the share of that Class in the assets of the
Portfolio of which it is a part to satisfy their claims.
"(c) DIVIDENDS. Dividends and distributions on Shares of any
Series may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise pursu ant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees
may determine, to the Shareholders of that Series, from such of the
income, accrued or realized, and capital gains, realized or unrealized,
and out of the assets belonging to the Portfolio to which such Series
pertains, as the Trustees may determine, after providing for actual and
accrued liabilities of that Portfolio. All dividends and distributions
on Shares of any Series without separate Classes shall be distributed
pro rata to the holders of Shares of that Series in proportion to the
number of such Shares held by such holders at the date and time of
record established for the payment of such dividends or distributions.
Dividends and distributions on the Shares of a Portfolio having
separate Classes of Shares shall be in such amount as may be declared
from time to time by the Trustees, and such dividends and dis
tributions may vary as between such Classes to reflect differing
allocations among such Classes of the liabilities, expenses, costs,
charges and reserves of such Portfolio, and any resultant differences
between the net asset value of such several Classes, to such extent and
for such purposes as the Trustees may deem appropriate, but dividends
and distributions on the Shares of a particular Class shall be
distributed pro rata to the Shareholders of that Class in proportion to
the number of such Shares held by such holders at the date and time of
rec ord established for the payment of such dividends and
distributions. Notwithstanding the last two preceding sentences, the
Trustees may determine, in connection with any dividend or distribution
program or procedure, that no dividend or distribution shall be payable
on newly-issued Shares as to which the Shareholder's purchase order
and/or payment have not been received by the time or times established
by the Trustees under such program or procedure, or that dividends or
distributions shall be payable on Shares which have been tendered by
the holder thereof for redemption or repurchase, but the redemption or
repurchase proceeds of which have not yet been paid to such
Shareholder. Dividends and distributions on the Shares of a Series may
be made in cash or Shares of any Class of that Series or a combination
thereof as determined by the Trustees, or pursuant to any program that
the Trustees may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or distribution
to that Shareholder. Any such dividend or distribution paid in
<PAGE>
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Shares will be paid at the net asset value thereof as determined in
accordance with SUBSECTION (G) of this SECTION 6.2.
"(d) LIQUIDATION. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Portfolio with
outstanding Shares shall be entitled to receive, when and as declared
by the Trustees, the excess of the Portfolio Assets of such Portfolio
over the liabilities of such Portfolio. The assets so distributable to
the Shareholders of any Portfolio without Classes shall be distributed
among such Shareholders in proportion to the number of Shares of that
Portfolio held by them and recorded on the books of the Trust. The
assets so distributable to the Shareholders of any Portfolio with
Classes shall be allocated among such Classes in proportion to the
respective aggregate net asset value of the outstanding Shares thereof,
and shall be distributed to the Shareholders of each such Class in
proportion to the number of Shares of that Class held by them and
recorded on the books of the Trust. The liquidation of any Portfolio,
or of any Class of a Portfolio, may be authorized by vote of a Majority
of the Trustees, subject to the affirmative vote of 'a majority of the
outstanding voting securities' of the Series representing the
beneficial interests in that Portfolio, or in that Class of such
Series, as the quoted phrase is defined in the 1940 Act, determined in
accord ance with CLAUSE (III) of the definition of 'MAJORITY
SHAREHOLDER VOTE' in SECTION 1.4 hereof.
"(e) REDEMPTION BY SHAREHOLDER. Each holder of Shares of any
Series or Class shall have the right at such times as may be permitted
by the Trust, but no less frequently than once each week, to require
the Trust to redeem all or any part of such Shares at a redemption
price equal to the net asset value per Share of that Series or Class
next determined in accord ance with SUBSECTION (G) of this SECTION 6.2
after the Shares are properly tendered for re demption; PROVIDED, that
the Trustees may from time to time, in their discretion, determine and
impose a fee for such redemption, and the proceeds of the redemption of
Shares (includ ing a fractional Share) of any Series or Class shall be
reduced by the amount of any applic able contingent deferred sales
charge payable on such redemption pursuant to the terms of the initial
issuance of such Shares (to the extent consistent with the 1940 Act or
regulations or exemptions thereunder). The redemption price of Shares
redeemed under this SUBSECTION (E) shall be paid in cash; PROVIDED,
that if the Trustees determine, which determination shall be
conclusive, that conditions exist with respect to any Series of Shares,
or one or more Clas ses of any Series, which make payment wholly in
cash unwise or undesirable, the Trust may make payment wholly or partly
in Securities or other assets belonging to the Portfolio to which such
Series or Class pertains, at the value of such Securities or assets
used in such de termination of net asset value. Notwithstanding the
foregoing, the Trust may postpone pay ment of the redemption price and
may suspend the right of the holders of Shares of any Ser ies or Class
to require the Trust to redeem such Shares during any period or at any
time when and to the extent permissible under the 1940 Act.
"(f) REDEMPTION AT THE OPTION OF THE TRUST. Each Share of any
Series or Class shall be subject to redemption at the option of the
Trust at the redemption price which would be applicable if such Share
were then being redeemed by the Shareholder pursuant to SUBSECTION (E)
of this SECTION 6.2: (I) at any time, if the Trustees determine in
their sole discretion that failure to so redeem may have materially
adverse consequences to the holders of the Shares of the Trust,
generally, or of any Portfolio thereof, or (II) upon such other
conditions with
<PAGE>
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respect to maintenance of Shareholder accounts of a minimum amount as
may from time to time be determined by the Trustees and set forth in
the then current Prospectus of such Portfolio. Upon such redemption the
holders of the Shares so redeemed shall have no further right with
respect thereto other than to receive payment of such redemption price.
"(g) NET ASSET VALUE. Subject to the provisions of the two
sentences immediately following, the net asset value per Share of any
Series without Classes, or of any Class of a Series having separate
Classes, at any time shall be the quotient obtained by dividing the
then value of the net assets of the Portfolio to which such Series
pertains, or the share of such Class in such assets, as the case may be
(being the current value of the assets then belonging to such
Portfolio, or the share of such Class therein, less the then-existing
liabilities of such Portfolio, or the share of such Class in such
liabilities) by the total number of Shares of that Series or Class then
outstanding, all determined in accordance with the methods and proced
ures, including without limitation those with respect to rounding,
established by the Trustees from time to time. The aggregate net asset
value of the several Classes of a Portfolio having separate Classes of
Shares shall be separately computed, and may vary from one another. The
Trustees shall establish procedures for the allocation of investment
income or capital gains and expenses and liabilities of a Portfolio
having separate Classes of Shares among the several Classes of such
Portfolio, in order to reflect the varying net asset values of, and the
liabilities and expenses attributable to, such Classes. The Trustees
may determine to main tain the net asset value per Share of any
Portfolio at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for
the continuing declaration of income attributable to that Portfolio as
dividends payable in ad ditional Shares of that Portfolio at the
designated constant dollar amount and for the handling of any losses
attributable to that Portfolio. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have contributed
to the shares of beneficial interest account of that Portfolio such
Shareholder's pro rata portion of the total number of Shares required
to be cancelled in order to permit the net asset value per Share of
that Portfo lio to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Trust shall
be deemed to have expressly agreed, by investing in any Portfolio with
respect to which the Trustees shall have adopted any such procedure, to
make the contribution referred to in the preceding sentence in the
event of any such loss.
"(h) TRANSFER. All Shares of the Trust shall be transferable,
but transfers of Shares of a particular Series or Class will be
recorded on the Share transfer records of the Trust ap plicable to that
Series or Class only at such times as Shareholders shall have the right
to require the Trust to redeem Shares of that Series or Class and at
such other times as may be permitted by the Trustees.
"(i) EQUALITY. All Shares of each Series without Classes shall
represent an equal pro portionate interest in the assets belonging to
the Portfolio to which such Series pertains (sub ject to the
liabilities of that Portfolio), and each Share of any such Series shall
be equal to each other Share thereof. All Shares of each Class of any
Series having separate Classes shall represent an equal proportionate
interest in the share of such Class in the assets belong ing to the
Portfolio to which such Series pertains, subject to a like share of the
liabilities of such Portfolio, adjusted for any liabilities
specifically allocable to that Class, and each Share
<PAGE>
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of any such Class shall be equal to each other Share thereof; but the
interests represented by the Shares of the different Classes of a
Series having separate Classes shall reflect any dis tinctions among
the several Classes of such Series existing pursuant to this ARTICLE VI
or SEC TION 7.1 hereof, or the Certificate of Designation for the
Portfolio providing for such Series. The Trustees may from time to time
divide or combine the Shares of any Series, or any Class of any Series,
into a greater or lesser number of Shares of that Series or Class
without thereby changing the proportionate beneficial interest in the
assets belonging to the Portfolio to which such Series or Class
pertains, or in any way affecting the rights of the holders of Shares
of any other Series or Class.
"(j) RIGHTS OF FRACTIONAL SHARES. Any fractional Share of any
Series or Class of Shares shall carry proportionately all the rights
and obligations of a whole Share of that Ser ies or Class, including
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust or of
the Portfolio to which such Series or Class pertains.
"(k) CONVERSION AND EXCHANGE RIGHTS. Subject to compliance
with the requirements of the 1940 Act, the Trustees shall have the
authority to provide that holders of Shares of any Series or Class
shall have the right to convert said Shares into, or exchange said
Shares for, Shares of one or more other Series or Classes of the Trust
or one or more other investment companies set forth in the Prospectus
with respect to such Series or Class, and that Shares of any Class of
any Series shall be automatically converted into Shares of another
Class of such Series, in each case in accordance with such requirements
and procedures as the Trus tees may establish."
6. SECTION 7.1 of the Declaration of Trust is hereby amended and
restated in its entirety to read as follows:
"SECTION 7.1 VOTING POWERS. The Shareholders shall have power
to vote only (I) for the election or removal of Trustees as provided in
SECTIONS 4.1(C) and (E) hereof, (II) with respect to the approval or
termination in accordance with the 1940 Act of any con tract with a
Contracting Party as provided in SECTION 5.2 hereof as to which
Shareholder approval is required by the 1940 Act, (III) with respect to
any termination or reorganization of the Trust or any Portfolio to the
extent and as provided in SECTIONS 9.1 and 9.2 hereof, (IV) with
respect to any amendment of this Declaration to the extent and as
provided in SEC TION 9.3 hereof, (V) to the same extent as the
stockholders of a Massachusetts business corpo ration as to whether or
not a court action, proceeding or claim should or should not be brought
or maintained derivatively or as a class action on behalf of the Trust
or any Portfolio, or the Shareholders of any of them (PROVIDED,
HOWEVER, that a Shareholder of a particular Portfolio shall not in any
event be entitled to maintain a derivative or class action on behalf of
any other Portfolio or the Shareholders thereof), and (VI) with respect
to such additional matters relating to the Trust as may be required by
the 1940 Act, this Declaration, the ByLaws or any registration of the
Trust with the Commission (or any successor agency) or any State, or as
the Trustees may consider necessary or desirable. If and to the extent
that the Trustees shall determine that such action is required by law
or by this Declaration, they shall cause each matter required or
permitted to be voted upon at a meeting or by written consent
<PAGE>
-10-
of Shareholders to be submitted to a separate vote of the outstanding
Shares of each Series entitled to vote thereon; PROVIDED, that (I) when
expressly required by the 1940 Act or by other law, actions of
Shareholders shall be taken by Single Class Voting of all outstanding
Shares of each Series and Class whose holders are entitled to vote
thereon; and (II) when the Trustees determine that any matter to be
submitted to a vote of Shareholders affects only the rights or
interests of Shareholders of one or more but not all Series, or of one
or more but not all Classes of a single Series (including without
limitation any distribution plan pursuant to Rule 12b-1 under the 1940
Act applicable to any such Series or Class), then only the Share
holders of the Series or Classes so affected shall be entitled to vote
thereon. Without limiting the generality of the foregoing, and except
as required by the 1940 Act or other law, the Shareholders of each
Class shall have exclusive voting rights with respect to the provisions
of any distribution plan adopted by the Trustees pursuant to Rule 12b-1
under the 1940 Act (a 'PLAN') applicable to such Class."
7. SECTION 7.5 of the Declaration of Trust is hereby amended and
restated in its entirety to read as follows:
"SECTION 7.5 QUORUM AND REQUIRED VOTE. A majority of the
outstanding Shares entitled to vote on a matter without regard to
Series or Class shall be a quorum for the trans action of business with
respect to such matter at a Shareholders' meeting, but any lesser num
ber shall be sufficient for adjournments. Any adjourned session or
sessions may be held within a reasonable time after the date set for
the original meeting without the necessity of further notice. A
Majority Shareholder Vote at a meeting of which a quorum is present
shall decide any question, except when a different vote is required or
permitted by any provision of the 1940 Act or other applicable law or
by this Declaration of Trust or the By-Laws, or when the Trustees shall
in their discretion require a larger vote or the vote of a majority or
larger fraction of the Shares of one or more particular Series or
Classes."
8. SECTION 9.3 of the Declaration of Trust is hereby amended and
restated in its entirety to read as follows:
"SECTION 9.3 AMENDMENTS; ETC. All rights granted to the
Shareholders under this Declaration of Trust are granted subject to the
reservation of the right to amend this Decla ration of Trust as herein
provided, except that no amendment shall repeal the limitations on
personal liability of any Shareholder or Trustee or the prohibition of
assessment upon the Shareholders (otherwise than as permitted under
SECTION 6.2(G)) without the express consent of each Shareholder or
Trustee involved. Subject to the foregoing, the provisions of this
Declaration of Trust (whether or not related to the rights of
Shareholders) may be amended at any time, so long as such amendment
does not adversely affect the rights of any Share holder with respect
to which such amendment is or purports to be applicable and so long as
such amendment is not in contravention of applicable law, including the
1940 Act, by an instrument in writing signed by a Majority of the
Trustees (or by an officer of the Trust pur suant to the vote of a
Majority of the Trustees). Any amendment to this Declaration of Trust
that adversely affects the rights of all Shareholders may be adopted at
any time by an instru ment in writing signed by a Majority of the
Trustees (or by an officer of the Trust pursuant to a vote of a
Majority of the Trustees) when authorized to do so by the vote in
accordance
<PAGE>
-11-
with SECTION 7.1 hereof of Shareholders holding a majority of all the
Shares outstanding and entitled to vote, without regard to Series, or
if said amendment adversely affects the rights of the Shareholders of
less than all of the Series or of less than all of the Classes of
Shares of any Series, by the vote of the holders of a majority of all
the Shares entitled to vote of each Series or Class so affected.
Subject to the foregoing, any such amendment shall be effective when
the terms thereof have been duly adopted, as aforesaid, and an
instrument reciting such adoption, and setting forth the terms of such
amendment and the circumstances of its adoption, has been executed and
acknowledged by a Trustee or officer of the Trust and filed with the
records of the Trust."
9. SECTION 9.4 of the Declaration of Trust is hereby amended and
restated in its entirety to read as follows:
"SECTION 9.4 FILING OF COPIES OF DECLARATION AND AMENDMENTS.
The original or a copy of this Declaration, of each amendment hereto
(including each Certificate of Desig nation and Certificate of
Termination), as well as the certificates called for by Section 4.1(k)
hereof as to changes in the Trustees, shall be kept at the office of
the Trust where it may be inspected by any Shareholder, and one copy of
each such instrument shall be filed with the Secretary of The
Commonwealth of Massachusetts, and with any other governmental office
where such filing may from time to time be required by the laws of
Massachusetts, but such filing shall not be a prerequisite to the
effectiveness of this Declaration or any such amend ment or other
instrument. A restated Declaration, integrating into a single
instrument all of the provisions of this Declaration which are then in
effect and operative, may be executed from time to time by a Majority
of the Trustees and shall, upon filing with the Secretary of The
Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of the
original Declaration and the various amendments thereto."
IN WITNESS WHEREOF, the undersigned has set his/her and the seal of the
Trust, this 10th day of December, 1996.
/s/ Mary Marsden-Cochran
- ---------------------------
Name: Mary Marsden-Cochran
Title: Secretary
[TRUST SEAL]
<PAGE>
-12-
ACKNOWLEDGMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK ) December 10, 1996
Then personally appeared the above-named Mary Marsden-Cochran and
acknowledged the foregoing instrument to be his/her free act and deed.
Before me,
/s/ Eric Sanders
----------------------
Notary Public
My commission expires: 5/6/98
[NOTARIAL SEAL]
DISTRIBUTION AGREEMENT
October 24, 1986
Amended as of December 31, 1996
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, The Alger Fund (the "Fund"), an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts, has agreed that Fred Alger & Company, Incorporated ("Alger")
shall be, for the period of this agreement, the distributor of shares of
beneficial interest of the Fund.
1. SERVICES OF THE DISTRIBUTOR
1.1 Alger will act as agent for the distribution of each series
of shares of beneficial interest of the Fund (the "Shares") covered by the
registration statement, prospectus and statement of additional information then
in effect (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), and the Investment Company Act of 1940, as amended (the
"1940 Act").
1.2 Alger agrees to use its best efforts to solicit orders for
the sale of the Shares at the public offering price, as determined in accordance
with the Registration Statement, and will undertake such advertising and
promotion as it believes is reasonable in connection with such solicitation.
Alger agrees to bear all selling expenses, including the cost of printing
prospectuses and statements of additional information and distributing them to
prospective shareholders.
1.3 All activities by Alger as distributor of the Shares shall
comply with all applicable laws, rules and regulations, including, without
limitation, all rules and regulations made by the Securities and exchange
Commission (the "SEC") or by any securities association registered under the
Securities Exchange Act of 1934.
-1-
<PAGE>
1.4 Alger will provide one or more persons during normal business
hours to respond to telephone inquiries concerning the Fund.
1.5 Alger acknowledges that, whenever in the judgment of the
Fund's officers such action is warranted for any reason, including, without
limitation, market, economic or political conditions, those officers may decline
to accept any orders for, or make any sales of, the Shares until such time as
those officers deem it advisable to accept such orders and to make such sales.
1.6 Alger will act only on its own behalf as principal should it
choose to enter into selling agreements with selected dealers or others.
1.7 As promptly as is possible after the last day of each month
this Agreement is in effect, the Fund may reimburse Alger for certain expenses
incurred by Alger in connection with the offering and sales of the Class B
Shares of each of the portfolios of the Fund, other than the Alger Money Market
Portfolio (each a "Portfolio" and collectively, the "Portfolios"), under this
Agreement that ore not covered by any contingent deferred sales charges received
by Alger with respect to Class B Shares of that Portfolio; provided that payment
shall be made in any month only to the extent that such payment, together with
any other payments made by the Fund pursuant to its Plan of Distribution adopted
in accordance with Rule 12b-1 under the 1940 Act (the "Plan"), shall not exceed
(originally .0833% - as of 5112/93:) .0625% ([originally 1.00 - as of 5112193:]
.75 on an annualized basis) of the average daily net assets represented by Class
B Shares of each of the Portfolios for the prior month. If distribution expenses
incurred during a month in excess of any contingent deferred sales charges
received by Alger in respect of the Class B Shares of a Portfolio are not fully
reimbursed by said monthly payment, the unpaid portion of the expenses may be
carried forward for payment by the Portfolio at the end of the following
month(s) and interest, at the prevailing broker loan rate, may be charged
thereon, but only if such payment would not cause the Portfolio for that month
to exceed the monthly or annual limitations on distribution expenses stated
above. The payments contemplated by this paragraph shall be made only out of the
assets allocable to each Portfolio's Class B Shares.
For purposes of this Agreement, "distribution expenses" of Alger shall
mean all expenses borne by Alger or by any other person with which Alger has an
agreement approved by the Fund, which expenses represent payment for activities
primarily intended to result in the sale of the Class B Shares, including, but
not limited to, the following to the extent that they relate to Class B Shares:
(a) payments made to and expenses of the persons who provide
support services in connection with the distribution of the Shares, including,
but not limited to, answering routine inquiries regarding the Portfolios,
processing shareholder transactions and providing any other shareholder services
not otherwise provided by the Fund's transfer agent:
-2-
<PAGE>
(b) costs relating to the formulation and implementation of
marketing and promotional activities, including but not limited to, direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising;
(c) costs of printing and distributing prospectuses and reports
of the Fund to prospective shareholders of the Portfolios;
(d) costs involved in preparing, printing and distributing sales
literature pertaining to the Portfolios;
(e) costs involved in obtaining whatever information, analyses
and reports with respect to marketing and promotional activities on behalf of
the Portfolios that the Fund may, from time to time, deem advisable.
Expenses incurred in connection with promotional activities shall be
identified to the Portfolio involved, except that, where expenses cannot be
identified to any particular Portfolio, expenses shall be allocated among the
Portfolios pro rata on the basis of their relative net assets represented by
Class B shares. Distribution expenses shall not include any expenditures in
connection with services that Alger, any of its affiliates or any other person
have agreed to bear without reimbursement.
1.8 Each written request for reimbursement under section 1.7
shall be directed to the Treasurer of the Fund and shall show in reasonable
detail the expenses incurred by Alger.
1.9 Alger shall prepare and deliver reports to the Treasurer of
the Fund, for review by the Trustees, on a regular, at least quarterly, basis
showing the distribution expenses expected to be incurred in the ensuing quarter
pursuant to this Agreement and the Plan and the purposes therefor. Alger shall
also prepare and deliver reports to the Treasurer of the Fund, for review by the
Trustees, on regular, at least quarterly, basis, showing the distribution
expenses actually incurred in the past quarter, as well as any supplemental
reports as the Trustees, from time to time, may request.
1.10 Alger acknowledges that payments under the Plan are subject
to the approval of the Fund's board of Trustees and that no Portfolio is
contractually obligated to make payments in any amount or at anytime, including
those in reimbursement of Alger for expenses and interest thereon incurred in a
prior month or year.
-3-
<PAGE>
2. DUTIES OF THE FUND
2.1 The Fund agrees to execute at its own expense any and all
documents, to furnish any and all information and to take any other actions that
may be reasonably necessary in connection with the qualification of the Shares
for sale in those states that Alger may designate.
2.2 The Fund shall furnish from time to time, for use in
connection with the sale of the Shares, such information reports with respect to
the Fund and the Shares as Alger may reasonably request, all of which shall be
signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such reports, when so signed by
one or more of the Fund's officers, shall be true and correct. The Fund shall
also furnish Alger upon request with: (a) annual audits of the Fund's books and
accounts made by independent public accountants regularly retained by the Fund,
(b) semiannual unaudited financial statements pertaining to the Fund, (c)
quarterly earnings statements prepared by the Fund, (d) a monthly itemized list
of the securities in each Portfolio, (e) monthly balance sheets as soon as
practicable after the end of each month and (f) from time to time such
additional information regarding the Fund's financial condition as Alger may
reasonably request.
3. REPRESENTATIONS AND WARRANTIES
The Fund represents to Alger that all registration statements,
prospectuses and statements of additional information filed by the Fund with the
SEC under the 1933 Act and the 1940 Act with respect to the Shares have been
prepared in conformity with the requirements of the 1933 Act, the 1940 Act and
the rules and regulations of the SEC thereunder. As used in this Agreement the
terms Registration statement", "prospectus" and "statement of additional
information" shall mean any registration statement, prospectus and statement of
additional information filed by the Fund with the SEC and any amendments and
supplements thereto that at any time shall have been filed with the SEC. The
Fund represents and warrants to Alger that any registration statement,
prospectus and statement of additional information, when such registration
statement becomes effective, will include all statements required to be
contained therein in conformity with the 1933 Act, the 1940 Act and the rules
and regulations of the SEC; that all statements of fact contained in any
registration statement, prospectus or statement of additional information will
be true and correct when such registration statement becomes effective; and that
neither any registration statement nor any prospectus or statement of additional
information when such registration
-4-
<PAGE>
statement becomes effective will include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading to a purchaser of the Shares. Alger
may, but shall not be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus or statement of additional information as, in the light of future
developments, may, in the opinion of Alger's counsel, be necessary or advisable.
If the Fund shall not propose such amendment or amendments and/or supplement or
supplements within fifteen days after receipt by the Fund of a written request
from Alger to do so, Alger may, at its option, terminate this Agreement. The
Fund shall not file any amendment to any registration statement or supplement to
any prospectus or statement of additional information without giving Alger
reasonable notice thereof in advance; provided, however, that nothing contained
in this Agreement shall in any way limit the Fund's right to file at any time
such amendments to any registration statement and/or supplements to any
prospectus or statement of additional information, of whatever character, as the
Fund may deem advisable, such right being in all respects absolute and
unconditional.
4. INDEMNIFICATION
4.1 The Fund authorizes Alger and any dealers with whom Alger has
entered into dealer agreements to use any prospectus or statement of additional
information furnished by the Fund from time to time, in connection with the sale
of the Fund's shares. The Fund agrees to indemnify, defend and hold Alger, its
several officers and directors, and any person who controls Alger within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) that Alger, its officers and directors,
or any such controlling person, may incur under the 1933 Act, the 1940 Act or
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement, any prospectus or any statement of additional information, or arising
out of or based upon any omission or alleged omission to state a material fact
required to be stated in any registration statement, any prospectus or any
statement of additional information, or necessary to make the statements in any
of them not misleading; provided, however, that the Fund's agreement to
indemnify Alger, its officers or directors, and any such controlling person
shall not be deemed to cover any claims, demands,
-5-
<PAGE>
liabilities or expenses arising out of or based upon any statements or
representations made by Alger or its representatives or agents other than such
statements and representations as are contained in any registration statement,
prospectus or statement of additional information and in such financial and
other statements as are furnished to Alger pursuant to paragraph 2.2 hereof; and
further provided that the Fund's agreement to indemnify Alger and the Fund's
representations and warranties hereinbefore set forth in paragraph 3 shall not
be deemed to cover any liability to the Fund or its shareholders to which Alger
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of Alger's reckless
disregard of its obligations and duties under this Agreement. The Fund's
agreement to indemnify Alger, its officers and directors, and any such
controlling person, as aforesaid, is expressly conditioned upon the Fund's being
notified of any action brought against Alger, its officers or directors, or any
such controlling person, such notification to be given by letter or by telegram
addressed to the Fund at its principal office in New York, New York and sent to
the Fund by the person against whom such action is brought, within ten days
after the summons or other first legal process shall have been served. The
failure so to notify the Fund of any such action shall not relieve the Fund from
any liability that the Fund may have to the person against whom such action is
brought by reason of any such untrue or alleged untrue statement or omission or
alleged omission otherwise than on account of the Fund's indemnity agreement
contained in this paragraph 4.1. The Fund will be entitled to assume the
defense of any suit brought to enforce any such claim, demand or liability, but,
in such case, such defense shall be conducted by counsel of good standing chosen
by the Fund and approved by Alger. In the event the Fund elects to assume the
defense of any such suit and retain counsel of good standing approved by Alger,
the defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Fund does not elect
to assume the defense of any such suit, or in case Alger does not approve of
counsel chosen by the Fund, the Fund will reimburse Alger, its officers and
directors, or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses or any counsel retained by
Alger or them. The Fund's indemnification agreement contained in this paragraph
4.1 and the Fund's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of Alger, its officers and directors, or any controlling person,
and shall survive the delivery of any of the Fund's shares. This agreement of
indemnity will inure exclusively to Alger's
-6-
<PAGE>
benefit, to the benefit of its several officers and directors, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Fund agrees to notify Alger promptly-of the commencement of any
litigation or proceedings against the Fund or any of its officers or Trustees in
connection with the issuance and sale of any of the Shares.
4.2 Alger agrees to indemnify, defend and hold the Fund, its
several officers and Trustees, and any person who controls the Fund within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
incurred in connection therewith) that the Fund, its officers or Trustees or any
such controlling person may incur under the 1933 Act, the 1940 Act or common law
or otherwise, but only to the extent that such liability or expense incurred by
the Fund, its officers or Trustees or such controlling person resulting from
such claims or demands shall arise out of or be based upon (a) any unauthorized
sales literature, advertisements, information, statements or representations or
(b) any untrue or alleged untrue statement of a material fact contained in
information furnished in writing by Alger to the Fund and used in the answers to
any of the items of the registration statement or in the corresponding
statements made in the prospectus or statement of additional information, or
shall arise out of or be based upon any omission or alleged omission to state a
material fact in connection with such information furnished in writing by Alger
to the Fund and required to be stated in such answers or necessary to make such
information not misleading. Alger's agreement to indemnify the Fund, its
officers and Trustees, and any such controlling person, as aforesaid, is
expressly conditioned upon Alger's being notified of any action brought against
the Fund, its officers or Trustees, or any such controlling person, such
notification to be given by letter or telegram addressed to Alger at its
executive office in New York, New York and sent to Alger by the person against
whom such action is brought, within ten days after the summons or other first
legal process shall have been served. Alger shall have the right of first
control of the defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon such alleged
misstatement or omission on Alger's part, and in any other event the Fund, its
officers or Trustees or such controlling person shall each have the right to
participate in the defense or preparation of the defense of any such action. The
failure so to notify Alger of any such action shall not relieve Alger from any
liability that Alger may have to the Fund, its officers or Trustees, or to such
controlling person by reason of any such untrue or alleged
-7-
<PAGE>
untrue statement or omission or alleged omission otherwise than on account of
Alger's indemnity agreement contained in this paragraph 4.2. Alger agrees to
notify the Fund promptly of the commencement of any litigation or proceedings
against Alger or any of its officers or directors in connection with the
issuance and sale of any of the Shares.
5. EFFECTIVENESS OF REGISTRATION
None of the Shares shall be offered by either Alger or the Fund under
any of the provisions of this Agreement and no orders for the purchase or sale
of the Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 5(b)(2) of
the 1933 Act is not on file with the SEC; provided, however, that nothing
contained in this paragraph 5 shall in any way restrict or have an application
to or bearing upon the Fund's obligation to redeem its shares from any
shareholder in accordance with the provisions of the Fund's prospectus,
statement of additional information or articles of incorporation.
6. NOTICE TO ALGER
The Fund agrees to advise Alger immediately in writing:
(a) of any request by the SEC for amendments to the registration
statement, prospectus or statement of additional information then in effect or
for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus or
statement of additional information then in effect or the initiation of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement, prospectus or statement of
additional information then in effect or that requires the making of a change in
such registration statement, prospectus or statement of additional information
in order to make the statements therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to any
registration statement, prospectus or statement of additional information which
may from time to time be filed with the SEC.
-8-
<PAGE>
7. TERM OF AGREEMENT
This Agreement shall continue until October 24, 1988 and
thereafter shall continue automatically for successive annual periods ending on
October 24th of each year, provided such continuance is specifically approved at
least annually by (a) the Fund's Board of Trustees or (b) a vote of a majority
(as-defined in the 1940 Act) of the Fund's outstanding voting securities,
provided that in either event the continuance is also approved by a majority of
the Trustees of the Fund who are not interested persons (as defined in the 1940
Act) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval. This Agreement is terminable,
without penalty, on 60 days' written notice, by the Fund's Board of Trustees or
by vote of the holders of a majority of the Fund's shares, or on 90 days'
written notice, by Alger. This agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act and the rules
thereunder).
8. REPRESENTATION BY THE FUND
The Fund represents that a copy of its Agreement and Declaration
of Trust, dated March 20, 1986, together with all amendments thereto, is on file
in the office of the Secretary of the Commonwealth of Massachusetts.
9. LIMITATION OF LIABILITY
This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall be binding upon the assets and property of
the Fund only and shall not be binding upon any Trustee, officer or shareholder
of the Fund individually.
10. GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the laws (except the conflict of law rules) of the State of New York.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning the enclosed copy
hereof.
-9-
<PAGE>
Very truly yours,
THE ALGER FUND
By:-------------------------------
Authorized Officer
Accepted and Agreed:
FRED ALGER & COMPANY, INCORPORATED
By:--------------------------------------
Authorized Officer
Section 1.7 amended as of December 31, 1996
FRED ALGER & COMPANY, THE ALGER FUND
INCORPORATED
By:----------------------------------- By:--------------------------------
Authorized Officer Authorized Officer
-10-
THE ALGER FUND
ALGER BALANCED PORTFOLIO
Rule 18f-3
Multiple Class Plan
The ALGER BALANCED PORTFOLIO (the "Portfolio") of THE ALGER FUND (the
"Fund"), has elected to rely on Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), in offering multiple classes of shares with
differing distribution arrangements, voting rights and exchange and conversion
features.
Pursuant to Rule 18f-3, the Board of Trustees of the Fund has approved
and adopted this written plan (the "Plan") specifying all of the differences
among the classes of shares to be offered by the Portfolio. Prior to such
offering, the Plan will be filed as an exhibit to the Fund's registration
statement. The Plan sets forth all the differences among the classes, including
those, if any, pertaining to shareholder services, distribution arrangements,
expense allocations, and conversion or exchange options.
I. ATTRIBUTES OF SHARE CLASSES
This section discusses the attributes of the various classes
of shares. Each share of the Portfolio represents an equal PRO RATA interest in
the Portfolio and has identical voting rights, powers, qualifications, terms and
conditions and, in proportion to each share's net asset value, liquidation
rights and preferences. The classes differ in that: (a) each class has a
different class designation; (b) only the Class A Shares are subject to a
front-end sales charge ("FESC"); (c) only the Class B Shares are subject to a
contingent deferred sales charge ("CDSC"), except that certain Class A shares
may also be subject to a CDSC different from that to which the Class B shares
are subject; (d) only the Class B Shares (as described below) are subject to
distribution fees under a plan adopted pursuant to Rule 12b-1 under the 1940 Act
(a "Rule 12b-1 Plan"); (e) to the extent that one class alone is affected by a
matter submitted to a vote of the shareholders, then only that class has voting
power on the matter; (f) the exchange privileges of each class differ from those
of the other; and (g) as described below, record holders of certain Class B
Shares will be entitled to convert those shares to Class A Shares at any time
prior to a date to be determined.1/
- --------
1/ Both classes of shares are subject to the same non-Rule 12b-1 shareholder
servicing fee.
1
<PAGE>
A. CLASS A SHARES
Class A Shares are sold to (1) retail and institutional
customers and (2) persons entitled to exchange into Class A Shares
under the exchange privileges of the Fund.
1. SALES LOADS. Class A Shares are sold subject to the current
maximum FESC (with scheduled variations or eliminations of the
sales charge, as permitted by the 1940 Act), except that
certain Class A shares for which the FESC has been eliminated
may instead be subject to a CDSC.
2. DISTRIBUTION AND SERVICE FEES. Class A Shares are not
subject to a Rule 12b-1 distribution fee. However, they are,
like the Class B Shares, subject to a shareholder servicing
fee not to exceed .25% of the average daily net assets of the
Portfolio.
3. CLASS EXPENSES. No expenses are allocated particularly to
Class A Shares.
4. EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class A Shares
are exchangeable for Class A Shares of the other portfolios of
the Fund and for shares of the Money Market Portfolio of the
Fund. Class A Shares have no conversion features.
B. CLASS B SHARES
Class B Shares are sold to (1) retail and institutional
customers and (2) persons entitled to exchange into Class B Shares
under the exchange privileges of the Fund. Shares of the Fund
outstanding on the date that the two classes of shares are first made
available will be redesignated Class B Shares.
1. SALES LOADS. Class B Shares are sold without the imposition
of any FESC, but are subject to a CDSC (with scheduled
variations or eliminations of the sales charge, as permitted
by the 1940 Act).
2. DISTRIBUTION AND SERVICE FEES. Class B Shares are subject
to a distribution fee pursuant to the Fund's Rule 12b-1 Plan
not to exceed .75% of the average daily net assets of Class B
and, like the Class A Shares, to a shareholder servicing fee
not to exceed .25% of the average daily net assets of the
Portfolio.
3. CLASS EXPENSES. No expenses other than the distribution fee
are allocated particularly to Class B Shares.
4. EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class B Shares
are exchangeable for Class B Shares of the other portfolios of
the Fund and for shares of the Money Market Portfolio of the
Fund. Record holders of "Qualified Class B Shares" (as defined
below) will be entitled to convert those shares to Class A
Shares at any time prior to a date to be determined. For this
purpose, "Qualified Class B Shares" shall mean Class B Shares
held of record by a broker-dealer, bank or other
2
<PAGE>
institution on behalf of (i) investment advisers or financial
planners trading for their own accounts or the accounts of
their clients and who charge a management, consulting or other
fee for their services, and clients of such investment
advisers or financial planners trading for their own accounts
if the accounts are linked to the master account of such
investment adviser or financial planner on the books and
records of the record holder; and (ii) retirement and deferred
compensation plans and trusts used to fund those plans.
C. ADDITIONAL CLASSES
In the future, the Portfolio may offer additional classes of
shares which differ from the classes discussed above. However, any
additional classes of shares must be approved by the Board, and the
Plan must be amended to describe those classes.
II. APPROVAL OF MULTIPLE CLASS PLAN
The Board of the Fund, including a majority of the independent
Trustees, must approve the Plan initially. In addition, the Board must approve
any material changes to the classes and the Plan prior to their implementation.
The Board must find that the Plan is in the best interests of each class
individually and the Portfolio as a whole. In making its findings, the Board
should focus on, among other things, the relationships among the classes and
examine potential conflicts of interest among classes regarding the allocation
of fees, services, waivers and reimbursements of expenses, and voting rights.
Most significantly, the Board should evaluate the level of services provided to
each class and the cost of those services to ensure that the services are
appropriate and that the costs thereof are reasonable. In accordance with the
foregoing provisions of this Section II, the Board of the Fund has approved and
adopted this Plan as of the date written below.
3
<PAGE>
III. DIVIDENDS AND DISTRIBUTIONS
Because of the differences in fees paid under a Rule 12b-1
Plan, the dividends payable to shareholders of a class will differ from the
dividends payable to shareholders of the other class. Dividends paid to each
class of shares in the Portfolio will, however, be declared and paid at the same
time and, except for the differences in expenses listed above, will be
determined in the same manner and paid in the same amounts per outstanding
shares.
IV. EXPENSE ALLOCATIONS
Income, realized and unrealized capital gains and losses, and
Portfolio expenses not allocated to a particular class shall be allocated to
each class on the basis of the net asset value of that class in relation to the
net asset value of the Portfolio.
Dated: December 10, 1996
4
<PAGE>
THE ALGER FUND
ALGER SMALL CAPITALIZATION PORTFOLIO
Rule 18f-3
Multiple Class Plan
The ALGER SMALL CAPITALIZATION PORTFOLIO (the "Portfolio") of THE ALGER
FUND (the "Fund"), has elected to rely on Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "1940 Act"), in offering multiple classes
of shares with differing distribution arrangements, voting rights and exchange
and conversion features.
Pursuant to Rule 18f-3, the Board of Trustees of the Fund has approved
and adopted this written plan (the "Plan") specifying all of the differences
among the classes of shares to be offered by the Portfolio. Prior to such
offering, the Plan will be filed as an exhibit to the Fund's registration
statement. The Plan sets forth all the differences among the classes, including
those, if any, pertaining to shareholder services, distribution arrangements,
expense allocations, and conversion or exchange options.
I. ATTRIBUTES OF SHARE CLASSES
This section discusses the attributes of the various classes of shares.
Each share of the Portfolio represents an equal PRO RATA interest in the
Portfolio and has identical voting rights, powers, qualifications, terms and
conditions and, in proportion to each share's net asset value, liquidation
rights and preferences. The classes differ in that: (a) each class has a
different class designation; (b) only the Class A Shares are subject to a
front-end sales charge ("FESC"); (c) only the Class B Shares are subject to a
contingent deferred sales charge ("CDSC"), except that certain Class A shares
may also be subject to a CDSC different from that to which the Class B shares
are subject; (d) only the Class B Shares (as described below) are subject to
distribution fees under a plan adopted pursuant to Rule 12b-1 under the 1940 Act
(a "Rule 12b-1 Plan"); (e) to the extent that one class alone is affected by a
matter submitted to a vote of the shareholders, then only that class has voting
power on the matter; (f) the exchange privileges of each class differ from those
of the other; and (g) as described below, record holders of certain Class B
Shares will be entitled to convert those shares to Class A Shares at any time
prior to a date to be determined.2/
- --------
2/ Both classes of shares are subject to the same non-Rule 12b-1 shareholder
servicing fee.
5
<PAGE>
A. CLASS A SHARES
Class A Shares are sold to (1) retail and institutional
customers and (2) persons entitled to exchange into Class A Shares
under the exchange privileges of the Fund.
1. SALES LOADS. Class A Shares are sold subject to the current
maximum FESC (with scheduled variations or eliminations of the
sales charge, as permitted by the 1940 Act), except that
certain Class A shares for which the FESC has been eliminated
may instead be subject to a CDSC.
2. DISTRIBUTION AND SERVICE FEES. Class A Shares are not
subject to a Rule 12b-1 distribution fee. However, they are,
like the Class B Shares, subject to a shareholder servicing
fee not to exceed .25% of the average daily net assets of the
Portfolio.
3. CLASS EXPENSES. No expenses are allocated particularly to
Class A Shares.
4. EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class A Shares
are exchangeable for Class A Shares of the other portfolios of
the Fund and for shares of the Money Market Portfolio of the
Fund. Class A Shares have no conversion features.
B. CLASS B SHARES
Class B Shares are sold to (1) retail and institutional
customers and (2) persons entitled to exchange into Class B Shares
under the exchange privileges of the Fund. Shares of the Fund
outstanding on the date that the two classes of shares are first made
available will be redesignated Class B Shares.
1. SALES LOADS. Class B Shares are sold without the imposition
of any FESC, but are subject to a CDSC (with scheduled
variations or eliminations of the sales charge, as permitted
by the 1940 Act).
2. DISTRIBUTION AND SERVICE FEES. Class B Shares are subject
to a distribution fee pursuant to the Fund's Rule 12b-1 Plan
not to exceed .75% of the average daily net assets of Class B
and, like the Class A Shares, to a shareholder servicing fee
not to exceed .25% of the average daily net assets of the
Portfolio.
3. CLASS EXPENSES. No expenses other than the distribution fee
are allocated particularly to Class B Shares.
4. EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class B Shares
are exchangeable for Class B Shares of the other portfolios of
the Fund and for shares of the Money Market Portfolio of the
Fund. Record holders of "Qualified Class B Shares" (as defined
below) will be entitled to convert those shares to Class A
Shares at any time prior to a date to be determined. For this
purpose, "Qualified Class B Shares" shall mean Class B Shares
held of record by a broker-dealer, bank or other
6
<PAGE>
institution on behalf of (i) investment advisers or financial
planners trading for their own accounts or the accounts of
their clients and who charge a management, consulting or other
fee for their services, and clients of such investment
advisers or financial planners trading for their own accounts
if the accounts are linked to the master account of such
investment adviser or financial planner on the books and
records of the record holder; and (ii) retirement and deferred
compensation plans and trusts used to fund those plans.
C. ADDITIONAL CLASSES
In the future, the Portfolio may offer additional classes of
shares which differ from the classes discussed above. However, any
additional classes of shares must be approved by the Board, and the
Plan must be amended to describe those classes.
II. APPROVAL OF MULTIPLE CLASS PLAN
The Board of the Fund, including a majority of the independent
Trustees, must approve the Plan initially. In addition, the Board must approve
any material changes to the classes and the Plan prior to their implementation.
The Board must find that the Plan is in the best interests of each class
individually and the Portfolio as a whole. In making its findings, the Board
should focus on, among other things, the relationships among the classes and
examine potential conflicts of interest among classes regarding the allocation
of fees, services, waivers and reimbursements of expenses, and voting rights.
Most significantly, the Board should evaluate the level of services provided to
each class and the cost of those services to ensure that the services are
appropriate and that the costs thereof are reasonable. In accordance with the
foregoing provisions of this Section II, the Board of the Fund has approved and
adopted this Plan as of the date written below.
7
<PAGE>
III. DIVIDENDS AND DISTRIBUTIONS
Because of the differences in fees paid under a Rule 12b-1
Plan, the dividends payable to shareholders of a class will differ from the
dividends payable to shareholders of the other class. Dividends paid to each
class of shares in the Portfolio will, however, be declared and paid at the same
time and, except for the differences in expenses listed above, will be
determined in the same manner and paid in the same amounts per outstanding
shares.
IV. EXPENSE ALLOCATIONS
Income, realized and unrealized capital gains and losses, and
Portfolio expenses not allocated to a particular class shall be allocated to
each class on the basis of the net asset value of that class in relation to the
net asset value of the Portfolio.
Dated: December 10, 1996
8
<PAGE>
THE ALGER FUND
ALGER MIDCAP GROWTH PORTFOLIO
Rule 18f-3
Multiple Class Plan
The ALGER MIDCAP GROWTH PORTFOLIO (the "Portfolio") of THE ALGER FUND
(the "Fund"), has elected to rely on Rule 18f-3 under the Investment Company Act
of 1940, as amended (the "1940 Act"), in offering multiple classes of shares
with differing distribution arrangements, voting rights and exchange and
conversion features.
Pursuant to Rule 18f-3, the Board of Trustees of the Fund has approved
and adopted this written plan (the "Plan") specifying all of the differences
among the classes of shares to be offered by the Portfolio. Prior to such
offering, the Plan will be filed as an exhibit to the Fund's registration
statement. The Plan sets forth all the differences among the classes, including
those, if any, pertaining to shareholder services, distribution arrangements,
expense allocations, and conversion or exchange options.
I. ATTRIBUTES OF SHARE CLASSES
This section discusses the attributes of the various classes of shares.
Each share of the Portfolio represents an equal PRO RATA interest in the
Portfolio and has identical voting rights, powers, qualifications, terms and
conditions and, in proportion to each share's net asset value, liquidation
rights and preferences. The classes differ in that: (a) each class has a
different class designation; (b) only the Class A Shares are subject to a
front-end sales charge ("FESC"); (c) only the Class B Shares are subject to a
contingent deferred sales charge ("CDSC"), except that certain Class A shares
may also be subject to a CDSC different from that to which the Class B shares
are subject; (d) only the Class B Shares (as described below) are subject to
distribution fees under a plan adopted pursuant to Rule 12b-1 under the 1940 Act
(a "Rule 12b-1 Plan"); (e) to the extent that one class alone is affected by a
matter submitted to a vote of the shareholders, then only that class has voting
power on the matter; (f) the exchange privileges of each class differ from those
of the other; and (g) as described below, record holders of certain Class B
Shares will be entitled to convert those shares to Class A Shares at any time
prior to a date to be determined.3/
A. CLASS A SHARES
Class A Shares are sold to (1) retail and institutional
customers and (2) persons entitled to exchange into Class A Shares
under the exchange privileges of the Fund.
- --------
3/ Both classes of shares are subject to the same non-Rule 12b-1 shareholder
servicing fee.
9
<PAGE>
1. SALES LOADS. Class A Shares are sold subject to the current
maximum FESC (with scheduled variations or eliminations of the
sales charge, as permitted by the 1940 Act), except that
certain Class A shares for which the FESC has been eliminated
may instead be subject to a CDSC.
2. DISTRIBUTION AND SERVICE FEES. Class A Shares are not
subject to a Rule 12b-1 distribution fee. However, they are,
like the Class B Shares, subject to a shareholder servicing
fee not to exceed .25% of the average daily net assets of the
Portfolio.
3. CLASS EXPENSES. No expenses are allocated particularly to
Class A Shares.
4. EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class A Shares
are exchangeable for Class A Shares of the other portfolios of
the Fund and for shares of the Money Market Portfolio of the
Fund. Class A Shares have no conversion features.
B. CLASS B SHARES
Class B Shares are sold to (1) retail and institutional
customers and (2) persons entitled to exchange into Class B Shares
under the exchange privileges of the Fund. Shares of the Fund
outstanding on the date that the two classes of shares are first made
available will be redesignated Class B Shares.
1. SALES LOADS. Class B Shares are sold without the imposition
of any FESC, but are subject to a CDSC (with scheduled
variations or eliminations of the sales charge, as permitted
by the 1940 Act).
2. DISTRIBUTION AND SERVICE FEES. Class B Shares are subject
to a distribution fee pursuant to the Fund's Rule 12b-1 Plan
not to exceed .75% of the average daily net assets of Class B
and, like the Class A Shares, to a shareholder servicing fee
not to exceed .25% of the average daily net assets of the
Portfolio.
3. CLASS EXPENSES. No expenses other than the distribution fee
are allocated particularly to Class B Shares.
4. EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class B Shares
are exchangeable for Class B Shares of the other portfolios of
the Fund and for shares of the Money Market Portfolio of the
Fund. Record holders of "Qualified Class B Shares" (as defined
below) will be entitled to convert those shares to Class A
Shares at any time prior to a date to be determined. For this
purpose, "Qualified Class B Shares" shall mean Class B Shares
held of record by a broker-dealer, bank or other institution
on behalf of (i) investment advisers or financial planners
trading for their own accounts or the accounts of their
clients and who charge a management, consulting or other fee
for their services, and clients of such investment advisers or
10
<PAGE>
financial planners trading for their own accounts if the
accounts are linked to the master account of such investment
adviser or financial planner on the books and records of the
record holder; and (ii) retirement and deferred compensation
plans and trusts used to fund those plans.
C. ADDITIONAL CLASSES
In the future, the Portfolio may offer additional classes of
shares which differ from the classes discussed above. However, any
additional classes of shares must be approved by the Board, and the
Plan must be amended to describe those classes.
II. APPROVAL OF MULTIPLE CLASS PLAN
The Board of the Fund, including a majority of the independent
Trustees, must approve the Plan initially. In addition, the Board must approve
any material changes to the classes and the Plan prior to their implementation.
The Board must find that the Plan is in the best interests of each class
individually and the Portfolio as a whole. In making its findings, the Board
should focus on, among other things, the relationships among the classes and
examine potential conflicts of interest among classes regarding the allocation
of fees, services, waivers and reimbursements of expenses, and voting rights.
Most significantly, the Board should evaluate the level of services provided to
each class and the cost of those services to ensure that the services are
appropriate and that the costs thereof are reasonable. In accordance with the
foregoing provisions of this Section II, the Board of the Fund has approved and
adopted this Plan as of the date written below.
11
<PAGE>
III. DIVIDENDS AND DISTRIBUTIONS
Because of the differences in fees paid under a Rule 12b-1
Plan, the dividends payable to shareholders of a class will differ from the
dividends payable to shareholders of the other class. Dividends paid to each
class of shares in the Portfolio will, however, be declared and paid at the same
time and, except for the differences in expenses listed above, will be
determined in the same manner and paid in the same amounts per outstanding
shares.
IV. EXPENSE ALLOCATIONS
Income, realized and unrealized capital gains and losses, and
Portfolio expenses not allocated to a particular class shall be allocated to
each class on the basis of the net asset value of that class in relation to the
net asset value of the Portfolio.
Dated: December 10, 1996
12
<PAGE>
THE ALGER FUND
ALGER GROWTH PORTFOLIO
Rule 18f-3
Multiple Class Plan
The ALGER GROWTH PORTFOLIO (the "Portfolio") of THE ALGER FUND (the
"Fund"), has elected to rely on Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), in offering multiple classes of shares with
differing distribution arrangements, voting rights and exchange and conversion
features.
Pursuant to Rule 18f-3, the Board of Trustees of the Fund has approved
and adopted this written plan (the "Plan") specifying all of the differences
among the classes of shares to be offered by the Portfolio. Prior to such
offering, the Plan will be filed as an exhibit to the Fund's registration
statement. The Plan sets forth all the differences among the classes, including
those, if any, pertaining to shareholder services, distribution arrangements,
expense allocations, and conversion or exchange options.
I. ATTRIBUTES OF SHARE CLASSES
This section discusses the attributes of the various classes of shares.
Each share of the Portfolio represents an equal PRO RATA interest in the
Portfolio and has identical voting rights, powers, qualifications, terms and
conditions and, in proportion to each share's net asset value, liquidation
rights and preferences. The classes differ in that: (a) each class has a
different class designation; (b) only the Class A Shares are subject to a
front-end sales charge ("FESC"); (c) only the Class B Shares are subject to a
contingent deferred sales charge ("CDSC") except that certain Class A shares may
also be subject to a CDSC different from that to which the Class B shares are
subject; (d) only the Class B Shares (as described below) are subject to
distribution fees under a plan adopted pursuant to Rule 12b-1 under the 1940 Act
(a "Rule 12b-1 Plan"); (e) to the extent that one class alone is affected by a
matter submitted to a vote of the shareholders, then only that class has voting
power on the matter; (f) the exchange privileges of each class differ from those
of the other; and (g) as described below, record holders of certain Class B
Shares will be entitled to convert those shares to Class A Shares at any time
prior to a date to be determined.4/
A. CLASS A SHARES
Class A Shares are sold to (1) retail and institutional
customers and (2) persons entitled to exchange into Class A Shares
under the exchange privileges of the Fund.
- --------
4/ Both classes of shares are subject to the same non-Rule 12b-1 shareholder
servicing fee.
13
<PAGE>
1. SALES LOADS. Class A Shares are sold subject to the current
maximum FESC (with scheduled variations or eliminations of the
sales charge, as permitted by the 1940 Act) except that
certain Class A shares for which the FESC has been eliminated
may instead be subject to a CDSC.
2. DISTRIBUTION AND SERVICE FEES. Class A Shares are not
subject to a Rule 12b-1 distribution fee. However, they are,
like the Class B Shares, subject to a shareholder servicing
fee not to exceed .25% of the average daily net assets of the
Portfolio.
3. CLASS EXPENSES. No expenses are allocated particularly to
Class A Shares.
4. EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class A Shares
are exchangeable for Class A Shares of the other portfolios of
the Fund and for shares of the Money Market Portfolio of the
Fund. Class A Shares have no conversion features.
B. CLASS B SHARES
Class B Shares are sold to (1) retail and institutional
customers and (2) persons entitled to exchange into Class B Shares
under the exchange privileges of the Fund. Shares of the Fund
outstanding on the date that the two classes of shares are first made
available will be redesignated Class B Shares.
1. SALES LOADS. Class B Shares are sold without the imposition
of any FESC, but are subject to a CDSC (with scheduled
variations or eliminations of the sales charge, as permitted
by the 1940 Act).
2. DISTRIBUTION AND SERVICE FEES. Class B Shares are subject
to a distribution fee pursuant to the Fund's Rule 12b-1 Plan
not to exceed .75% of the average daily net assets of Class B
and, like the Class A Shares, to a shareholder servicing fee
not to exceed .25% of the average daily net assets of the
Portfolio.
3. CLASS EXPENSES. No expenses other than the distribution fee
are allocated particularly to Class B Shares.
4. EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class B Shares
are exchangeable for Class B Shares of the other portfolios of
the Fund and for shares of the Money Market Portfolio of the
Fund. Record holders of "Qualified Class B Shares" (as defined
below) will be entitled to convert those shares to Class A
Shares at any time prior to a date to be determined. For this
purpose, "Qualified Class B Shares" shall mean Class B Shares
held of record by a broker-dealer, bank or other institution
on behalf of (i) investment advisers or financial planners
trading for their own accounts or the accounts of their
clients and who charge a management, consulting or other fee
for their services, and clients of such investment advisers or
14
<PAGE>
financial planners trading for their own accounts if the
accounts are linked to the master account of such investment
adviser or financial planner on the books and records of the
record holder; and (ii) retirement and deferred compensation
plans and trusts used to fund those plans.
C. ADDITIONAL CLASSES
In the future, the Portfolio may offer additional classes of
shares which differ from the classes discussed above. However, any
additional classes of shares must be approved by the Board, and the
Plan must be amended to describe those classes.
II. APPROVAL OF MULTIPLE CLASS PLAN
The Board of the Fund, including a majority of the independent
Trustees, must approve the Plan initially. In addition, the Board must approve
any material changes to the classes and the Plan prior to their implementation.
The Board must find that the Plan is in the best interests of each class
individually and the Portfolio as a whole. In making its findings, the Board
should focus on, among other things, the relationships among the classes and
examine potential conflicts of interest among classes regarding the allocation
of fees, services, waivers and reimbursements of expenses, and voting rights.
Most significantly, the Board should evaluate the level of services provided to
each class and the cost of those services to ensure that the services are
appropriate and that the costs thereof are reasonable. In accordance with the
foregoing provisions of this Section II, the Board of the Fund has approved and
adopted this Plan as of the date written below.
15
<PAGE>
III. DIVIDENDS AND DISTRIBUTIONS
Because of the differences in fees paid under a Rule 12b-1
Plan, the dividends payable to shareholders of a class will differ from the
dividends payable to shareholders of the other class. Dividends paid to each
class of shares in the Portfolio will, however, be declared and paid at the same
time and, except for the differences in expenses listed above, will be
determined in the same manner and paid in the same amounts per outstanding
shares.
IV. EXPENSE ALLOCATIONS
Income, realized and unrealized capital gains and losses, and
Portfolio expenses not allocated to a particular class shall be allocated to
each class on the basis of the net asset value of that class in relation to the
net asset value of the Portfolio.
Dated: December 10, 1996
16
<PAGE>
THE ALGER FUND
ALGER CAPITAL APPRECIATION PORTFOLIO
Rule 18f-3
Multiple Class Plan
The ALGERCAPITAL APPRECIATION PORTFOLIO (the "Portfolio") of THE ALGER
FUND (the "Fund"), has elected to rely on Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "1940 Act"), in offering multiple classes
of shares with differing distribution arrangements, voting rights and exchange
and conversion features.
Pursuant to Rule 18f-3, the Board of Trustees of the Fund has approved
and adopted this written plan (the "Plan") specifying all of the differences
among the classes of shares to be offered by the Portfolio. Prior to such
offering, the Plan will be filed as an exhibit to the Fund's registration
statement. The Plan sets forth all the differences among the classes, including
those, if any, pertaining to shareholder services, distribution arrangements,
expense allocations, and conversion or exchange options.
I. ATTRIBUTES OF SHARE CLASSES
This section discusses the attributes of the various classes of shares.
Each share of the Portfolio represents an equal PRO RATA interest in the
Portfolio and has identical voting rights, powers, qualifications, terms and
conditions and, in proportion to each share's net asset value, liquidation
rights and preferences. The classes differ in that: (a) each class has a
different class designation; (b) only the Class A Shares are subject to a
front-end sales charge ("FESC"); (c) only the Class B Shares are subject to a
contingent deferred sales charge ("CDSC"), except that certain Class A shares
may also be subject to a CDSC different from that to which the Class B shares
are subject; (d) only the Class B Shares (as described below) are subject to
distribution fees under a plan adopted pursuant to Rule 12b-1 under the 1940 Act
(a "Rule 12b-1 Plan"); (e) to the extent that one class alone is affected by a
matter submitted to a vote of the shareholders, then only that class has voting
power on the matter; (f) the exchange privileges of each class differ from those
of the other; and (g) as described below, record holders of certain Class B
Shares will be entitled to convert those shares to Class A Shares at any time
prior to a date to be determined.5/
- --------
5/ Both classes of shares are subject to the same non-Rule 12b-1 shareholder
servicing fee.
17
<PAGE>
A. CLASS A SHARES
Class A Shares are sold to (1) retail and institutional
customers and (2) persons entitled to exchange into Class A Shares
under the exchange privileges of the Fund.
1. SALES LOADS. Class A Shares are sold subject to the current
maximum FESC (with scheduled variations or eliminations of the
sales charge, as permitted by the 1940 Act), except that
certain Class A shares for which the FESC has been eliminated
may instead be subject to a CDSC.
2. DISTRIBUTION AND SERVICE FEES. Class A Shares are not
subject to a Rule 12b-1 distribution fee. However, they are,
like the Class B Shares, subject to a shareholder servicing
fee not to exceed .25% of the average daily net assets of the
Portfolio.
3. CLASS EXPENSES. No expenses are allocated particularly to
Class A Shares.
4. EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class A Shares
are exchangeable for Class A Shares of the other portfolios of
the Fund and for shares of the Money Market Portfolio of the
Fund. Class A Shares have no conversion features.
B. CLASS B SHARES
Class B Shares are sold to (1) retail and institutional
customers and (2) persons entitled to exchange into Class B Shares
under the exchange privileges of the Fund. Shares of the Fund
outstanding on the date that the two classes of shares are first made
available will be redesignated Class B Shares.
1. SALES LOADS. Class B Shares are sold without the imposition
of any FESC, but are subject to a CDSC (with scheduled
variations or eliminations of the sales charge, as permitted
by the 1940 Act).
2. DISTRIBUTION AND SERVICE FEES. Class B Shares are subject
to a distribution fee pursuant to the Fund's Rule 12b-1 Plan
not to exceed .75% of the average daily net assets of Class B
and, like the Class A Shares, to a shareholder servicing fee
not to exceed .25% of the average daily net assets of the
Portfolio.
3. CLASS EXPENSES. No expenses other than the distribution fee
are allocated particularly to Class B Shares.
4. EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class B Shares
are exchangeable for Class B Shares of the other portfolios of
the Fund and for shares of the Money Market Portfolio of the
Fund. Record holders of "Qualified Class B Shares" (as defined
below) will be entitled to convert those shares to Class A
Shares at any time prior to a date to be determined. For this
purpose, "Qualified Class B Shares" shall mean Class B Shares
held of record by a broker-dealer, bank or other
18
<PAGE>
institution on behalf of (i) investment advisers or financial
planners trading for their own accounts or the accounts of
their clients and who charge a management, consulting or other
fee for their services, and clients of such investment
advisers or financial planners trading for their own accounts
if the accounts are linked to the master account of such
investment adviser or financial planner on the books and
records of the record holder; and (ii) retirement and deferred
compensation plans and trusts used to fund those plans.
C. ADDITIONAL CLASSES
In the future, the Portfolio may offer additional classes of
shares which differ from the classes discussed above. However, any
additional classes of shares must be approved by the Board, and the
Plan must be amended to describe those classes.
II. APPROVAL OF MULTIPLE CLASS PLAN
The Board of the Fund, including a majority of the independent
Trustees, must approve the Plan initially. In addition, the Board must approve
any material changes to the classes and the Plan prior to their implementation.
The Board must find that the Plan is in the best interests of each class
individually and the Portfolio as a whole. In making its findings, the Board
should focus on, among other things, the relationships among the classes and
examine potential conflicts of interest among classes regarding the allocation
of fees, services, waivers and reimbursements of expenses, and voting rights.
Most significantly, the Board should evaluate the level of services provided to
each class and the cost of those services to ensure that the services are
appropriate and that the costs thereof are reasonable. In accordance with the
foregoing provisions of this Section II, the Board of the Fund has approved and
adopted this Plan as of the date written below.
19
<PAGE>
III. DIVIDENDS AND DISTRIBUTIONS
Because of the differences in fees paid under a Rule 12b-1
Plan, the dividends payable to shareholders of a class will differ from the
dividends payable to shareholders of the other class. Dividends paid to each
class of shares in the Portfolio will, however, be declared and paid at the same
time and, except for the differences in expenses listed above, will be
determined in the same manner and paid in the same amounts per outstanding
shares.
IV. EXPENSE ALLOCATIONS
Income, realized and unrealized capital gains and losses, and
Portfolio expenses not allocated to a particular class shall be allocated to
each class on the basis of the net asset value of that class in relation to the
net asset value of the Portfolio.
Dated: December 10, 1996
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, as amended, Registrant certifies that this
Registration Statement meets all of the requirements for effectiveness pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Amendment to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York and State of New York on the 20 day of
December, 1996.
THE ALGER FUND
By: /s/ David D. Alger, President
-----------------------------
David D. Alger, President
ATTEST: /s/ Gregory S. Duch, Treasurer
------------------------------
Gregory S. Duch, Treasurer
Pursuant to the requirements of the Securities Act of 1933,
this Amendment has bee signed below by the following persons in the capacities
and on the dates indicated.
Signature Title Date
- --------- ----- ----
*
- ------------------------ Chairman of the Board December 20, 1996
Fred M. Alger III
/s/ David D. Alger
- ------------------------ President and Trustee December 20, 1996
David D. Alger (Chief Executive Officer)
/s/ Gregory S. Duch Treasurer
- ------------------------ (Chief Financial and December 20, 1996
Gregory S. Duch Accounting Officer)
*
- ------------------------ Trustee December 20, 1996
Nathan E. Saint-Amand
*
- ------------------------ Trustee December 20, 1996
Stephen E. O'Neil
*
- ------------------------ Trustee December 20, 1996
Arthur M. Dubow
*
- ------------------------ Trustee December 20, 1996
John T. Sargent
* By:/s/ Gregory S. Duch
- ------------------------
Gregory S. Duch
Attorney-in-Fact
