As filed with the Securities and Exchange Commission
February 27, 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. 20 [X]
and/or
Registration Statement Under the Investment Company Act of 1940 [ ]
Amendment No. 22 [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):
[X] immediately upon filing pursuant to paragraph (b), or
[ ] on [date] 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, 1995 was filed on December 28, 1995.
<PAGE>
PROSPECTUS
- ----------
THE
ALGER
FUND
75 Maiden Lane
New York, New York 10038
(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 4. 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
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. A Statement of
Additional Information dated February 27, 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
-----
Portfolio Expenses..................................... ii
Financial Highlights................................... iv
How to Buy Shares...................................... 1
Special Investor Services.............................. 2
How to Sell Shares..................................... 2
How to Exchange Shares................................. 3
Investment Objectives and Policies..................... 4
Investment Practices................................... 6
Management of the Fund................................. 8
Net Asset Value........................................ 10
Contingent Deferred Sales Charge....................... 10
Dividends and Taxes.................................... 11
Performance............................................ 12
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 SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FEBRUARY 27, 1996
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 the Portfolios. These amounts assume the reinvestment of all dividends and
distributions, payment of any applicable 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 Alger Small Alger
Money Alger Alger MidCap Capitaliza- Capital
Market Balanced Growth Growth tion Appreciation
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio*
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed
on Purchases........................................... None None None None None None
Maximum Sales Load Imposed on
Reinvested Dividends................................... None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage of
redemption proceeds)(a)................................ None 5.00% 5.00% 5.00% 5.00% 5.00%
Redemption Fees.......................................... None None None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (after expense
reimbursements)(b)..................................... 0% .75% .75% .80% .85% .85%
12b-1 Fees(c)............................................ 0 .75 .75 .75 .75 .75
Other Expenses (after expense
reimbursements)(b)(d)(e)............................... .29 1.84 .59 .84 .51 1.94
--- ----- ---- ---- ---- --------
Total Fund Expenses (b) (c) (d) (e)...................... .29% 3.34% 2.09% 2.39% 2.11% 3.54%
=== ===== ==== ==== ==== ====
</TABLE>
(a) The amount of the contingent deferred sales charge will depend on the
number of years since the shareholder made the purchase payment. See
"Contingent Deferred Sales Charge."
(b) The investment manager is currently voluntarily waiving its management fee
with respect to the Alger Money Market Portfolio. Absent this waiver, the
amount of Management Fees and Total Fund Expenses would be .50% and .79%,
respectively, for the Alger Money Market Portfolio.
(c) The Fund reimburses Alger Inc. for the expenses it incurs in distributing
shares of each portfolio other than the Alger Money Market Portfolio at the
maximum annual rate of .75% of the Portfolio's 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) Absent reimbursements, the amounts of Other Expenses and Total Fund
Expenses would be 2.08% and 3.58%, respectively, for the Alger Balanced
Portfolio.
(e) Included in Other Expenses of the Alger Capital Appreciation Portfolio is
0.28% of interest expense.
* Prior to March 27, 1995, the Alger Capital Appreciation Portfolio was known
as the Alger Leveraged AllCap Portfolio.
ii
<PAGE>
PORTFOLIO EXPENSES (continued)
<TABLE>
<CAPTION>
Alger
Alger Alger Small Alger
Money Alger Alger MidCap Capitaliza- Capital
Market Balanced Growth Growth tion Appreciation
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------- -------- --------- -------- -------- -----------
EXAMPLE
You would pay the following expenses
on a $1,000 investment, assuming
(1) 5% annual return and
(2) redemption at the end of
each time period:
<S> <C> <C> <C> <C> <C> <C>
One Year ................................................ $ 3 $ 84 $ 71 $ 74 $ 71 $ 86
Three Years.............................................. 9 133 95 105 96 139
Five Years............................................... 16 194 132 148 133 204
Ten Years................................................ 37 363 242 273 244 381
You would pay the following expenses
on the same investment, assuming
no redemption:
One Year................................................. $ 3 $ 34 $ 21 $ 24 $ 21 $ 36
Three Years.............................................. 9 103 65 75 66 109
Five Years............................................... 16 174 112 128 113 184
Ten Years................................................ 37 363 242 273 244 381
</TABLE>
iii
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended October 31, 1990 through 1995 have
been audited by Arthur Andersen LLP, the Fund's independent public accountants,
as indicated in their report dated December 14, 1995 on the Fund's financial
statements as of October 31, 1995 which are included in the Fund's Statement of
Additional Information. The Financial Highlights should be read in conjunction
with the Fund's financial statements and related notes. 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 Statement of
Additional Information may be obtained from the Fund without charge.
THE ALGER FUND
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.............. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- -------- -------- -------- --------
Net investment income........................... .0573 .0374 .0304 .0424 .0671
Dividends from net investment income............ (.0573) (.0374) (.0304) (.0424) (.0671)
------- -------- -------- -------- --------
Net asset value, end of year.................... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======== ======== ======== ========
Total Return ............................... 5.9% 3.8% 3.1% 4.3% 6.9%
======= ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)....... 185,822 $163,170 $126,567 $135,288 $160,898
======= ======== ======== ======== ========
Ratio of expenses to average net assets....... .29%(ii) .27% .41% .25% .18%
======= ======== ======== ======== ========
Decrease reflected in above expense
ratios due to expense reimbursements
and management fee waivers.................. .50% .50% .50% .60% .63%
======= ======== ======== ======== ========
Ratio of net investment income to
average net assets.......................... 5.73% 3.78% 3.04% 4.30% 6.76%
======= ======== ======== ======== ========
</TABLE>
THE ALGER FUND
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS (cont'd)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<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% -- -- .64%
======== ======= ======= =======
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>
* From November 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 ratio net of earnings credits would have been 0.27%
iv
<PAGE>
THE ALGER FUND
BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From June 1, 1992
Year Ended October 31, (commencement
-------------------------------- of operations)
1995 1994 1993 to October 31, 1992(i)
--------- --------- --------- ----------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year...................... $10.65 $11.18 $ 9.95 $10.00
-------- -------- --------- --------
Net investment income (loss)............................ (.02)(iii) (.05) (.01) (.12)
Net realized and unrealized gain (loss)
on investments........................................ 2.96 (.39) 1.24 .07
-------- -------- --------- --------
Total from investment operations........................ 2.94 (.44) 1.23 (.05)
Distributions from net realized gains................... -- (.09) -- --
-------- -------- --------- --------
Net asset value, end of year............................ $13.59 $10.65 $11.18 $ 9.95
======== ======== ========= ========
Total Return (ii)....................................... 27.6% (4.0%) 12.4% (0.5%)
======== ======== ========= ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)............... $ 6,214 $ 3,073 $ 3,125 $ 1,370
======== ======== ========= ========
Ratio of expenses to average net assets............... 3.34%(iv) 3.18% 3.82% 5.62%
======== ======== ========= ========
Decrease reflected in above expense
ratios due to expense reimbursements................ .24% -- .75% .75%
======== ======== ========= ========
Ratio of net investment income (loss)
to average net assets............................... (.13%) (.41%) (.97%) (3.07%)
======== ======== ========= ========
Portfolio Turnover Rate............................... 84.06% 84.88% 115.17% 17.07%
======== ======== ========= ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Does not reflect contingent deferred sales charge.
(iii)Amount was computed based on average shares outstanding during the period.
(iv) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 3.25%.
v
<PAGE>
THE ALGER FUND
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (I)
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.............. $ 6.97 $ 7.43 $ 5.76 $ 5.77 $ 4.25
------- ------- ------- ------- -------
Net investment income (loss).................... (.02) (.07)(iv) (.02) (.06)(iv) (.02)
Net realized and unrealized gains
(loss) on investments......................... 2.59 .35 1.70 .61 1.86
------- ------- ------- ------- -------
Total from investment operations................ 2.57 .28 1.68 .55 1.84
Distributions from net realized gains........... (.16) (.74) (.01) (.56) (.32)
------- ------- ------- ------- -------
Net asset value, end of year.................... $ 9.38 $ 6.97 $ 7.43 $ 5.76 $5.77
======= ======= ======= ======= =======
Total Return (iii).............................. 37.8% 4.1% 29.2% 9.7% 45.8%
======= ======= ======= ======= =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)....... $154,284 $76,390 $37,988 $19,379 $10,213
======= ======= ======= ======= =======
Ratio of expenses to average net assets....... 2.09%(v) 2.20% 2.20% 2.32% 2.70%
======= ======= ======= ======= =======
Decrease reflected in above expense
ratios due to expense
reimbursements.............................. -- -- -- -- --
======= ======= ======= ======= =======
Ratio of net investment income (loss)
to average net assets....................... (1.03%) (1.01%) (1.16%) (1.07%) (1.06%)
======= ======= ======= ======= =======
Portfolio Turnover Rate....................... 118.16% 103.86% 108.54% 69.28% 76.06%
======= ======= ======= ======= =======
</TABLE>
THE ALGER FUND
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS (cont'd)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (I)
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------
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 (iii).............................. (4.0%) 27.0%(ii) 7.7%(ii) (3.0%)(ii)
======= ======= ======= =======
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% 3.32% 3.01% 3.00%
======= ======= ======= =======
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%
======= ======= ======= =======
</TABLE>
* From November 11, 1986 (commencement of operations) through October 31,
1987. Ratios have been annualized; total return has not been annualized.
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock
split which occurred September 27, 1995.
(ii) Unaudited.
(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 ratio net of earnings credits would have been 2.07%.
vi
<PAGE>
THE ALGER FUND
MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
May 24, 1993
Year Ended October 31, (commencement
-------------------------- of operations)
1995 1994 to October 31, 1993(i)
-------- -------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of year........................ $12.77 $12.48 $10.00
-------- -------- --------
Net investment (loss)..................................... (.08) (.11) (.09)
Net realized and unrealized gain on
investments............................................. 6.25 .68 2.57
-------- -------- --------
Total from investment operations........................ 6.17 .57 2.48
Distribution from net realized gains...................... -- (.28) --
-------- -------- --------
Net asset value, end of year.............................. $18.94 $12.77 $12.48
======== ======== ========
Total Return (ii)......................................... 48.3% 4.7% 24.8%
======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)................. $54,016 $18,516 $ 3,836
======== ======== ========
Ratio of expenses to average net assets................. 2.39%(iii) 3.20% 3.73%
======== ======== ========
Decrease reflected in above expense
ratio due to expense
reimbursements........................................ -- .07% 0.80%
======== ======== ========
Ratio of net investment income (loss)
to average net assets................................. (1.71%) (2.32%) (2.86%)
======== ======== ========
Portfolio Turnover Rate................................. 121.60% 127.40% 57.64%
======== ======== ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Does not reflect contingent deferred sales charge.
(iii) Reflects total expenses, including fees offset by earnings credits.
The expense ratio net of earnings credits would have been 2.34%.
vii
<PAGE>
THE ALGER FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (I)
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of year...................... $7.62 $8.65 $6.88 $6.97 $4.33
-------- -------- -------- ------- -------
Net investment income
(loss)....................... (.13) (.09) (.08) (.11)(iv) (.03)
Net realized and unrealized
gains (loss) on investments.. 3.64 (.02) 1.85 .37 2.76
-------- -------- -------- ------- -------
Total from investment
operations................... 3.51 (.11) 1.77 .26 2.73
Distributions from net
realized gains............... -- (.92) -- (.35) (.09)
-------- -------- -------- ------- -------
Net asset value, end
of year...................... $11.13 $ 7.62 $ 8.65 $ 6.88 $ 6.97
======== ======== ======== ======= =======
Total Return (iii).............. 46.2% (1.1%) 25.8% 3.4% 63.7%
======== ======== ======== ======= =======
Ratios and Supplemental
Data:
Net assets, end of year
(000's omitted)............ $463,718 $294,890 $300,108 $182,432 $61,273
======== ======== ======== ======== =======
Ratio of expenses to
average net assets......... 2.11%(v) 2.18% 2.13% 2.17% 2.23%
======== ======== ======== ======== =======
Decrease reflected in
above expense ratios
due to expense
reimbursements............. -- -- -- -- --
======== ======== ======== ======== =======
Ratio of net investment
income (loss) to
average net assets.......... (1.75%) (1.51%) (1.52%) (1.64%) (1.37%)
======== ======== ======== ======== =======
Portfolio Turnover Rate....... 97.37% 131.86% 148.49% 121.00% 171.04%
======== ======== ======== ======== =======
</TABLE>
THE ALGER FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS (cont'd.)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (I)
<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)(iv) -- (.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 (iii).............. (7.1%) 65.1%(ii) 19.3%(ii) (10.0%)(ii)
======= ======== ======== =======
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% 3.25% 3.01% 3.00%
======= ======== ======== =======
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%
======= ======== ======== =======
</TABLE>
* From November 11, 1986 (commencement of operations) through October 31,
1987. Ratios have been annualized; total return has not been annualized.
(i) Per share data has been adjusted to reflect the effect of a 3 for 1
stock split which occurred September 27, 1995.
(ii) Unaudited.
(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 ratio net of earnings credits would have been the same.
viii
<PAGE>
THE ALGER FUND
ALGER CAPITAL APPRECIATION PORTFOLIO (i)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------
1995 1994
----- -----
<S> <C> <C>
Net asset value, beginning of year................................................. $ 11.11 $ 10.00
-------- --------
Net investment (loss).............................................................. (0.47)(ii) (0.47)
Net realized and unrealized gain on investments.................................... 7.98 1.58
-------- --------
Total from investment operations................................................. 7.51 1.11
-------- --------
Net asset value, end of year....................................................... $ 18.62 $ 11.11
======== ========
Total Return (iii)................................................................. 67.6% 11.1%
======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted).......................................... $ 33,640 $ 2,369
======== ========
Ratio of expenses excluding interest to average net assets....................... 3.26% 4.13%
======== ========
Ratio of expenses including interest to average net assets....................... 3.54%(iv) 5.53%
======== ========
Decrease reflected in above expense ratios due to expense
reimbursements................................................................. -- 0.85%
======== ========
Ratio of net investment income (loss) to average net assets...................... (3.02%) (5.12%)
======== ========
Portfolio Turnover Rate.......................................................... 197.65% 231.99%
======== ========
Debt outstanding at end of year.................................................. -- $651,000
======== ========
Average amount of debt outstanding during the year............................... $293,153 $406,864
======== ========
Average daily number of shares outstanding during the year....................... 543,270 191,676
======== ========
Average amount of debt per share during the year................................. $0.54 $2.12
======== ========
</TABLE>
(i) Prior to March 27, 1995, the Alger Capital Appreciation Portfolio was the
Alger Leveraged AllCap Portfolio.
(ii) Amount was computed based on average shares outstanding during the period.
(iii) Does not reflect contingent deferred sales charge.
(iv) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 3.43%.
ix
<PAGE>
HOW TO BUY SHARES
IN GENERAL
You can buy shares of The Alger Fund (the "Fund") in any of the following
ways: through the Fund's transfer agent; through a broker, dealer or financial
institution who has a sales agreement with Fred Alger & Company, Incorporated
("Alger Inc."), the Fund's distributor; or automatically from your bank account
through an Automatic Investment Plan. There is no minimum investment requirement
except for purchases through the TELEPURCHASE Privilege. The Fund or the
transfer agent may reject any purchase order.
PURCHASES THROUGH THE TRANSFER AGENT
You can buy shares through Alger Shareholder Services, Inc., the Fund's
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. You can also purchase shares
by wire transfer according to the instructions below.
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. You will be charged $10.00 for any check returned by your bank.
Purchases for the other Portfolios will be processed at the next net asset
value calculated for each Portfolio after your order is received and accepted.
If your 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.
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.
The following information should be included in wire transfers to Fund
accounts:
1. Nat West NJ/CUST/021200339
2. For Account 011313045 A/C Alger/NAME OF PORTFOLIO
3. Security Code (see below)--Account Number (if new account indicate such)
4. Name of Account
5. Social Security or Taxpayer Indentification Number
SECURITY CODES:
07--Alger Money Market Portfolio
11--Alger Small Capitalization Portfolio
12--Alger Growth Portfolio
14--Alger Balanced Portfolio
15--Alger MidCap Growth Portfolio
16--Alger Capital Appreciation Portfolio
EXAMPLE:
Nat West NJ/CUST/021200339
For Account 011313045 A/C
Alger/Money Market Portfolio
07-123456789 or 07-New Account
John & Jane Doe
123-45-6789
PURCHASES THROUGH BROKERS
You can buy shares of the Portfolios through brokers who have signed sales
agreements with Alger Inc. These brokers may purchase shares of the Portfolios
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on a three day settlement basis through the National Securities Clearing
Corporation Fund/SERV system.
PURCHASES THROUGH 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.
SPECIAL INVESTOR SERVICES
TELEPURCHASE PRIVILEGE
You can 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 two
business days. To use this service, your bank must be a member of the Automated
Clearing House.
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.
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.
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 contingent deferred sales charge may be
charged on certain redemptions. See "Contingent Deferred Sales Charge" 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 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.
SELLING SHARES BY MAIL
You should send a letter of instruction to the transfer agent that includes
your name, account number, Portfolio name, 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. 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.
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SELLING SHARES BY 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 (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 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 account.
This service is not available within 90 days of changing your address or bank
account of record. 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.
You may use the TELEREDEMPTION Service to transfer funds (minimum $500,
maximum $50,000) between your Fund account and your designated bank account.
Your bank must be a member of the Automated Clearing House. 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 wire redemption, it does not currently intend to
do so. Shares held in any Alger retirement plan and shares issued in certificate
form are not eligible for this service.
SELLING SHARES BY 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 contingent deferred sales
charge as described below. If your account is not adequate to cover the amount
of your check and any applicable contingent deferred sales charge, the check
will be returned marked insufficient funds. As a result, checks should not be
used to close an account.
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 contingent deferred sales
charge. The maximum monthly withdrawal is one percent of the current account
value in the Portfolio at the time you begin participation in the Plan.
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.
HOW TO EXCHANGE SHARES
If you want to authorize exchanges by telephone, you should mark the
appropriate box on the New Account Application. Shares of one Portfolio may be
exchanged for shares of another Portfolio at net asset value per share at the
time of the exchange. No contingent deferred sales charge is assessed in
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connection with exchanges. 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.
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, 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.
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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 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 December 31, 1995, the range of market capitalization of these
companies was $118 million to $7.5 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, updated quarterly. The
Russell 2000 Growth Index is designed to track the performance of small
capitalization companies. As of December 31, 1995, the range of market
capitalization of these companies was $20 million to $2.2 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 Russell 2000 Growth Index 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
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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 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'
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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.
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
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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.
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.
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.
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
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services since 1964 and, as of December 31, 1995, had approximately $4.8 billion
under management, $3.0 billion in mutual fund accounts and $1.8 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
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.
DISTRIBUTION PLAN
The Fund has adopted an Amended and Restated Distribution Plan (the "Plan")
under which each Portfolio other than the Alger Money Market Portfolio may
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reimburse Alger Inc. for the expenses it incurs in promoting sales of that
Portfolio's shares--at a maximum annual rate of .75% of its average daily net
assets. This fee is known as an "asset-based sales charge" and allows investors
to buy shares without a front end sales charge while allowing Alger Inc. to
compensate dealers that sell shares of the Portfolios. Alger Inc. pays sales
commissions of 4.00% 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 contingent
deferred sales charges 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.
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 Portfolio is its "net asset value." The net asset
value is computed by adding the value of the Portfolio's investments plus cash
and other assets, 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.
CONTINGENT DEFERRED
SALES CHARGE
There is no initial sales charge on purchases of shares of any Portfolio, but
a contingent deferred sales charge may be charged on certain redemptions. The
charge is imposed on any redemption that causes the current value of your
account in 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 charge on redemptions of (i) shares that represent appreciation on
your original investment, or (ii) shares purchased through reinvestment of
dividends and capital gains. No charge is imposed on the redemption of shares of
the Alger Money Market Portfolio, except for redemption of shares acquired in
exchange for shares of the other Portfolios. The amount of the charge is based
on the length of time shares are held, according to the following table:
Contingent
Deferred
Years Share 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 charge, it is assumed that the shares of the Portfolio
from which the redemption is made are the shares of that Portfolio held the
longest and which result in the lowest charge.
EXCHANGES
No contingent deferred sales charge is assessed in connection with exchanges.
Because the charge is applied on the basis of the net asset value of your
account on a Portfolio by Portfolio rather than a Fund-wide basis, the amount of
the charge in a particular instance may be affected by the choice of
Portfolio(s) for the redemption and whether there have been any exchanges among
those Portfolios. Consequently, you should consider the advisability of
exchanging shares of one Portfolio for shares of another Portfolio prior to
redeeming shares if the exchange would reduce the charge applicable to the
redemption.
10
<PAGE>
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 shares
of the other Portfolios. The exchange privilege may be modified or terminated at
any time upon notice to shareholders. Please see the Statement of Additional
Information for examples of how the contingent deferred sales charge is
calculated when shares are exchanged.
WAIVERS OF THE CHARGE
The contingent deferred sales charge is waived on Systematic Withdrawal Plan
payments and on redemptions of shares in connection with certain post-retirement
withdrawals from an IRA or other retirement plan or following the death or
disability of a shareholder. A shareholder who has redeemed may reinvest all or
part of the redemption proceeds within 30 days and receive a pro rata credit for
any charge imposed. This privilege may be exercised only once by a shareholder.
Reinvestment will not alter any tax payable on the redemption and a loss may not
be allowed for tax purposes.
In addition, no contingent deferred sales charge is imposed on (1)
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) 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) 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) redemptions of shares held
through defined contribution plans; (5) redemptions by an investment company
registered under the Act in connection with the combination of the investment
company with the Fund by merger, acquisition of assets or by any other
transaction; (6) 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) redemptions by registered
investment advisers for their own accounts; (8) redemptions of shares purchased
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 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 Processing Organization, and (ii) retirement and deferred compensation
plans and trusts used to fund those plans; and (9) redemptions of shares
purchased by registered representatives of broker-dealers which have entered
into Selected Dealer Agreements with Alger Inc., and their spouses, children,
siblings and parents. Investors purchasing 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 subject to 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 (800) 992-3863.
DIVIDENDS AND TAXES
DIVIDENDS
Each Portfolio 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
11
<PAGE>
reinvested on the payment date in additional shares of the Portfolio that paid
the dividend or distribution at net asset value, unless you elected on the New
Account Application to have all dividends and distributions paid in cash. Shares
of the Portfolios purchased through reinvestment of dividends and distributions
are not subject to the contingent deferred 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.
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 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. 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 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 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 Portfolio from the
beginning date of the measuring period to the end of the measuring period. These
figures reflect changes in the price of the Portfolio's shares and assume that
any income dividends and/or capital gains distributions made by the Portfolio
during the period were reinvested in shares of the Portfolio. 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 Portfolio's operations, or on a
year-by-year basis) and may utilize dollar cost averaging. The Portfolio may
also use "aggregate" total return figures for various periods, representing the
cumulative change in value of an investment in the Portfolio for the specific
period (again reflecting changes in Portfolio share price and assuming
12
<PAGE>
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 contingent deferred sales charge to which the
Portfolio's 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 Portfolio will vary based on
changes in market conditions. In addition, since the deduction of a Portfolio's
expenses is reflected in the total return and yield figures, "total return" and
"yield" will also vary based on the level of the Portfolio's expenses.
The Statement of Additional Information 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.
13
<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
AS145
THE
ALGER Meeting the challenge
of investing
FUND
Alger Money Market Portfolio
Alger Small Capitalization Portfolio
Alger MidCap Growth Portfolio
Alger Growth Portfolio
Alger Balanced Portfolio
Alger Capital Appreciation Portfolio
PROSPECTUS
February 27, 1996
14
<PAGE>
PROSPECTUS
- ----------
THE | 75 Maiden Lane
ALGER | New York, New York 10038
FUND | (800) 992-FUND (992-3863)
ALGER MONEY MARKET PORTFOLIO
================================================================================
The Alger Fund (the "Fund") is a registered investment company--a mutual
fund--that presently offers interest in six portfolios. This Prospectus sets
forth information about the Alger Money Market Portfolio (the "Portfolio"). The
Portfolio seeks high current income consistent with preservation of principal
and maintenance of liquidity.
SHARES OF THE PORTFOLIO ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE PORTFOLIO 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.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. A Statement of
Additional Information dated February 27, 1996 containing further information
about all the portfolios of the Fund, including the Portfolio, 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 Fund at the
address or phone number above.
FRED ALGER | FRED ALGER |
MANAGEMENT, | Investment Manager & COMPANY, | Distributor
INC. | INCORPORATED |
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURI-
TIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
FEBRUARY 27, 1996
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
Portfolio Expenses ..................................... iii
Financial Highlights ................................... iv
How to Buy Shares ...................................... 1
Special Investor Services .............................. 1
How to Sell Shares ..................................... 2
How to Exchange Shares ................................. 3
Investment Objective and Policies ...................... 3
Investment Practices ................................... 4
Management of the Fund ................................. 5
Net Asset Value ........................................ 6
Contingent Deferred Sales Charge ....................... 6
Dividends and Taxes .................................... 6
Performance ............................................ 7
- --------------------------------------------------------------------------------
ii
<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
accompanying the Table shows the amount of expenses you would pay on a $1,000
investment in the Portfolio. These amounts assume the reinvestment of all
dividends and distributions, payment of any applicable contingent deferred sales
charge and payment by the Portfolio of operating expenses as shown in the Table
under Annual Portfolio Operating Expenses. The Example is an illustration only
and actual expenses may be greater or less than those shown.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases.............................. None
Maximum Sales Load Imposed on Reinvested Dividends................... None
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds)............................. None
Redemption Fees...................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after expense reimbursements)(a).................... 0%
12b-1 Fees........................................................... 0
Other Expenses (after expense reimbursements)........................ .29
----
Total Portfolio Operating Expenses
(after expense reimbursements)(b).................................... .29%
====
(a) The investment manager is currently voluntarily waiving its management fee
with respect to the Portfolio. Absent this waiver, the amount of Management
Fees and Total Fund Expenses would be .50% and .79%, respectively, for the
Portfolio.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
One Year ............................................................. $ 3
Three Years........................................................... 9
Five Years............................................................ 16
Ten Years............................................................. 37
You would pay the following expenses on the same investment, assuming no
redemption:
One Year.............................................................. $ 3
Three Years........................................................... 9
Five Years............................................................ 16
Ten Years............................................................. 37
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended October 31, 1990 through 1995 have
been audited by Arthur Andersen LLP, the Fund's independent public accountants,
as indicated in their report dated December 14, 1995 on the Fund's financial
statements as of October 31, 1995 which are included in the Fund's Statement of
Additional Information. The Financial Highlights should be read in conjunction
with the Fund's financial statements and related notes. 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 Statement of
Additional Information may be obtained from the Fund without charge.
THE ALGER FUND
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987*
----- ----- ----- ----- ---- ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year..................... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- -------- ------- ------- ------- -------- -------- --------
Net investment income....... .0573 .0374 .0304 .0424 .0671 .0844 .0927 .0732 .0541
Dividends from net
investment income........ (.0573) (.0374) (.0304) (.0424) (.0671) (.0844) (.0927) (.0732) (.0541)
-------- -------- -------- ------- ------- ------- -------- ------- --------
Net asset value, end of year 1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======== ======== ======== ======= ======= ======= ======== ======= ========
Total Return ............... 5.9% 3.8% 3.1% 4.3% 6.9% 8.8% 9.7%(i) 7.6%(i) 5.6%(i)
======== ======== ======== ======= ======= ======= ======== ======= ========
Ratios and Supplemental Data:
Net assets, end of yea
(000's omitted) $185,822 $163,170 $126,567 $135,288 $160,898 $143,420 $69,581 $11,509 $4,247
======== ======== ======== ======= ======= ======= ======== ======= ========
Ratio of expenses to average
net assets............. .29%(ii) .27% .41% .25% .18% .03% -- -- .64%
======== ======== ======== ======= ======= ======= ======== ======= ========
Decrease reflected in above
expense ratios due to
expense reimbursements
and management fee
waivers................ .50% .50% .50% .60% .63% .84% .93% 1.73% 1.88%
======== ======== ======== ======= ======= ======= ======== ======= ========
Ratio of net investment
income to average net
assets................. 5.73% 3.78% 3.04% 4.30% 6.76% 8.37% 9.45% 7.16% 5.82%
======== ======== ======== ======= ======= ======= ======== ======= ========
</TABLE>
* From November 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 ratio net of earnings credits would have been 0.27%.
iv
<PAGE>
HOW TO BUY SHARES
IN GENERAL
You can buy shares of the Alger Money Market Portfolio (the "Portfolio") in
any of the following ways: through the Fund's transfer agent; through a broker,
dealer or financial institution who has a sales agreement with Fred Alger &
Company, Incorporated ("Alger Inc."), the Fund's distributor; or automatically
from your bank account through an Automatic Investment Plan. There is no minimum
investment requirement except for purchases through the TELEPURCHASE Privilege.
The Fund or the transfer agent may reject any purchase order.
PURCHASES THROUGH THE TRANSFER AGENT
You can buy shares through Alger Shareholder Services, Inc., the Fund's
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. You can also purchase shares
by wire transfer according to the instructions below.
Purchases for the 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. You will be
charged $10.00 for any check returned by your bank.
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.
The following information should be included in wire transfers to Fund
accounts:
1. Nat West NJ/CUST/021200339
2. For Account 011313045 A/C Alger/Money Market Portfolio
3. 07--Account Number (if new account indicate such)
4. Name of Account
5. Social Security or Taxpayer Identification Number
EXAMPLE:
Nat West NJ/CUST/021200339
For Account 011313045 A/C
Alger/Money Market Portfolio
07-123456789 or 07-New Account
John & Jane Doe
123-45-6789
PURCHASES THROUGH 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.
SPECIAL INVESTOR SERVICES
TELEPURCHASE PRIVILEGE
You can purchase 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 account normally within two business
1
<PAGE>
days. To use this service, your bank must be a member of the Automated Clearing
House.
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan which permits you to make
regular transfers to your Portfolio account from your bank account on the last
business day of every month. Your bank must be a member of the Automated
Clearing House.
For more information on any of the services discussed above, please call the
Fund toll-free at (800) 992-3863.
RETIREMENT PLANS
Shares of the Portfolio 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.
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. 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 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.
SELLING SHARES BY MAIL
You should send a letter of instruction to the transfer agent that includes
your name, account number, Portfolio name, 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. 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.
SELLING SHARES BY 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 (800) 992-3863. 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 account on the next business day. This service is not
available within 90 days of changing your address or bank account of record.
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.
You may use the TELEREDEMPTION Service to transfer funds (minimum $500,
maximum $50,000) between your account and your designated bank account. Your
bank must be a member of the Automated Clearing House. 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 wire redemption, it does not currently intend to do so.
2
<PAGE>
Shares held in any Alger retirement plan and shares issued in certificate form
are not eligible for this service.
SELLING SHARES BY CHECK
You may redeem shares in your 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.
SYSTEMATIC WITHDRAWAL PLAN
If your account is $10,000 or more, 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 contingent deferred sales charge. The maximum
monthly withdrawal is one percent of the current account value in the Portfolio
at the time you begin participation in the Plan.
REDEMPTION IN KIND
Under unusual circumstances, shares of the 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.
HOW TO EXCHANGE SHARES
If you want to authorize exchanges by telephone, you should mark the
appropriate box on the New Account Application. Shares of the Portfolio may be
exchanged for shares of another portfolio at net asset value per share at the
time of the exchange. No contingent deferred sales charge is assessed in
connection with exchanges. 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
Portfolio to any other portfolio will receive dividends from the Portfolio for
the day of the exchange. Shares of the 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.
INVESTMENT OBJECTIVE
AND POLICIES
The investment objective 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 and in
the Statement of Additional Information are not fundamental, so the Fund's Board
of Trustees may change them without shareholder approval. There is no guarantee
that the Portfolio's objective will be achieved.
As a matter of fundamental policy, the Portfolio will not: (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, 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% 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 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. The Statement of Additional Information contains
additional investment restrictions as well as information on the Portfolio's
investment practices.
3
<PAGE>
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.
INVESTMENT PRACTICES
The Portfolio 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 Portfolio.
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.
REPURCHASE AGREEMENTS
In a repurchase agreement, the 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, Fred Alger Management, Inc. ("Alger Management") determines the
liquidity of the Portfolio's investments. Investments may be illiquid because of
the absence of an active trading market, making it difficult to sell promptly at
an acceptable price. The 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 Portfolio
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, the 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
4
<PAGE>
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.
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 Fund's portfolios including the Portfolio.
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 the Portfolio may
vote only on matters that affect the Portfolio.
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 Portfolio, places
orders to purchase and sell securities on behalf of the Portfolio 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
Portfolio's 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 Portfolio 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 December 31, 1995, had approximately $4.8 billion
under management, $3.0 billion in mutual fund accounts and $1.8 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.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
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.
FEE AND EXPENSES
The Portfolio pays Alger Management a management fee computed daily and paid
monthly at an annual rate of .50% of the value of the Portfolio's average daily
net assets.
The 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 the Portfolio's investment management agreement and other
expenses paid by the Portfolio is included in the Statement of Additional
Information.
The Statement of Additional Information contains information about the Fund's
brokerage policies and practices.
5
<PAGE>
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
Portfolio. 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.
NET ASSET VALUE
The price of one share of the Portfolio is its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets, deducting liabilities and then dividing the result by the
number of its shares outstanding. The net asset value of the Portfolio is
calculated on each day the New York Stock Exchange is open as of 12:00 noon
Eastern time.
CONTINGENT DEFERRED
SALES CHARGE
There is no initial sales charge on purchases of shares of any Portfolio, but
a contingent deferred sales charge may be charged on certain redemptions. The
charge is imposed on any redemption that causes the current value of your
account in 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 charge on redemptions of (i) shares that represent appreciation on
your original investment, or (ii) shares purchased through reinvestment of
dividends and capital gains. No charge is imposed on the redemption of shares of
the Portfolio, except for redemption of shares acquired in exchange for shares
of the other portfolios. The amount of the charge is based on the length of time
shares are held, according to the following table:
Contingent
Deferred
Years Share 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 charge, it is assumed that the shares redeemed are the
shares of the Portfolio held the longest and which result in the lowest charge.
DIVIDENDS AND TAXES
DIVIDENDS
Dividends and distributions will be automatically reinvested on the payment
date in additional shares of the Portfolio at net asset value, unless you
elected on the New Account Application to have all dividends and distributions
paid in cash. Dividends of the Portfolio are declared and paid monthly.
Distributions of any net realized short-term and long-term capital gains earned
by the Portfolio usually will be made annually after the close of the fiscal
year in which the gains are earned.
TAXES
The Fund intends that the Portfolio separately 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. The Portfolio is treated as a separate
taxable entity, with the result that taxable dividends and distributions from
the Portfolio reflect only the income and gains, net of losses, of the
Portfolio.
6
<PAGE>
For federal income tax purposes dividends and distributions from the
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 Portfolio.
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 the Portfolio. This
discussion is not intended to address the tax consequences of an investment by a
nonresident alien.
PERFORMANCE
All performance figures are based on historical earnings and are not intended
to indicate future performance. 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 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 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.
The Statement of Additional Information 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.
7
<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 PORTFOLIO'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 LAWFULLY BE 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
[LOGO]
Alger Money Market Portfolio
PROSPECTUS
----------
February 27, 1996
<PAGE>
PROSPECTUS
- ----------
THE ALGER FUND
--------------
75 Maiden Lane
New York, New York 10038
(800) 992-FUND (992-3863)
ALGER SMALL CAPITALIZATION PORTFOLIO
================================================================================
The Alger Fund (the "Fund") is a registered investment company--a mutual
fund--that presently offers interest in six portfolios. This Prospectus sets
forth information about the Alger Small Capitalization Portfolio (the
"Portfolio"). The Portfolio seeks long-term capital appreciation by investing in
a diversified, actively managed portfolio of equity securities, primarily of
companies with total market capitalization within the range of companies
included in the Russell 2000 Growth Index.
SHARES OF THE PORTFOLIO 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.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. A Statement of
Additional Information dated February 27, 1996 containing further information
about all the portfolios of the Fund, including the Portfolio, 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 Fund at the
address or phone number above.
FRED ALGER MANAGEMENT, INC. FRED ALGER & COMPANY, INCORPORATED
-------------------------- ----------------------------------
Investment Manager Distributor
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURI-
TIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
FEBRUARY 27, 1996
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
-----
Portfolio Expenses............................. iii
Financial Highlights........................... iv
How to Buy Shares.............................. 1
Special Investor Services...................... 1
How to Sell Shares............................. 2
How to Exchange Shares......................... 3
Investment Objectives and Policies............. 3
Investment Practices........................... 4
Management of the Fund......................... 5
Net Asset Value................................ 7
Contingent Deferred Sales Charge............... 7
Dividends and Taxes............................ 8
Performance.................................... 9
- --------------------------------------------------------------------------------
ii
<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
accompanying the Table shows the amount of expenses you would pay on a $1,000
investment in the Portfolio. These amounts assume the reinvestment of all
dividends and distributions, payment of any applicable contingent deferred sales
charge and payment by the Portfolio of operating expenses as shown in the Table
under Annual Portfolio Operating Expenses. The Example is an illustration only
and actual expenses may be greater or less than those shown.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases................................ None
Maximum Sales Load Imposed on Reinvested Dividends..................... None
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds)(a)............................ 5.00%
Redemption Fees........................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after expense reimbursements).......................... .85%
12b-1 Fees(b)........................................................... .75
Other Expenses (after expense reimbursements)........................... .51
----
Total Portfolio Operating Expenses
(after expense reimbursements)(b)....................................... 2.11%
====
(a)The amount of the contingent deferred sales charge will depend on the number
of years since the shareholder made the purchase payment. See "Redemptions
and Exchanges--Contingent Deferred Sales Charge."
(b)The Fund reimburses Alger Inc. for the expenses it incurs in distributing
shares of the Portfolio at the maximum annual rate of .75% of the Portfolio's
average daily net assets. 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.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
One Year ............................................................... $ 71
Three Years............................................................. 96
Five Years.............................................................. 133
Ten Years............................................................... 244
You would pay the following expenses on the same investment, assuming no
redemption:
One Year................................................................ $ 21
Three Years............................................................. 66
Five Years.............................................................. 113
Ten Years............................................................... 244
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended October 31, 1990 through 1995 have
been audited by Arthur Andersen LLP, the Fund's independent public accountants,
as indicated in their report dated December 14, 1995 on the Fund's financial
statements as of October 31, 1995 which are included in the Fund's Statement of
Additional Information. The Financial Highlights should be read in conjunction
with the Fund's financial statements and related notes. 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 Statement of
Additional Information may be obtained from the Fund without charge.
THE ALGER FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD(I)
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987*
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.................. $7.62 $8.65 $6.88 $6.97 $4.33 $5.91 $3.58 $3.00 $3.33
-------- -------- -------- -------- ------- ------- ------- ------- -------
Net investment income
(loss)................... (.13) (.09) (.08) (.11)(iv) (.03) (.06)(iv) -- (.07) (.06)
Net realized and unrealized
gains (loss) on investments 3.64 (.02) 1.85 .37 2.76 (.25) 2.33 .65 (.27)
-------- -------- -------- -------- ------- ------- ------- ------- -------
Total from investment
operations............... 3.51 (.11) 1.77 .26 2.73 (.31) 2.33 .58 (.33)
Distributions from net
realized gains........... -- (.92) -- (.35) (.09) (1.27) -- -- --
-------- -------- -------- -------- ------- ------- ------- ------- -------
Net asset value, end
of year.................. $11.13 $7.62 $8.65 $6.88 $6.97 $4.33 $5.91 $3.58 $3.00
======== ======== ======== ======== ======= ======= ======= ======= =======
Total Return (iii).......... 46.2% (1.1%) 25.8% 3.4% 63.7% (7.1%) 65.1%(ii) 19.3%(ii) (10.0%)(ii)
======== ======== ======== ======== ======= ======= ======= ======= =======
Ratios and Supplemental
Data:
Net assets, end of year
(000's omitted)........ $463,718 $294,890 $300,108 $182,432 $61,273 $23,628 $11,990 $3,709 $3,190
======== ======== ======== ======== ======= ======= ======= ======= =======
Ratio of expenses to
average net assets..... 2.11%(v) 2.18% 2.13% 2.17% 2.23% 2.66% 3.25% 3.01% 3.00%
======== ======== ======== ======== ======= ======= ======= ======= =======
Decrease reflected in
above expense ratios
due to expense
reimbursements......... -- -- -- -- -- -- -- 1.33% 1.62%
======== ======== ======== ======== ======= ======= ======= ======= =======
Ratio of net investment
income (loss) to
average net assets...... (1.75%) (1.51%) (1.52%) (1.64%) (1.37%) (1.17%) (1.92%) (2.07%) (2.02%)
======== ======== ======== ======== ======= ======= ======= ======= =======
Portfolio Turnover Rate... 97.37% 131.86% 148.49% 121.00% 171.04% 252.66% 441.42% 228.32% 267.55%
======== ======== ======== ======== ======= ======= ======= ======= =======
* From November 11, 1986 (commencement of operations) through October 31, 1987. Ratios have been annualized; total return has
not been annualized.
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock split which occurred September 27, 1995.
(ii) Unaudited.
(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 ratio net of earnings credits would have
been the same.
</TABLE>
- --------------------------------------------------------------------------------
iv
<PAGE>
<PAGE>
HOW TO BUY SHARES
IN GENERAL
You can buy shares of the Alger Small Capitalization Portfolio (the
"Portfolio") in any of the following ways: through the Fund's transfer agent;
through a broker, dealer or financial institution who has a sales agreement with
Fred Alger & Company, Incorporated ("Alger Inc."), the Fund's distributor; or
automatically from your bank account through an Automatic Investment Plan. There
is no minimum investment requirement except for purchases through the
TELEPURCHASE Privilege. The Fund or the transfer agent may reject any purchase
order.
PURCHASES THROUGH THE TRANSFER AGENT
You can buy shares through Alger Shareholder Services, Inc., the Fund's
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. You can also purchase shares
by wire transfer according to the instructions below.
Purchases will be processed at the next net asset value calculated after your
order is received and accepted. If your 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.
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.
The following information should be included in wire transfers to Fund
accounts:
1. Nat West NJ/CUST/021200339
2. For Account 011313045 A/C Alger/Small Capitalization Portfolio
3. 11--Account Number (if new account indicate such)
4. Name of Account
5. Social Security or Taxpayer Indentification Number
EXAMPLE:
Nat West NJ/CUST/021200339
For Account 011313045 A/C
Alger/Small Capitalization Portfolio
11-123456789 or 07-New Account
John & Jane Doe
123-45-6789
PURCHASES THROUGH BROKERS
You can buy shares through brokers who have signed sales agreements with
Alger Inc. These brokers may purchase shares of the Portfolio on a three day
settlement basis through the National Securities Clearing Corporation Fund/SERV
system.
PURCHASES THROUGH 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.
SPECIAL INVESTOR SERVICES
TELEPURCHASE PRIVILEGE
You can purchase 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 account normally within two business
1
<PAGE>
days. To use this service, your bank must be a member of the Automated Clearing
House.
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan which permits you to make
regular transfers to your Portfolio 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 the
Portfolio 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.
RETIREMENT PLANS
Shares of the Portfolio 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.
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 contingent deferred sales charge may be
charged on certain redemptions. See "Contingent Deferred Sales Charge" 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 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.
SELLING SHARES BY MAIL
You should send a letter of instruction to the transfer agent that includes
your name, account number, Portfolio name, 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. 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.
SELLING SHARES BY 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 (800) 992-3863. 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 account on the next business day. This service is not
available within 90 days of changing your address or bank account of record.
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.
2
<PAGE>
You may use the TELEREDEMPTION Service to transfer funds (minimum $500,
maximum $50,000) between your account and your designated bank account. Your
bank must be a member of the Automated Clearing House. 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 wire redemption, it does not currently intend to do so.
Shares held in any Alger retirement plan and shares issued in certificate form
are not eligible for this service.
SYSTEMATIC WITHDRAWAL PLAN
If your account is $10,000 or more, 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 contingent deferred sales charge. The maximum
monthly withdrawal is one percent of the current account value in the Portfolio
at the time you begin participation in the Plan.
REDEMPTION IN KIND
Under unusual circumstances, shares of the 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.
HOW TO EXCHANGE SHARES
If you want to authorize exchanges by telephone, you should mark the
appropriate box on the New Account Application. Shares of the Portfolio may be
exchanged for shares of another Portfolio at net asset value per share at the
time of the exchange. No contingent deferred sales charge is assessed in
connection with exchanges. 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.
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.
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 and in
the Statement of Additional Information 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, the Portfolio will not: (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, 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% 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; (5) borrow money or pledge its assets, except for temporary or
emergency purposes, in an amount not exceeding 10% of its total assets. The
Statement of Additional Information contains additional investment restrictions
as well as information on the Portfolio's 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.
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
3
<PAGE>
of the securities, have total market capitalization within the range of
companies included in the Russell 2000 Growth Index, updated quarterly. The
Russell 2000 Growth Index is designed to track the performance of small
capitalization companies. As of December 31, 1995, the range of market
capitalization of these companies was $20 million to $2.2 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 Russell 2000 Growth Index and in excess of that amount
(up to 100% of its assets) during temporary defensive periods.
IN GENERAL
The Portfolio seeks to achieve its objective 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
Portfolio 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 services with a high unit volume growth rate. In
order to afford the Portfolio the flexibility to take advantage of new
opportunities for investments in accordance with its investment objective, it
may hold up to 15 percent of its net assets in money market instruments and
repurchase agreements and in excess of that amount (up to 100% of its 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 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.
INVESTMENT PRACTICES
The Portfolio 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 Portfolio.
REPURCHASE AGREEMENTS
In a repurchase agreement, the 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, Fred Alger Management, Inc. ("Alger Management") determines the
liquidity of the Portfolio's investments. Investments may be illiquid because of
the absence of an active trading market, making it difficult to sell promptly at
an acceptable price. The 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 Portfolio
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.
4
<PAGE>
LENDING OF PORTFOLIO SECURITIES
In order to generate income and to offset expenses, the 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
The 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.
The 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.
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.
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 Fund's portfolios including the Portfolio.
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 the Portfolio may
vote only on matters that affect the Portfolio.
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 Portfolio, places
orders to purchase and sell securities on behalf of the Portfolio 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
Portfolio's 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
5
<PAGE>
employs professional securities analysts who provide research services
exclusively to the Portfolio 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 December 31, 1995, had approximately $4.8 billion
under management, $3.0 billion in mutual fund accounts and $1.8 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.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
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.
FEE AND EXPENSES
The Portfolio pays Alger Management a management fee computed daily and paid
monthly at an annual rate of .85% of the value of the Portfolio's average daily
net assets. The management fee paid by the Portfolio is higher than that paid by
most other investment companies.
The 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 the Portfolio's investment management agreement and other
expenses paid by the Portfolio 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
Portfolio. 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.
DISTRIBUTION PLAN
The Fund has adopted an Amended and Restated Distribution Plan (the "Plan")
under which the Portfolio may reimburse Alger Inc. for the expenses it incurs in
promoting sales of that Portfolio's shares--at a maximum annual rate of .75% of
its average daily net assets. This fee is known as an "asset-based sales charge"
and allows investors to buy shares without a front end sales charge while
allowing Alger Inc. to compensate dealers that sell shares of the Portfolio.
Alger Inc. pays sales commissions of 4.00% of the amount invested to dealers
6
<PAGE>
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 contingent deferred sales charges 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.
SHAREHOLDER SERVICING AGREEMENT
The Fund pays Alger Inc. a shareholder servicing fee of .25% of the average
daily net assets of the 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 the Portfolio is its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets, deducting liabilities and then dividing the result by the
number of its shares outstanding. The net asset value of the 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).
CONTINGENT DEFERRED
SALES CHARGE
There is no initial sales charge on purchases of shares of the Portfolio, but
a contingent deferred sales charge may be charged on certain redemptions. The
charge is imposed on any redemption that causes the current value of your
account in the Portfolio to fall below the amount of purchase payments made
during a six-year holding period. There is no charge on redemptions of (i)
shares that represent appreciation on your original investment, or (ii) shares
purchased through reinvestment of dividends and capital gains. The amount of the
charge is based on the length of time shares are held, according to the
following table:
Contingent
Deferred
Years Share 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 charge, it is assumed that the shares redeemed are the
shares of the Portfolio held the longest and which result in the lowest charge.
EXCHANGES
No contingent deferred sales charge is assessed in connection with exchanges.
Because the charge is applied on the basis of the net asset value of your
account on a portfolio by portfolio rather than a Fund-wide basis, the amount of
the charge in a particular instance may be affected by the choice of
portfolio(s) for the redemption and whether there have been any exchanges among
those portfolios. Consequently, you should consider the advisability of
exchanging shares of one portfolio for shares of another portfolio prior to
redeeming shares if the exchange would reduce the charge applicable to the
redemption.
Redemptions of shares of each of the Portfolio 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 shares
of the Portfolio. The exchange privilege may be modified or terminated at any
time upon notice to shareholders. Please see the Statement of Additional
Information for examples of how the contingent deferred sales charge is
calculated when shares are exchanged.
WAIVERS OF THE CHARGE
The contingent deferred sales charge is waived on Systematic Withdrawal Plan
7
<PAGE>
payments and on redemptions of shares in connection with certain post-retirement
withdrawals from an IRA or other retirement plan or following the death or
disability of a shareholder. A shareholder who has redeemed may reinvest all or
part of the redemption proceeds within 30 days and receive a pro rata credit for
any charge imposed. This privilege may be exercised only once by a shareholder.
Reinvestment will not alter any tax payable on the redemption and a loss may not
be allowed for tax purposes.
In addition, no contingent deferred sales charge is imposed on (1)
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) 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) 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) redemptions of shares held
through defined contribution plans; (5) redemptions by an investment company
registered under the Act in connection with the combination of the investment
company with the Fund by merger, acquisition of assets or by any other
transaction; (6) 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) redemptions by registered
investment advisers for their own accounts; (8) redemptions of shares purchased
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 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 Processing Organization, and (ii) retirement and deferred compensation
plans and trusts used to fund those plans; and (9) redemptions of shares
purchased by registered representatives of broker-dealers which have entered
into Selected Dealer Agreements with Alger Inc., and their spouses, children,
siblings and parents. Investors purchasing 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 subject to 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 (800) 992-3863.
DIVIDENDS AND TAXES
DIVIDENDS
Dividends and distributions will be automatically reinvested on the payment
date in additional shares of the Portfolio at net asset value, unless you
elected on the New Account Application to have all dividends and distributions
paid in cash. Shares of the Portfolio purchased through reinvestment of
dividends and distributions are not subject to the contingent deferred sales
charge. Dividends of the Portfolio are declared and paid annually. Distributions
of any net realized short-term and long-term capital gains earned by the
Portfolio usually will be made annually after the close of the fiscal year in
which the gains are earned.
TAXES
The Fund intends that the Portfolio separately 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
8
<PAGE>
things, distributes at least 90 percent of its investment company taxable income
to them within applicable time periods. The Portfolio is treated as a separate
taxable entity, with the result that taxable dividends and distributions from
the Portfolio reflect only the income and gains, net of losses, of the
Portfolio.
For federal income tax purposes dividends and distributions from the
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 Portfolio.
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 the Portfolio. This
discussion is not intended to address the tax consequences of an investment by a
nonresident alien.
PERFORMANCE
All performance figures are based on historical earnings and are not
intended to indicate future performance. Further information about the
Portfolio's performance is contained in its Annual Report to Shareholders, which
may be obtained without charge by contacting the Fund.
The Portfolio may include quotations of "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 the
Portfolio from the beginning date of the measuring period to the end of the
measuring period. These figures reflect changes in the price of the Portfolio's
shares and assume that any income dividends and/or capital gains distributions
made by the Portfolio during the period were reinvested in shares of the
Portfolio. 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 Portfolio's
operations, or on a year-by-year basis) and may utilize dollar cost averaging.
The Portfolio may also use "aggregate" total return figures for various periods,
representing the cumulative change in value of an investment in the Portfolio
for the specific period (again reflecting changes in Portfolio 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 contingent deferred sales charge to which the
Portfolio's 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 Portfolio will vary based on
changes in market conditions. In addition, since the deduction of the
Portfolio's expenses is reflected in the total return and yield figures, "total
return" and "yield" will also vary based on the level of the Portfolio's
expenses.
The Statement of Additional Information 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.
9
<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 PORTFOLIO'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 LAWFULLY BE 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
[LOGO]
Alger Small Capitalization Portfolio
PROSPECTUS
February 27, 1996
<PAGE>
PROSPECTUS
- ----------
THE ALGER FUND
--------------
75 Maiden Lane
New York, New York 10038
(800) 992-FUND (992-3863)
ALGER MIDCAP GROWTH PORTFOLIO
================================================================================
The Alger Fund (the "Fund") is a registered investment company--a mutual
fund--that presently offers interest in six portfolios. This Prospectus sets
forth information about the Alger MidCap Growth Portfolio (the "Portfolio"). The
Portfolio seeks long-term capital appreciation by investing in a diversified,
actively managed portfolio of equity securities, primarily of companies with
total market capitalization within the range of companies included in the S&P
MidCap 400 Index.
SHARES OF THE PORTFOLIO 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.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. A Statement of
Additional Information dated February 27, 1996 containing further information
about all the portfolios of the Fund, including the Portfolio, 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 Fund at the
address or phone number above.
FRED ALGER MANAGEMENT, INC. FRED ALGER & COMPANY, INCORPORATED
-------------------------- ----------------------------------
Investment Manager Distributor
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURI-
TIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
FEBRUARY 27, 1996
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
-----
Portfolio Expenses............................. iii
Financial Highlights........................... iv
How to Buy Shares.............................. 1
Special Investor Services...................... 1
How to Sell Shares............................. 2
How to Exchange Shares......................... 3
Investment Objectives and Policies............. 3
Investment Practices........................... 4
Management of the Fund......................... 5
Net Asset Value................................ 7
Contingent Deferred Sales Charge............... 7
Dividends and Taxes............................ 8
Performance.................................... 9
- --------------------------------------------------------------------------------
ii
<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
accompanying the Table shows the amount of expenses you would pay on a $1,000
investment in the Portfolio. These amounts assume the reinvestment of all
dividends and distributions, payment of any applicable contingent deferred sales
charge and payment by the Portfolio of operating expenses as shown in the Table
under Annual Portfolio Operating Expenses. The Example is an illustration only
and actual expenses may be greater or less than those shown.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases.............................. None
Maximum Sales Load Imposed on Reinvested Dividends................... None
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds)(a).......................... 5.00%
Redemption Fees...................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after expense reimbursements)....................... .80%
12b-1 Fees(b)........................................................ .75
Other Expenses (after expense reimbursements)........................ .84
----
Total Portfolio Operating Expenses
(after expense reimbursements)(b).................................... 2.39%
====
(a) The amount of the contingent deferred sales charge will depend on the
number of years since the shareholder made the purchase payment. See
"Redemptions and Exchanges--Contingent Deferred Sales Charge."
(b) The Fund reimburses Alger Inc. for the expenses it incurs in distributing
shares of the Portfolio at the maximum annual rate of .75% of the
Portfolio's average daily net assets. 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.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
One Year ............................................................... $ 74
Three Years............................................................. 105
Five Years.............................................................. 148
Ten Years.............................................................. . 273
You would pay the following expenses on the same investment, assuming no
redemption:
One Year................................................................ $ 24
Three Years............................................................. 75
Five Years.............................................................. 128
Ten Years............................................................... 273
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights have been audited by Arthur Andersen LLP, the Fund's
independent public accountants, as indicated in their report dated December 14,
1995 on the Fund's financial statements as of October 31, 1995 which are
included in the Fund's Statement of Additional Information. The Financial
Highlights should be read in conjunction with the Fund's financial statements
and related notes. The Statement of Additional Information may be obtained from
the Fund without charge.
THE ALGER FUND
MIDCAP GROWTH PORTFOLIO
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
May 24, 1993
(commencement
of operations) to
Year Ended October 31, October 31,
---------------------------
1995 1994 1993(i)
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of year.............................. $12.77 $12.48 $10.00
-------- -------- --------
Net investment (loss)........................................... (.08) (.11) (.09)
Net realized and unrealized gain on investments................. 6.25 .68 2.57
-------- -------- --------
Total from investment operations.............................. 6.17 .57 2.48
Distribution from net realized gains............................ -- (.28) --
-------- -------- --------
Net asset value, end of year.................................... $18.94 $12.77 $12.48
======== ======== ========
Total Return (ii)............................................... 48.3% 4.7% 24.8%
======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)....................... $ 54,016 $ 18,516 $ 3,836
======== ======== ========
Ratio of expenses to average net assets....................... 2.39%(iii) 3.20% 3.73%
======== ======== ========
Decrease reflected in above expense ratio due to expense
reimbursements.............................................. -- .07% 0.80%
======== ======== ========
Ratio of net investment income (loss) to average net assets... 1.71% (2.32%) (2.86%)
======== ======== ========
Portfolio Turnover Rate....................................... 121.60% 127.40% 57.64%
======== ======== ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Does not reflect contingent deferred sales charge.
(iii)Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 2.34%
- --------------------------------------------------------------------------------
iv
<PAGE>
HOW TO BUY SHARES
IN GENERAL
You can buy shares of the Alger MidCap Growth Portfolio (the "Portfolio") in
any of the following ways: through the Fund's transfer agent; through a broker,
dealer or financial institution who has a sales agreement with Fred Alger &
Company, Incorporated ("Alger Inc."), the Fund's distributor; or automatically
from your bank account through an Automatic Investment Plan. There is no minimum
investment requirement except for purchases through the TELEPURCHASE Privilege.
The Fund or the transfer agent may reject any purchase order.
PURCHASES THROUGH THE TRANSFER AGENT
You can buy shares through Alger Shareholder Services, Inc., the Fund's
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. You can also purchase shares
by wire transfer according to the instructions below.
Purchases will be processed at the next net asset value calculated after your
order is received and accepted. If your 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.
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.
The following information should be included in wire transfers to Fund
accounts:
1. Nat West NJ/CUST/021200339
2. For Account 011313045 A/C Alger/MidCap Growth Portfolio
3. 15--Account Number (if new account indicate such)
4. Name of Account
5. Social Security or Taxpayer Indentification Number
EXAMPLE:
Nat West NJ/CUST/021200339
For Account 011313045 A/C
Alger/MidCap Growth Portfolio
15-123456789 or 07-New Account
John & Jane Doe
123-45-6789
PURCHASES THROUGH BROKERS
You can buy shares through brokers who have signed sales agreements with
Alger Inc. These brokers may purchase shares of the Portfolio on a three day
settlement basis through the National Securities Clearing Corporation Fund/SERV
system.
PURCHASES THROUGH 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.
SPECIAL INVESTOR SERVICES
TELEPURCHASE PRIVILEGE
You can purchase 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
1
<PAGE>
from your designated bank account to your account normally within two business
days. To use this service, your bank must be a member of the Automated Clearing
House.
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan which permits you to make
regular transfers to your Portfolio 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 the
Portfolio 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.
RETIREMENT PLANS
Shares of the Portfolio 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.
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 contingent deferred sales charge may be
charged on certain redemptions. See "Contingent Deferred Sales Charge" 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 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.
SELLING SHARES BY MAIL
You should send a letter of instruction to the transfer agent that includes
your name, account number, Portfolio name, 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. 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.
SELLING SHARES BY 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 (800) 992-3863. 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 account on the next business day. This service is not
available within 90 days of changing your address or bank account of record.
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.
2
<PAGE>
You may use the TELEREDEMPTION Service to transfer funds (minimum $500,
maximum $50,000) between your account and your designated bank account. Your
bank must be a member of the Automated Clearing House. 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 wire redemption, it does not currently intend to do so.
Shares held in any Alger retirement plan and shares issued in certificate form
are not eligible for this service.
SYSTEMATIC WITHDRAWAL PLAN
If your account is $10,000 or more, 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 contingent deferred sales charge. The maximum
monthly withdrawal is one percent of the current account value in the Portfolio
at the time you begin participation in the Plan.
REDEMPTION IN KIND
Under unusual circumstances, shares of the 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.
HOW TO EXCHANGE SHARES
If you want to authorize exchanges by telephone, you should mark the
appropriate box on the New Account Application. Shares of the Portfolio may be
exchanged for shares of another Portfolio at net asset value per share at the
time of the exchange. No contingent deferred sales charge is assessed in
connection with exchanges. 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.
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.
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 and in
the Statement of Additional Information are not fundamental, so the Fund's Board
of Trustees may change them without shareholder approval. There is no guarantee
that the Portfolio's objectives will be achieved.
As a matter of fundamental policy, the Portfolio will not: (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, 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% 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; (5) borrow money or pledge its assets, except for temporary or
emergency purposes, in an amount not exceeding 10% of its total assets. The
Statement of Additional Information contains additional investment restrictions
as well as information on the Portfolio's 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.
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
3
<PAGE>
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 December 31, 1995, the range of market capitalization of these
companies was $118 million to $7.5 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.
IN GENERAL
The Portfolio seeks to achieve its objective 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
Portfolio 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 services with a high unit volume growth rate. In
order to afford the Portfolio the flexibility to take advantage of new
opportunities for investments in accordance with its investment objective, it
may hold up to 15 percent of its net assets in money market instruments and
repurchase agreements and in excess of that amount (up to 100% of its assets)
during temporary defensive periods. This amount may be higher than that
maintained by other funds with similar investment objectives.
INVESTMENT PRACTICES
The Portfolio 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 Portfolio.
REPURCHASE AGREEMENTS
In a repurchase agreement, the 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, Fred Alger Management, Inc. ("Alger Management") determines the
liquidity of the Portfolio's investments. Investments may be illiquid because of
the absence of an active trading market, making it difficult to sell promptly at
an acceptable price. The 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 Portfolio
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, the 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.
4
<PAGE>
FOREIGN SECURITIES
The 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.
The 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.
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.
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 Fund's portfolios including the Portfolio.
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 the Portfolio may
vote only on matters that affect the Portfolio.
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 Portfolio, places
orders to purchase and sell securities on behalf of the Portfolio 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
Portfolio's 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 Portfolio 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 December 31, 1995, had approximately $4.8 billion
under management, $3.0 billion in mutual fund accounts and $1.8 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.
5
<PAGE>
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.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
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.
FEE AND EXPENSES
The Portfolio pays Alger Management a management fee computed daily and paid
monthly at an annual rate of .80% of the value of the Portfolio's average daily
net assets. The management fee paid by the Portfolio is higher than that paid by
most other investment companies.
The 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 the Portfolio's investment management agreement and other
expenses paid by the Portfolio 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
Portfolio. 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.
DISTRIBUTION PLAN
The Fund has adopted an Amended and Restated Distribution Plan (the "Plan")
under which the Portfolio may reimburse Alger Inc. for the expenses it incurs in
promoting sales of that Portfolio's shares--at a maximum annual rate of .75% of
its average daily net assets. This fee is known as an "asset-based sales charge"
and allows investors to buy shares without a front end sales charge while
allowing Alger Inc. to compensate dealers that sell shares of the Portfolio.
Alger Inc. pays sales commissions of 4.00% 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 contingent deferred sales charges 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.
SHAREHOLDER SERVICING AGREEMENT
The Fund pays Alger Inc. a shareholder servicing fee of .25% of the average
daily net assets of the 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.
6
<PAGE>
NET ASSET VALUE
The price of one share of the Portfolio is its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets, deducting liabilities and then dividing the result by the
number of its shares outstanding. The net asset value of the 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).
CONTINGENT DEFERRED
SALES CHARGE
There is no initial sales charge on purchases of shares of the Portfolio, but
a contingent deferred sales charge may be charged on certain redemptions. The
charge is imposed on any redemption that causes the current value of your
account in the Portfolio to fall below the amount of purchase payments made
during a six-year holding period. There is no charge on redemptions of (i)
shares that represent appreciation on your original investment, or (ii) shares
purchased through reinvestment of dividends and capital gains. The amount of the
charge is based on the length of time shares are held, according to the
following table:
Contingent
Deferred
Years Share 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 charge, it is assumed that the shares redeemed are the
shares of the Portfolio held the longest and which result in the lowest charge.
EXCHANGES
No contingent deferred sales charge is assessed in connection with exchanges.
Because the charge is applied on the basis of the net asset value of your
account on a portfolio by portfolio rather than a Fund-wide basis, the amount of
the charge in a particular instance may be affected by the choice of
portfolio(s) for the redemption and whether there have been any exchanges among
those portfolios. Consequently, you should consider the advisability of
exchanging shares of one portfolio for shares of another portfolio prior to
redeeming shares if the exchange would reduce the charge applicable to the
redemption.
Redemptions of shares of each of the Portfolio 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 shares
of the Portfolio. The exchange privilege may be modified or terminated at any
time upon notice to shareholders. Please see the Statement of Additional
Information for examples of how the contingent deferred sales charge is
calculated when shares are exchanged.
WAIVERS OF THE CHARGE
The contingent deferred sales charge is waived on Systematic Withdrawal Plan
payments and on redemptions of shares in connection with certain post-retirement
withdrawals from an IRA or other retirement plan or following the death or
disability of a shareholder. A shareholder who has redeemed may reinvest all or
part of the redemption proceeds within 30 days and receive a pro rata credit for
any charge imposed. This privilege may be exercised only once by a shareholder.
Reinvestment will not alter any tax payable on the redemption and a loss may not
be allowed for tax purposes.
In addition, no contingent deferred sales charge is imposed on (1)
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) redemptions by
(i) accounts managed by investment advisory affiliates of Alger Inc. that are
7
<PAGE>
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) 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) redemptions of shares held
through defined contribution plans; (5) redemptions by an investment company
registered under the Act in connection with the combination of the investment
company with the Fund by merger, acquisition of assets or by any other
transaction; (6) 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) redemptions by registered
investment advisers for their own accounts; (8) redemptions of shares purchased
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 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 Processing Organization, and (ii) retirement and deferred compensation
plans and trusts used to fund those plans; and (9) redemptions of shares
purchased by registered representatives of broker-dealers which have entered
into Selected Dealer Agreements with Alger Inc., and their spouses, children,
siblings and parents. Investors purchasing 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 subject to 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 (800) 992-3863.
DIVIDENDS AND TAXES
DIVIDENDS
Dividends and distributions will be automatically reinvested on the payment
date in additional shares of the Portfolio at net asset value, unless you
elected on the New Account Application to have all dividends and distributions
paid in cash. Shares of the Portfolio purchased through reinvestment of
dividends and distributions are not subject to the contingent deferred sales
charge. Dividends of the Portfolio are declared and paid annually. Distributions
of any net realized short-term and long-term capital gains earned by the
Portfolio usually will be made annually after the close of the fiscal year in
which the gains are earned.
TAXES
The Fund intends that the Portfolio separately 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. The Portfolio is treated as a separate
taxable entity, with the result that taxable dividends and distributions from
the Portfolio reflect only the income and gains, net of losses, of the
Portfolio.
For federal income tax purposes dividends and distributions from the
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 Portfolio.
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 the Portfolio. This
8
<PAGE>
discussion is not intended to address the tax consequences of an investment by a
nonresident alien.
PERFORMANCE
All performance figures are based on historical earnings and are not intended
to indicate future performance. Further information about the Portfolio's
performance is contained in its Annual Report to Shareholders, which may be
obtained without charge by contacting the Fund.
The Portfolio may include quotations of "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 the
Portfolio from the beginning date of the measuring period to the end of the
measuring period. These figures reflect changes in the price of the Portfolio's
shares and assume that any income dividends and/or capital gains distributions
made by the Portfolio during the period were reinvested in shares of the
Portfolio. 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 Portfolio's
operations, or on a year-by-year basis) and may utilize dollar cost averaging.
The Portfolio may also use "aggregate" total return figures for various periods,
representing the cumulative change in value of an investment in the Portfolio
for the specific period (again reflecting changes in Portfolio 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 contingent deferred sales charge to which the
Portfolio's 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 Portfolio will vary based on
changes in market conditions. In addition, since the deduction of the
Portfolio's expenses is reflected in the total return and yield figures, "total
return" and "yield" will also vary based on the level of the Portfolio's
expenses.
The Statement of Additional Information 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.
9
<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 PORTFOLIO'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 LAWFULLY BE 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
[LOGO]
Alger MidCap Growth Portfolio
PROSPECTUS
February 27, 1996
<PAGE>
PROSPECTUS
- ----------
THE ALGER FUND
--------------
75 Maiden Lane
New York, New York 10038
(800) 992-FUND (992-3863)
ALGER GROWTH PORTFOLIO
================================================================================
The Alger Fund (the "Fund") is a registered investment company--a mutual
fund--that presently offers interest in six portfolios. This Prospectus sets
forth information about the Alger Growth Portfolio (the "Portfolio"). The
Portfolio seeks long-term capital appreciation by investing in a diversified,
actively managed portfolio of equity securities, primarily of companies with
total market capitalization of $1 billion or greater.
SHARES OF THE PORTFOLIO 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.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. A Statement of
Additional Information dated February 27, 1996 containing further information
about all the portfolios of the Fund, including the Portfolio, 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 Fund at the
address or phone number above.
FRED ALGER MANAGEMENT, INC. FRED ALGER & COMPANY, INCORPORATED
--------------------------- ----------------------------------
Investment Manager Distributor
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURI-
TIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
FEBRUARY 27, 1996
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
-----
Portfolio Expenses............................. iii
Financial Highlights........................... iv
How to Buy Shares.............................. 1
Special Investor Services...................... 1
How to Sell Shares............................. 2
How to Exchange Shares......................... 3
Investment Objectives and Policies............. 3
Investment Practices........................... 4
Management of the Fund......................... 5
Net Asset Value................................ 7
Contingent Deferred Sales Charge............... 7
Dividends and Taxes............................ 8
Performance.................................... 9
- --------------------------------------------------------------------------------
ii
<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
accompanying the Table shows the amount of expenses you would pay on a $1,000
investment in the Portfolio. These amounts assume the reinvestment of all
dividends and distributions, payment of any applicable contingent deferred sales
charge and payment by the Portfolio of operating expenses as shown in the Table
under Annual Portfolio Operating Expenses. The Example is an illustration only
and actual expenses may be greater or less than those shown.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases.................................. None
Maximum Sales Load Imposed on Reinvested Dividends....................... None
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds)(a).............................. 5.00%
Redemption Fees.......................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after expense reimbursements)........................... .75%
12b-1 Fees(b)............................................................ .75
Other Expenses (after expense reimbursements)............................ .59
-----
Total Portfolio Operating Expenses
(after expense reimbursements)(b)........................................ 2.09%
=====
(a) The amount of the contingent deferred sales charge will depend on the
number of years since the shareholder made the purchase payment. See
"Redemptions and Exchanges--Contingent Deferred Sales Charge."
(b) The Fund reimburses Alger Inc. for the expenses it incurs in distributing
shares of the Portfolio at the maximum annual rate of .75% of the
Portfolio's average daily net assets. 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.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
One Year ................................................................ $ 71
Three Years.............................................................. 95
Five Years............................................................... 132
Ten Years................................................................ 242
You would pay the following expenses on the same investment, assuming no
redemption:
One Year................................................................. $ 21
Three Years.............................................................. 65
Five Years............................................................... 112
Ten Years................................................................ 242
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights, for the years ended October 31, 1990 through 1995,
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants, as indicated in their report dated December 14, 1995 on the Fund's
financial statements as of October 31, 1995 which are included in the Fund's
Statement of Additional Information. The Financial Highlights should be read in
conjunction with the Fund's financial statements and related notes. 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
Statement of Additional Information may be obtained from the Fund without
charge.
THE ALGER FUND
GROWTH PORTFOLIO
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (I)
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987*
----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year....... $ 6.97 $7.43 $5.76 $5.77 $4.25 $4.42 $3.48 $3.23 $3.33
------- ------- -------- ------- ------- ------- ------- -------- -------
Net investment income (loss)............. (.02) (.07)(iv)(.02) (.06)(iv)(.02) (.02) (.05) (.04) (.03)
Net realized and unrealized gains
(loss) on investments.................. 2.59 .35 1.70 .61 1.86 (.15) .99 .29 (.07)
------- ------- -------- -------- ------- ------- ------- -------- --------
Total from investment operations......... 2.57 .28 1.68 .55 1.84 (.17) .94 .25 (.10)
Distributions from net realized gains.... (.16) (.74) (.01) (.56) (.32) -- -- -- --
------- ------- -------- -------- ------- ------- ------- -------- --------
Net asset value, end of year............. $9.38 $6.97 $7.43 $5.76 $5.77 $4.25 $4.42 $3.48 $3.23
======= ======= ======== ======== ======= ======= ======= ======== ========
Total Return (iii)....................... 37.8% 4.1% 29.2% 9.7% 45.8% (4.0%) 27.0%(ii) 7.7%(ii)(3.0%)(ii)
======= ======= ======== ======== ======= ======= ======= ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $154,284 $76,390 $37,988 $19,379 $10,213 $5,667 $5,463 $5,294 $5,305
======= ======= ======== ======== ======= ======= ======= ======== ========
Ratio of expenses to average net assets 2.09%(v) 2.20% 2.20% 2.32% 2.70% 3.09% 3.32% 3.01% 3.00%
======= ======= ======== ======== ======= ======= ======= ======== ========
Decrease reflected in above expense
ratios due to expense
reimbursements....................... -- -- -- -- -- -- -- .43% .83%
======= ======= ======== ======== ======= ======= ======= ======== ========
Ratio of net investment income (loss)
to average net assets................ (1.03%) (1.01%) (1.16%) (1.07%) (1.06%) (.68%) (.70%) (.99%) (1.08%)
======= ======= ======== ======== ======= ======= ======= ======== ========
Portfolio Turnover Rate................ 118.16% 103.86% 108.54% 69.28% 76.06% 86.06% 106.73% 151.30% 135.50%
======= ======= ======== ======== ======= ======= ======= ======== ========
</TABLE>
* From November 11, 1986 (commencement of operations) through October 31,
1987. Ratios have been annualized; total return has not been annualized.
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock
split which occurred September 27, 1995.
(ii) Unaudited.
(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 ratio net of earnings credits would have been 2.07%
- --------------------------------------------------------------------------------
iv
<PAGE>
HOW TO BUY SHARES
IN GENERAL
You can buy shares of the Alger Growth Portfolio (the "Portfolio") in any of
the following ways: through the Fund's transfer agent; through a broker, dealer
or financial institution who has a sales agreement with Fred Alger & Company,
Incorporated ("Alger Inc."), the Fund's distributor; or automatically from your
bank account through an Automatic Investment Plan. There is no minimum
investment requirement except for purchases through the TELEPURCHASE Privilege.
The Fund or the transfer agent may reject any purchase order.
PURCHASES THROUGH THE TRANSFER AGENT
You can buy shares through Alger Shareholder Services, Inc., the Fund's
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. You can also purchase shares
by wire transfer according to the instructions below.
Purchases will be processed at the next net asset value calculated after your
order is received and accepted. If your 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.
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.
The following information should be included in wire transfers to Fund
accounts:
1. Nat West NJ/CUST/021200339
2. For Account 011313045 A/C Alger/Growth Portfolio
3. 12--Account Number (if new account indicate such)
4. Name of Account
5. Social Security or Taxpayer Indentification Number
EXAMPLE:
Nat West NJ/CUST/021200339
For Account 011313045 A/C
Alger/Growth Portfolio
12-123456789 or 07-New Account
John & Jane Doe
123-45-6789
PURCHASES THROUGH BROKERS
You can buy shares through brokers who have signed sales agreements with
Alger Inc. These brokers may purchase shares of the Portfolio on a five day
settlement basis (three day settlement beginning in June 1995) through the
National Securities Clearing Corporation Fund/SERV system.
PURCHASES THROUGH 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.
SPECIAL INVESTOR SERVICES
TELEPURCHASE PRIVILEGE
You can purchase shares by telephone (minimum $500, maximum $50,000) by
filling out the appropriate section of the New Account Application or sending an
1
<PAGE>
Additional Services Form to the transfer agent. Your funds will be transferred
from your designated bank account to your account normally within two business
days. To use this service, your bank must be a member of the Automated Clearing
House.
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan which permits you to make
regular transfers to your Portfolio 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 the
Portfolio 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.
RETIREMENT PLANS
Shares of the Portfolio 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.
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 contingent deferred sales charge may be
charged on certain redemptions. See "Contingent Deferred Sales Charge" 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 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.
SELLING SHARES BY MAIL
You should send a letter of instruction to the transfer agent that includes
your name, account number, Portfolio name, 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. 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.
SELLING SHARES BY 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 (800) 992-3863. 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 account or the next business day. This service is not
available within 90 days of changing your address or bank account of record.
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.
2
<PAGE>
You may use the TELEREDEMPTION Service to transfer funds (minimum $500,
maximum $50,000) between your account and your designated bank account. Your
bank must be a member of the Automated Clearing House. 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 wire redemption, it does not currently intend to do so.
Shares held in any Alger retirement plan and shares issued in certificate form
are not eligible for this service.
SYSTEMATIC WITHDRAWAL PLAN
If your account is $10,000 or more, 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 contingent deferred sales charge. The maximum
monthly withdrawal is one percent of the current account value in the Portfolio
at the time you begin participation in the Plan.
REDEMPTION IN KIND
Under unusual circumstances, shares of the 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.
HOW TO EXCHANGE SHARES
If you want to authorize exchanges by telephone, you should mark the
appropriate box on the New Account Application. Shares of the Portfolio may be
exchanged for shares of another Portfolio at net asset value per share at the
time of the exchange. No contingent deferred sales charge is assessed in
connection with exchanges. 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.
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.
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 and in
the Statement of Additional Information are not fundamental, so the Fund's Board
of Trustees may change them without shareholder approval. There is no guarantee
that the Portfolio's objectives will be achieved.
As a matter of fundamental policy, the Portfolio will not: (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, 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% 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; (5) borrow money or pledge its assets, except for temporary or
emergency purposes, in an amount not exceeding 10% of its total assets. The
Statement of Additional Information contains additional investment restrictions
as well as information on the Portfolio's 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.
The investment objective of the Portfolio is long-term capital appreciation.
3
<PAGE>
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--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.
IN GENERAL
The Portfolio seeks to achieve its objective 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
Portfolio 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 services with a high unit volume growth rate. In
order to afford the Portfolio the flexibility to take advantage of new
opportunities for investments in accordance with its investment objective, it
may hold up to 15 percent of its net assets in money market instruments and
repurchase agreements and in excess of that amount (up to 100% of its assets)
during temporary defensive periods. This amount may be higher than that
maintained by other funds with similar investment objectives.
INVESTMENT PRACTICES
The Portfolio 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 Portfolio.
REPURCHASE AGREEMENTS
In a repurchase agreement, the 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, Fred Alger Management, Inc. ("Alger Management") determines the
liquidity of the Portfolio's investments. Investments may be illiquid because of
the absence of an active trading market, making it difficult to sell promptly at
an acceptable price. The 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 Portfolio
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, the 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.
4
<PAGE>
FOREIGN SECURITIES
The 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.
The 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.
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.
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 Fund's portfolios including the Portfolio.
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 the Portfolio may
vote only on matters that affect the Portfolio.
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 Portfolio, places
orders to purchase and sell securities on behalf of the Portfolio 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
Portfolio's 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 Portfolio 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 December 31, 1995, had approximately $4.8 billion
under management, $3.0 billion in mutual fund accounts and $1.8 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.
5
<PAGE>
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.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
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.
FEE AND EXPENSES
The Portfolio pays Alger Management a management fee computed daily and paid
monthly at an annual rate of .75% of the value of the Portfolio's average daily
net assets. The management fee paid by the Portfolio is higher than that paid by
most other investment companies.
The 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 the Portfolio's investment management agreement and other
expenses paid by the Portfolio 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
Portfolio. 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.
DISTRIBUTION PLAN
The Fund has adopted an Amended and Restated Distribution Plan (the "Plan")
under which the Portfolio may reimburse Alger Inc. for the expenses it incurs in
promoting sales of that Portfolio's shares--at a maximum annual rate of .75% of
its average daily net assets. This fee is known as an "asset-based sales charge"
and allows investors to buy shares without a front end sales charge while
allowing Alger Inc. to compensate dealers that sell shares of the Portfolio.
Alger Inc. pays sales commissions of 4.00% 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 contingent deferred sales charges 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.
SHAREHOLDER SERVICING AGREEMENT
The Fund pays Alger Inc. a shareholder servicing fee of .25% of the average
daily net assets of the 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.
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NET ASSET VALUE
The price of one share of the Portfolio is its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets, deducting liabilities and then dividing the result by the
number of its shares outstanding. The net asset value of the 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).
CONTINGENT DEFERRED
SALES CHARGE
There is no initial sales charge on purchases of shares of the Portfolio, but
a contingent deferred sales charge may be charged on certain redemptions. The
charge is imposed on any redemption that causes the current value of your
account in the Portfolio to fall below the amount of purchase payments made
during a six-year holding period. There is no charge on redemptions of (i)
shares that represent appreciation on your original investment, or (ii) shares
purchased through reinvestment of dividends and capital gains. The amount of the
charge is based on the length of time shares are held, according to the
following table:
Contingent
Deferred
Years Share 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 charge, it is assumed that the shares redeemed are the
shares of the Portfolio held the longest and which result in the lowest charge.
EXCHANGES
No contingent deferred sales charge is assessed in connection with exchanges.
Because the charge is applied on the basis of the net asset value of your
account on a portfolio by portfolio rather than a Fund-wide basis, the amount of
the charge in a particular instance may be affected by the choice of
portfolio(s) for the redemption and whether there have been any exchanges among
those portfolios. Consequently, you should consider the advisability of
exchanging shares of one portfolio for shares of another portfolio prior to
redeeming shares if the exchange would reduce the charge applicable to the
redemption.
Redemptions of shares of each of the Portfolio 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 shares
of the Portfolio. The exchange privilege may be modified or terminated at any
time upon notice to shareholders. Please see the Statement of Additional
Information for examples of how the contingent deferred sales charge is
calculated when shares are exchanged.
WAIVERS OF THE CHARGE
The contingent deferred sales charge is waived on Systematic Withdrawal Plan
payments and on redemptions of shares in connection with certain post-retirement
withdrawals from an IRA or other retirement plan or following the death or
disability of a shareholder. A shareholder who has redeemed may reinvest all or
part of the redemption proceeds within 30 days and receive a pro rata credit for
any charge imposed. This privilege may be exercised only once by a shareholder.
Reinvestment will not alter any tax payable on the redemption and a loss may not
be allowed for tax purposes.
In addition, no contingent deferred sales charge is imposed on (1)
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) redemptions by
(i) accounts managed by investment advisory affiliates of Alger Inc. that are
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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) 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) redemptions of shares held
through defined contribution plans; (5) redemptions by an investment company
registered under the Act in connection with the combination of the investment
company with the Fund by merger, acquisition of assets or by any other
transaction; (6) 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) redemptions by registered
investment advisers for their own accounts; (8) redemptions of shares purchased
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 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 Processing Organization, and (ii) retirement and deferred compensation
plans and trusts used to fund those plans; and (9) redemptions of shares
purchased by registered representatives of broker-dealers which have entered
into Selected Dealer Agreements with Alger Inc., and their spouses, children,
siblings and parents. Investors purchasing 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 subject to 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 (800) 992-3863.
DIVIDENDS AND TAXES
DIVIDENDS
Dividends and distributions will be automatically reinvested on the payment
date in additional shares of the Portfolio at net asset value, unless you
elected on the New Account Application to have all dividends and distributions
paid in cash. Shares of the Portfolio purchased through reinvestment of
dividends and distributions are not subject to the contingent deferred sales
charge. Dividends of the Portfolio are declared and paid annually. Distributions
of any net realized short-term and long-term capital gains earned by the
Portfolio usually will be made annually after the close of the fiscal year in
which the gains are earned.
TAXES
The Fund intends that the Portfolio separately 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. The Portfolio is treated as a separate
taxable entity, with the result that taxable dividends and distributions from
the Portfolio reflect only the income and gains, net of losses, of the
Portfolio.
For federal income tax purposes dividends and distributions from the
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 Portfolio.
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 the Portfolio. This
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<PAGE>
discussion is not intended to address the tax consequences of an investment by a
nonresident alien.
PERFORMANCE
All performance figures are based on historical earnings and are not intended
to indicate future performance. Further information about the Portfolio's
performance is contained in its Annual Report to Shareholders, which may be
obtained without charge by contacting the Fund.
The Portfolio may include quotations of "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 the
Portfolio from the beginning date of the measuring period to the end of the
measuring period. These figures reflect changes in the price of the Portfolio's
shares and assume that any income dividends and/or capital gains distributions
made by the Portfolio during the period were reinvested in shares of the
Portfolio. 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 Portfolio's
operations, or on a year-by-year basis) and may utilize dollar cost averaging.
The Portfolio may also use "aggregate" total return figures for various periods,
representing the cumulative change in value of an investment in the Portfolio
for the specific period (again reflecting changes in Portfolio 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 contingent deferred sales charge to which the
Portfolio's 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 Portfolio will vary based on
changes in market conditions. In addition, since the deduction of the
Portfolio's expenses is reflected in the total return and yield figures, "total
return" and "yield" will also vary based on the level of the Portfolio's
expenses.
The Statement of Additional Information 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.
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<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 PORTFOLIO'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 LAWFULLY BE 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
[LOGO]
Alger Growth Portfolio
PROSPECTUS
February 27, 1996
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION February 27, 1996
- ----------------------
THE | 75 Maiden Lane
ALGER | New York, New York 10038
FUND | (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
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 February 27, 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 .............................................. 18
Certain Shareholders ...................................................... 18
Organization .............................................................. 20
Determination of Performance .............................................. 20
Financial Statements ...................................................... F-1
Appendix .................................................................. A-1
A1345
<PAGE>
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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<PAGE>
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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<PAGE>
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.
4
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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,
1993, 1994, and 1995, the Fund paid an aggregate of approximately $592,256,
$765,940 and $799,446 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. 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
Portfolios 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 Portfolio's 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 and appropriate, including:
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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
Alger Small Capitalization Portfolio, the Alger MidCap Growth Portfolio, the
Alger Growth Portfolio, the Alger Balanced Portfolio and the Alger Capital
Appreciation Portfolio, 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 Portfolio's 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 Portfolio; 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 Portfolio; costs involved in preparing, printing
and distributing sales literature for the Portfolio; and costs involved in
obtaining whatever information, analyses and reports with respect to marketing
and promotional activities on behalf of the Portfolio that the Fund deems
advisable.
It is anticipated that distribution expenses incurred by Alger Inc. during the
early years of a Portfolio's operations will exceed the assets of the Portfolio
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 a Portfolio in excess of contingent deferred sales charges received
by Alger Inc. relating to redemptions of shares of the Portfolio during that
year and .75 percent of the Portfolio's 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 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 and 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 shareholder approval, 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 any Portfolio to which the Plan
relates, by a vote of a majority of the outstanding voting securities of the
Portfolio, 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 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, 1995, the Fund reimbursed $3,856,850 to Alger Inc. as the
Fund's underwriter, under the provisions of the Plan. Alger Inc.'s selling
expenses during that period totaled $9,842,827 which
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consisted of $580,427 in printing and mailing of prospectuses and other sales
literature to prospective investors; $1,575,690 in advertising; $6,033,408 in
compensation to dealers; $469,930 in compensation to sales personnel; $15,556 in
other marketing expenses; and $1,167,816 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 the Portfolios, the excess may be
carried forward, with interest, and sought to be reimbursed in future periods.
As of October 31, 1995, such excess carried forward was approximately
$5,561,000, $10,680,000, $118,000, $1,034,000 and $533,000 for the 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, certain
Portfolios may reimburse Alger Inc. for expenses incurred in distributing their
shares and may compensate Alger Inc. for servicing shareholder accounts.
Fundwide expenses not identifiable to any particular Portfolio 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. Alger Management will not be reimbursed for such amounts if such action
would violate the provisions of any applicable state securities laws relating to
the limitation of the applicable Portfolio's expenses.
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 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 two banking days. While there is no charge to shareholders for this
service, a charge of $10.00 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.
AUTOMATIC INVESTMENT PLAN
While there is no charge to shareholders for this service, a charge of $10.00
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.
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.
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 value not reasonably practicable or (c) for such
other
12
<PAGE>
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 signature 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. 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., 13th Floor, 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 imposed on redemptions of Fund shares will
be waived in certain instances, including (a) redemptions of shares held at the
time a shareholder dies or becomes disabled, 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, and (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 59l/2); (ii) lump-sum or other distributions to a five percent
owner of the employer maintaining the plan following attainment of age 70l/2;
(iii) 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 59l/2; and (iv) a tax-free return of an excess contribution to
an IRA. 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.
REINVESTMENT PRIVILEGE
A shareholder who has redeemed shares in the Fund may reinvest all or part of
the redemption proceeds in the Fund 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 reinvestment privilege may be
exercised only once by a shareholder. Reinvestment 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)
13
<PAGE>
may be made under the Withdrawal Plan by redeeming 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
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 contingent deferred sales charge
would not apply to an exchange of shares 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 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 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 contingent deferred sales
charge 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. 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 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 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 shares of the Alger Growth Portfolio for 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
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.
No contingent deferred sales charge 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 contingent deferred sales charge
is assessed on redemptions of shares of the Charge Portfolios and of shares of
the Alger Money Market Portfolio that have been acquired
14
<PAGE>
in exchange for shares of a Charge Portfolio, based solely on the period of time
the 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.
The following examples illustrate the operation of the contingent deferred sales
charge for accounts opened after October 17, 1992: (1) An investor purchases
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 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 purchase shares of the Alger Money Market Portfolio on
the first day of year 1 and exchanges those shares for 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 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.
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 Defined Contribution Trust 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.
<TABLE>
<CAPTION>
NAME, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
<S> <C>
Fred M. Alger III Chairman of the Board of Alger Associates, Inc.
Chairman of the Board ("Associates"), Alger Inc., Alger Management, Alger Properties, Inc.
("Properties"), Alger Shareholder Services, Inc. ("Services"), Alger Life Insurance Agency,
Inc. ("Agency") and Analysts Resources, Inc. ("ARI").
David D. Alger President and Director of Associates, Alger Management, Alger Inc.,
President and Trustee Properties, Services and Agency; Executive Vice President and Director
of ARI.
Gregory S. Duch Executive Vice President, Treasurer and Director of Alger Management
Treasurer and Properties; Executive Vice President and Treasurer of Associates,
Alger Inc., ARI, Services and Agency.
Frederick A. Blum Senior Vice President of Associates, Alger Management, Alger Inc.,
Assistant Secretary Properties, ARI, Services and Agency.
15
<PAGE>
NAME, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
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, 1995. The following table provides
compensation amounts paid to Disinterested Trustees of the Fund for the fiscal
year ended October 31, 1995.
<TABLE>
<CAPTION>
COMPENSATION TABLE
Total Compensation Paid to Trustees from
The Alger Defined Contribution Trust,
Aggregate The Alger Fund,
Compensation The Alger American Fund,
from Castle Convertible Fund, Inc. and
Name of Person, Position The Alger Fund Spectra Fund, Inc.
------------------------ ---------------- ---------------------------------------
<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 both it and the
Fund. 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 value, 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.
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<PAGE>
Alger Management has agreed that, if in any fiscal year the aggregate expenses
of any Portfolio (including fees payable pursuant to its Management Agreement
but excluding interest, taxes, brokerage expenses, distribution expenses and if
permitted by the relevant state securities commissions, certain other expenses
including extraordinary expenses) 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. An
expense reimbursement, if any, will be estimated and reconciled daily and paid
on a monthly basis. At the date of this Statement of Additional Information, the
most restrictive annual expense limitation applicable to any Portfolio is 2.5
percent of the Portfolio's first $30 million of average net assets, 2.0 percent
of the next $70 million of average net assets and 1.5 percent of the remaining
average net assets. However, under this limitation, Alger Management will not be
required to reimburse a Portfolio an amount in excess of its management fee
earned with respect to that Portfolio.
During the fiscal years ended October 31, 1993, 1994 and 1995, Alger Management
earned under the terms of the Management Agreements $632,155, $711,113, and
$830,000, respectively, in respect of the Alger Money Market Portfolio;
$2,095,962, $2,359,000 and $3,118,000, respectively, in respect of the Alger
Small Capitalization Portfolio; $215,997, $444,000, and $760,000, respectively,
in respect of the Alger Growth Portfolio; $15,791, $26,000, and $27,000,
respectively, in respect of the Alger Balanced Portfolio. For the period from
May 24, 1993 (commencement of operations) through October 31, 1993 and for the
fiscal years ended October 31, 1994, and 1995, Alger Management earned $7,896,
$92,000, and $244,000, respectively, under the terms of the Management Agreement
in respect of the Alger MidCap Growth Portfolio. For the fiscal years ended
October 31, 1994, and 1995, Alger Management earned $17,000 and $77,000
respectively, under the terms of the Management Agreement 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, 1995 are
described in the Notes to the Financial Statements, which appear in this
Statement of Additional Information.
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 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
17
<PAGE>
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 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.
CUSTODIAN AND TRANSFER AGENT
NatWest Bank N.A., 10 Exchange Place, Jersey City, New Jersey 07302, 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
Portfolio, 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. In the aggregate, Alger Management (a New York corporation), Alger
Inc. (a Delaware corporation), Associates (a Delaware corporation), Fred M.
Alger III and David D. Alger owned beneficially or of record 13.25% of
18
<PAGE>
the shares of the Alger Balanced Portfolio at February 20, 1996. Alger
Management is a wholly owned subsidiary of Alger Inc., which in turn is a wholly
owned subsidiary of Associates. Fred M. Alger III and David D. Alger are the
majority shareholders of Associates and may be deemed to control that company
and its subsidiaries.
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 February 20, 1996 and record and beneficial holdings are in each
instance denoted as follows: record/beneficial.
<TABLE>
<CAPTION>
Alger Alger
Alger MidCap Alger Capital
Balanced Growth Growth Appreciation
Portfolio Portfolio Portfolio Portfolio
(Record/ (Record/ (Record/ (Record/
Beneficial) Beneficial) Beneficial) Beneficial)
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Alger Associates, Inc.
75 Maiden Lane
New York, NY 10038 13.25%/13.25% 2.68%/2.68% */* */*
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302 */* 2.87%/2.87% */* */*
Boston & Co. A/C ISPF1956532
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198 */* */* 8.12%/* */*
Merrill Lynch Tr Co
Ttee fbo Qualified
Retirement Plans
265 Davidson Avenue
Somerset, NJ 08873 */* */* 7.69%/* */*
Charles Schwab & Co., Inc.
Special Custody Account
Att. Mutual Funds
101 Montgomery St.
San Francisco, CA 94101 */* */* 7.40%/* 6.51%/*
Officers & Trustees
as a Group */* */* */* */*
- -----------------------------
* Indicates shareholder owns less than 5% of the Portfolio's shares.
</TABLE>
19
<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.
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. 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 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, 1995, the annualized yield was 5.58%,
and the compounded effective yield was 5.73%.
OTHER PORTFOLIOS
The "total return" and "yield" described in the Prospectus as to each 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:
20
<PAGE>
A. Total Return--A Portfolio's 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 Portfolios, other than the Money Market
Portfolio, for the periods indicated below were as follows:
Period
Five from
Years Inception
Year-Ended Ended through
10/31/95 10/31/95 10/31/95
---------- -------- --------
Alger Small Capitalization
Portfolio* 41.15% 25.07% 19.85%
Alger Growth Portfolio* 32.78 24.08 15.95
Alger Balanced Portfolio **22.61 n/a 9.17
Alger MidCap Growth
Portfolio*** 43.32 n/a 30.28
Alger Capital Appreciation
Portfolio+ 62.60 n/a 34.98
* 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 Portfolio's net annualized yield described in the Prospectus is
computed according to the following formula:
a-b 6
YIELD = 2[(----- + 1) - 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 Portfolios may be obtained by calling
the Fund at the telephone number provided on the cover page of this Statement of
Additional Information. A Portfolio's quoted performance may not be indicative
of future performance. A Portfolio's performance will depend upon factors such
as the Portfolio's expenses and the types and maturities of instruments held by
the Portfolio.
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.
21
<PAGE>
Fellow Shareholders: December 15, 1995
Unlike France in the 1790's, which Charles Dickens described in the TALE OF TWO
CITIES as the "best of times and the worst of times," the late 1990's for the
American financial markets are purely the best of times. While all periods
provide some room for concern, the current period is more promising than almost
any other in recent history.
HOW WE ARRIVED AT THIS POINT
The stock market and the bond market have both done exceptionally well this
year. This year's performance results from the one-two combination punch to the
jaw of growth stocks which commenced with the Presidential election in 1992.
After twelve years of Republican stewardship, the market and business community
began to see a very unclear economic picture emerge. The first punch landed with
the appointment of the President's new cabinet whose agenda was to create new
taxes on the "rich" and to socialize the health care industry (which represents
15% of the Gross Domestic Product). Growth stocks, which rely on a reasonable
visibility of the future, began to lose relative valuation. What seemed like a
value market at the time was in reality a reluctance on the part of investors to
face an uncertain future. An exceedingly lenient monetary policy, which touched
off a boom in consumer spending in the fourth quarter of 1993, added to this
confusion. This brought about the second punch to the jaw that growth stocks
received. In February of 1994, the Federal Reserve began to tighten interest
rates in a series of six consecutive steps. Once again, this clouded the
economic future and created a compression of growth stock multiples.
At this point, fear of the new administration's policies was replaced by fear of
the Federal Reserve. The market declined and growth stocks collapsed on a
relative basis. The collective body of market and economic forecasters who are
colloquially known as "pundits" all unanimously agreed that inflation would soar
and the stock market would collapse.
Why were they so wrong? First, inflation fears were driven by soaring prices of
industrial commodities. However, commodity based raw materials represent only
15% of the total cost of manufacturing. Much more important is the cost of
labor, which did not rise rapidly. Inflation was subdued throughout 1994.
Secondly, the forecaster's assumption of a stock market collapse was predicated
on the view that the market abhors increases in short-term rates. Indeed, the
crash of 1987 was preceded and perhaps caused by an increase in short-term
rates. Thirdly, there was a generally accepted view that the market was
overpriced. Although this view was widely expressed on television, it was never
the case. By way of comparison, in the period prior to the crash of 1987, the
earnings yield of the market was only half the yield of the 30-year U.S.
Government Bond. This was below the normal range of 50% to 90%. Throughout 1994,
the earnings yield of the stock market typically sold at about 75% of the U.S.
Government Bond yield. Moreover, the bond market itself was undervalued,
discounting a level of inflation which never materialized. Based on forward
looking price earnings ratios, the market was, if anything, undervalued.
CURRENT MARKET AND ECONOMY
As 1995 dawned, the key questions facing the markets concerned the need for
future tightening of interest rates by the Federal Reserve, the possible onset
of inflation and the excessive strength of the economy, all of which are
naturally interrelated. Now we are well into the fourth quarter and the concern
of the market is not whether the economy is growing too fast, but whether it is
growing too slowly.
As early as last year, we forecasted that the economy would slow and that there
would be a "soft landing". This has been a correct forecast, although it may now
be obsolete. All four components of consumer spending, which constitute 69% of
the Gross Domestic Product: housing, autos, consumer durables and apparel, have
slowed significantly but should bounce back due to the drop in interest rates
and a reduction in inventory levels. There is evidence, therefore, that we are
no longer looking at a "soft landing," but rather a "touch and go landing."
It would be overly optimistic to say that all is well with the economy. Consumer
confidence, while better in some surveys, is not robust. While leading
indicators are up slightly, many components of retail sales are still pointing
down. Whether the Federal Reserve will continue to lower rates is an open
question especially in light of the current Federal budget negotiations. While
these
F-1
<PAGE>
negotiations may well drag into 1996, it would be disappointing for those who
are expecting a cut in rates in the near term.
The bond market continues to believe that interest rates are too high. The
dramatic flattening of the yield curve and the fact that the Government pays
less interest to borrow for 10 years than banks do overnight provides ample
evidence. The price of gold, an excellent proxy for inflation, remains at a
relatively low historic level (approximately $390 an ounce). We believe that the
economy will soon begin to react to the drop in interest rates that we have
experienced to date. As a result, we expect the economy to keep advancing at a
slow rate and avoid a recession in 1996.
As for the stock market, we feel it still remains undervalued. We use three
measures to determine the appropriate valuation for the market. The first is
simply to multiply our best estimate of Dow earnings for 1995 by the average
multiple of the last ten years which is 16. The result is an expected target of
the Dow of 5600. The second method relates the market to short-term interest
rates. Our own proprietary model multiplies the bottom-up forecast for the Dow
earnings by the reciprocal of the 90-day commercial paper rate adjusted for some
smoothing techniques. This model states that the Dow would be correctly valued
at 6200. The third technique involves the relationship between the industrial
S&P indexes estimated earnings and the 30 year bond yield. Using the average
relationship between these two variables for the period 1988 through 1994,
suggests that the market could appreciate 33% next year. The Dow equivalent of
this would be 6300. While none of these forecasts may be realized, it is
interesting that they all agree that the market will appreciate significantly
next year using only average relationships.
ALGER FUND PORTFOLIO REVIEWS
ALGER GROWTH PORTFOLIO
The Alger Growth Portfolio recorded excellent results for the period ended
October 31, 1995, with a gain of 37.8% relative to the S&P 500 Index return of
26.4%. The Portfolio is well represented in three industries which are full of
fast growing, profitable and well run companies. The Healthcare, Computer
Related & Business Equipment and Semiconductors industries represent 21.1%,
16.5% and 10.7%, respectively, of the Portfolio's composition. The Portfolio
held 20 companies for the entire period, purchased 44 new companies and
eliminated 38 companies. Intel Corporation, Cisco Systems, Inc. and Bay Networks
Inc. were held for the entire year and each realized increases in excess of
100%.
ALGER SMALL CAPITALIZATION PORTFOLIO
For the year ended October 31, 1995, the Alger Small Capitalization Portfolio
returned 46.2% significantly outperforming the Wilshire Small Company Growth
Index which returned 25.2% and the Russell 2000 Growth Index which returned
20.6% over the same period. During this one year period, we purchased 64 new
stocks, eliminated 54 and held 36 for the entire year. Of those stocks held for
the entire year, 21 posted gains in excess of 50%. Three stocks, Alliance
Semiconductor Corp., Altera Corporation and PhyCor performed particularly well
over the period each posting gains of 200% or more. At present, we still own
these companies as their products are innovative, in high demand by an expanding
marketplace and have earnings that continue to grow at very high rates.
ALGER BALANCED PORTFOLIO
The Alger Balanced Portfolio enjoyed a return of 27.6% for the twelve month
period ended October 31, 1995, while maintaining an approximately equal
allocation of common stocks and bonds. The relative benchmark indexes returned
26.4% for the S&P 500 Index and 16.2% for the Lehman Government / Corporate Bond
Index. Our conservative bond portfolio coupled with a moderately aggressive
stock portfolio provided the Alger Balanced Portfolio with excellent results.
ALGER MIDCAP GROWTH PORTFOLIO
The Alger MidCap Growth Portfolio continues to provide its investors with
strong, solid performance, returning 48.3% for the one year period ended October
31, 1995. Over the same period, the benchmark S&P MidCap 400 Index returned
21.2%. We added 39 new stocks, eliminated 25 and held 23 for the twelve month
period. Altera Corporation, Bay Networks Inc. and Glenayre Technologies Inc. are
three companies which the Portfolio held for the entire period and, in part,
contributed to its success. Possibly the most exciting and yet to be recognized
sectors of the equities market, midcap stocks have many of the upside
characteristics of small cap stocks without the attendant volatility
attributable to a lack of liquidity.
F-2
<PAGE>
ALGER CAPITAL APPRECIATION PORTFOLIO
At the time of this writing, the Alger Capital Appreciation Portfolio is one of
the nation's top performing mutual funds based on year-to-date 1995 total
return. Our newest mutual fund portfolio, the Capital Appreciation Portfolio
employs an "all cap" (small, medium and large capitalizations) portfolio
management strategy which has been implemented at Fred Alger Management for over
31 years. In addition, the Portfolio may employ a management technique known as
leveraging, that is borrowing money for investment purposes, in order to
increase the Portfolio's holdings and, therefore, its exposure to the stock
market. Over the year ended October 31, 1995, the Alger Capital Appreciation
Portfolio returned 67.6% relative to the S&P 500 Index which returned 26.4%. An
actively managed portfolio, the Alger Capital Appreciation Portfolio purchased
65 companies, sold 55 companies and held 21 for the entire year ended October
31, 1995. Similar to the Alger Growth Portfolio, the representative industry
groups at year end included Computer Related & Business Equipment 20.7%,
Semiconductors 18.8%, and Healthcare 16.0%.
ALGER MONEY MARKET PORTFOLIO
For the seven day period ended October 31, 1995, the Alger Money Market
Portfolio yielded 5.74% on a compounded annualized basis and 5.58% on a simple
annualized basis. The Portfolio continues to provide its shareholders with a
safe, steady return on their money.
LOOKING AHEAD
Despite the rally year-to-date, growth stocks generally remain undervalued
relative to the market. Technology stocks still represent excellent investments.
While they have moved up a great deal, so have their earnings. Consequently,
their price/earnings multiples have not greatly increased. An example of this is
one of our favorite holdings, Altera Corporation, which has appreciated
approximately 150% year-to-date . However, we expect Altera's earnings to be up
135% this year. Consequently, Altera is not trading at a substantially higher
multiple of 1995 earnings compared to its 1994 earnings at this point last year.
In 1991, I wrote a book entitled RAGING BULL: HOW TO INVEST IN THE GROWTH STOCKS
OF THE 90'S. In the last chapter I predicted that the Dow Jones Industrial
Average would reach 6,000 by the millennium and perhaps sooner based on seven
basic factors:
1. End of the Cold War, leading to increased American self confidence.
2. An average high level of employment, due mainly to demographics.
3. Modest inflation.
4. Normal real rates of interest.
5. Rapidly expanding exports.
6. The eventual elimination of the deficit.
7. Rapid technological change.
Generally, I think we are still on target (even the deficit point is being
debated) and I am extremely excited about the prospects for the market and
especially growth stocks during the next 5 years.
Respectfully submitted,
/s/ David D. Alger
David D. Alger
President
F-3
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Alger Growth Portfolio:
Portfolio Highlights...................... 5
Schedule of Investments................... 6-7
Financial Highlights...................... 8
Alger Small Capitalization Portfolio:
Portfolio Highlights...................... 9
Schedule of Investments................... 10-11
Financial Highlights...................... 12
Alger Balanced Portfolio:
Portfolio Highlights...................... 13
Schedule of Investments................... 14-15
Financial Highlights...................... 16
Alger MidCap Growth Portfolio:
Portfolio Highlights...................... 17
Schedule of Investments................... 18-19
Financial Highlights...................... 20
Alger Capital Appreciation Portfolio:
Portfolio Highlights...................... 21
Schedule of Investments................... 22-23
Financial Highlights...................... 24
Alger Money Market Portfolio:
Schedule of Investments................... 25
Financial Highlights...................... 26
Statements of Assets and Liabilities............................ 27
Statements of Operations........................................ 28
Statement of Cash Flows (Alger Capital Appreciation Portfolio).. 29
Statements of Changes in Net Assets............................. 30
Notes to Financial Statements................................... 31-34
Report of Independent Public Accountants........................ 35
F-4
<PAGE>
- --------------------------------------------------------------------------------
ALGER GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Growth Portfolio invests in companies which generally have broader
product lines, markets, financial resources and depth of management than
smaller, newer companies.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION November 11, 1986
- --------------------------------------------------------------------------------
[The following table represents a chart in the printed piece.]
Alger Growth S&P 500
------------ -------
11-11-86 10,000 10,000
10-31-87 9,700 10,537
10-31-88 10,450 12,097
10-31-89 13,270 15,290
10-31-90 12,740 14,145
10-31-91 18,574 18,883
10-31-92 20,369 20,767
10-31-93 26,311 23,871
10-31-94 27,383 24,794
10-31-95 37,728 31,350
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Growth Portfolio and the S&P 500 on November 11,
1986, the inception date of the Alger Growth Portfolio. The figures for both
the Alger Growth Portfolio and the S&P 500, an unmanaged index of common
stocks, include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH October 31, 1995
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 5 Years 11/11/86
-----------------------------------------------
Alger Growth Portfolio 37.78% 24.25% 15.95%
ASSUMING REDEMPTION AT THE
END OF EACH PERIOD 32.78% 24.08% 15.95%
S&P 500 26.44% 17.25% 13.58%
-----------------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE
AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND
THE PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
F-5
<PAGE>
THE ALGER FUND
ALGER GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1995
COMMON STOCKS--90.3% SHARES VALUE
------ -----
AIRLINES--1.3%
Delta Air Lines Inc......................... 30,000 $ 1,968,750
------------
BUILDING &
CONSTRUCTION--.4%
Pulte Corp.................................. 19,100 604,037
------------
COMMUNICATIONS--5.8%
ADC Telecommunications, Inc.*............... 16,600 664,000
DSC Communications Corporation*............. 67,900 2,512,300
Glenayre Technologies Inc.*................. 20,000 1,285,000
Tellabs, Inc.*.............................. 76,000 2,584,000
U.S. Robotics Corp.*........................ 20,000 1,850,000
------------
8,895,300
COMPUTER RELATED &
BUSINESS EQUIPMENT--16.5%
Altera Corporation*......................... 63,400 3,835,700
Bay Networks Inc.*.......................... 61,000 4,041,250
Cisco Systems, Inc.*........................ 37,800 2,929,500
Dell Computer Corporation*.................. 34,000 1,585,250
Hewlett-Packard Company..................... 34,000 3,149,250
Read-Rite Corporation*...................... 38,700 1,349,662
Seagate Technology*......................... 67,000 2,998,250
3 Com Corp.*................................ 40,000 1,880,000
Xilinx, Inc.*............................... 80,000 3,680,000
------------
25,448,862
------------
COMPUTER SOFTWARE--2.1%
Informix Corporation*....................... 50,000 1,456,250
Learning Company (The)*..................... 30,000 1,770,000
------------
3,226,250
------------
COMPUTER TECHNOLOGY--1.3%
AVX Corporation*............................ 25,000 778,125
Silicon Graphics, Inc.*..................... 38,000 1,263,500
------------
2,041,625
------------
DEFENSE--5.1%
Lockheed Martin Corp........................ 38,789 2,642,500
Loral Corporation........................... 79,000 2,340,375
McDonnell Douglas Corporation............... 35,500 2,902,125
------------
7,885,000
------------
FINANCIAL SERVICES--6.4%
First Data Corporation...................... 63,112 4,173,297
Merrill Lynch & Co., Inc.................... 65,000 3,607,500
Schwab (Charles) Corporation (The).......... 90,600 2,072,475
------------
9,853,272
------------
FREIGHT--1.9%
Federal Express Corp.*...................... 35,200 2,890,800
------------
HEALTHCARE--21.1%
Apria Healthcare Group Inc.*................ 33,600 726,600
Biochem Pharma Inc.*........................ 75,000 2,868,750
Boston Scientific Corporation*.............. 30,000 1,263,750
Cardinal Health, Inc........................ 52,400 2,692,050
Columbia/HCA Healthcare
Corporation.............................. 70,000 3,438,750
Genzyme Corp.--General Division*............ 17,500 1,019,375
Healthsource, Inc.*......................... 75,300 3,990,900
IMNET Systems, Inc.*........................ 35,000 888,125
Lilly (Eli) Co.............................. 34,000 3,285,250
Medtronic, Inc.............................. 29,400 1,697,850
Merck & Co., Inc............................ 40,000 2,300,000
Nellcor Puritan Bennett Inc.*............... 11,300 649,750
Oxford Health Plans, Inc.*.................. 19,700 1,541,525
SmithKline Beecham PLC ADS.................. 75,800 3,932,125
Summit Technology Inc.*..................... 36,100 1,606,450
United Healthcare Corporation............... 14,000 743,750
------------
32,645,000
------------
LEISURE &
ENTERTAINMENT--2.8%
Disney (Walt) Productions................... 25,000 1,440,625
Mirage Resorts, Incorporated*............... 38,000 1,244,500
Viacom Inc. Cl. B.*......................... 33,000 1,650,000
------------
4,335,125
------------
RESTAURANTS &
LODGING--4.2%
Cracker Barrel Old Country
Stores, Inc.............................. 51,000 867,000
La Quinta Inns, Inc......................... 65,000 1,673,750
Lone Star Steakhouse & Saloon, Inc.*........ 103,100 3,982,237
------------
6,522,987
------------
RETAILING--4.7%
OfficeMax, Inc.*............................ 157,700 3,903,075
Tandy Corporation........................... 38,700 1,910,813
Viking Office Products, Inc.*............... 34,000 1,513,000
------------
7,326,888
------------
SEMICONDUCTORS--10.7%
Cirrus Logic, Inc.*......................... 35,000 1,474,375
Intel Corporation........................... 23,800 1,663,025
LSI Logic Corporation*...................... 72,000 3,393,000
Linear Technology Corporation............... 40,000 1,750,000
Maxim Integrated Products, Inc.*............ 45,000 3,363,750
MEMC Electronic Materials, Inc.*............ 25,000 800,000
Micron Technology, Inc...................... 36,000 2,542,500
Texas Instruments, Incorporated............. 22,000 1,501,500
------------
16,488,150
------------
F-6
<PAGE>
THE ALGER FUND
ALGER GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1995
COMMON STOCKS--(cont.) SHARES VALUE
------ -----
SEMICONDUCTORS CAPITAL
EQUIPMENT--2.8%
Applied Materials, Inc.*.................... 49,600 $ 2,486,200
Teradyne, Inc.*............................. 54,500 1,818,938
------------
4,305,138
------------
MISCELLANEOUS--3.2%
Loewen Group Inc............................ 47,100 1,886,237
Service Corporation International..
......... 76,300 3,061,538
------------
4,947,775
------------
Total Common Stocks
(Cost $110,075,444)...................... 139,384,959
------------
Warrants
MANUFACTURING
Windmere Corp. Warrants,
expire 1/19/98 (Cost $61)................ 81 0
------------
PRINCIPAL
SHORT-TERM CORPORATE AMOUNT VALUE
NOTES--9.3% --------- -----
Allied Signal Inc.,
5.75%, 11/10/95 (a).................... $7,300,000 $ 7,289,506
AT&T Corp.,
5.73%, 11/14/95........................ 4,400,000 4,390,896
International Lease Finance Corp.,
5.72%, 11/01/95........................ 400,000 400,000
Merrill Lynch & Co., Inc.,
5.73%, 11/07/95........................ 600,000 599,427
Spiegel Funding Corp.,
5.80%, 11/06/95........................ 700,000 699,436
Washington Square Mortgage Co,
5.78%, 11/03/95........................ 900,000 899,711
------------
Total Short-Term Corporate Notes
(Cost $14,278,976)....................... 14,278,976
------------
Total Investments
(Cost $124,354,481)(b)................... 99.6% 153,663,935
Other Assets in Excess of Liabilities....... .4 619,770
------ ------------
Net Assets.................................. 100.0% $154,283,705
====== ============
* Non-income producing security.
(a)Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity only to qualified institutional buyers.
(b)At October 31, 1995, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $124,354,481, amounted to
$29,309,454, which consisted of aggregate gross unrealized appreciation of
$31,956,544, and aggregate gross unrealized depreciation of $2,647,090.
See Notes to Financial Statements.
F-7
<PAGE>
THE ALGER FUND
ALGER GROWTH PORTFOLIO
Financial Highlights
For a share outstanding throughout the period (i)
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 6.97 $ 7.43 $ 5.76 $ 5.77 $ 4.25
-------- -------- ------- ------- -------
Net investment income (loss)................. (.02) (.07)(ii) (.02) (.06)(ii) (.02)
Net realized and unrealized gain (loss)
on investments............................ 2.59 .35 1.70 .61 1.86
-------- -------- ------- ------- -------
Total from investment operations............. 2.57 .28 1.68 .55 1.84
Distributions from net realized gains........ (.16) (.74) (.01) (.56) (.32)
-------- -------- ------- ------- -------
Net asset value, end of year................. $ 9.38 $ 6.97 $ 7.43 $ 5.76 $ 5.77
======== ======== ======= ======= =======
Total Return (iii)........................... 37.8% 4.1% 29.2% 9.7% 45.8%
======== ======== ======= ======= =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)... $154,284 $ 76,390 $37,988 $19,379 $10,213
======== ======== ======= ======= =======
Ratio of expenses to average net assets.... 2.09%(iv) 2.20% 2.20% 2.32% 2.70%
======== ======== ======= ======= =======
Ratio of net investment income (loss)
to average net assets................... (1.03%) (1.01%) (1.16%) (1.07%) (1.06%)
======== ======== ======= ======= =======
Portfolio Turnover Rate.................... 118.16% 103.86% 108.54% 69.28% 76.06%
======== ======== ======= ======= =======
</TABLE>
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock
split which occurred September 27, 1995.
(ii) Amount was computed based on average shares outstanding during the period.
(iii) Does not reflect contingent deferred sales charge.
(iv) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 2.07%.
See Notes to Financial Statements.
F-8
<PAGE>
- --------------------------------------------------------------------------------
ALGER SMALL CAPITALIZATION PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Small Capitalization Portfolio invests in small, fast-growing
companies that offer innovative products, services, or technologies to a
rapidly expanding marketplace.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION November 11, 1986
- --------------------------------------------------------------------------------
[The following table represents a chart in the printed piece.]
Wilshire
Small Russell
Company 2,000
Growth Growth
Index S&P 500 Index
-------- ------- -------
11-11-86 10,000 10,000 10,000
10-31-87 8,595 9,000 8,336
10-31-88 10,605 10,740 10,301
10-31-89 12,639 17,730 12,229
10-31-90 8,603 16,474 9,008
10-31-91 15,065 26,975 15,001
10-31-92 16,133 27,899 14,947
10-31-93 20,989 35,093 19,083
10-31-94 22,013 34,726 18,909
10-31-95 27,560 50,753 22,798
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Small Capitalization Portfolio, Wilshire Small
Company Growth Index and the Russell 2000 Growth Index on November 11, 1986,
the inception date of the Alger Small Capitalization Portfolio. The figures
for the Alger Small Capitalization Portfolio, Wilshire Small Company Growth
Index (an unmanaged index of common stocks) and the Russell 2000 Growth Index
(an unmanaged index of common stocks) include reinvestment of dividends. For
the upcoming fiscal year, the Portfolio will use only the Russell 2000 Growth
Index (the "Russell 2000") as a comparative index. The Portfolio has elected
to change its comparative index because management of the Portfolio believes
the size of the companies in the Russell 2000 is more representative of the
size of the companies in which the Portfolio invests.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH October 31, 1995
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 5 Years 11/11/86
-------------------------------------
Alger Small Capitalization Portfolio 46.15% 25.24% 19.85%
ASSUMING REDEMPTION AT THE
END OF EACH PERIOD 41.15% 25.07% 19.85%
Wilshire Small Co. Growth Index 25.20% 26.22% 11.96%
Russell 2000 Growth Index 20.57% 20.41% 9.62%
-------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE
AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND
THE PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
F-9
<PAGE>
THE ALGER FUND
ALGER SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1995
COMMON STOCKS--90.3% SHARES VALUE
------ -----
APPAREL--1.4%
Kenneth Cole Productions
Inc. Cl. A.*........................... 52,200 $ 2,133,675
Tommy Hilfiger Corporation*............... 117,700 4,487,312
------------
6,620,987
------------
COMMUNICATIONS--15.1%
ADC Telecommunications, Inc.*............. 140,800 5,632,000
Ascend Communications, Inc.*.............. 148,400 9,646,000
DSC Communications Corporation*........... 216,600 8,014,200
DSP Communications, Inc.*................. 80,000 2,900,000
Glenayre Technologies Inc.*............... 264,750 17,010,186
Network Equipment
Technologies, Inc.*.................... 170,400 5,559,300
Tekelec Inc.*............................. 41,800 606,100
Tellabs, Inc.*............................ 236,300 8,034,200
U.S. Robotics Corp.*...................... 136,000 12,580,000
------------
69,981,986
------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--10.2%
Altera Corporation*....................... 246,000 14,883,000
Avid Technology, Inc.*.................... 20,000 875,000
Bay Networks Inc.*........................ 230,400 15,264,000
Creative Technology Ltd.*................. 129,000 1,499,624
ESS Technology, Inc.*..................... 100,000 3,000,000
Gateway 2000, Inc.*....................... 25,000 834,375
Komag, Incorporated*...................... 102,300 5,831,100
Read-Rite Corporation*.................... 138,300 4,823,214
Xilinx, Inc.*............................. 7,500 345,000
------------
47,355,313
------------
COMPUTER SOFTWARE--8.7%
Activision Inc.*.......................... 71,000 1,189,250
Broderbund Software, Inc.*................ 20,000 1,387,500
Computron Software, Inc.*................. 25,000 425,000
Electronics For Imaging Inc.*............. 140,000 11,515,000
Enterprise Systems Inc.*.................. 25,000 584,375
EPIC Design Technology, Inc.*............. 23,000 1,058,000
Informix Corporation*..................... 345,000 10,048,125
INSO Corp*................................ 40,000 1,430,000
S3 Incorporated*.......................... 300,000 5,137,500
Softkey International Inc.*............... 149,000 4,693,500
Symantec Corp.*........................... 40,000 972,520
Wonderware Corporation*................... 54,600 1,733,550
------------
40,174,320
------------
COMPUTER
TECHNOLOGY--3.5%
Adaptec, Inc.*............................ 96,100 4,276,450
ADFlex Solutions, Inc.*................... 62,500 1,656,250
C.P. Clare Corporation*................... 156,900 4,059,790
Integrated Silicon Systems, Inc.*......... 72,000 2,115,000
Pinnacle Systems, Inc.*................... 130,000 4,078,750
------------
16,186,240
------------
CONSUMER PRODUCTS--1.3%
Oakley, Inc.*............................. 177,000 6,106,500
------------
FINANCIAL SERVICES--3.6%
Advanta Corp. Class B..................... 96,100 3,435,575
Oxford Resources Corp. Cl. A.*............ 100,000 2,625,000
Schwab (Charles) Corporation (The)........ 456,100 10,433,290
------------
16,493,865
------------
HEALTHCARE--12.7%
Apria Healthcare Group Inc.*.............. 43,800 947,175
Biochem Pharma Inc.*...................... 315,000 12,048,750
CellPro Incorporated*..................... 28,000 325,500
CompDent Corp.*........................... 40,000 1,245,000
Genzyme Corp.--General Division*.......... 60,000 3,495,000
HBO & Company............................. 67,500 4,775,625
Health Management Associates, Inc.* ...... 118,950 2,557,423
Healthsource, Inc.*....................... 143,800 7,621,400
Hologic, Inc.*............................ 25,000 650,000
I-Stat Corp.*............................. 30,000 930,000
IDEXX Laboratories Inc.*.................. 30,000 1,222,500
Liposome Company Inc.*.................... 235,000 3,613,125
Metra Biosystems, Inc.*................... 105,000 1,942,500
Omnicare, Inc............................. 111,800 4,052,750
PhyCor Inc.*.............................. 64,125 2,356,593
Sepracor Inc.*............................ 50,000 843,750
Summit Technology Inc.*................... 95,900 4,267,550
Sybron International Corp.*............... 64,900 2,758,250
Target Therapeutics, Inc.*................ 40,000 3,100,000
------------
58,752,891
------------
POLLUTION CONTROL--2.5%
United Waste Systems, Inc.*............... 159,000 6,280,500
USA Waste Services, Inc.*................. 255,100 5,357,100
------------
11,637,600
------------
RESTAURANTS &
LODGING--4.7%
Apple South, Inc.......................... 29,500 604,750
DF&R Restaurants, Inc.*................... 5,000 152,500
Landry's Seafood Restaurants, Inc.*....... 263,400 3,555,900
Lone Star Steakhouse & Saloon, Inc.* 303,400 11,718,824
O'Charley's Inc.*......................... 120,500 1,385,750
Outback Steakhouse, Inc.*................. 141,500 4,439,564
------------
21,857,288
------------
F-10
<PAGE>
THE ALGER FUND
ALGER SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1995
RETAILING--5.6%
CompUSA Inc.*............................. 62,900 $ 2,405,925
Fabri-Centers Of America Inc.
Cl. A.*................................ 104,600 1,555,925
Fabri-Centers Of America Inc.
Cl B.*................................. 83,500 970,688
Gucci Group NV*........................... 133,000 3,990,000
Guest Supply Inc.*........................ 136,500 2,576,436
OfficeMax, Inc.*.......................... 262,500 6,496,875
Viking Office Products, Inc.*............. 179,200 7,974,400
------------
25,970,249
------------
SEMICONDUCTORS--19.3%
Alliance Semiconductor Corp.*............. 256,875 7,898,904
Cirrus Logic, Inc.*....................... 255,000 10,741,875
Integrated Device Technology, Inc.* ...... 327,000 6,213,000
Intel Corporation......................... 40,000 2,795,000
LSI Logic Corporation*.................... 193,000 9,095,125
LTX Corporation*.......................... 212,000 2,623,500
Linear Technology Corporation............. 315,000 13,781,250
Maxim Integrated Products, Inc.*.......... 234,600 17,536,350
Micrel, Incorporated*..................... 9,000 204,750
Micro Linear Corporation*................. 218,400 3,357,900
Microchip Technology Incorporated*. ...... 326,500 12,958,131
TriQuint Semiconductor, Inc.*............. 100,000 2,275,000
------------
89,480,785
------------
SEMICONDUCTORS
CAPITAL EQUIPMENT--6.5%
AG Associates, Inc.*...................... 75,000 1,659,375
ASM Lithography Holdings *................ 12,500 620,310
Electroglas, Inc.*........................ 12,500 878,125
FSI International, Inc.*.................. 92,000 2,185,000
GaSonics International Corp.*............. 178,000 5,874,000
Lam Research Corporation*................. 84,500 5,143,937
Opal, Inc.*............................... 48,000 726,000
PRI Automation, Inc.*..................... 81,600 3,019,200
Semitool, Inc............................. 132,950 2,160,438
Silicon Valley Group, Inc.*............... 94,000 3,043,250
Tencor Instruments*....................... 118,600 5,055,325
Ultratech Stepper, Inc.*.................. 5,000 200,000
------------
30,564,960
------------
MISCELLANEOUS--.9%
Loewen Group Inc.......................... 100,000 4,004,750
------------
Total Common Stocks
(Cost $287,758,762).................... 445,187,734
------------
Short-Term Principal
Corporate Notes--3.5% Amount
---------
AT&T Corp.,
5.73%, 11/14/95........................ $6,500,000 6,486,550
International Lease Finance Corp.,
5.72%, 11/01/95........................ 1,400,000 1,400,000
Merrill Lynch & Co., Inc.,
5.73%, 11/07/95........................ 1,300,000 1,298,759
Spiegel Funding Corp.,
5.80%, 11/06/95........................ 7,100,000 7,094,281
------------
Total Short-Term Corporate Notes
(Cost $16,279,590)..................... 16,279,590
------------
Total Investments
(Cost $304,038,352)(a)................. 99.5% 461,467,324
Other Assets in Excess
of Liabilities......................... .5 2,250,428
----- ------------
Net Assets................................ 100.0% $463,717,752
===== ============
* Non-income producing security.
(a)At October 31, 1995, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $304,038,352, amounted to
$157,428,972, which consisted of aggregate gross unrealized appreciation of
$162,412,994 and aggregate gross unrealized depreciation of $4,984,022.
See Notes to Financial Statements.
F-11
<PAGE>
THE ALGER FUND
ALGER SMALL CAPITALIZATION PORTFOLIO
Financial Highlights
For a share outstanding throughout the period (i)
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 7.62 $ 8.65 $ 6.88 $ 6.97 $ 4.33
-------- -------- -------- -------- --------
Net investment income (loss)................. (.13) (.09) (.08) (.11)(ii) (.03)
Net realized and unrealized gain (loss)
on investments............................ 3.64 (.02) 1.85 .37 2.76
Total from investment operations............. 3.51 (.11) 1.77 .26 2.73
Distributions from net realized gains........ -- (.92) -- (.35) (.09)
-------- -------- -------- -------- --------
Net asset value, end of year................. $ 11.13 $ 7.62 $ 8.65 $ 6.88 $ 6.97
Total Return (iii)........................... 46.2% (1.1%) 25.8% 3.4% 63.7%
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)... $463,718 $294,890 $300,108 $182,432 $ 61,273
======== ======== ======== ======== ========
Ratio of expenses to average net assets.... 2.11%(iv) 2.18% 2.13% 2.17% 2.23%
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets................... (1.75%) (1.51%) (1.52%) (1.64%) (1.37%)
======== ======== ======== ======== ========
Portfolio Turnover Rate.................... 97.37% 131.86% 148.49% 121.00% 171.04%
======== ======== ======== ======== ========
</TABLE>
(i) Per share data has been adjusted to reflect the effect of a 3 for 1
stock split which occurred September 27, 1995.
(ii) Amount was computed based on average shares outstanding during the period.
(iii) Does not reflect contingent deferred sales charge.
(iv) Reflects total expenses, including fees offset by earnings credits.
The expense ratio net of earnings credits would have been the same.
See Notes to Financial Statements.
F-12
<PAGE>
- --------------------------------------------------------------------------------
ALGER BALANCED PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Balanced Portfolio invests in stocks of companies with growth
potential and fixed-income securities, with emphasis on income-producing
securities which appear to have some potential for capital appreciation.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION June 1, 1992
- --------------------------------------------------------------------------------
[The following table represents a chart in the printed piece.]
Lehman Govt/
Balanced S&P 500 Corp Bond Index
-------- ------- ---------------
06-01-92 10,000 10,000 10,000
10-31-92 9,950 10,196 10,479
10-31-93 11,180 11,722 11,911
10-31-94 10,736 12,175 11,356
10-31-95 13,500 15,395 13,193
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Balanced Portfolio, the S&P 500 Index, and the
Lehman Government/Corporate Bond Index on June 1, 1992, the inception date
of the Alger Balanced Portfolio. Figures for the Alger Balanced Portfolio,
the S&P 500, an unmanaged index of common stocks, and the Lehman
Government/Corporate Bond Index, an unmanaged index of government and
corporate bonds, include reinvestment of dividends and/or interest.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH October 31, 1995
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 6/1/92
------------------------------
Alger Balanced Portfolio 27.61% 9.65%
ASSUMING REDEMPTION AT THE
END OF EACH PERIOD 22.61% 9.17%
S&P 500 26.44% 13.45%
Lehman Corp./Gov't Bond Index 16.16% 8.44%
------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE
AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND
THE PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
F-13
<PAGE>
THE ALGER FUND
ALGER BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1995
COMMON STOCKS--52.1% SHARES VALUE
------ -----
AIRLINES--.6%
Delta Air Lines Inc......................... 600 $ 39,375
------------
APPAREL--.8%
Tommy Hilfiger Corporation*................. 1,300 49,563
------------
COMMUNICATIONS--4.9%
DSC Communications Corporation*............. 1,000 37,000
Glenayre Technologies Inc.*................. 2,025 130,106
Tellabs, Inc.*.............................. 1,800 61,200
U.S. Robotics Corp.*........................ 800 74,000
------------
302,306
------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--7.5%
Altera Corporation*......................... 1,600 96,800
Cisco Systems, Inc.*........................ 900 69,750
Dell Computer Corporation*.................. 800 37,300
Hewlett-Packard Company..................... 800 74,100
Seagate Technology*......................... 2,000 89,500
Xilinx, Inc.*............................... 2,100 96,600
------------
464,050
------------
COMPUTER SOFTWARE--1.1%
Informix Corporation.*...................... 2,400 69,900
------------
COMPUTER TECHNOLOGY--.3%
AVX Corporation*............................ 500 15,563
------------
DEFENSE--2.7%
Lockheed Martin Corp........................ 652 44,418
Loral Corporation........................... 2,000 59,250
McDonnell Douglas Corporation............... 800 65,400
------------
169,068
------------
FINANCIAL SERVICES--4.0%
First Data Corporation...................... 1,869 123,569
Lehman Brothers Holdings Inc................ 1,200 26,100
Merrill Lynch & Co., Inc.................... 1,200 66,600
Schwab (Charles) Corporation (The).......... 1,500 34,313
------------
250,582
------------
FREIGHT--1.1%
Federal Express Corp.*...................... 800 65,700
------------
HEALTHCARE--10.3%
Biochem Pharma Inc.*........................ 1,000 38,250
Boston Scientific Corporation*.............. 700 29,488
Cardinal Health, Inc........................ 1,200 61,650
Columbia/HCA Healthcare
Corporation.............................. 1,500 73,688
Healthsource, Inc.*......................... 1,500 79,500
Lilly (Eli) Co.............................. 800 77,300
Merck & Co., Inc............................ 900 51,750
Nellcor Puritan Bennett Inc.*............... 500 28,750
Omnicare, Inc............................... 400 14,500
Oxford Health Plans, Inc.*.................. 400 31,300
SmithKline Beecham PLC ADS.................. 1,500 77,813
Summit Technology Inc.*..................... 1,700 75,650
------------
639,639
------------
LEISURE & ENTERTAINMENT--2.3%
Disney (Walt) Productions................... 800 46,100
Mirage Resorts, Incorporated*............... 1,000 32,750
Viacom Inc. Cl B.*.......................... 1,300 65,000
------------
143,850
------------
RESTAURANTS & LODGING--2.8%
La Quinta Inns, Inc......................... 2,200 56,650
Lone Star Steakhouse & Saloon, Inc.*........ 2,300 88,838
Outback Steakhouse, Inc.*................... 1,000 31,375
------------
176,863
------------
RETAILING--2.9%
CompUSA Inc.*............................... 1,000 38,250
OfficeMax, Inc.*............................ 3,750 92,813
Tandy Corporation........................... 1,000 49,375
------------
180,438
------------
SEMICONDUCTORS--6.6%
Intel Corporation........................... 900 62,888
LSI Logic Corporation*...................... 1,000 47,125
Linear Technology Corporation............... 1,200 52,500
Maxim Integrated Products, Inc.*............ 1,300 97,175
Microchip Technology Incorporated*.......... 1,000 39,688
Micron Technology, Inc...................... 800 56,500
Texas Instruments, Incorporated............. 800 54,600
------------
410,476
------------
SEMICONDUCTORS
CAPITAL EQUIPMENT--1.8%
Applied Materials, Inc.*.................... 1,400 70,175
Teradyne, Inc.*............................. 1,300 43,388
------------
113,563
------------
F-14
<PAGE>
THE ALGER FUND
ALGER BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1995
COMMON STOCKS--(cont.) SHARES VALUE
------ -----
MISCELLANEOUS--2.4%
Loewen Group Inc............................ 1,700 $ 68,080
Service Corporation International........... 2,000 80,250
------------
148,330
------------
Total Common Stocks (Cost $2,463,475)....... 3,239,266
------------
Principal
Amount
---------
Corporate Bonds--6.6%
AUTOMOTIVE--1.7%
Ford Motor Credit Corp.,
7.75%, 11/15/02.......................... $100,000 106,867
------------
BROKERAGE--1.5%
Merrill Lynch & Co., Inc.,
6.375%, 9/08/06.......................... 100,000 95,239
------------
FINANCIAL SERVICES--3.4%
Associates Corp. of North America
7.50%, 4/15/02........................... 200,000 211,010
------------
Total Corporate Bonds
(Cost $390,024).......................... 413,116
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--20.3%
U.S. Treasury Notes,
7.50%, 10/31/99.......................... 100,000 106,016
U.S. Treasury Notes,
6.375%, 1/15/00.......................... 100,000 102,094
U.S. Treasury Notes,
7.50%, 5/15/02........................... 100,000 108,672
U.S. Treasury Notes,
5.75%, 9/30/97........................... 250,000 250,625
U.S. Treasury Bonds,
7.625%, 11/15/22......................... 100,000 115,297
Federal Home Loan Mortgage Corp.,
8.20%, 1/16/98........................... 100,000 102,859
Federal Home Loan Mortgage Corp.,
4.75%, 9/20/00........................... 120,000 116,400
Federal Home Loan Mortgage Corp.,
6.50%, 6/10/03........................... 150,000 147,891
Federal National Mortgage Assoc.,
7.39%, 7/15/99........................... 100,000 100,969
Federal National Mortgage Assoc.,
8.50%, 2/01/05........................... 100,000 108,031
------------
Total U.S. Government
& Agency Obligations
(Cost $1,203,007)........................ $1,258,854
------------
SHORT-TERM
CORPORATE NOTES--9.8%
Allied Signal Inc.,
5.75%, 11/10/95 (a)...................... $250,000 249,641
International Lease Finance Corp.,
5.72%, 11/01/95.......................... 160,000 160,000
Spiegel Funding Corp.,
5.73%, 11/02/95.......................... 200,000 199,968
------------
Total Short-Term Corporate Notes
(Cost $609,609).......................... 609,609
------------
SHORT-TERM
U.S. GOVERNMENT
OBLIGATIONS--5.5%
U.S. Treasury Bills,
5.64%, 11/09/95.......................... 75,000 74,906
5.29%, 10/17/96.......................... 280,000 266,024
------------
Total Short-Term U.S. Government
Obligations (Cost $340,461).............. 340,930
------------
Total Investments
(Cost $5,006,576)(b)..................... 94.3% 5,861,775
Other Assets in Excess of Liabilities....... 5.7 351,866
----- ------------
Net Assets.................................. 100.0% $6,213,641
===== ============
* Non-income producing security.
(a)Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity only to qualified institutional buyers.
(b)At October 31, 1995, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $5,006,576, amounted to $855,199,
which consisted of aggregate gross unrealized appreciation of $930,445 and
aggregate gross unrealized depreciation of $75,246.
See Notes to Financial Statements.
F-15
<PAGE>
THE ALGER FUND
ALGER BALANCED PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
From June 1, 1992
Year Ended October 31, (commencement of
--------------------------------------------- operations)
1995 1994 1993 to October 31, 1992(iii)
-------- -------- -------- ------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of year.............................. $ 10.65 $ 11.18 $ 9.95 $ 10.00
-------- -------- -------- ----------
Net investment income (loss)............ (.02)(i) (.05) (.01) (.12)
Net realized and unrealized
gain (loss) on investments........... 2.96 (.39) 1.24 .07
-------- -------- -------- ----------
Total from investment
operations........................... 2.94 (.44) 1.23 (.05)
Distributions from net realized
gains................................ ---- (.09) ---- ----
-------- -------- -------- ----------
Net asset value, end of year............ $ 13.59 $ 10.65 $ 11.18 $ 9.95
======== ======== ======== ==========
Total Return (ii)....................... 27.6% (4.0%) 12.4% (0.5%)
======== ======== ======== ==========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted).................... $ 6,214 $ 3,073 $ 3,125 $ 1,370
======== ======== ======== ==========
Ratio of expenses to average
net assets......................... 3.34%(iv) 3.18% 3.82% 5.62%
======== ======== ======== ==========
Decrease reflected in above
expense ratios due to expense
reimbursements--Note 3(a).......... .24% ---- .75% .75%
======== ======== ======== ==========
Ratio of net investment income
(loss) to average net assets....... (.13%) (.41%) (.97%) (3.07%)
======== ======== ======== ==========
Portfolio Turnover Rate................. 84.06% 84.88% 115.17% 17.07%
======== ======== ======== ==========
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) Does not reflect contingent deferred sales charge.
(iii) Ratios have been annualized; total return has not been annualized.
(iv) Reflects total expenses, including fees offset by earnings credits.
The expense ratio net of earnings credits would have been 3.25%.
See Notes to Financial Statements.
F-16
<PAGE>
- --------------------------------------------------------------------------------
ALGER MIDCAP GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger MidCap Growth Portfolio invests in mid-sized companies.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION May 24, 1993
- --------------------------------------------------------------------------------
[The following table represents a chart in the printed piece.]
MidCap
Growth S&P 400
------ -------
05-24-93 10,000 10,000
10-31-93 12,480 10,714
10-31-94 13,062 10,969
10-31-95 19,073 13,296
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger MidCap Growth Portfolio and the S&P MidCap 400
Index on May 24, 1993, the inception date of the Alger MidCap Growth
Portfolio. Figures for the Alger MidCap Growth Portfolio and the S&P MidCap
400 Index, an unmanaged index of common stocks, include reinvestment of
dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH October 31, 1995
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 5/24/93
--------------------------------
Alger MidCap Growth Portfolio 48.32% 31.11%
ASSUMING REDEMPTION AT THE
END OF EACH PERIOD 43.32% 30.28%
S&P MidCap 400 Index 21.21% 12.38%
--------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE
AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND
THE PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
F-17
<PAGE>
THE ALGER FUND
ALGER MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1995
COMMON STOCKS--88.7% SHARES VALUE
------ -----
APPAREL--.9%
Tommy Hilfiger Corporation*................. 13,000 $ 495,625
------------
BUILDING & CONSTRUCTION--.6%
Pulte Corp.................................. 10,900 344,713
------------
COMMUNICATIONS--8.9%
Ascend Communications, Inc.*................ 14,000 910,000
DSC Communications Corporation*............. 17,200 636,400
Glenayre Technologies Inc.*................. 21,150 1,358,888
Tellabs, Inc.*.............................. 24,000 816,000
U.S. Robotics Corp.*........................ 12,000 1,110,000
------------
4,831,288
------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--12.5%
Altera Corporation*......................... 24,800 1,500,400
Bay Networks Inc.*.......................... 24,000 1,590,000
Dell Computer Corporation*.................. 8,800 410,300
Read-Rite Corporation*...................... 13,100 456,862
Seagate Technology*......................... 25,000 1,118,750
3 Com Corp.*................................ 6,000 282,000
Xilinx, Inc.*............................... 30,200 1,389,200
------------
6,747,512
------------
COMPUTER SOFTWARE--2.5%
Computron Software, Inc.*................... 15,000 255,000
Informix Corporation*....................... 16,800 489,300
Learning Company (The)*..................... 10,000 590,000
------------
1,334,300
------------
COMPUTER TECHNOLOGY--2.5%
AVX Corporation*............................ 8,000 249,000
Adaptec, Inc.*.............................. 12,000 534,000
Integrated Silicon Systems, Inc.*........... 20,000 587,500
------------
1,370,500
------------
CONSUMER PRODUCTS--2.0%
CUC International Inc.*..................... 9,000 311,625
Oakley, Inc.*............................... 22,500 776,250
------------
1,087,875
------------
FINANCIAL SERVICES--4.3%
Advanta Corp. Class B....................... 7,250 259,188
First Data Corporation...................... 22,445 1,484,169
Lehman Brothers Holdings Inc................ 14,200 308,850
Schwab (Charles) Corporation (The).......... 10,900 249,338
------------
2,301,545
------------
HEALTHCARE--16.6%
Apria Healthcare Group Inc.*................ 15,300 330,862
Biochem Pharma Inc.*........................ 30,300 1,158,975
Boston Scientific Corporation*.............. 10,000 421,250
Cardinal Health, Inc........................ 22,000 1,130,250
Genzyme Corp.--General Division*............ 10,000 582,500
Health Management Associates, Inc.*......... 25,500 548,250
Healthsource, Inc.*......................... 25,800 1,367,400
MedPartners, Inc.*.......................... 24,000 672,000
Nellcor Puritan Bennett Inc.*............... 5,600 322,000
Oxford Health Plans, Inc.*.................. 12,900 1,009,425
Summit Technology Inc.*..................... 27,300 1,214,850
United Healthcare Corporation............... 3,600 191,250
------------
8,949,012
------------
LEISURE & ENTERTAINMENT--.6%
Mirage Resorts, Incorporated*............... 9,200 301,300
------------
POLLUTION CONTROL--4.3%
United Waste Systems, Inc.*................. 25,000 987,500
USA Waste Services, Inc.*................... 65,200 1,369,200
------------
2,356,700
------------
RESTAURANTS & LODGING--5.4%
La Quinta Inns, Inc......................... 35,000 901,250
Lone Star Steakhouse & Saloon, Inc.*........ 37,100 1,432,988
Outback Steakhouse, Inc.*................... 18,500 580,438
------------
2,914,676
------------
RETAILING--8.5%
CompUSA Inc.*............................... 21,000 803,250
Global DirectMail Corp.*.................... 20,000 545,000
OfficeMax, Inc.*............................ 58,500 1,447,875
Tandy Corporation........................... 19,900 982,562
Viking Office Products, Inc.*............... 18,200 809,900
------------
4,588,587
SEMICONDUCTORS--10.7%
Alliance Semiconductor Corp.*............... 15,000 461,250
Cirrus Logic, Inc.*......................... 15,000 631,875
Integrated Device Technology, Inc.*......... 23,400 444,600
LSI Logic Corporation*...................... 21,500 1,013,188
Linear Technology Corporation............... 25,000 1,093,750
Maxim Integrated Products, Inc.*............ 18,000 1,345,500
Microchip Technology Incorporated*.......... 20,000 793,760
------------
5,783,923
------------
SEMICONDUCTORS CAPITAL
EQUIPMENT--4.2%
ASM Lithography Holdings*................... 13,000 645,125
Lam Research Corporation*................... 11,000 669,625
OnTrak Systems, Inc.*....................... 11,000 215,875
Teradyne, Inc.*............................. 21,700 724,238
------------
2,254,863
------------
F-18
<PAGE>
THE ALGER FUND
ALGER MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1995
COMMON STOCKS--(cont.) SHARES VALUE
------ -----
MISCELLANEOUS--4.2%
Loewen Group Inc.......................... 25,000 $ 1,001,188
Service Corporation International......... 31,600 1,267,950
------------
2,269,138
------------
Total Common Stocks
(Cost $ 38,217,155).................... 47,931,557
------------
SHORT-TERM PRINCIPAL
CORPORATE NOTES--11.7% AMOUNT VALUE
--------- -----
AT&T Corp.,
5.73%, 11/14/95........................ $1,200,000 $ 1,197,517
International Lease Finance Corp.,
5.72%, 11/01/95........................ 1,200,000 1,200,000
Merrill Lynch & Co., Inc.,
5.73%, 11/07/95........................ 100,000 99,905
Spiegel Funding Corp.,
5.73%, 11/02/95........................ 1,300,000 1,299,793
5.80%, 11/06/95........................ 1,000,000 999,194
State Mutual Life Assurance Co.
of America,
5.73%, 11/03/95........................ 1,400,000 1,399,554
Washington Square Mortgage Co.,
5.78%, 11/03/95........................ 100,000 99,968
------------
Total Short-Term Corporate Notes
(Cost $6,295,931)...................... 6,295,931
------------
Total Investments
(Cost $44,513,086)(a).................. 100.4% 54,227,488
Liabilities in Excess of
Other Assets........................... (.4) (211,008)
----- ------------
Net Assets................................ 100.0% $54,016,480
===== ============
* Non-income producing security.
(a) At October 31, 1995, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $44,513,086, amounted to
$9,714,402, which consisted of aggregate gross unrealized appreciation of
$10,781,781 and aggregate gross unrealized depreciation of $1,067,379.
See Notes to Financial Statements.
F-19
<PAGE>
THE ALGER FUND
ALGER MIDCAP GROWTH PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
From May 24, 1993
Year Ended October 31, (commencement of
------------------------- operations)
1995 1994 to October 31, 1993(i)
------- -------- ----------------------
<S> <C> <C> <C>
Net asset value, beginning
of year........................... $ 12.77 $ 12.48 $ 10.00
------- -------- -------
Net investment income (loss)......... (.08) (.11) (.09)
Net realized and unrealized
gain (loss) on investments........ 6.25 .68 2.57
------- -------- -------
Total from investment
operations........................ 6.17 .57 2.48
Distributions from net realized
gains............................. ---- (.28) ----
------- -------- -------
Net asset value, end of year......... $ 18.94 $ 12.77 $ 12.48
======= ======== =======
Total Return (ii).................... 48.3% 4.7% 24.8%
======= ======== =======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)................. $ 54,016 $ 18,516 $ 3,836
======= ======== =======
Ratio of expenses to average
net assets...................... 2.39%(iii) 3.20% 3.73%
======= ======== =======
Decrease reflected in above
expense ratio due to expense
reimbursements-Note 3(a)........ ---- .07% .80%
======= ======== =======
Ratio of net investment income
(loss) to average net assets.... (1.71%) (2.32%) (2.86%)
======= ======== =======
Portfolio Turnover Rate............ 121.60% 127.40% 57.64%
======= ======== =======
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Does not reflect contingent deferred sales charge.
(iii)Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 2.34%.
See Notes to Financial Statements.
F-20
<PAGE>
- --------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Capital Appreciation Portfolio focuses on companies with promising
growth potential and uses some special investment tools such as leveraging
and options and futures transactions.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION November 1, 1993
- --------------------------------------------------------------------------------
[The following table represents a chart in the printed piece.]
Cap App S&P 500
------- -------
01-11-93 10,000 10,000
10-31-94 11,110 10,387
10-31-95 18,220 13,133
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Capital Appreciation Portfolio and the S&P 500
on November 1, 1993, the inception date of the Alger Capital Appreciation
Portfolio. Figures for the Alger Capital Appreciation Portfolio and the S&P
500 Index, an unmanaged index of common stocks, include reinvestment of
dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH October 31, 1995
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 11/1/93
---------------------------------------
Alger Capital Appreciation Portfolio 67.60% 36.46%
ASSUMING REDEMPTION AT THE
END OF EACH PERIOD 62.60% 34.98%
S&P 500 26.44% 14.60%
---------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE
AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND
THE PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
F-21
<PAGE>
THE ALGER FUND
ALGER CAPITAL APPRECIATION PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1995
COMMON STOCKS--95.4% Shares Value
------ -----
APPAREL--.1%
Tommy Hilfiger Corporation*...... 1,000 $ 38,125
-------------
COMMUNICATIONS--6.6%
ADC Telecommunications, Inc.* ... 3,200 128,000
DSC Communications Corporation*.. 14,500 536,500
DSP Communications, Inc.*........ 3,000 108,750
Glenayre Technologies Inc.*...... 10,300 661,775
Network Equipment
Technologies, Inc.*............ 2,300 75,036
U.S. Robotics Corp.*............. 7,600 703,000
-------------
2,213,061
-------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--20.7%
Altera Corporation*.............. 14,600 883,300
Bay Networks Inc.*............... 17,700 1,172,625
Cisco Systems, Inc.*............. 2,000 155,000
Creative Technology Ltd.*........ 48,000 558,000
Dell Computer Corporation*....... 7,000 326,375
Digital Equipment Corporation*... 10,000 541,250
ESS Technology, Inc.*............ 25,000 750,000
Gateway 2000, Inc.*.............. 5,000 166,875
Komag, Incorporated*............. 17,500 997,500
Read-Rite Corporation*........... 10,000 348,750
Stormedia Inc., Cl. A*........... 5,000 230,000
3 Com Corp.*..................... 2,000 94,000
Xilinx, Inc.*.................... 16,000 736,000
-------------
6,959,675
-------------
COMPUTER SOFTWARE--9.8%
Activision Inc.*................. 35,000 586,250
Cooper & Chyan Technology, Inc.*. 13,000 183,625
Electronics For Imaging Inc.*.... 6,000 493,500
Enterprise Systems Inc.*......... 12,000 280,500
EPIC Design Technology, Inc.*.... 2,500 115,000
Logic Works Inc.................. 10,000 152,500
Maxis Inc.*...................... 19,500 862,875
Microsoft Corporation*........... 2,600 260,000
S3 Incorporated*................. 7,000 119,875
Symantec Corp.*.................. 10,000 243,130
-------------
3,297,255
-------------
COMPUTER TECHNOLOGY--3.8%
Actel Corporation*............... 19,000 223,250
Adaptec, Inc.*................... 1,400 62,300
C.P. Clare Corporation*.......... 28,000 724,500
Pinnacle Systems, Inc.*.......... 8,000 251,000
-------------
1,261,050
-------------
DEFENSE--.5%
McDonnell Douglas Corporation.... 500 $ 40,875
Tracor, Inc.*.................... 7,600 121,600
-------------
162,475
-------------
FINANCIAL SERVICES--1.9%
First Data Corporation........... 9,572 632,935
Lehman Brothers Holdings Inc..... 1,000 21,750
-------------
654,685
-------------
HEALTHCARE--16.0%
Biochem Pharma Inc.*............. 30,000 1,147,500
Cardinal Health, Inc............. 5,000 256,875
CellPro Incorporated*............ 25,000 290,625
Genzyme Corp.--General Division*. 7,000 407,750
HPR Inc.*........................ 5,000 130,000
Healthsource, Inc.*.............. 7,800 413,400
Hologic, Inc.*................... 17,500 455,000
IDEXX Laboratories Inc.*......... 5,000 203,750
Lilly (Eli) Co................... 3,800 367,175
Liposome Company Inc.*........... 20,000 307,500
Medtronic, Inc................... 2,000 115,500
Nellcor Puritan Bennett Inc.*.... 3,000 172,500
Summit Technology Inc.*.......... 7,700 342,650
Target Therapeutics, Inc.*....... 10,000 775,000
-------------
5,385,225
-------------
POLLUTION CONTROL--1.3%
United Waste Systems, Inc.*...... 10,000 395,000
USA Waste Services, Inc.*........ 1,700 35,700
-------------
430,700
-------------
RESTAURANTS & LODGING--2.5%
DF&R Restaurants, Inc.*.......... 7,400 225,700
Lone Star Steakhouse &
Saloon, Inc.* ................. 15,300 590,962
Outback Steakhouse, Inc.*........ 1,100 34,512
-------------
851,174
-------------
RETAILING--2.0%
CompUSA Inc.*.................... 7,500 286,875
OfficeMax, Inc.*................. 13,300 329,175
Viking Office Products, Inc.*.... 1,500 66,750
-------------
682,800
-------------
F-22
<PAGE>
THE ALGER FUND
ALGER CAPITAL APPRECIATION PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1995
COMMON STOCKS--(cont.) Shares Value
------ -----
SEMICONDUCTORS--18.8%
Alliance Semiconductor Corp.*.... 10,000 $ 307,500
Cirrus Logic, Inc.*.............. 16,000 674,000
Integrated Device
Technology, Inc.* ............. 25,600 486,400
Intel Corporation................ 10,000 698,750
LSI Logic Corporation*........... 13,600 640,900
Linear Technology Corporation.... 2,000 87,500
Maxim Integrated Products, Inc.*. 13,500 1,009,125
Micro Linear Corporation*........ 23,200 356,700
Microchip Technology
Incorporated* ................. 27,400 1,087,450
Micron Technology, Inc........... 3,000 211,875
Paradigm Technology, Inc.*....... 8,500 187,000
Texas Instruments, Incorporated.. 3,600 245,700
TriQuint Semiconductor, Inc.*.... 13,900 316,225
-------------
6,309,125
-------------
SEMICONDUCTORS
CAPITAL EQUIPMENT--9.7%
AG Associates, Inc.*............. 6,000 132,750
ASM Lithography Holdings*........ 14,900 739,412
FSI International, Inc.*......... 10,800 256,500
GaSonics International Corp.*.... 6,200 204,600
Kulicke and Soffa
Industries, Inc.* ............. 6,000 210,000
Lam Research Corporation*........ 3,200 194,800
OnTrak Systems, Inc.*............ 7,200 141,300
Opal, Inc.*...................... 12,000 181,500
Tencor Instruments*.............. 9,200 392,150
Teradyne, Inc.*.................. 5,800 193,575
Ultratech Stepper, Inc.*......... 15,800 632,000
-------------
3,278,587
-------------
MISCELLANEOUS--1.7%
Redhook Ale Brewery,
Incorporated* ................. 4,500 132,750
Service Corporation
International ................. 11,000 441,375
-------------
574,125
-------------
Total Common Stocks
(Cost $30,960,476)............. 32,098,062
-------------
WARRANTS--2.2%
SEMI-CONDUCTORS
Intel Corp. Warrants,
expire 3/14/98 (Cost $720,833). 20,000 740,000
-------------
Principal
SHORT-TERM Amount Value
CORPORATE NOTES--4.6% --------- ------
AT&T Corp.,
5.73%, 11/14/95................$600,000 $ 598,759
International Lease Finance Corp.,
5.72%, 11/01/95................ 280,000 280,000
Merrill Lynch & Co. Inc.,
5.73%, 11/07/95................ 180,000 179,828
Spiegel Funding Corp.,
5.73%, 11/02/95................ 200,000 199,968
Washington Square Mortgage Co.,
5.78%, 11/03/95................ 290,000 289,906
-------------
Total Short-Term Corporate Notes
(Cost $1,548,461).............. 1,548,461
-------------
Total Investments
(Cost $33,229,770)(a).......... 102.2% 34,386,523
Liabilities in Excess of
Other Assets................... (2.2) (746,972)
------- -----------
Net Assets....................... 100.0% $33,639,551
======= ===========
* Non-income producing security.
(a)At October 31, 1995, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $33,229,770 amounted to
$1,156,753, which consisted of aggregate gross unrealized appreciation of
$3,066,212 and aggregate gross unrealized depreciation of $1,909,459.
See Notes to Financial Statements.
F-23
<PAGE>
THE ALGER FUND
ALGER CAPITAL APPRECIATION PORTFOLIO (i)
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of year ....................................... $ 11.11 $ 10.00
------------ ------------
Net investment income (loss) ............................................. (0.47)(ii) (0.47)
Net realized and unrealized gain (loss) on investments ................... 7.98 1.58
------------ ------------
Total from investment operations ................................... 7.51 1.11
------------ ------------
Net asset value, end of year ............................................. $ 18.62 $ 11.11
============ ============
Total Return (iii) ....................................................... 67.6% 11.1%
============ ============
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) ............................ $ 33,640 $ 2,369
============ ============
Ratio of expenses excluding interest to average net assets ......... 3.26% 4.13%
============ ============
Ratio of expenses including interest to average net assets ......... 3.54%(iv) 5.53%
============ ============
Decrease reflected in above expense ratios due to expense
reimbursements--Note 3(a) .......................................... ---- 0.85%
============ ============
Ratio of net investment income (loss) to average net assets ........ (3.02%) (5.12%)
============ ============
Portfolio Turnover Rate ............................................ 197.65% 231.99%
============ ============
Debt outstanding at end of year .................................... ---- $ 651,000
============ ============
Average amount of debt outstanding during the year ................. $ 293,153 $ 406,864
============ ============
Average daily number of shares outstanding during the year ......... 543,270 191,676
============ ============
Average amount of debt per share during the year ................... $ 0.54 $ 2.12
============ ============
</TABLE>
(i) Prior to March 27, 1995, the Alger Capital Appreciation Portfolio was the
Alger Leveraged AllCap Portfolio.
(ii) Amount was computed based on average shares outstanding during the period.
(iii)Does not reflect contingent deferred sales charge.
(iv) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 3.43%.
See Notes to Financial Statements.
F-24
<PAGE>
THE ALGER FUND
ALGER MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1995
SHORT-TERM CORPORATE PRINCIPAL
NOTES--93.1% AMOUNT VALUE
--------- -----
AUTOMOBILES--7.6%
American Honda Finance Corp.
5.77%, 11/7/95............. $7,700,000 $ 7,692,595
Daimler-Benz
North America Corp.,
5.71%, 11/7/95............. 200,000 199,810
Ford Motor Credit Corp.,
5.72%, 11/1/95............. 6,200,000 6,200,000
------------
14,092,405
------------
AUTOMOTIVE EQUIPMENT
& SERVICES--4.4%
Bridgestone/Firestone Inc.,
5.75%, 1/18/96............. 8,200,000 8,097,842
------------
BANKS--20.1%
Bank of America,
5.00%, 6/1/96 ............. 3,000,000 2,985,097
Banca CRT Financial Corp.,
5.75%, 11/8/95............. 8,100,000 8,090,944
BOT Financial Corp.,
5.90%, 1/16/96 (a)......... 8,600,000 8,492,882
Caisse Centrale Desjardins
Du Quebec,
5.70%, 11/14/95............ 4,000,000 3,991,767
ING Group Bank,
5.73%, 11/9/95............. 6,000,000 5,992,360
Shinhan Bank,
5.80%, 11/27/95............ 8,000,000 7,966,489
------------
37,519,539
------------
BROKERAGE--5.2%
Dean Witter, Discover & Co.,
5.73%, 11/17/95............ 7,800,000 7,780,136
Merrill Lynch & Co., Inc.
5.73%, 11/7/95............. 1,800,000 1,798,281
------------
9,578,417
------------
COMPUTER
TECHNOLOGY--4.4%
CSC Enterprises,
5.68-5.77%,
11/21/95-12/11/95.......... 8,200,000 8,160,671
------------
CONSUMER PRODUCTS--2.8%
Golden Peanut Co.,
5.68%, 1/5/96.............. 5,200,000 5,146,671
------------
ELECTRONICS--4.5%
Hitachi, LTD,
5.68%, 11/1/95............. 8,300,000 8,300,000
------------
FINANCE--19.1%
Dynamic Funding Corp.,
5.90%, 1/11/96............. 4,000,000 3,953,456
Honeywell, Inc.,
5.75%, 11/1/95............. 7,700,000 7,700,000
Province of Quebec,
5.70%, 2/1/96.............. 7,000,000 6,898,033
Sanwa Business Credit Corp.,
5.78-5.86%, 1/18/96-1/25/96 9,000,000 8,882,039
SRD Finance Inc.,
5.85%, 11/21/95............ 8,000,000 7,974,000
------------
35,407,528
------------
HEALTHCARE--2.7%
Allergan Inc.,
5.73%, 11/7/95............. 5,000,000 4,995,225
------------
IMPORT/EXPORT--1.6%
The Harper Group Inc.,
5.71%, 11/9/95............. 3,000,000 2,996,193
------------
REAL ESTATE--4.6%
Washington Square Mortgage
Corp.,
5.78%, 11/3/95-11/9/95..... 8,500,000 8,492,984
------------
RETAIL--1.8%
Spiegal Inc.,
5.80%, 11/6/95............. 3.400,000 3,397,261
------------
TRADING COMPANY--7.4%
Mitsubishi International Corp.,
5.74%, 11/10/95............ 6,000,000 5,991,390
Mitsui & Co., (USA) Inc.,
5.60%, 3/11/96............. 8,000,000 7,836,978
------------
13,828,368
------------
UTILITIES--6.9%
AT&T Capital Corp.,
5.73%, 11/14/95............ 8,800,000 8,781,791
Elmore Funding L.P.,
5.72%, 1/11/96............. 4,100,000 4,053,747
------------
12,835,538
------------
Total Short-Term Corporate
Notes (Cost $172,848,642).. 172,848,642
------------
CERTIFICATES OF DEPOSIT--4.7%
Banco Espirito Santo North
America Capital Corp.,
5.8125%, 1/25/96
(Cost $8,800,000).......... 8,800,000 8,800,000
------------
Total Investments
(Cost $181,648,642)(b)......... 97.8% 181,648,642
Other Assets
in Excess of Liabilities....... 2.2 4,172,890
============
Net Assets....................... 100% $185,821,532
============
(a)Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity only to qualified institutional buyers.
(b) At October 31, 1995, the cost of investments for federal income tax purposes
was the same as the cost for financial reporting purposes.
See Notes to Financial Statements.
F-25
<PAGE>
THE ALGER FUND
ALGER MONEY MARKET PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year......................... $ 1.000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
------- -------- -------- -------- --------
Net investment income.............. .0573 .0374 .0304 .0424 .0671
Dividends from net
investment income............... (.0573) (.0374) (.0304) (.0424) (.0671)
------- -------- -------- -------- --------
Net asset value, end of year....... $ 1.000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======= ======== ======== ======== ========
Total Return....................... 5.9% 3.8% 3.1% 4.3% 6.9%
======= ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)............... $185,822 $163,170 $126,567 $135,288 $160,898
======= ======== ======== ======== ========
Ratio of expenses to average
net assets.................... .29%(i) .27% .41% .25% .18%
======= ======== ======== ======== ========
Decrease reflected in above
expense ratios due to
expense reimbursements
and management fee
waivers-Note 3(a)............. .50% .50% .50% .60% .63%
======= ======== ======== ======== ========
Ratio of net investment
income to average net
assets........................ 5.73% 3.78% 3.04% 4.30% 6.76%
======= ======== ======== ======== ========
</TABLE>
(i) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 0.27%.
See Notes to Financial Statements.
F-26
<PAGE>
THE ALGER FUND
STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except per share amounts)
October 31, 1995
<TABLE>
<CAPTION>
Small Capital
Capital- MidCap Appre- Money
Growth ization Balanced Growth ciation Market
ASSETS: Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investments in securities, at value
(identified cost*)-see accompany-
ing schedules of investments ....... $153,664 $461,467 $5,862 $54,227 $34,387 $181,649
Cash .................................. 70 2,957 18 127 695 260
Receivable for investment
securities sold..................... -- 6,160 35 531 521 --
Receivable for shares of beneficial
interest sold...................... 1,984 3,294 371 817 799 5,029
Dividends and interest
receivable.......................... 50 31 27 2 -- 80
Prepaid expenses and other assets...... 16 35 5 5 5 8
--------- --------- ------- ------- ------- --------
Total Assets....................... 155,784 473,944 6,318 55,709 36,407 187,026
--------- --------- ------- ------- ------- --------
LIABILITIES:
Payable for investment
securities purchased................ 1,142 6,794 73 321 1,795 --
Payable for shares of beneficial
interest redeemed................... 41 2,461 -- 1,244 872 1,044
Interest payable....................... -- -- -- -- 4 --
Accrued investment management fees..... 96 341 4 35 23 --
Accrued distribution fees ............. 96 301 4 33 20 --
Accrued shareholder servicing fees..... 32 100 1 11 7 --
Dividends payable-Note 2(c)............ -- -- -- -- -- 20
Accrued expenses....................... 93 229 22 49 46 140
--------- --------- ------- ------- ------- --------
Total Liabilities.................. 1,500 10,226 104 1,693 2,767 1,204
--------- --------- ------- ------- ------- --------
NET ASSETS ............................ $154,284 $463,718 $6,214 $54,016 $33,640 $185,822
========= ========== ======= ======= ======= ========
Net Assets Consist of:
Paid-in capital..................... $115,263 $286,504 $5,284 $40,563 $31,375 $185,872
Undistributed net investment
income (accumulated loss)......... (2,406) (17,471) (55) (817) (373) --
Undistributed net realized
gain (accumulated loss)........... 12,118 37,256 130 4,556 1,481 (50)
Net unrealized appreciation.......... 29,309 157,429 855 9,714 1,157 --
--------- --------- ------- ------- ------- --------
NET ASSETS ............................ $154,284 $463,718 $6,214 $54,016 $33,640 $185,822
========= ========== ======= ======= ======= ========
Shares of beneficial interest
outstanding-Note 6.................. 16,442 41,675 457 2,853 1,806 185,872
========= ========== ======= ======= ======= ========
NET ASSET VALUE PER SHARE.............. $9.38 $ 11.13 $13.59 $18.94 $18.62 $1.00
========= ========== ======= ======= ======= ========
*Identified cost....................... $124,355 $304,038 $5,007 $44,513 $33,230 $181,649
========= ========== ======= ======= ======= ========
</TABLE>
See Notes to Financial Statements.
F-27
<PAGE>
THE ALGER FUND
STATEMENTS OF OPERATIONS (in thousands)
For the year ended October 31, 1995
<TABLE>
<CAPTION>
Small Capital
Capital- MidCap Appre- Money
Growth ization Balanced Growth ciation Market
INVESTMENT INCOME: Portfolio Portfolio Portfolio Portfolio Portfolio* Portfolio
--------- --------- --------- --------- --------- ---------
Income:
<S> <C> <C> <C> <C> <C> <C>
Dividends ............................. $ 714 $ 379 $ 13 $ 61 $ 17 $--
Interest .............................. 332 912 98 132 20 9,961
------- ------- ----- ----- ----- -------
Total Income........................... 1,046 1,291 111 193 37 9,961
Expenses:
Management fees-Note 3(a).............. 760 3,118 27 244 77 830
Distribution fees-Note 3(b)............ 760 2,751 27 229 68 --
Shareholder servicing fees-Note 3(f)... 253 917 9 76 23 --
Interest on line of credit utilized-Note 5 -- -- -- -- 25
--
Custodian fees......................... 33 51 5 14 13 38
Transfer agent fees and
expenses-Note 3(e).................. 197 696 14 79 52 322
Professional fees...................... 35 37 20 32 20 18
Trustees' fees......................... 5 5 5 5 5 5
Registration fees...................... 37 42 17 30 32 51
Miscellaneous.......................... 40 139 4 20 6 42
------- ------- ----- ----- ----- -------
2,120 7,756 128 729 321 1,306
Less, earnings credits-Note 2(e)......... (27) (32) (3) (14) (11) (22)
Less, expense reimbursements and fee waivers-
Note 3(a)........................... -- -- (9) -- -- (830)
------- ------- ----- ----- ----- -------
Total net expenses..................... 2,093 7,724 116 715 310 454
------- ------- ----- ----- ----- -------
NET INVESTMENT
INCOME (LOSS)......................... (1,047) (6,433) (5) (522) (273) 9,507
------- ------- ----- ----- ----- -------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments.. 11,826 32,765 215 4,286 1,551 (20)
Net change in unrealized appreciation
on investments......................... 22,002 114,070 644 8,407 826 --
------- ------- ----- ----- ----- -------
Net realized and unrealized
gain (loss) on investments............. 33,828 146,835 859 12,693 2,377 (20)
------- ------- ----- ----- ----- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS........... $32,781 $140,402 $ 854 $12,171 $2,104 $9,487
======= ======= ====== ====== ====== =======
</TABLE>
*Prior to March 27, 1995, the Alger Capital Appreciation Portfolio was the Alger
Leveraged AllCap Portfolio.
See Notes to Financial Statements.
F-28
<PAGE>
THE ALGER FUND
ALGER CAPITAL APPRECIATION PORTFOLIO*
STATEMENT OF CASH FLOWS (in thousands)
For the year ended October 31, 1995
Increase (decrease) in Cash: Cash flows from operating activities:
Dividends received .............................................. $ 17
Interest received ............................................... 20
Interest paid ................................................... (21)
Operating expenses paid ......................................... (207)
Purchase of investment securities ............................... (45,802)
Purchase of short-term securities, net .......................... (1,548)
Proceeds from disposition of investment securities .............. 19,629
Other ........................................................... 5
-------
Net cash used in operating activities ....................... (27,907)
-------
Cash flows from financing activities:
Proceeds from shares sold ....................................... 38,186
Payments on shares redeemed ..................................... (8,948)
Repayment of bank borrowings .................................... (651)
-------
Net cash provided by financing activities ................. 28,587
-------
Net increase in cash ................................................ 680
Cash--beginning of year ............................................. 15
-------
Cash--end of year ................................................... $ 695
=======
Reconciliation of net increase in net assets
to net cash used in operating activities:
Net increase in net assets resulting from operations .......... $ 2,104
Increase in investments in securities ......................... (28,930)
Increase in receivable for investment securities sold ......... (521)
Increase in payable for investment securities purchased ....... 1,729
Net realized gain ............................................. (1,552)
Net increase in unrealized appreciation ....................... (826)
Increase in accrued expenses and other liabilities ............ 81
Net decrease in other assets .................................. 8
-------
Net cash used in operating activities ..................... $(27,907)
=======
*Prior to March 27, 1995, the Alger Capital Appreciation Portfolio was the Alger
Leveraged AllCap Portfolio.
See Notes to Financial Statements.
F-29
<PAGE>
THE ALGER FUND
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
For the year ended October 31, 1995
<TABLE>
<CAPTION>
Small Capital
Capital- MidCap Appre- Money
Growth ization Balanced Growth ciation Market
Portfolio Portfolio Portfolio Portfolio Portfolio* Portfolio
---------- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss)............ $ (1,047) $ (6,433) $ (5) $ (522) $ (273) $ 9,507
Net realized gain (loss)
on investments........................ 11,826 32,765 215 4,286 1,551 (20)
Net change in unrealized appreciation
on investments........................ 22,002 114,070 644 8,407 826 --
---------- --------- ------ ------- ------- --------
Net increase in net assets
resulting from operations......... 32,781 140,402 854 12,171 2,104 9,487
Dividends to shareholders:
Net investment income.................. -- -- -- -- -- (9,507)
Net realized gains.................... (1,768) (170) -- -- -- --
Net increase from
shares of beneficial interest
transactions-Note 6................... 46,881 28,596 2,287 23,329 29,167 22,672
---------- --------- ------ ------- ------- --------
Total increase..................... 77,894 168,828 3,141 35,500 31,271 22,652
Net Assets:
Beginning of period .................. 76,390 294,890 3,073 18,516 2,369 163,170
End of period.......................... $154,284 $463,718 $6,214 $54,016 $33,640 $185,822
========== ========= ====== ======= ======= ========
Undistributed net investment
income (accumulated loss)............ $ (2,406) $ (17,471) $ (55) $ (817) $ (373) $--
========== ========= ====== ======= ======= ========
</TABLE>
THE ALGER FUND
STATEMENTS OF CHANGES IN NET ASSETS (in thousands) For the year ended October
31, 1994
<TABLE>
<CAPTION>
Small Capital
Capital- MidCap Appre- Money
Growth ization Balanced Growth ciation Market
Portfolio Portfolio Portfolio Portfolio Portfolio* Portfolio
---------- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss)............ $ (595) $ (4,194) $ (14) $ (267) $ (100) $ 5,377
Net realized gain (loss)
on investments........................ 1,641 47 (85) 242 (70) (19)
Net change in unrealized appreciation
(depreciation) on investments......... 789 1,079 (50) 845 331 --
---------- --------- ------ ------- ------- --------
Net increase (decrease) in net
assets resulting from operations.. 1,835 (3,068) (149) 820 161 5,358
Dividends to shareholders:
Net investment income.................. -- -- -- -- -- (5,377)
Net realized gains.................... (3,909) (30,622) (28) (111) -- --
Net increase from shares of beneficial
interest transactions-Note 6.......... 40,476 28,472 125 13,971 2,208 36,622
---------- --------- ------ ------- ------- --------
Total increase (decrease).......... 38,402 (5,218) (52) 14,680 2,369 36,603
Net Assets:
Beginning of year..................... 37,988 300,108 3,125 3,836 -- 126,567
---------- --------- ------ ------- ------- --------
End of year............................ $76,390 $294,890 $3,073 $18,516 $2,369 $163,170
========== ========= ====== ======= ======= ========
Undistributed net investment
income (accumulated loss)............ $ (1,359) $ (11,038) $ (50) $ (295) $ (100) $--
========== ========= ====== ======= ======= ========
</TABLE>
*Prior to March 27, 1995, the Alger Capital Appreciation Portfolio was the Alger
Leveraged AllCap Portfolio.
See Notes to Financial Statements.
F-30
<PAGE>
THE ALGER FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1- General:
The Alger Fund (the "Fund") is a diversified, open-end registered
investment company organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts. The Fund operates as a series company
currently issuing six classes of shares of beneficial interest--Growth
Portfolio, Small Capitalization Portfolio, Balanced Portfolio, MidCap Growth
Portfolio, Capital Appreciation Portfolio and Money Market Portfolio (the
"Portfolios"). Prior to March 27, 1995, the Capital Appreciation Portfolio was
known as the Leveraged AllCap Portfolio. The Income and Growth Portfolio was
liquidated in May 1995, pursuant to a plan of liquidation approved by the Board
of Trustees and the shareholders.
NOTE 2- Significant Accounting Policies:
(a) INVESTMENT VALUATION: Investments of the Portfolios, other than the Money
Market Portfolio, are valued on each day the New York Stock Exchange (the
"NYSE") is open as of the close of the NYSE (currently 4:00 p.m. Eastern time).
Listed and unlisted securities for which such information is regularly reported
are valued at the last reported sales price or, in the absence of reported
sales, at the mean between the bid and asked price or, in the absence of a
recent bid or asked price, the equivalent as obtained from one or more of the
major market makers for the securities to be valued.
Securities for which market quotations are not readily available are valued
at fair value, as determined in good faith pursuant to procedures established by
the Board of Trustees.
The investments of the Money Market Portfolio, and short-term securities
held by the other Portfolios having a remaining maturity of sixty days or less,
are valued at amortized cost which approximates market value.
(b) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income is recognized on the
accrual basis.
(c) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are recorded on
the ex-dividend date.
The Money Market Portfolio declares dividends daily from net investment
income; such dividends are paid monthly. The dividends from net investment
income of the other Portfolios are declared and paid annually.
With respect to all Portfolios, dividends from net realized gains, offset
by any loss carryforward, are declared and paid annually after the end of the
fiscal year in which earned.
(d) FEDERAL INCOME TAXES: It is each Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders. To
the extent a Portfolio maintains such compliance, no federal income tax
provision is required. Each Portfolio is treated as a separate entity for the
purpose of determining such compliance. At October 31, 1995, the net capital
loss carryforwards of the Money Market Portfolio which may be used to offset
future net realized gains was approximately $50,000, and expires between 1996
and 2003.
(e) EXPENSES: The Fund accounts separately for the assets, liabilities and
operations of each Portfolio. Expenses directly attributable to each Portfolio
are charged to that Portfolio's operations; expenses which are applicable to all
Portfolios are allocated among them. The Fund's custodian fees have been reduced
as a result of earnings credits received on overnight cash balances. Balances
left on deposit with the custodian preclude their use elsewhere.
F-31
<PAGE>
THE ALGER FUND
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 3- Investment Management Fees and Other Transactions with Affiliates:
(a) INVESTMENT MANAGEMENT FEES: Fees incurred by each Portfolio, pursuant to the
provisions of Investment Management Agreements (the "Agreements") with Fred
Alger Management, Inc. ("Alger Management"), are payable monthly and computed
based on the value of the average daily net assets of each Portfolio at the
following annual rates:
Growth Portfolio............................ .75%
Small Capitalization Portfolio.............. .85
Balanced Portfolio.......................... .75
MidCap Growth Portfolio..................... .80
Capital Appreciation Portfolio.............. .85
Money Market Portfolio...................... .50
The Agreements further provide that if in any fiscal year the aggregate
expenses of any Portfolio, excluding interest, taxes, brokerage commissions,
distribution fees and extraordinary expenses, exceed the expense limitation of
any state securities laws having jurisdiction over a Portfolio, Alger Management
will reimburse that Portfolio for the excess expense to the extent required by
such state laws. During the year ended October 31, 1995, Alger Management
reimbursed the Balanced Portfolio $8,668, pursuant to the state expense
limitation applicable to that Portfolio.
With respect to the Money Market Portfolio, Alger Management undertook to
waive its management fee of $829,603 for the year ended October 31, 1995. Alger
Management has undertaken to waive its fee through December 31, 1995 at which
time Alger Management may extend this undertaking in whole or in part.
(b) DISTRIBUTION FEES: The Fund has adopted an Amended and Restated Plan of
Distribution pursuant to which each Portfolio, other than the Money Market
Portfolio, has agreed to reimburse Fred Alger & Company, Incorporated, the
Fund's distributor (the "Distributor"), for costs and expenses incurred by the
Distributor in connection with advertising and marketing shares of the Fund's
Portfolios. The distribution fee is not to exceed .75% of the average daily net
assets of each of the designated Portfolios. If in any month, the costs incurred
by the Distributor are in excess of the distribution fees charged to the
Portfolios, the excess may be carried forward, with interest, and sought to be
reimbursed in future periods. As of October 31, 1995, such excess carried
forward was approximately $5,561,000, $10,680,000, $118,000, $1,034,000 and
$533,000 for the Growth Portfolio, the Small Capitalization Portfolio, the
Balanced Portfolio, the MidCap Growth Portfolio, and the Capital Appreciation
Portfolio, respectively. Contingent deferred sales charges imposed on
redemptions will reduce the amount of distribution expenses for which
reimbursement may be sought. See Note 3(c) below. The Distributor has entered
into arrangements with broker/dealers for the sale of shares of certain of the
Fund's Portfolios. In connection with these arrangements, the Distributor has
agreed to pay these broker/dealers, with respect to the shares sold, from its
distribution fee received from the Portfolios.
(c) CONTINGENT DEFERRED SALES CHARGE: A contingent deferred sales charge is
imposed if an investor redeems an amount which causes the current value of the
investor's account of any Portfolio to fall below the total dollar amount of
investments made during the past six years, except that no sales charge is
imposed on the amount of the investment redeemed which is attributable to
reinvested dividends or capital gain distributions or is derived from increases
in the value of the investor's account above the amount invested during the past
six years. The amount of the charge is 5% of the purchase payment for
redemptions made in the first year. For redemptions made in the second, third,
fourth, fifth and sixth years, the amount of the charge is 4%, 3%, 2%, 2% and
F-32
<PAGE>
THE ALGER FUND
NOTES TO FINANCIAL STATEMENTS (continued)
1%, respectively. In addition, no charge is imposed on the redemption of shares
of the Money Market Portfolio, except for redemptions of shares acquired in
exchange for shares of the other Portfolios. Any sales charges imposed on
redemptions are paid to the Distributor. During the year ended October 31, 1995,
such charges amounted to approximately $1,385,000.
(d) BROKERAGE COMMISSIONS: During the year ended October 31, 1995, the Growth
Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the
MidCap Growth Portfolio and the Capital Appreciation Portfolio paid the
Distributor commissions of $301,536, $373,332, $6,782, $93,354 and $24,442,
respectively, in connection with securities transactions.
(e) TRANSFER AGENT FEES: Alger Shareholder Services, Inc. ("Alger Services"), an
affiliate of Alger Management, serves as transfer agent for the Fund. During the
year ended October 31, 1995, the Growth Portfolio, the Small Capitalization
Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, the Capital
Appreciation Portfolio and the Money Market Portfolio incurred fees of $151,445,
$513,340, $10,600, $64,932, $39,504 and $209,765, respectively, for services
provided by Alger Services. In addition, during the year ended October 31, 1995,
the Growth Portfolio, the Small Capitalization Portfolio, the Balanced
Portfolio, the MidCap Growth Portfolio, the Capital Appreciation Portfolio and
the Money Market Portfolio reimbursed Alger Services $45,050, $182,160, $3,710,
$13,525, $12,145 and $112,543, respectively, for transfer agent related expenses
paid by Alger Services on behalf of the Portfolios.
(f) SHAREHOLDER SERVICING FEES: The Fund has entered into a shareholder
servicing agreement with the Distributor whereby the Distributor provides each
Portfolio other than the Money Market Portfolio with ongoing servicing of
shareholder accounts. As compensation for such services, each designated
Portfolio pays the Distributor a monthly fee at an annual rate equal to .25% of
the Portfolios' average daily net assets.
(g) OTHER TRANSACTIONS WITH AFFILIATES: Certain trustees and officers of the
Fund are directors and officers of Alger Management, the Distributor and Alger
Services. At October 31, 1995, Alger Management and its affiliates owned 705,834
shares, 736,184 shares, 101,546 shares, 211,677 shares, 100,001 shares and
1,322,487 shares of the Growth Portfolio, the Small Capitalization Portfolio,
the Balanced Portfolio, the MidCap Growth Portfolio, the Capital Appreciation
Portfolio, and the Money Market Portfolio, respectively.
NOTE 4- Securities Transactions:
The following summarizes the securities transactions by the Fund, other
than short-term securities, for the year ended October 31, 1995:
Purchases Sales
Growth Portfolio......... $147,174,071 $114,517,379
Small Capitalization
Portfolio.............. 371,516,614 341,726,870
Balanced Portfolio....... 4,654,434 2,838,541
MidCap Growth
Portfolio.............. 54,595,775 35,368,745
Capital Appreciation
Portfolio.............. 47,526,708 20,149,187
NOTE 5- Short-Term Borrowings:
The Capital Appreciation Portfolio has a line of credit with a bank whereby
it may borrow up to 1/3 of its assets, as defined, up to a maximum of
$25,000,000. Such borrowings have a variable interest rate and are payable on
demand. For the year ended October 31, 1995, the Portfolio had borrowings which
averaged $293,153 at a weighted average interest rate of 8.69%.
F-33
<PAGE>
THE ALGER FUND
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 6- Share Capital:
The Fund has an unlimited number of authorized shares of beneficial interest of
$.001 par value which were divided into different classes of shares during the
year ended October 31, 1995. Transactions of shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
For the year ended For the year ended
October 31, 1995 October 31, 1994
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Alger Growth Portfolio*
Shares sold................. 14,201,363 $ 76,768,669 7,653,918 $ 52,802,599
Dividends reinvested........ 266,844 1,726,486 559,827 3,806,820
------------ ------------ ----------- ------------
14,468,207 78,495,155 8,213,745 56,609,419
Shares redeemed............. (1,678,400) (31,613,563) (2,369,604) (16,133,616)
------------ ------------ ----------- ------------
Net increase................ 12,789,807 $ 46,881,592 5,844,141 $ 40,475,803
============ ============ =========== ============
Alger Small Capitalization Portfolio*
Shares sold................. 42,344,546 $322,359,498 20,307,321 $149,953,791
Dividends reinvested........ 22,836 161,233 3,902,973 29,168,225
------------ ------------ ----------- ------------
42,367,382 322,520,731 24,210,294 179,122,016
Shares redeemed............. (13,590,168) (293,925,307) (20,213,790) (150,649,904)
------------ ------------ ----------- ------------
Net increase................ 28,777,214 $ 28,595,424 3,996,504 $ 28,472,112
============ ============ =========== ============
Alger Balanced Portfolio
Shares sold................. 274,506 $ 3,523,634 156,133 $ 1,697,838
Dividends reinvested........ -- -- 2,549 27,938
------------ ------------ ----------- ------------
274,506 3,523,634 158,682 1,725,776
Shares redeemed............. (105,829) (1,237,116) (149,768) (1,600,522)
------------ ------------ ----------- ------------
Net increase................ 168,677 $ 2,286,518 8,914 $ 125,254
============ ============ =========== ============
Alger MidCap Growth Portfolio
Shares sold................. 2,932,971 $ 47,462,566 1,383,145 $ 16,842,733
Dividends reinvested........ -- -- 8,710 105,566
------------ ------------ ----------- ------------
2,932,971 47,462,566 1,391,855 16,948,299
Shares redeemed............. (1,530,303) (24,133,228) (249,243) (2,977,761)
------------ ------------ ----------- ------------
Net increase................ 1,402,668 $ 23,329,338 1,142,612 $ 13,970,538
============ ============ =========== ============
Alger Capital Appreciation Portfolio
Shares sold................. 2,155,985 $ 38,975,452 403,937 $ 4,150,543
Shares redeemed............. (562,915) (9,808,970) (190,793) (1,942,219)
------------ ------------ ----------- ------------
Net increase................ 1,593,070 $ 29,166,482 213,144 $ 2,208,324
============ ============ =========== ============
Alger Money Market Portfolio
Shares sold................. 354,232,048 $354,232,048 245,130,350 $245,130,350
Dividends reinvested........ 9,136,546 9,136,546 5,201,659 5,201,659
------------ ------------ ----------- ------------
363,368,594 363,368,594 250,332,009 250,332,009
Shares redeemed............. (340,696,846) (340,696,846) (213,710,015) (213,710,015)
------------ ------------ ----------- ------------
Net increase................ 22,671,748 $ 22,671,748 36,621,994 $ 36,621,994
============ ============ =========== ============
</TABLE>
* Adjusted to reflect the effect of a 3 for 1 stock split which occurred on
September 27, 1995.
F-34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and
Board of Trustees of The Alger Fund:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Alger Fund (a Massachusetts
business trust comprising, respectively, the Growth Portfolio, Small
Capitalization Portfolio, Balanced Portfolio, MidCap Growth Portfolio, Capital
Appreciation Portfolio and Money Market Portfolio) as of October 31, 1995, and
the related statements of operations and cash flows for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting The Alger Fund as of October 31,
1995, the results of their operations and cash flows for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
December 14, 1995
F-35
<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 | THE | |
New York, N.Y. 10038 | | Meeting the |
- ---------------------------------- | ALGER | challenge |
DISTRIBUTOR | | of investing |
FRED ALGER & COMPANY, INCORPORATED | FUND | |
30 Montgomery Street | |
Jersey City, N.J. 07302 | |
- ---------------------------------- | |
CUSTODIAN | |
NATWEST BANK NATIONAL ASSOCIATION | |
10 Exchange Place | |
Jersey City, N.J. 07302 | |
- ---------------------------------- | |
TRANSFER AGENT | |
ALGER SHAREHOLDER SERVICES, INC. | |
30 Montgomery Street | |
Jersey City, N.J. 07302 | |
- ---------------------------------- | |
INDEPENDENT PUBLIC ACCOUNTANTS | |
ARTHUR ANDERSEN LLP | |
1345 Avenue of the Americas | |
New York, N.Y. 10105 | |
| |
| | |
| STATEMENT | |
| OF ADDITIONAL | February 27, 1996|
| INFORMATION | |
| | |
| | |
| |
| |
| |
====================================
<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 included in Part B:
(i) Report of Independent Accountants;
(ii) Financial Statements as of October 31, 1995 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)
16 Schedule for computation of performance quotations provided in
the Statement of Additional Information
- ----------
(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 January 31, 1996.
Title or Class Number of Record Holders
-------------- ------------------------
Alger Money Market Portfolio 16,606
Alger Small Capitalization Portfolio 43,051
Alger Growth Portfolio 17,615
Alger Balanced Portfolio 1,496
Alger Midcap Growth Portfolio 8,844
Alger Capital Appreciation Portfolio 10,536
<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.
<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 15th day of
February, 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 February 15, 1996
- ------------------------------
Fred M. Alger III
/s/ David D. Alger President and Trustee February 15, 1996
- ------------------------------ (Chief Executive Officer)
David D. Alger
/s/ Gregory S. Duch Treasurer February 15, 1996
- ------------------------------ (Chief Financial and
Gregory S. Duch Accounting Officer)
/s/ Nathan E. Saint-Amand* Trustee February 15, 1996
- ------------------------------
Nathan E. Saint-Amand
/s/ Stephen E. O'Neil* Trustee February 15, 1996
- ------------------------------
Stephen E. O'Neil
/s/ Arthur M. Dubow* Trustee February 15, 1996
- ------------------------------
Arthur M. Dubow
/s/ John T. Sargent* Trustee February 15, 1996
- ------------------------------
John T. Sargent
* By: /s/ 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. 20 [X]
and/or
Registration Statement Under the Investment Company Act of 1940 [ ]
Amendment No. 22 [X]
(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 ..........................
16 Schedule for computation of performance quotations
provided in the Statement of Additional Information .....
<PAGE>
ARTHUR ANDERSEN & CO. S.C.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated December 14, 1995 on the financial statements of The Alger Fund for the
period ended October 31, 1995 and to all references to our Firm included in or
made a part of the registration statement of Spectra Fund, Inc. filed on Form
N-1A (Amendment No. 22), Investment Company Act File No. 811-6880 with the
Securities and Exchange Commission.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New York, New York
February 22, 1996
<PAGE>
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
$1,000 payment made at the beginning of
the 1, 5, or 10 year (or other) periods at the
end of the 1, 5 or 10 year (or other)
periods (or fractional portion thereof)
<TABLE>
<CAPTION>
ENDING AVERAGE
PERIOD REDEEMABLE ANNUAL RATE
PORTFOLIO COVERED VALUE OF RETURN FORMULA*
- --------- ------- ----- --------- --------
<S> <C> <C> <C> <C>
ALGER SMALL
CAPITALIZATION: 11/11/86 (commencement
of operations)
through 10/31/95** 5,075.35 19.65% @RATE(5075.25,1000,8.97)
5 YEARS ENDED 10/31/95 3,060.71 25.07% @RATE(3060.71,1000,5)
YEAR ENDED 10/31/95 1,411.54 41.15% @RATE(1411.54,1000,1)
ALGER GROWTH: 11/11/86 (commencement
of operations)
through 10/31/95** 3,772.78 15.95% @RATE(3772.78,1000,8.97
5 YEARS ENDED 10/31/95 2,941.36 24.08% @RATE(2941.36,1000,5)
YEAR ENDED 10/31/95 1,327.76 32.78% @RATE(1327.76,1000,1)
ALGER BALANCED: 6/1/92 (commencement
of operations)
through 10/31/95*** 1,350.04 9.17% @RATE(1350.04.1000,3.42)
YEAR ENDED 10/31/95 1,226.06 22.61% @RATE(1226.06,1000,1)
ALGER MIDCAP: 5.24.93 (commencement
of operations)
through 10/31/95**** 1,907.28 30.28% @RATE(1907.28,1000,2.44)
YEAR ENDED 10/31/95 1,433.17 43.32% @RATE(1433.17,1000,1)
ALGER CAPITAL
APPRECIATION: 11/1/93 (commencement
of operations)
through 10/31/95***** 1,822.00 34.98% @RATE(1822.00,1000,2)
YEAR ENDED 10/31/95 1.625.97 62.60% @RATE(1625.97,1000,1)
*LOTUS 123 @RATE FUNCTION:
@RATE(FV,PV,TERM) The periodic interest rate necessary for
present value "pv", to grow to future
value "fv", over the number of compounding periods in "term".
</TABLE>
**Period equals 1.98 years.
***Period equals 3.42 years.
****Period equals 2.44 years.
*****Period equals 2 years.
<PAGE>
ALGER MONEY MARKET PORTFOLIO YIELD COMPUTATION
The Alger Money Market Portfolio's yield for the 7 days ended 10/31/95
was computed according to the following formula:
yield=a*(365/7)
Where: a=$.001069883 (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= 5.58%
The Alger Money Market Portfolio's effective yield for the 7 days ended
10/31/95 was computed according to the following formula:
365/7
effective yield=((a+1) )-1
Where: a=$.001069883 (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: 5.73%
