As filed with the Securities and Exchange Commission
on February 25, 1998
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. 26 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 28 [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 [ ] 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, 1997 was filed on December 19, 1997.
<PAGE>
THE ALGER FUND
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A
Item No. Prospectus Heading
- -------- ------------------
<S> <C>
1. Cover Page..................................... Front Cover Page
2. Synopsis ...................................... Portfolio Expenses
3. Condensed Financial Information ............... Financial Highlights
4. General Description of Registrant ............. Front Cover Page; Investment Objectives
and Policies; Investment Practices; Man-
agement of the Fund
5. Management of the Fund ........................ Management of the Fund
6. Capital Stock and Other Securities ............ Front Cover Page; Management of the
Fund; Dividends and Taxes
7. Purchase of Securities Being Offered .......... How to Purchase Shares; Special Investor
Services--Exchange Privilege
8. Redemption or Repurchase ...................... How to Sell Shares; How to Exchange
Shares
9. Pending Legal Proceedings ..................... Not Applicable
Part B Heading in Statement of
Item No. Additional Information
- -------- ----------------------
10. Cover Page .................................... Front Cover Page
11. Table of Contents ............................. Contents
12. General Information and History ............... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
13. Investment Objectives and Policies ............ Investment Objectives and Policies;
Appendix
14. Management of the Fund ........................ Management
15. Control Persons and Principal Holders of
Securities .................................. Certain Shareholders
16. Investment Advisory and Other Services ........ Management; Custodian and Transfer
Agent; Purchases; See in the Prospectus
"Management of the Fund"
17. Brokerage Allocation and Other Practices ...... Investment Objectives and Policies
18. Capital Stock and Other Securities ............ Organization; See in the Prospectus "Div-
idends and Taxes" and "Management of
the Fund"
19. Purchase, Redemption and Pricing of Secu-
rities Being Offered ......................... Net Asset Value; Purchases; Redemp-
tions
20. Tax Status .................................... Taxes; See in the Prospectus "Taxes"
21. Underwriters .................................. Purchases
22. Calculation of Performance Data ............... Determination of Performance; See
in the Prospectus "Performance"
23. Financial Statements .......................... Financial Statements incorporated by
reference--"Determination of Performance";
See in the Prospectus "Financial Highlights"
Part C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
</TABLE>
<PAGE>
PROSPECTUS
- ----------
THE
ALGER
FUND
75 Maiden Lane
New York, New York 10038
(800)992-FUND (3863)
The Alger Fund offers interests in six Portfolios. Each Portfolio has distinct
investment objectives and policies which are discussed in the section entitled
"Investment Objectives and Policies." The six Portfolios are:
o Alger Money Market Portfolio
o Alger Small Capitalization Portfolio
o Alger MidCap Growth Portfolio
o Alger Growth Portfolio
o Alger Balanced Portfolio
o Alger Capital Appreciation Portfolio
With the exception of Alger Money Market Portfolio, each Portfolio offers
three classes of shares, each with a different combination of
sales charges, ongoing fees and other features.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. A Statement
of Additional Information dated February 25, 1998 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. The Securities and Exchange Commission maintains a
Web site at http://www.sec.gov where the Statement of
Additional Information, material incorporated by
reference, and other information regarding The
Alger Fund may be accessed.
TABLE OF CONTENTS
Page
----
Introduction .................................. i
Portfolio Expenses ............................ ii
Financial Highlights .......................... vi
How to Purchase Shares ........................ 1
How to Sell Shares ............................ 5
Special Investor Services ..................... 6
Investment Objectives and Policies ............ 8
Investment Practices .......................... 10
Management of the Fund ........................ 12
Net Asset Value ............................... 14
Dividends and Taxes ........................... 14
Performance ................................... 15
SHARES OF ALGER MONEY MARKET PORTFOLIO ARE NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE IS NO ASSURANCE
THAT ALGER MONEY MARKET PORTFOLIO WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE ALGER 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 SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECUR-
ITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
February 25, 1998
<PAGE>
[This page intentionally left blank.]
<PAGE>
- --------------------------------------------------------------------------------
INTRODUCTION
The Alger Fund's portfolios, other than Alger Money Market Portfolio, offer
three classes of shares having different sales charges, ongoing fees and other
features. You may purchase the class of shares that is most beneficial to you
based upon the amount of the purchase, the length of time you expect to hold
shares and other circumstances.
Class A Shares
An investor purchasing Class A Shares may pay a sales charge at the time of
purchase. Class A Shares are not subject to a charge when they are redeemed
(except for shares purchased for total proceeds of $1 million or more, which
have no initial sales charge and which may be subject to a contingent deferred
sales charge ["CDSC"]). The initial sales charge may be reduced or waived for
certain purchases. Class A Shares are subject to a shareholder servicing fee
equal to an annual rate of .25% of the Portfolio's average daily net assets
attributable to its Class A Shares. See "How to Purchase Shares--Class A Share
Information."
Class B Shares
Class B Shares are offered for sale for purchases of less than $250,000.
Class B Shares have no initial sales charge, but may be subject to a CDSC of up
to 5% if you redeem within six years of purchase. They are subject to a
distribution (Rule 12b-1) fee at an annual rate of .75% of the Portfolio's
average daily net assets attributable to Class B Shares. Class B Shares also pay
a shareholder servicing fee calculated at an annual rate of .25% of the
Portfolio's average daily net assets attributable to its Class B Shares. Class B
Shares provide an investor the benefit of putting all of the investor's dollars
to work from the time the investment is made but will have a higher expense
ratio and generally will pay lower dividends than Class A Shares due to the
distribution fee on Class B Shares. Class B Shares will automatically convert to
Class A Shares eight years after the end of the calendar month in which the
investor's order to purchase was accepted. See "How to Purchase Shares--Class B
Share Information."
Class C Shares
Class C Shares are offered for sale for purchases of less than $1,000,000.
There is no initial sales charge for Class C Shares, but they may be subject to
a CDSC of 1% if you redeem within the first year of purchase. They are subject
to a distribution (Rule 12b-1) fee at an annual rate of .75% of the Portfolio's
average daily net assets attributable to Class C Shares. In addition, an annual
shareholder servicing fee calculated at an annual rate of .25% of the
Portfolio's average daily net assets attributable to its Class C Shares will be
paid by Class C shareholders. Class C Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made but will have a higher expense ratio and generally will pay lower dividends
than Class A Shares due to the distribution fee on Class C Shares. Class C
Shares will automatically convert to Class A Shares twelve years after the end
of the calendar month in which the investor's order to purchase was accepted.
See "How to Purchase Shares--Class C Share Information."
- --------------------------------------------------------------------------------
<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
beginning on page iv shows the amount of expenses you would pay on a $1,000
investment in each class of shares of the Portfolios. These amounts assume the
reinvestment of all dividends and distributions, payment of any applicable
initial sales charge or contingent deferred sales charge and payment by the
Portfolios of operating expenses as shown in the table under Annual Fund
Operating Expenses. The Example is an illustration only and actual expenses may
be greater or less than those shown.
<TABLE>
<CAPTION>
Alger Alger Alger
Money Market Balanced Growth
Portfolio Portfolio Portfolio
--------------- --------------------------- ------------------------
Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)(a)(b) .......... None 4.75% None None 4.75% None None
Maximum Sales Charge Imposed on
Reinvested Dividends .............. None None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of redemption proceeds)(b) ........ None None 5.00% 1.00% None 5.00% 1.00%
Redemption Fees ..................... None None None None None None None
Exchange Fees ....................... None None None None None None None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management Fees .50% .75% .75% .75% .75% .75% .75%
Rule 12b-1 Fees(c) .................. None None .75% .75% None .75% .75%
Other Expenses (d)(e)................ .31% 1.35% 1.39% 1.39% .55% .58% .58%
--- ---- ---- ---- ---- ---- ----
Total Fund Expenses (c)(d) .......... .81% 2.10% 2.89% 2.89% 1.30% 2.08% 2.08%
=== ==== ==== ==== ==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
ii
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Expenses (continued)
<TABLE>
<CAPTION>
Alger MidCap Alger Alger
Growth Small Capitalization Capital Appreciation
Portfolio Portfolio Portfolio
----------------------- -------------------------- -------------------------
Class A Class B Class C Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price)(a)(b)....... 4.75% None None 4.75% None None 4.75% None None
Maximum Sales Load Imposed on
Reinvested Dividends........ None None None None None None None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of redemption proceeds)(b).. None 5.00% 1.00% None 5.00% 1.00% None 5.00% 1.00%
Redemption Fees............... None None None None None None None None None
Exchange Fees................. None None None None None None None None None
Annual Fund Operating Expenses
(as a percentage of average
net assets)
Management Fees............... .80% .80% .80% .85% .85% .85% .85% .85% .85%
Rule 12b-1 Fees(c)............ None .75% .75% None .75% .75% None .75% .75%
Other Expenses (d)(e)......... .60% .64% .64% .53% .54% .54% .68% .78% .78%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Fund Expenses(c)(d)..... 1.40% 2.19% 2.19% 1.38% 2.14% 2.14% 1.53% 2.38% 2.38%
==== ==== ==== ==== ==== ==== ==== ==== ====
(a) The sales charge applicable to Class A Shares set forth in the above table
is the maximum charge imposed upon the purchase of shares. Shareholders may
pay less than 4.75% depending on the amount invested in Class A Shares of
the Fund. See "How to Purchase Shares--Class A Share Information."
(b) Class A purchases of $1 million or more are not subject to an initial sales
charge; however, a contingent deferred sales charge of 1% may be imposed on
certain redemptions within one year following such purchases. See "How to
Purchase Shares--Class A Share Information." For Class B purchases, the
amount of the contingent deferred sales charge, if applicable, will depend
on the number of years since the shareholder made the purchase payment. See
"How to Purchase Shares--Class B Share Information." For Class C purchases,
a contingent deferred sales charge of 1% may be imposed on redemptions
within one year following purchase. See "How to Purchase Shares--Class C
Share Information."
(c) The Alger Fund pays Fred Alger & Company, Incorporated for its services in
distributing Class B and Class C Shares of each Portfolio other than Alger
Money Market Portfolio at the maximum annual rate of .75% of the class's
average daily net assets. Long-term shareholders paying Rule 12b-1 fees
pursuant to The Alger Fund's plans of distribution may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
rules of the National Association of Securities Dealers, Inc.
(d) Included in Other Expenses of Alger Capital Appreciation Portfolio is 0.08%
of interest expense for Class A Shares and 0.11% of interest expense for
Class B and Class C Shares.
(e) Other Expenses for a Portfolio's Class C Shares are estimated on the basis
of amounts incurred by the Portfolio's Class B Shares during its most
recent fiscal year.
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Expenses (continued)
Alger Alger Alger
Money Market Balanced Growth
Portfolio Portfolio Portfolio
----------------------------------------------- ---------------------------
Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- -------
Example
You would pay the following
expenses on a $1,000
investment including
the maximum sales
charges and assuming
(1) 5% annual return and
(2) redemption at the end of
each time period:
<S> <C> <C> <C> <C> <C> <C> <C>
One Year $ 8 $ 68 $ 79 $ 39 $ 60 $ 71 $ 31
Three Years 26 110 119 89 87 95 65
Five Years 45 155 172 152 115 132 112
Ten Years 100 279 321 321 197 241 241
You would pay the following
expenses on the same
investment, assuming no
redemption at the end
of each time period:
One Year $ 8 $ 68 $ 29 $ 29 $ 60 $ 21 $ 21
Three Years 26 110 89 89 87 65 65
Five Years 45 155 152 152 115 112 112
Ten Years 100 279 321 321 197 241 241
</TABLE>
- --------------------------------------------------------------------------------
iv
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Expenses (continued)
<TABLE>
<CAPTION>
Alger MidCap Alger Alger
Growth Small Capitalization Capital Appreciation
Portfolio Portfolio Portfolio
----------------------- -------------------------- ---------------------------
Class A Class B Class C Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- ------- ------- ------- -------
Example
You would pay the following
expenses on a $1,000 investment
including the maximum sales
charges and assuming
(1) 5% annual return and
(2) redemption at the end of
each time period:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One Year ..................... $ 61 $ 72 $ 32 $ 61 $ 72 $ 32 $ 62 $ 74 $ 34
Three Years................... 90 99 69 89 97 67 94 104 74
Five Years.................... 120 137 117 119 135 115 127 147 127
Ten Years..................... 207 252 252 205 247 247 221 272 272
You would pay the following
expenses on the same
investment, assuming no
redemption at the end of
each time period:
One Year...................... $ 61 $ 22 $ 22 $ 61 $ 22 $22 $ 62 $ 24 $ 24
Three Years................... 90 69 69 89 67 67 94 74 74
Five Years.................... 120 117 117 119 115 115 127 127 127
Ten Years..................... 207 252 252 205 247 247 221 272 272
</TABLE>
- --------------------------------------------------------------------------------
v
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended October 31, 1990 through 1997 have
been audited by Arthur Andersen LLP, The Alger Fund's (the "Fund") independent
public accountants. This information should be read in conjunction with the
financial statements of the Fund contained in its Annual Report, which financial
statements are incorporated by reference in the Statement of Additional
Information. An Annual Report of the Fund is available by contacting the Fund at
(800) 992-3863. In addition to financial statements, the Annual Report contains
further information about the performance of the Fund. The Financial Highlights,
with the exception of the total return information, for the two years ended
October 31, 1989, have been audited by other independent accountants, who have
expressed an unqualified opinion thereon.
THE ALGER FUND
MONEY MARKET PORTFOLIO
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- --------- --------- --------- --------- ---------
Net investment income................ .0479 .0521 .0573 .0374 .0304 .0424
Dividends from net investment
income............................. (.0479) (.0521) (.0573) (.0374) (.0304) (.0424)
-------- --------- --------- --------- --------- ---------
Net asset value, end of period....... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ========= ========= ========= ========= =========
Total Return ........................ 4.9% 5.3% 5.9% 3.8% 3.1% 4.3%
======== ========= ========= ========= ========= =========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted).................. $179,407 $285,702 $185,822 $163,170 $126,567 $135,288
======== ========= ========= ========= ========= =========
Ratio of expenses to average net
assets........................... .81% .41% .29% .27% .41% .25%
======== ========= ========= ========= ========= =========
Decrease reflected in above
expense ratios due to expense
reimbursements and
management fee waivers........... --% .38% .50% .50% .50% .60%
======== ========= ========= ========= ========= =========
Ratio of net investment income
to average net assets............ 4.76% 5.18% 5.73% 3.78% 3.04% 4.30%
======== ========= ========= ========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
vi
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------------------
1991 1990 1989 1988
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net asset value, beginning of period. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- --------- ---------
Net investment income................ .0671 .0844 .0927 .0732
Dividends from net investment
income............................. (.0671) (.0844) (.0927) (.0732)
--------- --------- --------- ---------
Net asset value, end of period....... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========= ========= ========= =========
Total Return ........................ 6.9% 8.8% 9.7%(i) 7.6%(i)
========= ========= ========= =========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted).................. $160,898 $143,420 $ 69,581 $ 11,509
========= ========= ========= =========
Ratio of expenses to average net
assets........................... .18% .03% -- --
========= ========= ========= =========
Decrease reflected in above
expense ratios due to expense
reimbursements and
management fee waivers........... .63% .84% .93% 1.73%
========= ========= ========= =========
Ratio of net investment income
to average net assets............ 6.76% 8.37% 9.45% 7.16%
========= ========= ========= =========
</TABLE>
(i)Unaudited.
- --------------------------------------------------------------------------------
vii
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER FUND
BALANCED PORTFOLIO
Financial Highlights (i)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Class C Class A Class B
----------- ----------- -----------------------------------------------------
From
June 1, 1992
Three Months Ten Months (commencement
Ended Ended Year Ended October 31, of operations)
October 31, October 31, ---------------------------------------- to October 31,
1997(ii) 1997(ii) 1997 1996 1995 1994 1993 1992(ii)
---------- ---------- ----- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $ 16.88 $ 13.99 $ 14.21 $ 13.59 $ 10.65 $ 11.18 $ 9.95 $ 10.00
------- ------- ------- -------- -------- ------- ------- --------
Net investment income (loss) (.01) .05 -- .12 (.02)(iv) (.05) (.01) (.12)
Net realized and unrealized
gain (loss) on investments (.38) 2.54 2.67 .72 2.96 (.39) 1.24 .07
------- ------- ------- -------- -------- ------- ------- --------
Total from investment
operations ............. (.39) 2.59 2.67 .84 2.94 (.44) 1.23 (.05)
------- ------- ------- -------- -------- ------- ------- --------
Dividends from net
investment
income.................. -- -- (.06) (.01) -- -- -- --
Distributions from net
realized gains.......... -- -- (.34) (.21) -- (.09) -- --
------- ------- ------- -------- -------- ------- ------ --------
Total Distributions........ -- -- (.40) (.22) -- (.09) -- --
------- ------- ------- -------- -------- ------- ------ --------
Net asset value, end
of period .............. $ 16.49 $ 16.58 $ 16.48 $ 14.21 $ 13.59 $ 10.65 $ 11.18 $ 9.95
======= ======= ======= ======== ======== ======= ======= ========
Total Return (iii)......... (2.31%) 18.5% 19.3% 6.3% 27.6% (4.0%) 12.4% (0.5%)
======= ======= ======= ======== ======== ======= ======= ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted).......... $ 48 $ 459 $12,653 $ 13,492 $ 6,214 $ 3,073 $ 3,125 $ 1,370
======= ======= ======= ======== ======== ======= ======= ========
Ratio of expenses to
average net assets...... 2.77% 2.10% 2.89% 2.70% 3.34% 3.18% 3.82% 5.62%
======= ======= ======= ======== ======== ======== ======= ========
Decrease reflected in
above expense ratios
due to expense
reimbursements (v)..... -- -- -- -- .24% -- .75% .75%
======= ======= ======= ======== ======== ========= ====== ========
Ratio of net investment
income (loss) to average
net assets ............. (.84%) .72% .04% .47% (.13%) (.41%) (.97%) (3.07%)
======= ======= ======= ======== ======== ======= ====== ========
Portfolio Turnover Rate.. 109.26% 109.26% 109.26% 85.51% 84.06% 84.88% 115.17% 17.07%
======= ======= ======= ======== ======== ======= ======= ========
Average Commission
Rate Paid ............. $ .0709 $ .0709 $ .0709 $ .0700
======= ======= ======= ========
</TABLE>
(i) Class C Shares were initially offered August 1, 1997. Class A Shares were
initially offered January 1, 1997.
(ii) Ratios have been annualized; total return has not been annualized.
(iii)Does not reflect the effect of any sales charges.
(iv) Amount was computed based on average shares outstanding during the period.
(v) Represents expense reimbursements made pursuant to applicable state expense
limits.
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER FUND
MIDCAP GROWTH PORTFOLIO
Financial Highlights (i)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Class C Class A Class B
---------- -----------------------------------------------------------------------
From
Three Months Ten Months May 24, 1993
Ended Ended Year Ended October 31 (commencement
October 31, October 31, of operations) to
1997(ii) 1997(ii) 1997 1996 1995 1994 October 31, 1993 (ii)
-------------- ------------ ------- ------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................ $ 22.49 $ 18.92 $ 18.87 $ 18.94 $ 12.77 $ 12.48 $ 10.00
-------- -------- -------- -------- -------- -------- --------
Net investment income (loss)....... (.03) (.10) (.29) (.25)(iv) (.08) (.11) (.09)
Net realized and unrealized
gain (loss) on investments ....... (.13) 3.64 4.23 1.35 6.25 .68 2.57
-------- -------- -------- -------- -------- -------- --------
Total from investment operations . (.16) 3.54 3.94 1.10 6.17 .57 2.48
Distribution from net
realized gains .................. -- -- (.48) (1.17) -- (.28) --
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period .... $ 22.33 $ 22.46 $ 22.33 $ 18.87 $ 18.94 $ 12.77 $ 12.48
Total Return (iii) ................ (.7%) 18.7% 21.4% 6.4% 48.3% 4.7% 24.8%
======== ======== ======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) ................. $ 84 $ 5,436 $166,475 $125,686 $ 54,016 $ 18,516 $ 3,836
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to
average net assets .............. 1.97% 1.40% 2.19% 2.27% 2.39% 3.20% 3.73%
======== ======== ======== ======== ======== ======== ========
Decrease reflected in above
expense ratio due to
expense reimbursements (v) ...... -- -- -- -- -- .07% .80%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income
(loss) to average net assets .... (1.55%) (.83%) (1.58%) (1.33%) (1.71%) (2.32%) (2.86%)
======== ======== ======== ======== ======== ======== ========
Portfolio Turnover Rate .......... 160.09% 160.09% 160.09% 113.95% 121.60% 127.40% 57.64%
======== ======== ======== ======== ======== ======== ========
Average Commission Rate Paid ..... $ .0680 $ .0680 $ .0680 $ .0690
======== ======== ======== ========
</TABLE>
(i) Class C Shares were initially offered August 1, 1997. Class A Shares were
initially offered January 1, 1997.
(ii) Ratios have been annualized; total return has not been annualized.
(iii) Does not reflect the effect of any sales charges.
(iv) Amount was computed based on average shares outstanding during the period.
(v) Represents expense reimbursements made pursuant to applicable state
expense limits.
- --------------------------------------------------------------------------------
ix
<PAGE>
THE ALGER FUND
GROWTH PORTFOLIO
Financial Highlights (i)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Class C Class A Class B (ii)
-----------------------------------------------------------------------------------------------
Three Months Ten Months
Ended Ended Year Ended October 31,
October 31, October 31, ------------------------------------------------------
1997(vi) 1997(vi) 1997 1996 1995 1994 1993
------------- ---------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ....................... $ 11.98 $ 9.40 $ 9.49 $ 9.38 $ 6.97 $ 7.43 $ 5.76
-------- -------- -------- -------- -------- -------- --------
Net investment income (loss) ...... (.02) (.02) (.13) (.08)(v) (.02) (.07)(v) (.02)
Net realized and unrealized gain
(loss) on investments ............ (.46) 2.20 2.44 .78 2.59 .35 1.70
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations ...................... (.48) 2.18 2.31 .70 2.57 .28 1.68
Distributions from net
realized gains .................. -- -- (.30) (.59) (.16) (.74) (.01)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period .... $ 11.50 $ 11.58 $ 11.50 $ 9.49 $ 9.38 $ 6.97 $ 7.43
======== ======== ======== ======== ======== ======== ========
Total Return (iv) ................. (4.0%) 23.2% 24.9% 8.1% 37.8% 4.1% 29.2%
======== ======== ======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) ................. $ 199 $ 52,307 $304,984 $266,207 $154,284 $ 76,390 $ 37,988
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average
net assets ...................... 2.02% 1.30% 2.08% 2.08% 2.09% 2.20% 2.20%
======== ======== ======== ======== ======== ======== ========
Decrease reflected in above
expense ratios due to expense
reimbursements .................. -- -- -- -- -- -- --
======== ======== ======== ======== ======== ======== ========
Ratio of net investment
income (loss)
to average net assets ........... (1.43%) (.39%) (1.13%) (.84%) (1.03%) (1.01%) (1.16%)
======== ======== ======== ======== ======== ======== ========
Portfolio Turnover Rate .......... 128.26% 128.26% 128.26% 94.91% 118.16% 103.86% 108.54%
======== ======== ======== ======== ======== ======== ========
Average Commission Rate Paid ..... $ .0699 $ .0699 $ .0699 $ .0715
======== ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
x
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B (ii)
---------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------
1992 1991 1990 1989 1988
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ... $ 5.77 $ 4.25 $ 4.42 $ 3.48 $ 3.23
-------- -------- -------- -------- --------
Net investment income (loss) ........... (.06)(v) (.02) (.02) (.05) (.04)
Net realized and unrealized gain
(loss) on investments ................. .61 1.86 (.15) .99 .29
-------- -------- -------- -------- --------
Total from investment operations ....... .55 1.84 (.17) .94 .25
Distributions from net realized gains .. (.56) (.32) -- -- --
-------- -------- -------- -------- --------
Net asset value, end of period ......... $ 5.76 $ 5.77 $ 4.25 $ 4.42 $ 3.48
======== ======== ======== ======== ========
Total Return (iv) ...................... 9.7% 45.8% (4.0%) 27.0%(iii) 7.7%(iii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) ...................... $ 19,379 $ 10,213 $ 5,667 $ 5,463 $ 5,294
======== ======== ======== ======== ========
Ratio of expenses to average
net assets ........................... 2.32% 2.70% 3.09% 3.32% 3.01%
======== ======== ======== ======== ========
Decrease reflected in above
expense ratios due to expense
reimbursements ....................... -- -- -- -- .43%
======== ======== ======== ======== ========
Ratio of net investment
income (loss)
to average net assets ................ (1.07%) (1.06%) (.68%) (.70%) (.99%)
======== ======== ======== ======== ========
Portfolio Turnover Rate ............... 69.28% 76.06% 86.06% 106.73% 151.30%
======== ======== ======== ======== ========
</TABLE>
(i) Class C Shares were initially offered August 1, 1997. Class A Shares were
initially offered January 1, 1997.
(ii) Per share data have been adjusted to reflect the effect of a 3 for 1 stock
split which occurred September 27, 1995.
(iii) Unaudited.
(iv) Does not reflect the effect of any sales charges.
(v) Amount was computed based on average shares outstanding during the year.
(vi) Ratios have been annualized; total return has not been annualized.
- --------------------------------------------------------------------------------
xi
<PAGE>
THE ALGER FUND
SMALL CAPITALIZATION PORTFOLIO
Financial Highlights (i)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Class C Class A Class B (ii)
-------------- ------------ -----------------------------------------------------------
Three Months Ten Months
Ended Ended Year Ended October 31,
October 31, October 31, -----------------------------------------------------------
1997(vi) 1997(vi) 1997 1996 1995 1994 1993
------------- ---------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ....................... $ 10.38 $ 9.21 $ 10.86 $ 11.13 $ 7.62 $ 8.65 $ 6.88
-------- -------- -------- -------- -------- -------- --------
Net investment income (loss) ...... (.03) (.04) (.11) (.09) (.13) (.09) (.08)
Net realized and unrealized
gain (loss) on investments ....... (.06) 1.18 1.28 .42 3.64 (.02) 1.85
-------- -------- -------- -------- -------- -------- --------
Total from investment operations .. (.09) 1.14 1.17 .33 3.51 (.11) 1.77
Distributions from net
realized gains .................. -- -- (1.74) (.60) -- (.92) --
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period .... $ 10.29 $ 10.35 $ 10.29 $ 10.86 $ 11.13 $ 7.62 $ 8.65
======== ======== ======== ======== ======== ======== ========
Total Return (iv) ................. (.9%) 12.4% 12.9% 3.2% 46.2% (1.1%) 25.8%
======== ======== ======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) ................. $ 338 $ 25,996 $580,651 $553,872 $463,718 $294,890 $300,108
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to
average net assets .............. 2.09% 1.38% 2.14% 2.13% 2.11% 2.18% 2.13%
======== ======== ======== ======== ======== ======== ========
Decrease reflected in above
expense ratios due to
expense reimbursements .......... -- -- -- -- -- -- --
======== ======== ======== ======== ======== ======== ========
Ratio of net investment
income (loss) to
average net assets .............. (1.71%) (.93%) (1.67%) (1.59%) (1.75%) (1.51%) (1.52%)
======== ======== ======== ======== ======== ======== ========
Portfolio Turnover Rate .......... 120.27% 120.27% 120.27% 153.35% 97.37% 131.86% 148.49%
======== ======== ======== ======== ======== ======== ========
Average Commission Rate Paid ..... $ .0652 $ .0652 $ .0652 $ .0611
======== ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
xii
<PAGE>
<TABLE>
<CAPTION>
Class B (ii)
--------------------------------------------------------------
Year Ended October 31,
--------------------------------------------------------------
1992 1991 1990 1989 1988
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ......................... $ 6.97 $ 4.33 $ 5.91 $ 3.58 $ 3.00
-------- -------- -------- -------- --------
Net investment income (loss)......... (.11)(v) (.03) (.06)(v) -- (.07)
Net realized and unrealized
gain (loss) on investments........ .37 2.76 (.25) 2.33 .65
-------- -------- -------- -------- --------
Total from investment operations..... .26 2.73 (.31) 2.33 .58
Distributions from net
realized gains .................... (.35) (.09) (1.27) -- --
-------- -------- -------- -------- --------
Net asset value, end of period....... $ 6.88 $ 6.97 $ 4.33 $ 5.91 $ 3.58
======== ======== ======== ======== ========
Total Return (iv) ................... 3.4% 63.7% (7.1%) 65.1%(iii) 19.3%(iii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) ................. $182,432 $ 61,273 $ 23,628 $ 11,990 $ 3,709
======== ======== ======== ======== ========
Ratio of expenses to
average net assets .............. 2.17% 2.23% 2.66% 3.25% 3.01%
======== ======== ======== ======== ========
Decrease reflected in above expense
ratios due to expense
reimbursements .................. -- -- -- -- 1.33%
======== ======== ======== ======== ========
Ratio of net investment
income (loss) to
average net assets ................ (1.64%) (1.37%) (1.17%) (1.92%) (2.07%)
======== ======== ======== ======== ========
Portfolio Turnover Rate ............ 121.00% 171.04% 252.66% 441.42% 228.32%
======== ======== ======== ======== ========
</TABLE>
(i) Class C Shares were initially offered August 1, 1997. Class A Shares were
initially offered January 1, 1997.
(ii) Per share data have been adjusted to reflect the effect of a 3 for 1 stock
split which occurred September 27, 1995.
(iii) Unaudited.
(iv) Does not reflect the effect of any sales charges.
(v) Amount was computed based on average shares outstanding during the period.
(vi) Ratios have been annualized; total return has not been annualized.
xiii
<PAGE>
THE ALGER FUND
CAPITAL APPRECIATION PORTFOLIO (i)
Financial Highlights (ii)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Class C Class A Class B
----------- ------------ --------------------------------------------------------
Three Months Ten Months
Ended Ended Year Ended October 31,
October 31, October 31, ---------------------------------------------------------
1997(v) 1997(v) 1997 1996 1995 1994
----------- ----------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................... $ 27.67 $ 21.59 $ 21.62 $ 18.62 $ 11.11 $ 10.00
---------- ---------- ---------- ---------- ---------- ---------
Net investment income (loss) .......... (.05) (.09) (.33) (.34)(iii) (0.47)(iii) (0.47)
Net realized and unrealized
gain on investments ................. (1.62) 4.67 4.85 3.88 7.98 1.58
---------- ---------- ---------- ---------- ---------- ---------
Total from investment operations ..... (1.67) 4.58 4.52 3.54 7.51 1.11
Distributions from net
realized gains ...................... -- -- (.14) (.54) -- --
---------- ---------- ---------- ---------- ---------- ---------
Net asset value, end of period ........ $ 26.00 $ 26.17 $ 26.00 $ 21.62 $ 18.62 $ 11.11
========== ========== ========== ========== ========== =========
Total Return (iv) ..................... (6.0%) 21.2% 21.0% 19.5% 67.6% 11.1%
========== ========== ========== ========== ========== =========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) ..................... $ 631 $ 15,572 $ 212,895 $ 150,258 $ 33,640 $ 2,369
========== ========== ========== ========== ========== =========
Ratio of expenses excluding
interest to average net assets ...... 2.18% 1.45% 2.27% 2.44% 3.26% 4.13%
========== ========== ========== ========== ========== =========
Ratio of expenses including
interest to average net assets ...... 2.25% 1.53% 2.38% 2.46% 3.54% 5.53%
========== ========== ========== ========== ========== =========
Decrease reflected in above
expense ratios due to expense
reimbursements (vi) ................. -- -- -- -- -- 0.85%
========== ========== ========== ========== ========== =========
Ratio of net investment income
(loss) to average net assets ........ (1.80%) (.85%) (1.72%) (1.61%) (3.02%) (5.12%)
========== ========== ========== ========== ========== =========
Portfolio Turnover Rate .............. 157.63% 157.63% 157.63% 162.37% 197.65% 231.99%
========== ========== ========== ========== ========== =========
Average Commission Rate Paid ......... $ .0702 $ .0702 $ .0702 $ .0647
========== ========== ========== ==========
Amount of debt outstanding
at end of period .................... -- -- -- $7,700,000 -- $ 651,000
========== ========== ========== ========== ========== =========
Average amount of debt
outstanding during
the period .......................... $2,940,097 $2,940,097 $2,940,097 $ 239,966 $ 293,153 $ 406,864
========== ========== ========== ========== ========== =========
Average daily number of shares
outstanding during the period ....... 7,739,199 7,739,199 7,739,199 4,852,286 543,270 191,676
========== ========== ========== ========== ========== =========
Average amount of debt per
share during the period ............. $ 0.38 $ 0.38 $ 0.38 $ 0.05 $ 0.54 $ 2.12
========== ========== ========== ========== ========== =========
</TABLE>
(i) Prior to March 27, 1995, the Capital Appreciation Portfolio was the
Leveraged AllCap Portfolio.
(ii) Class C Shares were initially offered August 1, 1997. Class A Shares were
initially offered January 1, 1997.
(iii) Amount was computed based on average shares outstanding during the year.
(iv) Does not reflect the effect of any sales charges.
(v) Ratios have been annualized; total return has not been annualized.
(vi) Represents expense reimbursements made pursuant to applicable state
expense limits.
- --------------------------------------------------------------------------------
xiv
<PAGE>
HOW TO PURCHASE SHARES
In General
The Alger Fund (the "Fund") offers Class A, Class B and Class C Shares
(except for Alger Money Market Portfolio which has a single class of shares) for
investors. The offering price for Class A Shares is net asset value plus an
initial sales charge that declines for larger purchases (see "Class A Share
Information" below). Purchases of Class A Shares in amounts of $1 million or
more incur no initial sales charge but may be subject to a contingent deferred
sales charge ("CDSC") if held for less than one year. The offering price for
Class B Shares is net asset value with no initial sales charge but such shares
may be subject to a CDSC if held for less than six years. Class B Shares
automatically convert to Class A Shares after they have been held for eight
years (see "Class B Share Information" below). Class C shares also are sold at
net asset value without an initial sales charge, but they may be subject to a
CDSC of 1% if held for less than one year. Class C Shares automatically convert
to Class A Shares after they have been held for twelve years (see "Class C Share
Information" below). Alger Money Market Portfolio is sold without an initial
sales charge or CDSC. There is no minimum imposed on initial or subsequent
investments in any Portfolio other than Alger Money Market Portfolio. The
minimum initial investment in Alger Money Market Portfolio is $500, and
subsequent investments must be at least $25. These minimums may be waived under
certain circumstances. The Fund or the transfer agent may reject any purchase
order.
Methods of Purchasing Shares
MAIL
You can buy shares through Alger Shareholder Services, Inc., the Fund's
transfer agent ("Transfer Agent"), by filling out the New Account Application
and returning it with a check drawn on a U.S. bank to Alger Shareholder
Services, Inc. at 30 Montgomery Street, Box 2001, Jersey City, NJ 07302.
WIRE TRANSFERS
Investors establishing new accounts by wire transfer should forward their
completed New Account Applications to the Transfer Agent, stating that the
account was established by wire transfer and the date and amount of the
transfer. Further information regarding wire transfers is available by calling
(800) 992-3863.
BROKERS
You can buy shares of the Portfolios through brokers who have signed sales
agreements with the Fund's Distributor, Fred Alger & Company, Incorporated
("Alger Inc.").
PROCESSING ORGANIZATIONS
You can buy shares through a "Processing Organization," which is a
broker-dealer, bank or other financial institution that purchases shares for its
customers. Processing Organizations may impose charges and restrictions in
addition to or different from those applicable if you invest with the Fund
directly. Therefore, you should read the materials provided by the Processing
Organization in conjunction with this Prospectus. Certain Processing
Organizations may receive compensation from the Fund, Alger Inc., or any of its
affiliates.
CLASS A SHARE INFORMATION
Class A Shares are available in all Portfolios except Alger Money Market
Portfolio. These shares may be subject to an initial sales charge (indicated
below) on purchases of less than $1 million. Purchases of Class A Shares in the
amount of $1 million or more avoid the initial sales charge, but are subject to
a CDSC of 1% if held for less than one year. See "Contingent Deferred Sales
Charge" below.
INITIAL SALES CHARGE
The sales charges applicable to purchases of Class A Shares of the Portfolios
(other than the Alger Money Market Portfolio) are:
Sales Charge Sales Charge Dealer Allowance
Purchase as % of as % of as % of
Amount Offering Price Net Asset Value Offering Price
- ------------------- -------------- --------------- ----------------
Less than $100,000 4.75% 4.99% 4.00%
$100,000 - $249,999 4.00% 4.17% 3.25%
$250,000 - $499,999 3.00% 3.09% 2.50%
$500,000 - $999,999 2.25% 2.30% 1.75%
$1,000,000 and over * * 1.00%
- ------------------
* Purchases of Class A Shares, which when combined with current holdings of
Class A Shares offered with a sales charge equal to or exceeding $1,000,000
in the aggregate, may be made at net asset value without any initial sales
charge, but will be subject to a CDSC of 1.00% on redemptions made within 12
months of purchase. The CDSC is waived in certain circumstances. See "Waivers
of Sales Charges."
1
<PAGE>
The reduced sales charges shown above apply to the aggregate of purchases of
Class A Shares of the Fund made at one time (unless a Letter of Intent is on
file with the Fund) by "any person," which includes an individual, his or her
spouse and children, or a trustee or other fiduciary of a single trust, estate
or single fiduciary account. See "Letter of Intent."
From time to time Alger Inc. may reallow to brokers or financial
intermediaries all or substantially all of the initial sales charge. To the
extent that it does so, such persons may be deemed to be underwriters of the
Fund as defined in the Securities Act of 1933, as amended.
RIGHT OF ACCUMULATION
Class A Shares of the Fund may be purchased by "any person" (as defined
above) at a reduced sales charge as determined by aggregating the dollar amount
of the new purchase and the current value (at offering price) of all Class A
Shares of the Fund then held by such person and applying the sales charge
applicable to such aggregate. In order to obtain such discount, the purchaser
must provide sufficient information at the time of purchase to permit
verification that the purchase qualifies for the reduced sales charge. The right
of accumulation is subject to modification or discontinuance at any time with
respect to all shares purchased thereafter.
LETTER OF INTENT
A Letter of Intent ("LOI") contemplating aggregate purchases of $100,000 or
more provides an opportunity for an investor to obtain a reduced sales charge by
aggregating investments over a 13-month period, provided that the investor
refers to such LOI when placing orders. For purposes of a LOI, the "Purchase
Amount" as referred to in the preceding sales charge table includes purchases of
all Class A Shares of the Fund offered with a sales charge over the following 13
months. An alternative is to compute the 13-month period starting up to 90 days
before the date of execution of the LOI.
The minimum initial investment under the LOI is 5% of the total LOI amount.
Each investment made during the period receives the reduced sales charge
applicable to the total amount of the investment goal. Shares purchased with the
first 5% of the total LOI amount will be held in escrow by the Transfer Agent to
assure any necessary payment of a higher applicable sales charge if the
investment goal is not met. If the goal is not achieved within the period, the
investor must pay the difference between the sales charges applicable to the
purchases made and the charges previously paid, or an appropriate number of
escrowed shares will be redeemed.
CLASS B SHARE INFORMATION
Class B Shares are offered for sale for purchases of less than $250,000.
Class B Shares are sold at net asset value with no initial sales charge. This
provides investors the benefit of putting all of their dollars to work at the
time the investment is made. However, a CDSC of up to 5% may be imposed if you
redeem your shares within six years of purchase. See "Contingent Deferred Sales
Charge." Class B Shares are subject to certain Rule 12b-1 fees as well, which
are described below. Once Class B Shares have been held for eight years, they
will automatically convert to Class A Shares. See "Conversion of Class B and
Class C Shares."
CLASS C SHARE INFORMATION
Class C shares are offered for sale for purchases of less than $1,000,000.
Class C Shares are sold at net asset value with no initial sales charge. This
provides investors the benefit of putting all of their dollars to work at the
time the investment is made. However, a CDSC of 1% may be imposed if you redeem
your shares within one year of purchase. See "Contingent Deferred Sales Charge."
Class C Shares are subject to certain Rule 12b-1 fees as well, which are
described below. Once Class C Shares have been held for twelve years, they will
automatically convert to Class A Shares. (See "Conversion of Class B and Class C
Shares.")
Class C Shares are subject to the same ongoing distribution and service fees
as Class B Shares but are subject to a CDSC for a shorter period of time (one
year versus six years) than Class B Shares. However, Class B Shares convert to
Class A Shares after a shorter period of time than do Class C Shares (eight
years versus twelve years).
CONVERSION OF CLASS B AND CLASS C SHARES
Class B and Class C Shares will automatically convert to Class A Shares eight
and twelve years,
2
<PAGE>
respectively, after the end of the calendar month in which the order to purchase
was accepted and will thereafter not be subject to the original Class's Rule
12b-1 fees. The conversion will be completed on the basis of the relative net
asset values per share without the imposition of any sales charge, fee or other
charge. At conversion, a proportionate amount of shares representing reinvested
dividends and reinvested capital gains will also be converted into Class A
Shares. Because Alger Money Market Portfolio is not subject to any distribution
fees, the running of the applicable conversion period is suspended for any
period of time in which shares received in exchange for Class B or Class C
Shares are held in that Portfolio. For purposes of determining the conversion
date of Class B Shares outstanding prior to August 1, 1997, such shares will be
deemed to have been held for either eight years or the period (adjusted as set
forth in the preceding sentence) since their purchase acceptance, whichever is
shorter. Accordingly, all Class B Shares outstanding for at least eight years as
of August 28, 1997 were converted to Class A Shares on August 28, 1997.
The conversion of Class B Shares and Class C Shares is subject to the
continuing availability of an opinion of counsel to the effect that the
conversion of shares does not constitute a taxable event under Federal income
tax laws. The conversion of Class B and Class C Shares may be suspended if such
an opinion is no longer available.
DISTRIBUTION PLANS
The Fund has adopted separate Distribution Plans (the "Plans") pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act")
under which Classes B and C of each Portfolio other than Alger Money Market
Portfolio may make payments to Alger Inc. in connection with its activities in
promoting sales of that Portfolio's Class B and C Shares--at a maximum annual
rate of .75% of the Portfolio's average daily net assets represented by such
shares (each a Rule 12b-1 fee). Under the Class B Plan, the Rule 12b-1 fee is
paid, up to the maximum annual rate, to the extent necessary to reimburse Alger
Inc.'s expenses incurred in promoting distribution of Class B shares. Under the
Class C Plan, the Rule 12b-1 fee constitutes compensation to Alger Inc. for its
activities in distributing Class C Shares, and the expenses incurred by Alger
Inc. in connection with such activities may be greater or less than the
compensation received from the Portfolio. In each case, the Rule 12b-1 fee,
sometimes described as an "asset-based sales charge," allows investors to buy
shares without an initial sales charge while allowing Alger Inc. to compensate
dealers that sell Class B or C Shares of the Portfolios. Typically, Alger Inc.,
in its discretion or pursuant to dealer agreements, pays sales commissions of up
to 4.75% of the amount invested in Class B Shares, and up to 1% of the amount
invested in Class C Shares, to dealers from its own resources at the time of
sale and pays continuing commissions after purchase to dealers selling Class C
Shares. For Class B Shares, Alger Inc. retains the asset-based sales charge to
recoup the sales commissions and other sales-related expenses its pays. For
Class C Shares, the asset-based sales charge is retained by Alger Inc. in the
first year after purchase; in subsequent years, all or a portion of it typically
is paid to the dealers who sold the Class C Shares. In some cases, the selling
dealer is Alger Inc. Any CDSCs on Class B Shares received by Alger Inc. will
reduce the amount to be reimbursed under the Class B Plan. Under the Class B
Plan, any excess distribution expenses may be carried forward, with interest,
and reimbursed in future years. At October 31, 1997, the end of the Fund's
fiscal year, the following approximate amounts were carried forward under the
Class B Plan: Alger Small Capitalization Portfolio--$16,444,000 (2.71% of net
assets); Alger MidCap Growth Portfolio--$3,218,000 (1.87%); Alger Growth
Portfolio--$7,605,000 (2.13%); Alger Balanced Portfolio--$225,000 (1.71%); and
Alger Capital Appreciation Portfolio--$2,124,000 (.93%).
CONTINGENT DEFERRED SALES CHARGE
No CDSC is imposed on the redemption of shares of Alger Money Market
Portfolio, except that shares
3
<PAGE>
of the Portfolio acquired in exchange for shares of the other Portfolios will
bear any CDSC that would apply to the exchanged shares.
With respect to Class B Shares, there is no initial sales charge on purchases
of shares of any Portfolio, but a CDSC may be charged on certain redemptions.
The CDSC is imposed on any redemption that causes the current value of your
account in the Class B shares of the Portfolio to fall below the amount of
purchase payments made during a six-year holding period. The amount of the
charge is based on the length of time shares are held, according to the
following table:
Contingent
Deferred Sales
Years Shares Were Held Charge
---------------------------------- --------------
Less than one ................................................ 5%
One but less than two ........................................ 4%
Two but less than three ...................................... 3%
Three but less than four ..................................... 2%
Four but less than five ...................................... 2%
Five but less than six ....................................... 1%
Six and greater .............................................. 0%
Certain Class A Shares also are subject to a CDSC. Those Class A Shares
purchased in an amount of $1 million or more which have not been subject to the
Class's initial sales charge and which have not been held for a full year are
subject to a CDSC of 1% at the time of redemption.
Class C Shares have no initial sales charge but are subject to a CDSC of 1%
if redeemed within one year of purchase.
IN GENERAL
For purposes of the CDSC, it is assumed that the shares of the Portfolio from
which the redemption is made are the shares of that Portfolio which result in
the lowest charge, if any.
Redemptions of shares of each of the Portfolios are deemed to be made first
from amounts, if any, to which a CDSC does not apply. There is no CDSC on
redemptions of (i) shares that represent appreciation on your original
investment, or (ii) shares purchased through reinvestment of dividends and
capital gains. Since no charge is imposed on shares purchased and retained in
Alger Money Market Portfolio, you may wish to consider redeeming those shares,
if any, before redeeming shares that are subject to a CDSC. Please see the
Statement of Additional Information for examples of how the CDSC is calculated
when shares are exchanged.
WAIVERS OF SALES CHARGES
No initial sales charge (Class A) or CDSC (Classes A, B or C) is imposed on
(1) purchases or redemptions by (i) employees of Alger Inc. and its affiliates,
(ii) IRAs, Keogh Plans and employee benefit plans for those employees and (iii)
spouses, children, siblings and parents of those employees and trusts of which
those individuals are beneficiaries, as long as orders for the shares on behalf
of those individuals and trusts were placed by the employees; (2) purchases or
redemptions by (i) accounts managed by investment advisory affiliates of Alger
Inc. that are registered under the Investment Advisers Act of 1940, as amended,
(ii) employees, participants and beneficiaries of those accounts, (iii) IRAs,
Keogh Plans and employee benefit plans for those employees, participants and
beneficiaries and (iv) spouses and minor children of those employees,
participants and beneficiaries as long as orders for the shares were
placed by the employees, participants and beneficiaries; (3) purchases or
redemptions by directors or trustees of any investment company for which Alger
Inc. or any of its affiliates serves as investment adviser or distributor; (4)
purchases or redemptions of shares held through defined contribution plans as
defined by ERISA; (5) purchases or redemptions by an investment company
registered under the 1940 Act in connection with the combination of the
investment company with the Fund by merger, acquisition of assets or by any
other transaction; (6) purchases or redemptions by registered investment
advisers, banks, trust companies and other financial institutions exercising
discretionary authority with respect to the money invested in Fund shares; (7)
purchases or redemptions by registered investment advisers for their own
accounts; (8) purchases or redemptions by a Processing Organization, as
shareholder of record, on behalf of (i) investment advisers or financial
planners trading for their own accounts or the accounts of their clients and who
charge a management, consulting or other fee for their services ("wrap"
accounts); and clients of such investment advisers or financial plan-
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ners trading for their own accounts if the accounts are linked to the master
account of such investment adviser or financial planner on the books and records
of the Processing Organization, and (ii) retirement and deferred compensation
plans and trusts used to fund those plans; and (9) purchases or redemptions by
registered representatives of broker-dealers which have entered into Selected
Dealer Agreements with Alger Inc., and their spouses, children, siblings and
parents.
Any CDSC is also waived on (1) Systematic Withdrawal Plan payments, (2)
redemptions of shares in connection with certain required post-retirement
withdrawals from an IRA or other retirement plan or (3) redemptions following
the death or disability of a shareholder.
Investors purchasing Class A Shares subject to one of the foregoing waivers
are required to claim and substantiate their eligibility for the waiver at the
time of purchase. It is also the responsibility of shareholders redeeming shares
otherwise subject to a CDSC but qualifying for a waiver of the charge to assert
this status at the time of redemption. Information regarding these procedures is
available by contacting the Fund at (800) 992-3863.
HOW TO SELL SHARES
You can sell (redeem) some or all of your shares on any business day. Your
shares will be sold at the next net asset value calculated after your redemption
request is received and accepted by the Transfer Agent and your payment will be
made by check within seven days. A CDSC may be charged on certain redemptions.
See "Contingent Deferred Sales Charge" above for details. Redemptions may be
suspended and payments delayed under certain emergency circumstances as
determined by the Securities and Exchange Commission. The Transfer Agent will
reject any redemption request made within 15 days after receipt of the purchase
check, the TelePurchase order or Automatic Investment Plan transfer against
which such redemption is requested. You can sell your shares in any of the
following ways: by mail, by telephone, by check (Alger Money Market Portfolio
only) or through your broker. Please note that, although the Fund is authorized
to charge a fee for each wire redemption, it does not currently intend to do so.
MAIL
You should send a letter of instruction to the Transfer Agent that includes
your name, account number, Portfolio name, the class of shares (if applicable),
the number of shares or dollar amount and where you want the money to be sent.
The letter must be signed by all authorized signers and, if the redemption is
for more than $5,000 or if the proceeds are to be sent to an address other than
the address of record, the signature(s) must be guaranteed. In addition, any
request for redemption proceeds to be sent to the address of record must have
the signature(s) guaranteed if made within 60 days of changing your address. The
Transfer Agent will accept a signature guarantee by the following financial
institutions: a U.S. bank, trust company, broker, dealer, municipal securities
broker or dealer, government securities broker or dealer, credit union which is
authorized to provide signature guarantees, national securities exchange,
registered securities association or clearing agency.
TELEPHONE WIRE REDEMPTION OPTION
If you wish to use this service, you should mark the appropriate box on the
New Account Application or complete a Telephone Services Form 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 Alger Money
Market Portfolio, your redemption proceeds will be wired the same day.
Redemption requests for Portfolios other than Alger Money Market Portfolio
received prior to the close of business of the New York Stock Exchange ("NYSE")
(normally 4:00 p.m. Eastern time) and requests received after 12:00 noon for
Alger Money Market Portfolio will be paid on the next business day. The minimum
wire redemption amount is $2,500. If your proceeds are less than $2,500, they
will be mailed to your address of record. Redemption requests made before 12:00
noon Eastern time for Alger Money Market Portfolio will not receive a dividend
for that day. Shares held in any Alger retirement plan and shares issued in
certificate form are not eligible for this service.
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TELEPHONE REDEMPTIONS
You automatically have the ability to make redemptions by telephone unless
you refuse the telephone redemption privilege. To sell shares by telephone,
please call (800) 992-3863. If your redemption request is received before 12:00
noon Eastern time for Alger Money Market Portfolio, your redemption proceeds
will generally be mailed on the next business day. Redemption requests for
Portfolios other than Alger Money Market Portfolio received prior to the close
of business of the NYSE (normally 4:00 p.m. Eastern time) will generally be
mailed on the next business day. Requests received after 12:00 noon Eastern time
for Alger Money Market Portfolio will generally be mailed on the business day
following the next business day. Shares held in any Alger retirement plan and
shares issued in certificate form are not eligible for this service.
Redemption proceeds are mailed to the address of record. Any request for
redemption proceeds to be sent to the address of record must be in writing with
the signature(s) guaranteed if made within 60 days of changing your address.
Redemption requests made before 12:00 noon Eastern time for Alger Money Market
Portfolio will not receive a dividend for that day.
The Fund, the Transfer Agent and their affiliates are not liable for acting
in good faith on telephone instructions relating to your account, so long as
they follow reasonable procedures to determine that the telephone instructions
are genuine. Such procedures may include recording the telephone calls and
requiring some form of personal identification. You should verify the accuracy
of telephone transactions immediately upon receipt of your confirmation
statement.
CHECK REDEMPTIONS (ALGER MONEY MARKET PORTFOLIO ONLY)
You may redeem shares in your Alger Money Market Portfolio account by writing
a check for at least $500. Dividends are earned until the check clears. If you
mark the appropriate box on the New Account Application and sign the signature
card, the Fund will send you redemption checks. There is no charge for the first
five checks you write in any one calendar year. You will be charged $2.50 for
each additional check you write.
Your redemption may be reduced by any applicable CDSC (see "Contingent
Deferred Sales Charge"). If your account is not adequate to cover the amount of
your check and any applicable CDSC, the check will be returned marked
insufficient funds. As a result, checks should not be used to close an account.
Shares held in any Alger retirement plan and shares issued in certificate form
are not eligible for this service.
The use of the check redemption procedure does not give rise to a banking
relationship between the shareholder and the Fund or the Transfer Agent, which
will be acting solely as transfer agent for the Portfolio.
REDEMPTION IN KIND
Under unusual circumstances, shares of a Portfolio may be redeemed "in kind,"
which means that the redemption proceeds will be paid with securities which are
held by the Portfolio. Please refer to the Statement of Additional Information
for more details.
SPECIAL INVESTOR SERVICES
EXCHANGE PRIVILEGE
Except as limited below, shareholders may exchange some or all of their
shares for shares of another Portfolio of the Fund. Class A shareholders may
exchange their shares for Class A Shares of another Portfolio or for shares of
Alger Money Market Portfolio. Class B shareholders may exchange their shares for
Class B Shares of another Portfolio or for shares of Alger Money Market
Portfolio. Class C shareholders may exchange their shares for Class C Shares of
another Portfolio or for shares of Alger Money Market Portfolio. Alger Money
Market Portfolio shares acquired by direct purchase may be exchanged for Class
A, Class B or Class C Shares of another Portfolio; however, any applicable sales
charge will apply to the shares acquired, depending upon their class. Shares of
Alger Money Market Portfolio acquired by exchange rather than by direct purchase
may be exchanged for shares of another Portfolio, but only for shares of the
same class as those originally exchanged for Alger Money Market Portfolio
shares. The period
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of time shares are held in Alger Money Market Portfolio shall not be considered
in scheduling of the automatic conversion to Class A Shares or, for accounts
opened after October 17, 1992, in the calculation of a CDSC.
You automatically have the ability to make exchanges by telephone unless you
refuse the telephone exchange privilege. Exchanges can be made among Portfolios
of the same class of shares for identically registered accounts. 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 NYSE (normally 4:00 p.m.
Eastern time) from Alger Money Market Portfolio to any other Portfolio will
receive dividends from Alger Money Market Portfolio for the day of the exchange.
Shares of 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 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.
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. The minimum monthly investment amount is $25 per
Portfolio. 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
more of the other Portfolios on or about the fifteenth day of the month. The
minimum monthly exchange amount is $25 per Portfolio.
For more information on any of the services discussed above, please call the
Fund toll-free at (800) 992-3863.
TELEPURCHASE AND TELEREDEMPTION PRIVILEGES
The TELEPURCHASE Privilege allows you to purchase Fund shares by telephone
(minimum $500, maximum $50,000) by filling out the appropriate section of the
New Account Application or sending a Telephone Services Form to the Transfer
Agent. Your funds will be transferred from your designated bank account to your
Fund account normally within one business day.
The TELEREDEMPTION Privilege allows you to transfer funds (minimum $500,
maximum $50,000) between your Fund account and your designated bank account.
Redemption proceeds will be transferred to your bank account, generally within
two business days after your redemption request is received. Although the Fund
is authorized to charge a fee of $17.00 for each Automated Clearing House
redemption, it does not currently intend to do so.
To use these privileges, your bank must be a member of the Automated Clearing
House. Shares held in any Alger retirement plan and shares issued in certificate
form are not eligible for this service.
RETIREMENT PLANS
Shares of the Portfolios are available as an investment for your retirement
plans, including regular IRAs, Keogh Plans, corporate pension and profit-sharing
plans, Simplified Employee Pension IRAs, SIMPLE IRAs, Roth IRAs, education IRAs,
401(k) Plans and 403(b) Plans. Please call the Fund at (800) 992-3863 to receive
the appropriate documents which contain important information and applications.
SYSTEMATIC WITHDRAWAL PLAN
If your account balance in any Portfolio is $10,000 or more, you may
establish a Systematic Withdrawal Plan to receive payments of at least $50 on a
monthly, quarterly or annual basis, without payment of a CDSC. The maximum
monthly withdrawal is one percent of the current account value in the Portfolio
at the time you begin participation in the Plan. Shares held in certificate form
are not eligible for this service.
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REINSTATEMENT PRIVILEGE
A shareholder who has redeemed shares of a Portfolio may, within 30 days of
the redemption, reinstate any portion or all of the net proceeds of such
redemption in Portfolio shares of the same class by exercise of the
Reinstatement Privilege. Reinvestment will be at the net asset value of the
Portfolio next determined upon receipt of the proceeds and letter requesting
this privilege be exercised, subject to confirmation of the shareholder's status
or holdings, as the case may be. You will also receive a pro rata credit for any
CDSC imposed. This privilege may be exercised only once by a shareholder.
Exercising the Reinstatement Privilege will not alter any tax payable on the
redemption and a loss may not be allowed for tax purposes.
INVESTMENT OBJECTIVES
AND POLICIES
The investment objectives of the Portfolios and the investment restrictions
summarized in the next paragraph 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, which means 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 Alger Capital Appreciation Portfolio) of its net assets in securities that
are illiquid by virtue of legal or contractual restrictions on resale or the
absence of a readily available market; (4) invest more than 25% of its total
assets in any one industry, except for U.S. Government securities and, with
respect to Alger Money Market Portfolio, bank and thrift obligations; (5) borrow
money or pledge its assets, except that it may borrow money or pledge its assets
in an amount of up to 10% of its total assets for temporary or emergency
purposes and that Alger Capital Appreciation Portfolio may borrow for investment
purposes as described below under "Alger Capital Appreciation Portfolio." The
Statement of Additional Information contains additional investment restrictions
as well as additional information on the Portfolios' investment practices.
Except in the case of percentage limitations on borrowing by the Portfolios
and as may be otherwise stated, the percentage limitations contained in the
Fund's investment restrictions and other investment policies apply at the time
of purchase of a security, and a later increase or decrease in percentage
resulting from a change in value of securities or in the amount of the
Portfolio's assets will not constitute a violation of the restriction or policy.
In order to permit sales of shares in certain jurisdictions, the Fund may
commit to policies more restrictive than those stated above, and the Fund may
terminate any such commitment by discontinuing sales of shares in the applicable
jurisdiction.
ALGER MONEY MARKET PORTFOLIO
The investment objective of the Portfolio is to earn high current income
consistent with preservation of principal and maintenance of liquidity. The
Portfolio may invest in "money market" instruments including, certificates of
deposit, time deposits and bankers' acceptances; U.S. Government securities;
corporate bonds having less than 397 days remaining to maturity; and commercial
paper, including variable rate master demand notes. The Portfolio may also enter
into repurchase agreements, reverse repurchase agreements and firm commitment
agreements. The Statement of Additional Information contains more information on
these instruments.
The Portfolio will invest at least 95% of its total assets in money market
securities which are rated within the highest credit category assigned by at
least two established rating agencies (or one rating agency if the security is
rated by only one) and will only invest in money market securities rated at the
time of purchase within the two highest credit categories or, if not rated, of
equivalent investment quality as determined by Fred Alger Management, Inc.
("Alger Management"), the Fund's investment manager. Alger Management subjects
all securities eligible for investment to its own credit analysis and considers
all securities purchased by the Portfolio to present minimal credit risks.
The Portfolio has a policy of maintaining a stable net asset value of $1.00.
This policy has been maintained since its inception; however, the $1.00 price is
not guaranteed or insured, nor is its yield fixed.
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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. Accordingly, 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, 1997, the range of market capitalization of these
companies was $213 million to $13.737 billion. The Portfolio may invest up to
35% of its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization outside the range of companies
included in the S&P MidCap 400 Index and in excess of that amount (up to 100% of
its assets) during temporary defensive periods.
ALGER SMALL CAPITALIZATION PORTFOLIO
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of purchase
of the securities, have total market capitalization within the range of
companies included in the Russell 2000 Growth Index ("Russell Index") or the S&P
SmallCap 600 Index ("S&P Index"), updated quarterly. Both indexes are broad
indexes of small capitalization stocks. As of December 31, 1997, the range of
market capitalization of the companies in the Russell Index was $20 million to
$2.97 billion; the range of market capitalization of the companies in the S&P
Index at that date was $21 million to $2.934 billion. The combined range as of
that date was $20 million to $2.97 billion. The Portfolio may invest up to 35%
of its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization outside this combined range, and in
excess of that amount (up to 100% of its assets) during temporary defensive
periods.
ALGER CAPITAL APPRECIATION PORTFOLIO
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 85% of
its net assets in equity securities of companies of any size.
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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
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 and
to meet redemptions, they may hold up to 15% of their net assets (35% of total
assets, in the case of Alger Balanced Portfolio) 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 Alger Small
Capitalization Portfolio is likely to invest may have limited product lines,
markets or financial resources and may lack management depth. The securities of
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 smaller companies by all other Portfolios except Alger Money
Market 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
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. 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. 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. Under the policies and procedures
established by the Fund's Board of Trustees, Alger Management determines the
liquidity of the Portfolios' Rule 144A investments.
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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,
including all collateral on such loans less liabilities exclusive of the
obligation to return such collateral, 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. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recovering the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
FOREIGN SECURITIES
Each Portfolio other than 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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
LEVERAGE THROUGH BORROWING
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
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. Hedging transactions are intended to reduce the risk of price
fluctuations. The Portfolio may write an option on a security only if the option
is "covered" (for a discussion of covered options, see the Statement of
Additional Information). Although the Portfolio will generally purchase or write
only those options for which there appears to be an active secondary market,
there is no assurance that a liquid secondary market on an exchange will exist
for any particular option. The Portfolio will not purchase options if, as a
result, the aggregate cost of all outstanding options exceeds 10% of the
Portfolio's total assets, although no more than 5% will be committed to
transactions entered into for non-hedging purposes. The Portfolio may purchase
and sell put and call options on stock indexes in order to increase its gross
income or to hedge its portfolio against price fluctuations.
The writing and purchase of options are highly specialized activities which
involve 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.
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STOCK INDEX FUTURES AND OPTIONS ON
STOCK INDEX FUTURES
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.
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 its shares of the Portfolios. With the exception of Alger Money
Market Portfolio, each Portfolio offers three classes of shares.
Although the Fund is not required by law to hold annual shareholder meetings,
it may hold meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust. Shareholders of one Portfolio may
vote only on matters that affect that Portfolio. Shareholders of a class have
exclusive voting rights with respect to matters affecting only that class, and
shareholders vote separately by class on matters in which the interests of one
class differ from those of another.
BOARD OF TRUSTEES
The Fund is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders under Massachusetts law. The Statement
of Additional Information contains general background information about each
Trustee and officer of the Fund.
INVESTMENT MANAGER
Alger Management is the Fund's investment manager and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees. Alger Management makes investment decisions for the Portfolios, places
orders to purchase and sell securities on behalf of the Portfolios and selects
broker-dealers that, in its judgment, provide prompt and reliable execution at
favorable prices and reasonable commission rates. It is anticipated that Alger
Inc. will serve as the Fund's broker in effecting substantially all of the
Portfolios' transactions on securities exchanges and will retain commissions in
accordance with certain regulations of the Securities and Exchange Commission.
The Fund will consider sales of its shares as a factor in the selection of
broker-dealers to execute over-the-counter portfolio transactions, subject to
the requirements of best price and execution. In addition, Alger Management
employs professional securities analysts who provide research services
exclusively to the Portfolios and other accounts for which Alger Management or
its affiliates serve as investment adviser or subadviser.
Alger Management has been in the business of providing investment advisory
services since 1964 and, as of January 31, 1998, had approximately $7.8 billion
under management, $4.5 billion in mutual fund accounts and $3.3 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.
12
<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 since 1971, as Executive Vice President and
Director of Research until 1995 and as President since 1995. Ms. Khoo has been
employed by Alger Management since 1989, as a senior research analyst until 1995
and as a Senior Vice President since 1995. Mr. Tartaro has been employed by
Alger Management since 1990, as a senior research analyst until 1995 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 and other mutual funds managed by Alger Management. He has been
employed by Alger Management as a fixed income analyst since 1991.
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.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders of
the Portfolios. At February 2, 1998, Merrill Lynch & Co. Trustee FBO Qualified
Retirement Plans owned beneficially or of record 32.07% of Alger Growth
Portfolio--Class A Shares, and Dreyfus Retirement Services owned beneficially or
of record 37.34% of Alger Growth Portfolio--Class A Shares. On the same date,
FTC & Co.--Datalynx House Acct. owned beneficially or of record 32.35% of Alger
MidCap Growth Portfolio--Class A Shares. On that date, Donaldson Lufkin Jenrette
Securities Corp. owned beneficially or of record 27.99% of Alger Balanced
Portfolio--Class C Shares, and Ken's Auto Service, Inc. owned beneficially or of
record 26.88% of Alger Balanced Portfolio--Class C Shares. Also on February 2,
1998, Merrill Lynch Pierce Fenner & Smith FBO its Customers owned beneficially
or of record 39.35% of Alger MidCap Growth Portfolio--Class C Shares, 29.01% of
Alger Growth Portfolio--Class C Shares and 29.18% of Alger Capital Appreciation
Portfolio--Class C Shares. The shareholders identified above may be deemed to
control the specified Classes, which may have the effect of proportionately
diminishing the voting power of other shareholders of these Classes.
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%.
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.
13
<PAGE>
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 Alger Money Market Portfolio for
ongoing service and maintenance of shareholder accounts. Alger Inc. will
compensate dealers from this fee who provide personal service and maintenance
of customer accounts.
NET ASSET VALUE
The price of one share of a class is based on its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets allocable to the class, deducting applicable liabilities
and then dividing the result by the number of its shares outstanding. The net
asset value of a share of a given class may differ from that of one or more
other classes. Net asset value is calculated as of the close of business
(normally 4:00 p.m. Eastern time) or, for Alger Money Market Portfolio, as of
12:00 noon Eastern time on each day the NYSE is open.
Purchases for 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 NYSE (normally 4:00 p.m. Eastern time), it will be credited
and begin earning dividends the next business day.
Purchases for the other Portfolios will be based upon the next net asset
value calculated for each class after your order is received and accepted. If
your purchase is made by check, wire or exchange and is received by the close of
business of the NYSE (normally 4:00 p.m. Eastern time), your account will be
credited on the day of receipt. If your purchase is received after such time, it
will be credited the next business day.
Third-party checks will not be honored except in the case of
employer-sponsored retirement plans. You will be charged a fee for any check
returned by your bank.
DIVIDENDS AND TAXES
DIVIDENDS
Each class will be treated separately in determining the amounts of dividends
of investment income and distributions of capital gains payable to holders of
its shares. Dividends and distributions will be automatically reinvested at net
asset value on the payment date in additional shares of the class that paid the
dividend or distribution at net asset value, unless you elected in writing to
have all dividends and distributions paid in cash or reinvested at net asset
value into another identically registered Alger Portfolio account you have
established. In addition, accounts whose dividend/distribution checks have been
returned as undeliverable shall reinvest that dividend/distribution at the net
asset value next determined after the Transfer Agent receives the undelivered
check. Furthermore, all future dividend/distribution checks shall be reinvested
automatically at net asset value on the payment date until a written request for
reinstatement of cash distribution and a valid mailing address are provided by
the shareholder(s). Shares purchased through reinvestment of dividends and
distributions are not subject to a CDSC or front-end sales charge. Any dividends
of Alger Money Market Portfolio are declared daily and paid monthly, and any
dividends of the other Portfolios are declared and paid annually. Distributions
of any net realized short-term and long-term capital gains earned by a Portfolio
usually will be made annually after the close of the fiscal year in which the
gains are earned.
The classes of a Portfolio may have different dividend and distribution
rates. Class A dividends generally will be greater than those of Classes B and C
due to the Rule 12b-1 fees associated with Class B and C Shares. However,
dividends paid to each class of shares in a Portfolio will be declared and paid
at the same time and will be determined in the same manner as those paid to each
other class.
TAXES
Each Portfolio intends to qualify and elect to be treated each year as a
"regulated investment company" for federal income tax purposes. A regulated
investment company is not subject to regular income tax on
14
<PAGE>
any income or capital gains distributed to its shareholders if it, among other
things, distributes at least 90 percent of its investment company taxable income
to them within applicable time periods. Each Portfolio is treated as a separate
taxable entity, with the result that taxable dividends and distributions from a
Portfolio reflect only the income and gains, net of losses, of that Portfolio.
For federal income tax purposes dividends and distributions from a Portfolio
are taxable to you whether paid in cash or reinvested in additional shares. You
may also be liable for tax on any gain realized upon the redemption or exchange
of shares in the Portfolios.
Shortly after the close of each calendar year, you will receive a statement
setting forth the dollar amounts of dividends and any distributions for the
prior calendar year and the tax status of the dividends and distributions for
federal income tax purposes. You should consult your tax adviser to assess the
federal, state and local tax consequences of investing in each Portfolio. This
discussion is not intended to address the tax consequences of an investment by a
nonresident alien.
PERFORMANCE
The Portfolios and their underlying classes advertise different types of
yield and total return performance. All performance figures are based on
historical earnings and are not intended to indicate future performance. Yield
and total return figures may be different among the classes of a portfolio.
Further information about the Fund's performance is contained in its Annual
Report to Shareholders, which may be obtained without charge by contacting the
Fund.
Alger Money Market Portfolio may advertise its "yield" and "effective yield."
The "yield" of the Portfolio refers to certain 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 classes of the Portfolios other than Alger Money Market Portfolio
may also include quotations of their "total return" in advertisements or reports
to shareholders or prospective investors. Total return figures show the
aggregate or average percentage change in value of an investment in a class from
the beginning date of the measuring period to the end of the measuring period.
These figures reflect changes in the price of the class's shares and assume that
any income dividends and/or capital gains distributions made by the class during
the period were reinvested in shares of the class. Figures will be given for
recent 1, 5, and 10 year periods, and may be given for other periods as well
(such as from commencement of the class's operations, or on a year-by-year
basis) and may utilize dollar cost averaging. The class may use "aggregate"
total return figures for various periods, representing the cumulative change in
value of an investment in the class for the specific period (again reflecting
changes in class share price and assuming reinvestment of dividends and
distributions) as well as "actual annual" and "annualized" total return figures.
Total returns may be calculated either with or without the effect of the CDSC or
initial sales charge to which the shares are subject and may be shown by means
of schedules, charts or graphs, and may indicate subtotals of the various
components of total return (i.e., change in value of initial investment, income
dividends and capital gains distributions). "Total return" and "yield" for a
class will vary based on changes in market conditions. In addition, since the
deduction of a class's expenses is reflected in the total return and yield
figures, "total return" and "yield" will also vary based on the level of the
class's expenses.
The Statement of Additional Information, which is incorporated by reference,
further describes the method used to determine the yields and total return
figures. Current yield and/or total return quotations may be obtained by
contacting the Fund.
15
<PAGE>
<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
Counsel:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, NY 10176
THE
ALGER
FUND
Meeting the challenge
of investing
AS298
Alger Money Market Portfolio
Alger Small Capitalization Portfolio
Alger MidCap Growth Portfolio
Alger Growth Portfolio
Alger Balanced Portfolio
Alger Capital Appreciation Portfolio
PROSPECTUS
February 25, 1998
<PAGE>
PROSPECTUS
- ----------
75 Maiden Lane
New York, New York 10038
(800) 992-FUND (3863)
ALGER GROWTH PORTFOLIO
The Alger Fund (the "Fund") offers interests in six portfolios. This
Prospectus sets forth information about 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. The
Portfolio offers three classes of shares, each with a different combination of
sales charges, ongoing fees and other features.
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 25, 1998 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. The Securities and Exchange Commission maintains
a Web site at http://www.sec.gov where the Statement of Additional Information,
material incorporated by reference, and other information regarding The Alger
Fund may be accessed.
TABLE OF CONTENTS
Introduction .................................. ii
Portfolio Expenses ............................ iii
Financial Highlights .......................... iv
How to Purchase Shares ........................ 1
How to Sell Shares ............................ 5
Special Investor Services ..................... 6
Investment Objectives and Policies ............ 8
Investment Practices .......................... 9
Management of the Fund ........................ 9
Net Asset Value ............................... 11
Dividends and Taxes ........................... 11
Performance ................................... 12
- --------------------------------------------------------------------------------
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 25, 1998
<PAGE>
================================================================================
INTRODUCTION
The Alger Fund's portfolios, other than Alger Money Market Portfolio, offer
three classes of shares having different sales charges, ongoing fees and other
features. You may purchase the class of shares that is most beneficial to you
based upon the amount of the purchase, the length of time you expect to hold
shares and other circumstances.
Class A Shares
An investor purchasing Class A Shares may pay a sales charge at the time of
purchase. Class A Shares are not subject to a charge when they are redeemed
(except for shares purchased for total proceeds of $1 million or more, which
have no initial sales charge and which may be subject to a contingent deferred
sales charge ["CDSC"]). The initial sales charge may be reduced or waived for
certain purchases. Class A Shares are subject to a shareholder servicing fee
equal to an annual rate of .25% of the Portfolio's average daily net assets
attributable to its Class A Shares. See "How to Purchase Shares--Class A Share
Information."
Class B Shares
Class B Shares are offered for sale for purchases of less than $250,000.
Class B Shares have no initial sales charge, but may be subject to a CDSC of up
to 5% if you redeem within six years of purchase. They are subject to a
distribution (Rule 12b-1) fee at an annual rate of .75% of the Portfolio's
average daily net assets attributable to Class B Shares. Class B Shares also pay
a shareholder servicing fee calculated at an annual rate of .25% of the
Portfolio's average daily net assets attributable to its Class B Shares. Class B
Shares provide an investor the benefit of putting all of the investor's dollars
to work from the time the investment is made but will have a higher expense
ratio and generally will pay lower dividends than Class A Shares due to the
distribution fee on Class B Shares. Class B Shares will automatically convert to
Class A Shares eight years after the end of the calendar month in which the
investor's order to purchase was accepted. See "How to Purchase Shares--Class B
Share Information."
Class C Shares
Class C Shares are offered for sale for purchases of less than $1,000,000.
There is no initial sales charge for Class C Shares, but they may be subject to
a CDSC of 1% if you redeem within the first year of purchase. They are subject
to a distribution (Rule 12b-1) fee at an annual rate of .75% of the Portfolio's
average daily net assets attributable to Class C Shares. In addition, an annual
shareholder servicing fee calculated at an annual rate of .25% of the
Portfolio's average daily net assets attributable to its Class C Shares will be
paid by Class C shareholders. Class C Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made but will have a higher expense ratio and generally will pay lower dividends
than Class A Shares due to the distribution fee on Class C Shares. Class C
Shares will automatically convert to Class A Shares twelve years after the end
of the calendar month in which the investor's order to purchase was accepted.
See "How to Purchase Shares--Class C Share Information."
================================================================================
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 each class of shares of the Portfolio. These amounts assume the
reinvestment of all dividends and distributions, payment of any applicable
initial or contingent deferred sales charges 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C
------- ------- -------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)(a)(b) ................................. 4.75% None None
Maximum Sales Charge Imposed on Reinvested Dividends ........................ None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds)(b) ............................... None 5.00% 1.00%
Redemption Fees ............................................................. None None None
Exchange Fees ............................................................... None None None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees ............................................................. .75% .75% .75%
12b-1 Fees(c) ............................................................... None .75% .75%
Other Expenses(d) ........................................................... .55% .58% .58%
---- ---- ----
Total Portfolio Operating Expenses .......................................... 1.30% 2.08% 2.08%
==== ==== ====
</TABLE>
(a) The sales charge applicable to Class A Shares set forth in the above table
is the maximum charge imposed upon the purchase of shares. Shareholders may
pay less than 4.75% depending on the amount invested in Class A Shares of
the Fund. See "How to Purchase Shares--Class A Share Information."
(b) Class A purchases of $1 million or more are not subject to an initial sales
charge; however, a contingent deferred sales charge of 1% may be imposed on
certain redemptions within one year following such purchases. See "How to
Purchase Shares--Class A Share Information." For Class B purchases, the
amount of the contingent deferred sales charge, if applicable, will depend
on the number of years since the shareholder made the purchase payment. See
"How to Purchase Shares--Class B Share Information." For Class C purchases,
a contingent deferred sales charge of 1% may be imposed on redemptions
within one year following purchase. See "How to Purchase Shares--Class C
Share Information."
(c) The Alger Fund pays Fred Alger & Company, Incorporated for its services in
distributing Class B and Class C Shares of each Portfolio other than Alger
Money Market Portfolio at the maximum annual rate of .75% of the class's
average daily net assets. Long-term shareholders paying Rule 12b-1 fees
pursuant to The Alger Fund's plans 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) Other Expenses for the Portfolio's Class A and Class C Shares are estimated
on the basis of amounts incurred by the Portfolio's Class B Shares during
its most recent fiscal year.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EXAMPLE CLASS A CLASS B CLASS C
------- ------- -------
You would pay the following expenses on a $1,000 investment including the
maximum sales charges and assuming (1) 5% annual return and (2) redemption at
the end of each time period:
One Year ....................................................................... $ 60 $ 71 $ 31
Three Years .................................................................... 87 95 65
Five Years ..................................................................... 115 132 112
Ten Years ...................................................................... 197 241 241
</TABLE>
================================================================================
You would pay the following expenses on the same investment, assuming no
redemption at the end of each time period:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year ....................................................................... $ 60 $ 21 $ 21
Three Years .................................................................... 87 65 65
Five Years ..................................................................... 115 112 112
Ten Years ...................................................................... 194 241 241
</TABLE>
iii
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended October 31, 1990 through 1997 have
been audited by Arthur Andersen LLP, the Fund's independent public accountants.
This information should be read in conjunction with the financial statements of
the Fund contained in its Annual Report, which financial statements are
incorporated by reference in the Statement of Additional Information. An Annual
Report of the Fund is available by contacting the Fund at (800) 992-3863. In
addition to financial statements, the Annual Report contains further information
about the performance of the Fund. The Financial Highlights, with the exception
of the total return information, for the two years ended October 31, 1989 and
the period from November 11, 1986 (commencement of operations) to October 31,
1987 have been audited by other independent accountants, who have expressed an
unqualified opinion thereon.
THE ALGER FUND
GROWTH PORTFOLIO
Financial Highlights (i)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Class C Class A Class B (ii)
------------ ------------ ----------------------
Three Months Ten Months
Ended Ended
October 31, Year Ended October 31,
October 31, -------------------------------------
1997 (vi) 1997 (vi) 1997 1996 1995 1994
---------- ---- ---- ---- ---- ----
Net asset value, beginning of period. $ 11.98 $ 9.40 $ 9.49 $ 9.38 $ 6.97 $ 7.43
-------- --------- -------- -------- -------- --------
Net investment income (loss)......... (.02) (.02) (.13) (.08)(v) (.02) (.07)(v)
Net realized and unrealized gain
(loss) on investments............... (.46) 2.20 2.44 .78 2.59 .35
-------- --------- -------- -------- -------- --------
Total from investment operations..... (.48) 2.18 2.31 .70 2.57 .28
Distributions from net realized gains -- -- (.30) (.59) (.16) (.74)
-------- --------- -------- -------- -------- --------
Net asset value, end of period....... 11.50 $ 11.58 $ 11.50 $ 9.49 $ 9.38 $ 6.97
======== ========= ======== ======== ======== ========
Total Return (iv).................... (4.0%) 23.2% 24.9% 8.1% 37.8% 4.1%
======== ========= ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted).................... $ 199 $ 52,307 $304,984 $266,207 $154,284 $ 76,390
======== ========= ======== ======== ======== ========
Ratio of expenses to average
net assets ........................ 2.02% 1.30% 2.08% 2.08% 2.09% 2.20%
======== ========= ======== ======== ======== ========
Decrease reflected in above
expense ratios due to expense
reimbursements..................... -- -- -- -- -- --
======== ========= ======== ======== ======== ========
Ratio of net investment income
(loss) to average net assets....... (1.43%) (.39%) (1.13%) (.84%) (1.03%) (1.01%)
======== ========= ======== ======== ======== ========
Portfolio Turnover Rate............. 128.26% 128.26% 128.26% 94.91% 118.16% 103.86%
======== ========= ======== ======== ======== ========
Average Commission Rate Paid........ $ .0699 $ .0699 $ .0699 $ .0715
======== ========= ======== ========
(i) Class C Shares were initially offered on August 1, 1997. Class A Shares were initially offered January 1, 1997.
(ii) Per share data have been adjusted to
reflect the effect of a 3 for 1 stock split which occurred September 27, 1995.
(iii) Unaudited.
iv
<PAGE>
Class B (ii)
-----------------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------------
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
Net asset value, beginning of period. $ 5.76 $ 5.77 $ 4.25 $ 4.42 $ 3.48 $ 3.23
-------- -------- -------- -------- -------- --------
Net investment income (loss)......... (.02) (.06)(v) (.02) (.02) (.05) (.04)
Net realized and unrealized gain
(loss) on investments............... 1.70 .61 1.86 (.15) .99 .29
-------- -------- -------- -------- -------- --------
Total from investment operations..... 1.68 .55 1.84 (.17) .94 .25
Distributions from net realized gains (.01) (.56) (.32) -- -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of period....... 7.43 $ 5.76 $ 5.77 $ 4.25 $ 4.42 $ 3.48
======== ======== ======== ======== ======== ========
Total Return (iv).................... 29.2% 9.7% 45.8% (4.0%) 27.0%(iii) 7.7%(iii)
======== ======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted).................... $ 37,988 $ 19,379 $ 10,213 $ 5,667 $ 5,463 $ 5,294
======== ======== ======== ======== ======== ========
Ratio of expenses to average
net assets 2.20% 2.32% 2.70% 3.09% 3.32% 3.01%
======== ======== ======== ======== ======== ========
Decrease reflected in above
expense ratios due to expense
reimbursements..................... -- -- -- -- -- .43%
======== ======== ======== ======== ======== ========
Ratio of net investment income
(loss) to average net assets....... (1.16%) (1.07%) (1.06%) (.68%) (.70%) (.99%)
======== ======== ======== ======== ======== ========
Portfolio Turnover Rate............. 108.54% 69.28% 76.06% 86.06% 106.73% 151.30%
======== ======== ======== ======== ======== ========
</TABLE>
(iv) Does not reflect the effect of any sales charges.
(v) Amount was computed based on average shares outstanding during the year.
(vi) Ratios have been annualized; total return has not been annualized.
v
<PAGE>
HOW TO PURCHASE SHARES
IN GENERAL
The Fund offers Class A, Class B and Class C Shares of Alger Growth Portfolio
(the "Portfolio") for investors. The offering price for Class A Shares is net
asset value plus an initial sales charge that declines for larger purchases (see
"Class A Share Information" below). Purchases of Class A Shares in amounts of $1
million or more incur no initial sales charge but may be subject to a contingent
deferred sales charge ("CDSC") if held for less than one year. The offering
price for Class B Shares is net asset value with no initial sales charge but
such shares may be subject to a CDSC if held for less than six years. Class B
Shares automatically convert to Class A Shares after they have been held for
eight years (see "Class B Share Information" below). Class C shares also are
sold at net asset value without an initial sales charge, but they may be subject
to a CDSC of 1% if held for less than one year. Class C Shares automatically
convert to Class A Shares after they have been held for twelve years (see "Class
C Share Information" below). The Fund or the transfer agent may reject any
purchase order.
METHODS OF PURCHASING SHARES
MAIL
You can buy shares through Alger Shareholder Services, Inc., the Fund's
transfer agent ("Transfer Agent"), by filling out the New Account Application
and returning it with a check drawn on a U.S. bank to Alger Shareholder
Services, Inc. at 30 Montgomery Street, Box 2001, Jersey City, NJ 07302.
WIRE TRANSFERS
Investors establishing new accounts by wire transfer should forward their
completed New Account Applications to the Transfer Agent, stating that the
account was established by wire transfer and the date and amount of the
transfer. Further information regarding wire transfers is available by calling
(800) 992-3863.
BROKERS
You can buy shares of the Portfolio through brokers who have signed sales
agreements with the Fund's Distributor, Fred Alger & Company, Incorporated
("Alger Inc.").
PROCESSING ORGANIZATIONS
You can buy shares through a "Processing Organization", which is a
broker-dealer, bank or other financial institution that purchases shares for its
customers. Processing Organizations may impose charges and restrictions in
addition to or different from those applicable if you invest with the Fund
directly. Therefore, you should read the materials provided by the Processing
Organization in conjunction with this Prospectus. Certain Processing
Organizations may receive compensation from the Fund, Alger Inc., or any of its
affiliates.
CLASS A SHARE INFORMATION
Class A Shares may be subject to an initial sales charge (indicated below) on
purchases of less than $1 million. Purchases of Class A Shares in the amount of
$1 million or more avoid the initial sales charge, but are subject to a CDSC of
1% if held for less than one year. See "Contingent Deferred Sales Charge" below.
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INITIAL SALES CHARGE
The sales charges applicable to purchases of Class A Shares of the Portfolio
are:
Sales Charge Sales Charge Dealer Allowance
Purchase as % of as % of as % of
Amount Offering Price Net Asset Value Offering Price
- ------------------ -------------- --------------- ----------------
Less than $100,000 4.75% 4.99% 4.00%
$100,000 - $249,999 4.00% 4.17% 3.25%
$250,000 - $499,999 3.00% 3.09% 2.50%
$500,000 - $999,999 2.25% 2.30% 1.75%
$1,000,000 and over * * 1.00%
- ------------------
* Purchases of Class A Shares, which when combined with current holdings of
Class A Shares offered with a sales charge equal to or exceeding $1,000,000
in the aggregate, may be made at net asset value without any initial sales
charge, but will be subject to a CDSC of 1.00% on redemptions made within 12
months of purchase. The CDSC is waived in certain circumstances. See "Waivers
of Sales Charges."
The reduced sales charges shown above apply to the aggregate of purchases of
Class A Shares made at one time (unless a Letter of Intent is on file with the
Fund) by "any person," which includes an individual, his or her spouse and
children, or a trustee or other fiduciary of a single trust, estate or single
fiduciary account. See "Letter of Intent."
From time to time Alger Inc. may reallow to brokers or financial
intermediaries all or substantially all of the initial sales charge. To the
extent that it does so, such persons may be deemed to be underwriters of the
Fund as defined in the Securities Act of 1933, as amended.
RIGHT OF ACCUMULATION
Class A Shares may be purchased by "any person" (as defined above) at a
reduced sales charge as determined by aggregating the dollar amount of the new
purchase and the current value (at offering price) of all Class A Shares then
held by such person and applying the sales charge applicable to such aggregate.
In order to obtain such discount, the purchaser must provide sufficient
information at the time of purchase to permit verification that the purchase
qualifies for the reduced sales charge. The right of accumulation is subject to
modification or discontinuance at any time with respect to all shares purchased
thereafter.
LETTER OF INTENT
A Letter of Intent ("LOI") contemplating aggregate purchases of $100,000 or
more provides an opportunity for an investor to obtain a reduced sales charge by
aggregating investments over a 13-month period, provided that the investor
refers to such LOI when placing orders. For purposes of the LOI, the "Purchase
Amount" as referred to in the preceding sales charge table includes purchases of
all Class A Shares of the Fund offered with a sales charge over the following 13
months. An alternative is to compute the 13-month period starting up to 90 days
before the date of execution of the LOI.
The minimum initial investment under the LOI is 5% of the total LOI amount.
Each investment made during the period receives the reduced sales charge
applicable to the total amount of the investment goal. Shares purchased with the
first 5% of the total LOI amount will be held in escrow by the Transfer Agent to
assure any necessary payment of a higher applicable sales charge if the
investment goal is not met. If the goal is not achieved within the period, the
investor must pay the difference between the sales charges applicable to the
purchases made and the charges previously paid, or an appropriate number of
escrowed shares will be redeemed.
Class B Share Information
Class B Shares are offered for sale for purchases of less than $250,000.Class
B Shares are sold at net asset value with no initial sales charge. This provides
investors the benefit of putting all of their dollars to work at the time the
investment is made. However, a CDSC of up to 5% may be imposed if you redeem
your shares within six years of purchase.See "Contingent Deferred Sales Charge."
Class B Shares are subject to certain Rule 12b-1 fees as well, which are
described below. Once Class B Shares have been held for eight years, they
will automatically convert to Class A Shares. See "Conversion of Class B and
Class C Shares."
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Class C Share Information
Class C Shares are offered for sale for purchases of less than $1,000,000.
Class C Shares are sold at net asset value with no initial sales charge. This
provides investors the benefit of putting all of their dollars to work at the
time the investment is made. However, a CDSC of 1% may be imposed if you redeem
your shares within one year of purchase. See "Contingent Deferred Sales Charge."
Class C Shares are subject to certain Rule 12b-1 fees as well, which are
described below. Once Class C Shares have been held for twelve years, they will
automatically convert to Class A Shares. (See "Conversion of Class B and Class C
Shares.")
Class C Shares are subject to the same ongoing distribution and service fees
as Class B Shares but are subject to a CDSC for a shorter period of time (one
year versus six years) than Class B Shares. However, Class B Shares convert to
Class A Shares after a shorter period of time than do Class C Shares (eight
years versus twelve years).
CONVERSION OF CLASS B AND CLASS C SHARES
Class B and Class C Shares will automatically convert to Class A Shares eight
and twelve years, respectively, after the end of the calendar month in which the
order to purchase was accepted and will thereafter not be subject to the
original Class's Rule 12b-1 fees. The conversion will be completed on the basis
of the relative net asset values per share without the imposition of any sales
charge, fee or other charge. At conversion, a proportionate amount of shares
representing reinvested dividends and reinvested capital gains will also be
converted into Class A Shares. Because Alger Money Market Portfolio is not
subject to any distribution fees, the running of the applicable conversion
period is suspended for any period of time in which shares received in exchange
for Class B or Class C Shares are held in that Portfolio. For purposes of
determining the conversion date of Class B Shares outstanding prior to August 1,
1997, such shares will be deemed to have been held for either eight years or the
period (adjusted as set forth in the preceding sentence) since their purchase
acceptance, whichever is shorter. Accordingly, all Class B Shares outstanding
for at least eight years as of August 28, 1997 were converted to Class A Shares
on August 28, 1997.
The conversion of Class B Shares and Class C Shares is subject to the
continuing availability of an opinion of counsel to the effect that the
conversion of shares does not constitute a taxable event under Federal income
tax laws. The conversion of Class B and Class C Shares may be suspended if such
an opinion is no longer available.
DISTRIBUTION PLANS
The Fund has adopted separate Distribution Plans (the "Plans") pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act")
under which Classes B and C of the Portfolio may make payments to Alger Inc. in
connection with its activities in promoting sales of the Portfolio's Class B and
C Shares--at a maximum annual rate of .75% of the Portfolio's average daily net
assets represented by such shares (each a Rule 12b-1 fee). Under the Class B
Plan, the Rule 12b-1 fee is paid, up to the maximum annual rate, to the extent
necessary to reimburse Alger Inc.'s expenses incurred in promoting distribution
of Class B shares. Under the Class C Plan, the Rule 12b-1 fee constitutes
compensation to Alger Inc. for its activities in distributing Class C Shares,
and the expenses incurred by Alger Inc. in connection with such activities may
be greater or less than the compensation received from the Portfolio. In each
case, the Rule 12b-1 fee, sometimes described as an "asset-based sales charge,"
allows investors to buy shares without an initial sales charge while allowing
Alger Inc. to compensate dealers that sell Class B or C Shares of the Portfolio.
Typically, Alger Inc., in its discretion or pursuant to dealer agreements, pays
sales commissions of up to 4.75% of the amount invested in Class B Shares, and
up to 1% of the amount
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<PAGE>
invested in Class C Shares, to dealers from its own resources at the time of
sale and pays continuing commissions after purchase to dealers selling Class C
Shares. For Class B Shares, Alger Inc. retains the asset-based sales charge to
recoup the sales commissions and other sales-related expenses its pays. For
Class C Shares, the asset-based sales charge is retained by Alger Inc. in the
first year after purchase; in subsequent years, all or a portion of it typically
is paid to the dealers who sold the Class C Shares. In some cases, the selling
dealer is Alger Inc. Any CDSCs on Class B Shares received by Alger Inc. will
reduce the amount to be reimbursed under the Class B Plan. Under the Class B
Plan, any excess distribution expenses may be carried forward, with interest,
and reimbursed in future years. At October 31, 1997, the end of the Fund's
fiscal year, approximately $7,605,000 (2.13%) was carried forward under the Plan
on behalf of the Portfolio.
CONTINGENT DEFERRED SALES CHARGE
No CDSC is imposed on the redemption of shares of Alger Money Market
Portfolio, except that shares of the Portfolio acquired for shares of the other
Portfolios will bear any CDSC that would apply to the exchanged shares.
With respect to Class B Shares, there is no initial sales charge on purchases
of shares of the Portfolio, but a CDSC may be charged on certain redemptions.
The CDSC is imposed on any redemption that causes the current value of your
account in the Class B shares of the Portfolio to fall below the amount of
purchase payments made during a six-year holding period. The amount of the
charge is based on the length of time shares are held, according to the
following table:
Contingent
Deferred Sales
Years Shares Were Held Charge
- ---------------------------------- --------------
Less than one ................................................. 5%
One but less than two ......................................... 4%
Two but less than three ....................................... 3%
Three but less than four ...................................... 2%
Four but less than five ....................................... 2%
Five but less than six ........................................ 1%
Six and greater ............................................... 0%
Certain Class A Shares also are subject to a CDSC. Those Class A Shares
purchased in an amount of $1 million or more which have not been subject to the
Class's initial sales charge and which have not been held for a full year are
subject to a CDSC of 1% at the time of redemption.
Class C Shares have no initial sales charge but are subject to a CDSC of 1%
if redeemed within one year of purchase.
IN GENERAL
For purposes of the CDSC, it is assumed that the shares of the Portfolio from
which the redemption is made are the shares of that Portfolio which result in
the lowest charge, if any.
Redemptions of shares of the Portfolio are deemed to be made first from
amounts, if any, to which a CDSC does not apply. There is no CDSC on redemptions
of (i) shares that represent appreciation on your original investment, or (ii)
shares purchased through reinvestment of dividends and capital gains. Since no
charge is imposed on shares purchased and retained in Alger Money Market
Portfolio, you may wish to consider redeeming those shares, if any, before
redeeming shares that are subject to a CDSC. Please see the Statement of
Additional Information for examples of how the CDSC is calculated when shares
are exchanged.
WAIVERS OF SALES CHARGES
No initial sales charge (Class A) or CDSC (Classes A, B or C) is imposed on
(1) purchases or redemptions by (i) employees of Alger Inc. and its affiliates,
(ii) IRAs, Keogh Plans and employee benefit plans for those employees and (iii)
spouses, children, siblings and parents of those employees and trusts of which
those individuals are beneficiaries, as long as orders for the shares on behalf
of those individuals and trusts were placed by the employees; (2) purchases or
redemptions by (i) accounts managed by investment advisory affiliates of Alger
Inc. that are registered under the Investment Advisers Act of 1940, as amended,
(ii) employees, participants and beneficiaries of those accounts, (iii) IRAs,
Keogh Plans and employee benefit plans for those
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<PAGE>
employees, participants and beneficiaries and (iv) spouses and minor children of
those employees, participants and beneficiaries as long as orders for the shares
were placed by the employees, participants and beneficiaries; (3) purchases or
redemptions by directors or trustees of any investment company for which Alger
Inc. or any of its affiliates serves as investment adviser or distributor; (4)
purchases or redemptions of shares held through defined contribution plans as
defined by ERISA; (5) purchases or redemptions by an investment company
registered under the 1940 Act in connection with the combination of the
investment company with the Fund by merger, acquisition of assets or by any
other transaction; (6) purchases or redemptions by registered investment
advisers, banks, trust companies and other financial institutions exercising
discretionary authority with respect to the money invested in Fund shares; (7)
purchases or redemptions by registered investment advisers for their own
accounts; (8) purchases or redemptions by a Processing Organization, as
shareholder of record, on behalf of (i) investment advisers or financial
planners trading for their own accounts or the accounts of their clients and who
charge a management, consulting or other fee for their services ("wrap"
accounts); and clients of such investment advisers or financial planners trading
for their own accounts if the accounts are linked to the master account of such
investment adviser or financial planner on the books and records of the
Processing Organization, and (ii) retirement and deferred compensation plans and
trusts used to fund those plans; and (9) purchases or redemptions by registered
representatives of broker-dealers which have entered into Selected Dealer
Agreements with Alger Inc., and their spouses, children, siblings and parents.
Any CDSC is also waived on (1) Systematic Withdrawal Plan payments, (2)
redemptions of shares in connection with certain required post-retirement
withdrawals from an IRA or other retirement plan or (3) redemptions following
the death or disability of a shareholder.
Investors purchasing Class A Shares subject to one of the foregoing waivers
are required to claim and substantiate their eligibility for the waiver at the
time of purchase. It is also the responsibility of shareholders redeeming shares
otherwise subject to a CDSC but qualifying for a waiver of the charge to assert
this status at the time of redemption. Information regarding these procedures is
available by contacting the Fund at (800) 992-3863.
HOW TO SELL SHARES
You can sell (redeem) some or all of your shares on any business day. Your
shares will be sold at the next net asset value calculated after your redemption
request is received and accepted by the Transfer Agent and your payment will be
made by check within seven days. A CDSC may be charged on certain redemptions.
See "Contingent Deferred Sales Charge" above, 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, the TelePurchase order or Automatic Investment Plan transfer
against which such redemption is requested. You can sell your shares in any of
the following ways: by mail, by telephone, or through your broker. Please note
that, although the Fund is authorized to charge a fee for each wire redemption,
it does not currently intend to do so.
MAIL
You should send a letter of instruction to the Transfer Agent that includes
your name, account number, Portfolio name, the class of shares, 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(s) must be guaranteed. In addition, any request for
redemption proceeds to be sent to the address of record must have the
signature(s) guaranteed if made within 60 days of changing your address. The
Transfer Agent will accept a signature guarantee by the following financial
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<PAGE>
institutions: a U.S. bank, trust company, broker, dealer, municipal securities
broker or dealer, government securities broker or dealer, credit union which is
authorized to provide signature guarantees, national securities exchange,
registered securities association or clearing agency.
TELEPHONE WIRE REDEMPTION OPTION
If you wish to use this service, you should mark the appropriate box on the
New Account Application or complete a Telephone Services Form with a guaranteed
signature. To sell shares by telephone, please call (800) 992-3863. Redemption
requests for the Portfolio received prior to the close of business of the New
York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern time) will be paid on
the next business day. The minimum wire redemption amount is $2,500. If your
proceeds are less than $2,500, they will be mailed to your address of record.
Shares held in any Alger retirement plan and shares issued in certificate form
are not eligible for this service.
TELEPHONE REDEMPTIONS
You automatically have the ability to make redemptions by telephone unless
you refuse the telephone redemption privilege. To sell shares by telephone,
please call (800) 992-3863. Redemption requests for the Portfolio received prior
to the close of business of the NYSE (normally 4:00 p.m. Eastern time) will
generally be mailed on the next business day. Shares held in any Alger
retirement plan and shares issued in certificate form are not eligible for this
service.
Redemption proceeds are mailed to the address of record. Any request for
redemption proceeds to be sent to the address of record must be in writing with
the signature(s) guaranteed if made within 60 days of changing your address.
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.
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.
SPECIAL INVESTOR SERVICES
EXCHANGE PRIVILEGE
Except as limited below, shareholders may exchange some or all of their
Portfolio shares for shares of another portfolio of the Fund. Class A
shareholders may exchange their shares for Class A Shares of another portfolio
or for shares of Alger Money Market Portfolio. Class B shareholders may exchange
their shares for Class B Shares of another portfolio or for shares of Alger
Money Market Portfolio. Class C shareholders may exchange their shares for Class
C Shares of another portfolio or for shares of Alger Money Market Portfolio.
Alger Money Market Portfolio shares acquired by direct purchase may be exchanged
for Class A , Class B or Class C Shares of another portfolio; however, any
applicable sales charge will apply to the shares acquired, depending upon their
class. Shares of Alger Money Market Portfolio acquired by exchange rather than
by direct purchase may be exchanged for shares of another portfolio, but only
for shares of the same class as those originally exchanged for Alger Money
Market Portfolio shares. The period of time shares are held in Alger Money
Market Portfolio shall not be considered in scheduling of the automatic
conversion to Class A Shares or, for accounts opened after October 17, 1992, in
the calculation of a CDSC.
You automatically have the ability to make exchanges by telephone unless you
refuse the telephone exchange privilege. Exchanges can be made among portfolios
of the same class of shares for identically registered accounts. 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 ex-
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<PAGE>
changed prior to the close of business of the NYSE (normally 4:00 p.m. Eastern
time) from Alger Money Market Portfolio to any other portfolio will receive
dividends from Alger Money Market Portfolio for the day of the exchange. Shares
of 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 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.
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. The minimum monthly investment amount is $25 per
portfolio. 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. The
minimum monthly exchange amount is $25 per portfolio.
For more information on any of the services discussed above, please call the
Fund toll-free at (800) 992-3863.
TELEPURCHASE and TELEREDEMPTION Privileges
The TELEPURCHASE Privilege allows you to purchase Fund shares by telephone
(minimum $500, maximum $50,000) by filling out the appropriate section of the
New Account Application or sending a Telephone Services Form to the Transfer
Agent. Your funds will be transferred from your designated bank account to your
Fund account normally within one business day.
The TELEREDEMPTION Privilege allows you to transfer funds (minimum $500,
maximum $50,000) between your Fund account and your designated bank account.
Redemption proceeds will be transferred to your bank account, generally within
two business days after your redemption request is received. Although the Fund
is authorized to charge a fee of $17.00 for each Automated Clearing House
redemption, it does not currently intend to do so.
To use these privileges, your bank must be a member of the Automated Clearing
House. Shares held in any Alger retirement plan and shares issued in certificate
form are not eligible for this service.
RETIREMENT PLANS
Shares of the Portfolio are available as an investment for your retirement
plans, including regular IRAs, Keogh Plans, corporate pension and profit-sharing
plans, Simplified Employee Pension IRAs, SIMPLE IRAs, Roth IRAs, Education IRAs,
401(k) Plans and 403(b) Plans. Please call the Fund at (800) 992-3863 to receive
the appropriate documents which contain important information and applications.
SYSTEMATIC WITHDRAWAL PLAN
If your account balance in the Portfolio is $10,000 or more, you may
establish a Systematic Withdrawal Plan to receive payments of at least $50 on a
monthly, quarterly or annual basis, without payment of a CDSC. The maximum
monthly withdrawal is one percent of the current account value in the Portfolio
at the time you begin participation in the Plan. Shares held in certificate form
are not eligible for this service.
REINSTATEMENT PRIVILEGE
A shareholder who has redeemed shares of the Portfolio may, within 30 days of
the redemption, reinstate any portion or all of the net proceeds of such
redemption in Portfolio shares of the same class by exercise of the
Reinstatement Privilege. Reinvestment will be at the net asset value of the
Portfolio next determined upon receipt of the proceeds and letter requesting
this privilege be exercised, subject to confirmation of the shareholder's status
or holdings, as the case may be. You will also receive a pro rata credit for any
CDSC imposed. This privilege may be exercised only once by a shareholder.
Exercising the Reinstatement Privilege will not alter any tax payable on the
redemption and a loss may not be allowed for tax purposes.
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<PAGE>
INVESTMENT OBJECTIVES
AND POLICIES
The investment objective of the Portfolio and the investment restrictions
summarized in the next paragraph 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, which means 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 illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily available market;
(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 that
it may borrow money or pledge its assets in an amount of up to 10% of its total
assets for temporary or emergency purposes. The Statement of Additional
Information contains additional investment restrictions as well as additional
information on the Portfolio's investment practices.
Except in the case of percentage limitations on borrowing by the Portfolio
and as may be otherwise stated, the percentage limitations contained in the
Fund's investment restrictions and other investment policies apply at the time
of purchase of a security, and a later increase or decrease in percentage
resulting from a change in value of securities or in the amount of the
Portfolio's assets will not constitute a violation of the restriction or policy.
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 commitments 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
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. Accordingly, 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 objectives and
to meet redemptions, it may hold up to 15% 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. Some of the 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 of 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.
8
<PAGE>
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
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. 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. 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. 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 Rule 144A investments.
LENDING OF PORTFOLIO SECURITIES In order to generate income and to offset
expenses, the Portfolio may lend portfolio securities with a value of up to 33
1/3% of the Portfolio's total assets including collateral on such loans less
liabilities exclusive of the obligation to return such collateral 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.
Default by the borrower could result in delays, costs and/or losses in disposing
of the collateral or recovering the loaned securities and, should the borrower
fail financially, possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
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 its shares of the portfolios. With the exception of Alger Money
Market Portfolio, each portfolio offers three classes of shares.
Although the Fund is not required by law to hold annual shareholder meetings,
it may hold meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the
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Fund's Declaration of Trust. Shareholders of one portfolio may vote only on
matters that affect that portfolio. Shareholders of a class have exclusive
voting rights with respect to matters affecting only that class, and
shareholders vote separately by class on matters in which the interests of one
class differ from those of another.
BOARD OF TRUSTEES
The Fund is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders under Massachusetts law. The Statement
of Additional Information contains general background information about each
Trustee and officer of the Fund.
INVESTMENT MANAGER
Alger Management is the Fund's investment manager and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees. Alger Management makes investment decisions for the 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 Fund's portfolios and other accounts for which Alger
Management or its affiliates serve as investment adviser or subadviser.
Alger Management has been in the business of providing investment advisory
services since 1964 and, as of January 31, 1998, had approximately $7.8 billion
under management, $4.5 billion in mutual fund accounts and $3.3 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 since 1971, as Executive Vice President and
Director of Research until 1995 and as President since 1995. Ms. Khoo has been
employed by Alger Management since 1989, as a senior research analyst until 1995
and as a Senior Vice President since 1995. Mr. Tartaro has been employed by
Alger Management since 1990, as a senior research analyst until 1995 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.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders
of the Portfolio. At February 2, 1998, Merrill Lynch & Co. Trustee FBO Qualified
Retirement Plans owned beneficially or of record 32.07% of the Portfolio's class
A Shares, and Dreyfus Retirement Services owned beneficially or of record 37.34%
of the Portfolio's Class A Shares. On that date, Merrill Lynch Pierce Fenner &
Smith FBO its Customers owned beneficially or of record 29.01% of the
Portfolio's Class C Shares. The shareholders identified above may be deemed to
control the specified Classes, which may have the effect of proportionately
diminishing the voting power of other shareholders of theses classes.
FEES AND EXPENSES
The Portfolio pays Alger Management a management fee computed daily and paid
monthly at annual rates of .75% based on a percentage of the value of the
Portfolio's average daily net assets.
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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
Fund. The Fund, Alger Shareholder Services, Inc., Alger Inc. or any of its
affiliates may elect to enter into a contract to pay them for such services.
SHAREHOLDER SERVICING AGREEMENT
The Fund pays Alger Inc. a shareholder servicing fee of .25% of the average
daily net assets of 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 a class is based on its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets allocable to the class, deducting applicable liabilities
and then dividing the result by the number of its shares outstanding. The net
asset value of a share of a given class may differ from that of one or more
other classes. Net asset value is calculated as of the close of business
(normally 4:00 p.m. Eastern time).
Purchases for the Portfolio will be based upon the next net asset value
calculated for each class 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 NYSE (normally 4:00 p.m. Eastern time), your account will be
credited on the day of receipt. If your purchase is received after such time, it
will be credited the next business day.
Third-party checks will not be honored except in the case of
employer-sponsored retirement plans. You will be charged a fee for any check
returned by your bank.
DIVIDENDS AND TAXES
Dividends
Each class will be treated separately in determining the amounts of dividends
of investment income and distributions of capital gains payable to holders of
its shares. Dividends and distributions will be automatically reinvested at net
asset value on the payment date in additional shares of the class that paid the
dividend or distribution at net asset value, unless you elected in writing to
have all dividends and distributions paid in cash or reinvested at net asset
value into another identically registered Alger portfolio account you have
established. In addition, accounts whose dividend/distribution checks have been
returned as undeliverable shall reinvest that dividend/distribution at the net
asset value next determined after the Transfer Agent receives the undelivered
check. Furthermore, all future dividend/distribution checks shall be reinvested
automatically at net asset value on the payment date until a written request for
reinstatement of cash distribution and a valid mailing address are provided by
the shareholder(s). Shares purchased through reinvestment of dividends and
distributions are not subject to a CDSC or front-end sales charge. Any 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.
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The classes of the Portfolio may have different dividend and distribution
rates. Class A dividends generally will be greater than those of Classes B and C
due to the Rule 12b-1 fees associated with Class B and C Shares. However,
dividends paid to each class of shares in the Portfolio will be declared and
paid at the same time and will be determined in the same manner as those paid to
each other class.
TAXES
The 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. 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 that 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
The Portfolio and its underlying classes advertise different types of yield
and total return performance. All performance figures are based on historical
earnings and are not intended to indicate future performance. Yield and total
return figures may be different among the classes of a portfolio. 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.
Each of the classes of the Portfolio may include quotations of its "total
return" in advertisements or reports to shareholders or prospective investors.
Total return figures show the aggregate or average percentage change in value of
an investment in a class from the beginning date of the measuring period to the
end of the measuring period. These figures reflect changes in the price of the
class's shares and assume that any income dividends and/or capital gains
distributions made by the class during the period were reinvested in shares of
the class. Figures will be given for recent 1, 5, and 10 year periods, and may
be given for other periods as well (such as from commencement of the class's
operations, or on a year-by-year basis) and may utilize dollar cost averaging.
The class may use "aggregate" total return figures for various periods,
representing the cumulative change in value of an investment in the class for
the specific period (again reflecting changes in class share price and assuming
reinvestment of dividends and distributions) as well as "actual annual" and
"annualized" total return figures. Total returns may be calculated either with
or without the effect of the CDSC or initial sales charge to which the shares
are subject and may be shown by means of schedules, charts or graphs, and may
indicate subtotals of the various components of total return (i.e., change in
value of initial investment, income dividends and capital gains distributions).
"Total return" and "yield" for a class will vary based on changes in market
conditions. In addition, since the deduction of a class's expenses is reflected
in the total return and yield figures, "total return" and "yield" will also vary
based on the level of the class's expenses.
The Statement of Additional Information, which is incorporated by reference,
further describes the method used to determine the yields and total return
figures. Current yield and/or total return quotations may be obtained by
contacting the Fund.
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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
Counsel:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, NY 10176
THE
ALGER
FUND
Meeting the challenge
of investing
AS298
Alger Growth
Portfolio
PROSPECTUS
February 25, 1998
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
THE
ALGER
FUND
75 MAIDEN LANE
NEW YORK, NEW YORK 10038
(800) 992-FUND (992-3863)
================================================================================
The Alger Fund (the "Fund") is a registered investment company--a mutual
fund--that presently offers interests in the following six portfolios (the
"Portfolios"):
* Alger Money Market Portfolio
* Alger Balanced Portfolio
* Alger Growth Portfolio
* Alger MidCap Growth Portfolio
* Alger Small Capitalization Portfolio
* Alger Capital Appreciation Portfolio
With the exception of the Alger Money Market Portfolio, each Portfolio
offers three classes of shares, each with a different combination of sales
charges, ongoing fees and other features.
This Statement of Additional Information is not a Prospectus. This document
contains additional information about The Alger Fund and supplements information
in the Prospectus dated February 25, 1998. 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 ........................................................... 13
Exchanges and Conversions ............................................. 14
Management ............................................................ 16
Taxes ................................................................. 18
Custodian and Transfer Agent .......................................... 19
Certain Shareholders .................................................. 20
Organization .......................................................... 21
Determination of Performance .......................................... 22
Appendix .............................................................. A-1
February 25, 1998
SAI28
<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 debt 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 Fred
Alger Management, Inc. ("Alger Management") 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 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
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the issuers of the notes and 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 were to default 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. Each Portfolio will maintain segregated accounts with the Fund's
custodian consisting of cash or liquid securities that at all times are in an
amount equal to its obligations under reverse repurchase agreements. The
Portfolios will invest the proceeds in 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 a 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
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 cash or liquid securities 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 governed by Rule 144A under
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 for purposes of investment limitations if the board of
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<PAGE>
trustees (or the fund's adviser acting subject to the board's supervision)
determines that the securities are in fact liquid. The Board of Trustees has
delegated its responsibility to Alger Management to determine the liquidity of
each restricted security purchased pursuant to the Rule, subject to the Board of
Trustees' oversight and review. Examples of factors that will be taken 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). 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 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 or letters of credit 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 Alger Money Market Portfolio may invest up to 20% of
the value of its total assets in foreign securities (not including American
Depositary Receipts, American Depositary Shares or U.S. dollar-denominated
securities of foreign issuers). Foreign securities investments may be affected
by changes in currency rates or exchange control regulations, changes in
governmental administration or economic or monetary policy (in the United States
and abroad) or changed circumstances in dealing between nations. Dividends paid
by foreign issuers may be subject to withholding and other foreign taxes that
may decrease the net return on these investments as compared to dividends paid
to the Portfolio by domestic corporations. It should be noted that there may be
less publicly available information about foreign issuers than about domestic
issuers, and foreign issuers are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those of domestic
issuers. Securities of some foreign issuers are less liquid and more volatile
than securities of comparable domestic issuers and foreign brokerage commissions
are generally higher than in the United States. Foreign securities markets may
also be less liquid, more volatile and less subject to government supervision
than those in the United States. Investments in foreign countries could be
affected by other factors not present in the United States, including
expropriation, confiscatory taxation and potential difficulties in enforcing
contractual obligations. Securities purchased on foreign exchanges may be held
in custody by a foreign branch of a domestic bank.
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<PAGE>
OPTIONS (ALGER CAPITAL APPRECIATION PORTFOLIO)
A call option on a security is a contract that gives the holder of the option
the right, in return for a premium paid, to buy from the writer (seller) of the
call option 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 on a
security 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 on a security 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
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certain securities included in the index is interrupted. The Portfolio will not
purchase these options unless Alger Management is satisfied with the
development, 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
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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 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 13 below have been adopted by the
Fund with respect to each of the Portfolios as fundamental policies. Under 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 14 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 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 may borrow for temporary or
emergency 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) Alger
Money Market Portfolio and Alger Balanced Portfolio may engage in transactions
in reverse repurchase agreements; and (c) 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 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 in connection with borrowings permitted
under restriction 4.
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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<PAGE>
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 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 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 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 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 Alger Money Market Portfolio. 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 Alger Capital Appreciation Portfolio may buy and sell (write) 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.
Shares of Alger Growth Portfolio, Alger Small Capitalization Portfolio and Alger
MidCap Growth Portfolio are registered for sale in Germany. As long as 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 borrowed) valued at the lesser of cost or market,
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<PAGE>
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 and as may be stated otherwise, the percentage limitations
contained in the foregoing restrictions and in the Fund's other investment
policies 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
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<PAGE>
best price and execution. Alger Management's fees under 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, 1995, 1996, and 1997, the
Fund paid an aggregate of approximately $799,446, $1,554,261 and $2,875,727
respectively, in commissions to Alger Inc. in connection with portfolio
transactions. The commissions paid to Alger Inc. during the fiscal year ended
October 31, 1997 constituted 98% of the aggregate brokerage commissions paid by
the Fund; during that year, 97% of the aggregate dollar amount of transactions
by the Fund involving the payment of brokerage commissions was effected through
Alger Inc. Alger Inc. does not engage in principal transactions with the Fund
and, accordingly, received no compensation in connection with securities
purchased or sold in that manner, which include securities traded in the
over-the-counter markets, money market investments and most debt securities.
NET ASSET VALUE
The Prospectus discusses the time at which the net asset values of the classes
of each Portfolio are determined for purposes of sales and redemptions. The New
York Stock Exchange ("NYSE") is currently open on each Monday through Friday,
except (i) New Year's Day, Martin Luther King, Jr. Day, Presidents' Day (the
third Monday in February), Good Friday, Memorial Day (the last Monday in May),
Independence Day, Labor Day (the first Monday in September), Thanksgiving Day
(the fourth Thursday in November) and Christmas Day and (ii) the preceding
Friday when any one of those holidays falls on a Saturday, or the subsequent
Monday when any one of those holidays falls on a Sunday. The following is a
description of the procedures used by the Fund in valuing the Portfolios'
assets.
The assets of the Portfolios other than 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 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.
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, 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
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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: 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 distribution agreements (the "Distribution Agreements").
Under the Distribution Agreements, Alger Inc. bears all selling expenses,
including the costs of advertising and of printing prospectuses and distributing
them to prospective shareholders.
DISTRIBUTION PLANS
As stated in the Prospectus, in connection with the distribution activities of
Alger Inc. in respect of the Fund's Class B and Class C Shares, respectively,
the Fund has adopted two Distribution Plans (the "Plans") pursuant to Rule 12b-1
under the Act, one for each class.
Reimbursable distribution expenses covered under the Class B Plan may include
payments made to and expenses of persons who are engaged in, or provide support
services in connection with, the distribution of the class'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 class; costs related to the
formulation and implementation of marketing and promotional activities,
including direct mail promotions and television, radio, newspaper, magazine and
other mass media advertising; costs of printing and distributing prospectuses
and reports to prospective shareholders of the class; costs involved in
preparing, printing and distributing sales literature for the class; and costs
involved in obtaining whatever information, analyses and reports with respect to
marketing and promotional activities on behalf of the class that the Fund deems
advisable.
Historically, distribution expenses incurred by Alger Inc. have exceeded the
Class B assets available for reimbursement under the Plan; it is possible that
in the future the converse may be true. Distribution expenses incurred in a year
in respect of Class B Shares of a Portfolio in excess of contingent deferred
sales charges ("CDSCs") received by Alger Inc. relating to redemptions of shares
of the class during that year and .75 percent of the class' average daily net
assets may be carried forward and sought to be reimbursed in future years.
Interest at the prevailing broker loan rate may be charged to the applicable
Portfolio's Class B Shares on any expenses carried forward and those expenses
and interest will be reflected as current expenses on the Portfolio's statement
of operations for the year in which the amounts become accounting liabilities,
which is anticipated to be the year in which these amounts are actually paid.
Although the Fund's Board of Trustees may change this policy, it is currently
anticipated that payments under the Plan in a year will be applied first to
distribution expenses incurred in that year and then, up to the maximum amount
permitted under the Plan, to previously incurred but unreimbursed expenses
carried forward plus interest thereon.
The Plan for Class C Shares pays annually a flat percentage (up to .75 percent)
of the class's average daily net assets to Alger Inc., regardless of whether the
associated distribution expenses incurred are higher or lower than the fee. No
excess distribution expense shall be carried forward to subsequent years under
this Plan. Distribution services for which Alger Inc. is compensated under the
Class C Plan may include, but are not limited to, organizing and conducting
sales seminars, advertising programs, payment of finders' fees, printing of
prospectuses and statements of additional information and reports for other than
existing shareholders, preparation and distribution of advertising material and
sales literature, overhead, supplemental payments to dealers and other
institutions as asset-based sales charges or as payments of commissions or
service fees, and the costs of administering the Plan.
Alger Inc. has acknowledged that payments under the Plans 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 their terms, the Plans remain in effect from year to year, provided such
continuation is approved in each case 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"). A Plan may not be amended to increase
materially the amount to be spent for the services provided by Alger Inc.
without the approval of shareholders of the applicable class, and all material
amendments of a Plan must be approved by the Trustees in the manner described
above. A Plan may be termi-
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nated at any time, without penalty, by vote of a majority of the Independent
Trustees or, with respect to the Class B or Class C Shares of any Portfolio to
which a Plan relates, by a vote of a majority of the outstanding voting
securities of the class, on not more than thirty days' written notice to any
other party to the Plan. If a Plan is terminated, or not renewed with respect to
any one or more Portfolios, it may continue in effect with respect to the Class
B or Class C Shares of any Portfolio as to which it has not been terminated, or
has been renewed. Alger Inc. will provide to the Board of Trustees quarterly
reports of amounts expended under each Plan and the purpose for which such
expenditures were made. During the fiscal year ended October 31, 1997, the Fund
reimbursed $8,858,000 to Alger Inc. as the Fund's underwriter, under the
provisions of the Class B Shares' Plan. Alger Inc.'s selling expenses during
that period totaled $13,251,209 which consisted of $534,235 in printing and
mailing of prospectuses and other sales literature to prospective investors;
$1,803,868 in advertising; $7,689,808 in compensation to dealers; $909,071 in
compensation to sales personnel; $224,222 in other marketing expenses; and
$2,090,008 in interest, carrying or other financing charges. If in any month,
the costs incurred by Alger Inc. are in excess of the distribution expenses
charged to Class B Shares of a Portfolio, the excess may be carried forward,
with interest, and sought to be paid in future periods. During the fiscal year
ended October 31, 1997, the Fund paid $1,150 to Alger Inc. under the provisions
of the Class C Shares' plan.
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. During the Fund's fiscal
year ended October 31, 1997, the Fund paid approximately $3,071,000 to Alger
Inc. under the Shareholder Servicing Agreement.
EXPENSES OF THE FUND
Each Portfolio will bear its own expenses. Operating expenses for each Portfolio
generally consist of all costs not specifically borne by Alger Management,
including investment management fees, fees for necessary professional and
brokerage services, costs of regulatory compliance and costs associated with
maintaining legal existence and shareholder relations. In addition, Class B and
Class C of each Portfolio other than Alger Money Market Portfolio may pay Alger
Inc. for expenses incurred in distributing shares of that class and each such
Portfolio may compensate Alger Inc. for servicing shareholder accounts. Fundwide
expenses not identifiable to any particular portfolio or class will be allocated
in a manner deemed fair and equitable by the Board of Trustees. From time to
time, Alger Management, in its sole discretion and as it deems appropriate, may
assume certain expenses of one or more of the Portfolios while retaining the
ability to be paid by the applicable Portfolio for such amounts prior to the end
of the fiscal year. This will have the effect of lowering the applicable
Portfolio's overall expense ratio and of increasing yield to investors, or the
converse, at the time such amounts are assumed or reimbursed, as the case may
be.
PURCHASES THROUGH PROCESSING ORGANIZATIONS
When shares are purchased this way, the Processing Organization, rather than its
customer, may be the shareholder of record of the shares. The minimum initial
and subsequent investments in classes of the Portfolios for shareholders who
invest through a Processing Organization will be set by the Processing
Organization. Processing Organizations may charge their customers a fee in
connection with services offered to customers.
TELEPURCHASE PRIVILEGE
The price the shareholder will receive will be the price next computed after
Alger Shareholder Services, Inc. (the "Transfer Agent") receives the investment
from the shareholder's bank, which is normally one banking day. While there is
no charge to shareholders for this service, a fee will be deducted from a
shareholder's Fund account in case of insufficient funds. This privilege may be
terminated at any time without charge or penalty by the shareholder, the Fund,
the Transfer Agent or Alger Inc. Class A Share purchases will remain subject to
the initial sales charge.
AUTOMATIC INVESTMENT PLAN
While there is no charge to shareholders for this service, a fee will be
deducted from a shareholder's Fund account in the case of insufficient funds. A
shareholder's Automatic Investment Plan may be terminated at any time without
charge or penalty by the shareholder, the Fund, the Transfer Agent or Alger Inc.
Class A Share purchases will remain subject to the initial sales charge.
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. If the automatic
exchange amount exceeds the Alger Money Market Portfolio balance, any remaining
bal-
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<PAGE>
ance in Alger Money Market Portfolio will be exchanged. Shares held in
certificate form are not eligible for this service. Class A Share purchases will
remain subject to the front-end load.
REDEMPTIONS
The right of redemption of shares of a Portfolio may be suspended or the date of
payment postponed for more than seven days (a) for any periods during which the
NYSE is closed (other than for customary weekend and holiday closings), (b) when
trading in the markets the Portfolio normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC, exists, making
disposal of the Portfolio's investments or determination of its net asset values
not reasonably practicable or (c) for such other periods as the SEC by order may
permit for protection of the Fund's shareholders.
No interest will accrue on amounts represented by uncashed distribution or
redemption checks.
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; nor does it create a banking
relationship between the shareholder and the Fund. When a check is presented to
the Transfer Agent for payment, the Transfer Agent, as the investor's agent,
will cause the Fund to redeem a sufficient number of shares from the investor's
account to cover the amount of the check.
Shares for which stock certificates have been issued may not be redeemed by
check. An investor's account with Alger Money Market Portfolio will be reduced
by any CDSC 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
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
Any CDSC which otherwise would be imposed on redemptions of Fund shares will be
waived in certain instances, including (a) redemptions of shares held at the
time a shareholder becomes disabled or dies, including the shares of a
shareholder who owns the shares with his or her spouse as joint tenants with
right of survivorship, provided that the redemption is requested within one year
after the death or initial determination of disability, (b) redemptions in
connection with the following retirement plan distributions: (i) lump-sum or
other distri- butions from a qualified corporate or Keogh retirement plan
following retirement, termination of employment, death or disability (or in the
case of a five percent owner of the employer maintaining the plan, following
attainment of age 70l/2); (ii) required distributions from an Individual
Retirement Account ("IRA") following the attainment of age 70l/2 or from a
custodial account under Section 403(b)(7) of the Internal Revenue Code of 1986,
following the later of retirement or attainment of age 70l/2; and (iii) a
tax-free return of an excess contribution to an IRA, and (c) systematic
withdrawal payments. For purposes of the waiver described in (a) above, a person
will be deemed "disabled" if the person is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or to be of long-continued
and indefinite duration.
REINSTATEMENT PRIVILEGE
A shareholder who has redeemed shares in the Fund may reinvest all or part of
the redemption proceeds in the Fund without an initial sales charge and receive
a credit for any CDSC paid on the redemption, provided the reinvestment is made
within 30 days after the redemption. This reinstatement privilege may be
exercised only once by a shareholder. Reinstatement will not alter any capital
gains tax payable on the redemption and a loss may not be allowed for tax
purposes.
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<PAGE>
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan (the "Withdrawal Plan") is available to
shareholders who own shares of a Portfolio with a value exceeding $10,000 and
who wish to receive specific amounts of cash periodically. Withdrawals of at
least $50 monthly (but no more than one percent of the value of a shareholder's
shares in the Portfolio) may be made under the Withdrawal Plan by 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 AND CONVERSIONS
IN GENERAL
One class of shares may not be exchanged for another class of shares. Once an
initial sales charge has been imposed on a purchase of Class A Shares, no
additional charge is imposed in connection with their exchange. For example, a
purchase of Alger Money Market Portfolio shares and subsequent exchange to Class
A Shares of Alger Small Capitalization Portfolio, Alger Midcap Portfolio, Alger
Growth Portfolio, Alger Balanced Portfolio or Alger Capital Appreciation
Portfolio (each a "Charge Portfolio") would result in the imposition of an
initial sales charge at the time of exchange; but if the initial purchase had
been of Class A Shares in a Charge Portfolio, an exchange to Class A Shares of
any other Portfolio would not result in an additional initial sales charge. No
CDSC is assessed in connection with exchanges at any time. In addition, no CDSC
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 for Class B Shares and the one-year holding period for Class C
Shares and certain Class A Shares.
For purposes of calculating the applicable holding periods for automatic
conversion of Class B (eight years) and Class C (twelve years) Shares to Class A
Shares, shares acquired in an exchange are deemed to have been purchased on the
date on which the shares given in exchange were purchased, provided, however,
that if Class B or Class C Shares are exchanged for shares of Alger Money Market
Portfolio, the period during which the Alger Money Market Portfolio shares are
held will not be included in the holding period for purposes of determining
eligibility for automatic conversion, and the running of the holding period will
recommence only when those shares are reexchanged for shares of the original
class.
FOR SHAREHOLDERS MAINTAINING AN ACTIVE ACCOUNT ON OCTOBER 17, 1992. Shares
acquired in an exchange are deemed to have been purchased on, and continuously
held since, the date on which the shares given in exchange were purchased; thus,
an exchange would not affect the running of any CDSC-related holding period. No
initial sales charge or CDSC would apply to an exchange of shares of a Charge
Portfolio for shares of Alger Money Market Portfolio, but redemptions of shares
of that Portfolio acquired by exchange of shares from one or more of the Charge
Portfolios are subject to any applicable CDSC on the same terms as the shares
given in exchange. If shares of Alger Money Market Portfolio are exchanged for
shares of any of the Charge Portfolios, any later redemptions of those shares
would be subject to any applicable CDSC based on the period of time since the
shares given in exchange were purchased.
The following example illustrates the operation of the CDSC for active accounts
established prior to October 17, 1992. Assume that on the first day of year 1 an
investor purchases $1,000 of shares of each of Alger Money Market Portfolio and
Alger Growth Portfolio, Class B. The shareholder may at any time redeem the
shares of Alger Money Market Portfolio without imposition of the charge. If in
year 3 the shareholder redeems all the Class B Shares of Alger Growth Portfolio
purchased in year 1, a charge of three percent of the current net asset value of
those shares would be imposed on the redemption. The shareholder could redeem
without imposition of the charge any of his or her shares of that Portfolio that
were purchased through reinvestment of dividends and capital gains distributions
as well as an amount of Class B Shares not exceeding any increase in the net
asset value of the $1,000 of shares originally purchased. The shareholder could
also at any time exchange the Class B Shares of Alger Growth Portfolio for Class
B Shares of any other Portfolio without imposition of the
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<PAGE>
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 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 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 Alger Money Market Portfolio originally
purchased in year 1 for additional Class B Shares of 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 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.
A CDSC, if any, is assessed on redemptions of Class B and Class C Shares and
certain Class A Shares of the Charge Portfolios and of shares of Alger Money
Market Portfolio that have been acquired 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 Alger Money Market
Portfolio will not be counted towards the holding period described above in the
calculation of a CDSC.
The following examples illustrate the operation of the CDSC for accounts opened
after October 17, 1992: (1) An investor purchases Class B Shares of Alger Growth
Portfolio on the first day of year 1 and exchanges those shares for shares of
Alger Money Market Portfolio in year 2. No charge is assessed at the time of the
exchange. If in year 4 the shareholder redeems all the shares, a charge of four
percent of the current net asset value of those shares would be imposed on the
redemption based on the period of time the shares were retained in Class B of
the Alger Growth Portfolio. The time period during which the shares of Alger
Money Market Portfolio are held is not included when the amount of the charge is
calculated. The shareholder could redeem without imposition of the charge any of
his shares that were purchased through reinvestment of dividends and capital
gains distributions as well as an amount of shares not exceeding any increase in
the net asset value of the original purchase. (2) An investor purchases shares
of Alger Money Market Portfolio on the first day of year 1 and exchanges those
shares for Class B Shares of Alger Growth Portfolio on the first day of year 2.
No charge is assessed at the time of the exchange. If in year 4 the shareholder
redeems all the shares, a charge of three percent of the current net asset value
of those shares would be imposed on the redemption based on the period of time
the shares were retained in Class B of Alger Growth Portfolio. The time period
during which the shares of 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 or her 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.
CERTAIN ALGER MONEY MARKET PORTFOLIO SHARES
Shares of Alger Money Market Portfolio that have been acquired in exchange for
shares of Spectra Fund (a mutual fund managed by Alger Management), together
with Alger Money Market Portfolio shares acquired through reinvestment of
dividends on such shares, may be exchanged for Spectra Fund shares. These
exchanges will be effected at the respective net asset values of Spectra Fund
and Alger Money Market Portfolio next determined after the exchange request is
accepted, with no sales charge or transaction fee imposed. For more information
about such exchanges, please call (800) 992-3863. The Alger Fund reserves the
right to terminate or modify this exchange privilege upon notice to
shareholders.
CERTAIN 401(K) PLANS
Alger Inc. has entered into an agreement with Merrill Lynch Group Employees
Services ("Merrill Lynch") pursuant to which Merrill Lynch will make Class A
Shares of the Portfolios available to participants in certain 401(k) plans (each
a "Plan") at net asset value with no contingent deferred sales charge ("CDSC")
if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch and, on
the date the Plan Sponsor signs
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<PAGE>
the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or
more in assets invested in broker/dealer funds not advised or managed by Merrill
Lynch Asset Management, L.P. ("MLAM") each of which is made available pursuant
to a Services Agreement between Merrill Lynch and the fund's principal
underwriter or distributor and in funds advised or managed by MLAM
(collectively, the "Applicable Investments"): or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch, and on the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or more
in assets, excluding money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the Merrill
Lynch plan conversion manager, on the date the Plan Sponsor signs the Merrill
Lynch Recordkeeping Service Agreement.
Plans recordkept on a daily basis by Merrill Lynch or an independent
recordkeeper under a contract with Merrill Lynch that are currently investing in
Class B shares of the Fund convert (by means of a CDSC-free redemption/purchase
at net asset value) to A shares once the Plan has reached $5 million invested in
Applicable Investments. The Plan will receive a Plan level share conversion.
Also under the agreement, Class B Shares of the Portfolios are to be made
available to Plan participants at net asset value with no CDSC if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch and, on
the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement, the Plan has less than $3 million in assets invested in broker/dealer
funds not advised or managed by MLAM each of which is made available pursuant to
a Services Agreement between Merrill Lynch and the fund's principal underwriter
or distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch, and on the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has less than $3 million
in assets, excluding money market funds, invested in Applicable Investments; or
(iii) the Plan has less than 500 eligible employees, as determined by the
Merrill Lynch plan conversion manager, on the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement.
Plans recordkept on a daily basis by Merrill Lynch or an independent
recordkeeper under a contract with Merrill Lynch that are currently investing in
Class B shares of the Fund convert (by means of a CDSC-free redemption/purchase
at net asset value) to A shares once the Plan has reached $5 million invested in
Applicable Investments. The Plan will receive a Plan level share conversion.
MANAGEMENT
TRUSTEES AND OFFICERS OF THE FUND
The names of the Trustees and officers of the Fund, together with information
concerning their principal business occupations, are set forth below. Each of
the officers of the Fund is also an officer, and each of the Trustees is also a
director or trustee, as the case may be, of Castle Convertible Fund, Inc., a
registered closed-end investment company, and of The Alger American Fund, The
Alger Retirement Fund and Spectra Fund, registered open-end management
investment companies, for all of which Alger Management serves as investment
adviser. Fred M. Alger III and David D. Alger are "interested persons" of the
Fund, as defined in the Act. Fred M. Alger III and David D. Alger are brothers.
Unless otherwise noted, the address of each person named below is 75 Maiden
Lane, New York, New York 10038.
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<PAGE>
NAME, AGE AND POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
Fred M. Alger III (63) Chairman of the Boards 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"), Analysts
Resources, Inc. ("ARI"), The Alger American
Asset Growth Fund ("Asset Growth") and Fred
Alger International Advisory S. A.
("International").
David D. Alger (54) President and Director of Associates, Alger
President and Trustee Management, Alger Inc., Properties, Services,
International and Agency; Executive Vice
President and Director of ARI.
Gregory S. Duch (46) Executive Vice President, Treasurer and Director
Treasurer of Alger Management, Properties and Associates;
Executive Vice President and Treasurer of Alger
Inc., ARI, Services and Agency; Treasurer and
Director of International.
Mary E. Marsden-Cochran (45) Vice President, General Counsel and Secretary,
Secretary Associates, Alger Management, Alger Inc.,
Properties, ARI, Services, and Agency
(2/96-present); Secretary of International
(7/96-present); Associate General Counsel and
Vice President, Smith Barney Inc. (12/94-2/96);
Blue Sky Attorney, AMT Capital (1/94-11/94).
Frederick A. Blum (44) Senior Vice President, Alger Inc.
Assistant Secretary
and Assistant Treasurer
Arthur M. Dubow (64) Trustee of the Arthur Dubow Foundation; private
Trustee investor since 1985; Director of Coolidge
P.O. Box 969 Investment Corporation; formerly Chairman of the
Wainscott, NY 11975 Board of Institutional Shareholder Services,
Inc. and President of Fourth Estate, Inc.
Stephen E. O'Neil (65) Of Counsel to the law firm of Kohler & Barnes
Trustee P.C.; Private investor since 1981; Director of
460 Park Avenue NovaCare, Inc. and Brown-Forman Corporation;
New York, NY 10022 formerly President and Vice Chairman of City
Investing Company and Director of Centerre
Bancorporation and Syntro Corporation.
Nathan E. Saint-Amand, M.D.(60) Medical doctor in private practice.
Trustee
2 East 88th Street
New York, NY 10128
John T. Sargent (73) Private investor since 1987; Director of
Trustee Atlantic Mutual Insurance Co.; formerly Director
14 E. 69th Street of River Bank America.
New York, NY 10021
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 "Disinterested Trustee") 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, 1997. The following table provides
compensation amounts paid to Disinterested Trustees of the Fund for the fiscal
year ended October 31, 1997.
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<TABLE>
<CAPTION>
COMPENSATION TABLE
Total Compensation Paid to Trustees from
The Alger Retirement Fund,
Aggregate The Alger Fund,
Compensation The Alger American Fund,
from Castle Convertible Fund, Inc. and
Name of Person, Position The Alger Fund Spectra Fund
- ------------------------ ---------------- ---------------------------------------
<S> <C> <C>
Arthur M. Dubow, Trustee $8,000 $28,250
Stephen E. O'Neil, Trustee $8,000 $28,250
Nathan E. Saint-Amand, Trustee $8,000 $28,250
John T. Sargent, Trustee $8,000 $28,250
</TABLE>
INVESTMENT MANAGER
Alger Management serves as investment manager to each of the Portfolios pursuant
to separate written agreements (the "Management Agreements"). Certain of the
services provided by, and the fees paid by the Portfolios to, Alger Management
under the Management Agreements are described in the Prospectus. Alger
Management pays the salaries of all officers who are employed by it. Alger
Management has agreed to maintain office facilities for the Fund, furnish the
Fund with statistical and research data, clerical, accounting and bookkeeping
services, and certain other services required by the Fund, and to compute the
net asset values, net income and realized capital gains or losses of the
Portfolios. Alger Management prepares semi-annual reports to the SEC and to
shareholders, prepares federal and state tax returns and filings with state
securities commissions, maintains the Fund's financial accounts and records and
generally assists in all aspects of the Fund's operations. Alger Management
bears all expenses in connection with the performance of its services under the
Management Agreements.
Each Management Agreement provides that if, in any fiscal year, the aggregate
expenses of the Portfolio (exclusive of certain specified categories of expense)
exceed the expense limitation of any state having jurisdiction over the
Portfolio, Alger Management will reimburse the Portfolio for that excess expense
to the extent required by state law. At the date of this Statement of Additional
Information, there is no state expense limitation applicable to any Portfolio.
During the fiscal years ended October 31, 1995, 1996, and 1997, Alger Management
earned under the terms of the Management Agreements $830,000, $1,214,904 and
$1,104,000 respectively, in respect of the Alger Money Market Portfolio;
$3,118,000, $4,478,467, and $4,715,000 respectively, in respect of the Alger
Small Capitalization Portfolio; $760,000, $1,654,488 and $2,396,000
respectively, in respect of the Alger Growth Portfolio; $27,000, $82,116, and
$96,000 respectively, in respect of the Alger Balanced Portfolio; $244,000,
$720,696, and $1,236,000, respectively, in respect of the Alger MidCap Growth
Portfolio; and $77,000, $861,617, and $1,587,000 respectively, in respect of the
Alger Capital Appreciation Portfolio. Some of these fees for Alger Money Market
Portfolio, however, were offset in whole or in part by various expense
reimbursements and waivers.
DISTRIBUTOR
Alger Inc., the corporate parent of Alger Management, serves as the Fund's
principal underwriter, or distributor, and receives payments from the Fund under
the Fund's Distribution Plans (see "Purchases--Distribution Plans") and the
Shareholder Servicing Agreement (see "Purchases--Shareholder Servicing
Agreement"). It also receives brokerage commissions from the Fund (see
"Investment Objectives and Policies--Portfolio Transactions"). During the Fund's
fiscal year ended October 31, 1997, Alger Inc. retained approximately $3,914,000
in CDSCs and $108,000 in initial sales charges.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountant 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
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<PAGE>
not limited to, gains from options, futures and forward contracts) derived with
respect to the Portfolio's business of investing in securities; and (3)
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 utilization of certain of the investment
techniques described above and in the Fund's prospectus. As a regulated
investment company, each Portfolio is subject to a non-deductible excise tax of
4% with respect to certain undistributed amounts of income and capital gains
during the calendar year. The Fund expects each Portfolio to make additional
distributions or change the timing of its distributions so as to avoid the
application of this tax. Although the Fund expects each Portfolio to make such
distributions as are necessary to avoid the application of this tax, certain of
such distributions, if made in January, might be included in the taxable income
of shareholders in the year ended in the previous December.
Payments reflecting the dividend income of the Portfolios will not qualify for
the dividends-received deduction for corporations if the Portfolio sells the
underlying stock before satisfying a 46-day holding period requirement (91 days
for certain preferred stock). Dividends-received deductions will be allowed to a
corporate shareholder only if similar holding period requirements with respect
to shares of the Portfolio have been met.
In general, any gain or loss on the redemption or exchange of Portfolio shares
will be long-term capital gain or loss if held by the shareholder for more than
one year, and will be short-term capital gain or loss if held for one year or
less. However, if a shareholder receives a distribution taxable as long-term
capital gain with respect to Portfolio shares, and redeems or exchanges the
shares before holding them for more than six months, any loss on the redemption
or exchange up to the amount of the distribution will be treated as a long-term
capital loss.
Dividends of a Portfolio's net investment income and distributions of its
short-term capital gains will be taxable as ordinary income. Distributions of
long-term capital gains will be taxable as such at the appropriate rate,
regardless of the length of time you have held shares of the Portfolio. If you
receive a distribution treated as long-term capital gain with respect to Fund
shares, and you redeem or exchange the shares before holding them for more than
six months, any loss on the redemption or exchange up to the amount of the
distribution will be treated as long-term capital loss. Only dividends that
reflect a Portfolio's income from certain dividend-paying stocks will be
eligible for the federal dividends-received deduction for corporate
shareholders. None of the dividends paid by 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
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 serves as custodian for the Fund pursuant to a custodian
agreement
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<PAGE>
under which it holds the Portfolios' assets. Alger Shareholder Services, Inc.,
30 Montgomery Street, Jersey City, New Jersey 07302, serves as transfer agent
for the Fund pursuant to a transfer agency agreement. Under the transfer agency
agreement Alger Shareholder Services, Inc. processes purchases and redemptions
of shares of the Fund, maintains the shareholder account records for each
Portfolio, handles certain communications between shareholders and the Fund and
distributes any dividends and distributions payable by the Fund.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders of the
Portfolios.
Set forth below is certain information regarding significant shareholders of the
Portfolios. At February 2, 1998, Merrill Lynch & Co. Trustee FBO Qualified
Retirement Plans owned beneficially or of record 32.07% of Alger Growth
Portfolio--Class A Shares, and Dreyfus Retirement Services owned beneficially or
of record 37.34% of Alger Growth Portfolio--Class A Shares. On the same date,
FTC & Co.--Datalynx House Acct. owned beneficially or of record 32.35% of Alger
MidCap Growth Portfolio--Class A Shares. On that date, Donaldson Lufkin Jenrette
Securities Corp. owned beneficially or of record 27.99% of Alger Balanced
Portfolio--Class C Shares, and Ken's Auto Service, Inc. owned beneficially or of
record 26.88% of Alger Balanced Portfolio--Class C Shares. Also on February 2,
1998, Merrill Lynch Pierce Fenner & Smith FBO its Customers owned beneficially
or of record 39.35% of Alger MidCap Growth Portfolio--Class C Shares, 29.01% of
Alger Growth Portfolio--Class C Shares, and 29. 18% of Alger Capital
Appreciation Portfolio--Class C Shares. The shareholders identified above may be
deemed to control the specified Classes, which may have the effect of
proportionately diminishing the voting power of other shareholders of these
Classes.
The following table contains information regarding persons who own of record, or
are known to own beneficially, 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 2, 1998 and record and beneficial
holdings are in each instance denoted as follows: record/beneficial.
- --------------------------------------------------------------------------------
ALGER BALANCED PORTFOLIO - CLASS A (RECORD/BENEFICIAL)
Joseph Sabat Jr. & 10.08% / 10.08%
Carolyn D. Sabat JT TEN
77 White Pine Rd
Coumbus, NJ 08022
State Street Bank &
Trust Co. C/F IRA 7.71% / 7.71%
JosephL.Ferguson
106 Hickory Lane
Lebanon, OH 45036
NFSCC FEBO 7.23% / 7.23%
Lynda McLaren
119 Normandy Lane
Oak Ridge, TN 37830
John R. Richardson TTEE 20.21% / 20.21%
22994 El Toro Rd
Lake Forest, CA 92630-4691
Eugenia M. Benedict TTEE 5.07% / 5.07%
6141 N. Point Dr
Flowery Branch, GA 30542
PaineWebber For The Benefit Of 9.37% / 9.37%
Society of St. Charles
Provincial Account (RET)
27 Carmine Street
New York, NY 10014-4423
ALGER BALANCED PORTFOLIO - CLASS C (RECORD/BENEFICIAL)
Jeanne M. Meyers 5.36% / 5.36%
740 Miner Rd
Highlands Hts, Ohio 44143
Hugh P. Gallagher 5.96% / 5.96%
6050 W. Eastwood Ave.
Suite 104
Chicago, IL 60630
MLPF & S For The Sole Benefit Of 6.65% / *
Its Customers
4800 Deer Lk Dr. E 3rd Fl.
Jacksonville, FL 32246
Donaldson Lufkin Jenrette 7.60% / *
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 27.99% / *
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Richard O. Yeager 5.42% / 5.42%
11439 Stoney Point Place
Germantown, MD 20876
Ken's Auto Service, Inc. 26.88% / 26.88%
740 Miner Rd
Highland Heights, OH 44143
Christopher C. Sylvester 6.48% / 6.48%
40 Peyton St.
Trevose, PA 19053
ALGER SMALL CAPITALIZATION PORTFOLIO - CLASS A (RECORD/BENEFICIAL)
Independent Trust Corp. 5.74% / *
Custodial Funds 82
15255 S 94th Ave Ste 303
Orland Park Park, IL 60462-3897
Charles Schwab & Co., Inc. 5.47% / *
Special Custody Acct.
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
FTC & Co. 14.46% / *
Attn: Datalynk - House Account
P.O. Box 173736
Denver, CO 80217-3736
Modern Health Affiliates 9.16% / *
Jersey Shore Pension Pl.
Corestates Bank NA
1500 Market St, Box 13839
Philadelphia PA 19101
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<PAGE>
ALGER SMALL CAPITALIZATION PORTFOLIO - CLASS C (RECORD/BENEFICIAL)
State Street Bank &
Trust Co. C/F IRA 13.08% / 13.08%
Lester Lutz
P.O. Box 714 Plateau Rd.
Pleasant Valley, NY 12569
Mrs. Hedy R. Gold 19.77% / 19.77%
46 Terwilliger Road
Hyde Park, NY 12538
Royco Auto Parts Psp 12.66% / *
18 Delavergne Avenue
Wappingers Falls, NY 12590
Lawrence Deloatche & 20.92% / 20.92%
Flora Deloatche JT TEN
11 Wagon Wheel Road
Poughkeepsie, NY 12601
ALGER MIDCAP GROWTH PORTFOLIO - CLASS A (RECORD/BENEFICIAL)
Charles Schwab & Co., Inc. 19.77% / *
Special Custody Acct.
101 Montgomery Street
San Francisco, CA 94104
FTC & Co. 32.35% / *
Attn: Datalynx - House Account
P.O. Box 173736
Denver, Co. 80217-3736
ALGER MIDCAP GROWTH PORTFOLLO - CLASS C (RECORD/BENEFICIAL)
Dennie Conley & 8.50% / 8.50%
Margaret Conley JT TEN
8570 Maryann Lane
Port St. Lucie, FL 34952
State Street Bank &
Trust Co. C/F IRA 10.77% / 10.77%
George L. Roat
18 Wyandotte Ave.
Big Stone Gap, VA 24219-2710
MLPF&S For The Sole Beneft Of 39.35% / *
Its Customers
4800 Deer Lake Dr. E. 3rd Fl.
Jacksonville, FL 32246
Prudential Securities Inc. FBO 11.16% / 11.16%
Mr. John E. Bishop
41 Tulipwood Dr.
Commack, NY 11725-5623
Prudential Securities Inc. FBO 9.06% / 9.06%
Ifigenia Frangos
Dix Hills, NY 11746-5606
ALGER GROWTH PORTFOLIO - CLASS A (RECORD/BENEFICIAL)
Charles Schwab & Co., Inc. 10.31% / *
Special Custody Acct.
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
Boston & Co. 37.34% / *
Mutual Fund Operations
Dreyfus Retirement Services
1 Cabot Rd. AIM 028-0031
Medford, MA 02155
Merrill Lynch Co. TTEE FBO 32.07% / *
Qualifed Retirement Plans
265 Davidson Ave. 4th Fl.
Somerset, NJ 08873
ALGER GROWTH PORTFOLIO - CLASS C (RECORD/BENEFICIAL)
Sterling Trust Company, TTEE 8.27% / 8.27%
FBO Alton E. Havens
P.O. Box 2526
Waco, TX 76702-2526
MLPF&S For the Sole Benefit of 29.01% / *
Its Customers
4800 Deer Lake Dr. E. 3rd. Fl.
Jacksonville, FL. 32246
Donaldson Lufkin Jenrette 16.26% / *
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 12.59% / *
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
ALGER CAPITAL APPRECIATION PORTFOLIO -
CLASS A (RECORD/BENEFICIAL)
Charles Schwab & Co., Inc. 17.12% / *
Special Custody Acct.
101 Montgomery Street
San Francisco, CA 94104
FTC & Co. 15.19% / *
Attn: Datalynx - House Acct.
P.O. Box 173736
Denver, CO 80217-3736
J.C. Bradford & Co. Cust FBO 7.00% / 7.00%
Appel Equity Group
330 Commerce St.
Nashville, TN 37201-1899
ALGER CAPITAL APPRECIATION PORTFOLIO -
CLASS C (RECORD/BENEFICIAL)
MLPF&S For The Sole Beneft Of 29.18% / *
Its Customers
4800 Deer Lake Dr. E. 3rd Fl.
Jacksonville, FL 32246
* Indicates Shareholder owns less than 5% of the Portfolios shares.
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"). Alger Money Market
Portfolio, Alger Small Capitalization Portfolio and Alger Growth Portfolio
commenced operations on November 11, 1986. Alger Balanced Portfolio commenced
operations on June 1, 1992, Alger MidCap Growth Portfolio commenced operations
on May 24, 1993 and Alger Capital Appreciation Portfolio commenced operations on
November 1, 1993. Prior to March 27, 1995 Alger Capital Appreciation Portfolio
was known as Alger Leveraged AllCap Portfolio. The word "Alger" in the Fund's
name has been adopted pursuant to a provision contained in the Trust Agreement.
Under that provision, Alger Management may terminate the Fund's license to use
the word "Alger" in its name when Alger Management ceases to act as the Fund's
investment manager. On December 31, 1996, Class A Shares were added to all
portfolios of the Fund except Alger Money Market Portfolio. Class A shares have
an initial sales charge.
-21-
<PAGE>
The previously existing shares in those portfolios, subject to a CDSC, were
designated Class B Shares on that date. Class C Shares, which are subject to a
CDSC, were created on August 1, 1997.
Shares of each Portfolio other than Alger Money Market Portfolio are thus
divided into three classes, Class A, Class B and Class C. The classes differ in
that: (a) each class has a different class designation; (b) only the Class A
Shares are subject to an initial sales charge; (c) the Class B and Class C
Shares are subject to CDSCs, and certain Class A Shares may also be subject to a
CDSC; (d) only the Class B and Class C Shares (as described below) are subject
to distribution fees under plans adopted pursuant to Rule 12b-1 under the Act
(each, a "Rule 12b-1 Plan"); (e) to the extent that one class alone is affected
by a matter submitted to a vote of the shareholders, then only that class has
voting power on the matter; and (f) the exchange privileges and conversion
rights of each class differ from those of the others.
Shares do not have cumulative voting rights, which means that holders of more
than 50 percent of the shares voting for the election of Trustees can elect all
Trustees. Shares are transferable but have no preemptive, conversion or
subscription rights. Shareholders generally vote by Portfolio, except with
respect to the election of Trustees and the ratification of the selection of
independent accountants, and by class within a Portfolio on matters in which the
interests of one class differ from those of another; see also item (e) in the
preceding paragraph. 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 notmally 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
ALGER MONEY MARKET PORTFOLIO
The Alger Money Market Portfolio's "yield" and "effective yield" referred to 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 and income other than investment income, 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 Alger Money Market Portfolio includes quotations of "yield" and "effective
yield" that are based on 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, 1997, the annualized yield was 4.83%,
and the compounded effective yield was 4.94%.
OTHER PORTFOLIOS
The "total return" and "yield" referred to in the Prospectus as to each of the
Classes of the Portfolios, other than Alger Money Market Portfolio, are also
computed according to formulas prescribed by the SEC. These performance figures
are calculated in the following manner:
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<PAGE>
A. Total Return--A Class' average annual total return described in the
Prospectus is computed according to the following formula:
P (1+T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5, or 10 year periods at the end of
the 1, 5 and 10 year periods (or fractional portion thereof);
The average annual total returns for Class A, B and C Shares of the
Portfolios, other than Alger Money Market Portfolio, for the periods indicated
below were as follows:
<TABLE>
<CAPTION>
(Class B)
(Class B) Period(Class B)
(Class A)(Class B) Five from Ten (Class C)
Period Year YearsInception Years Period
Ended Ended EndedthroughEndedEnded
10/31/9710/31/97 10/31/9710/31/97 10/31/97 10/31/97
Alger Small Capitalization
<S> <C> <C> <C> <C> <C> <C>
Portfolio*--Class A++ 7.04% n/a n/a n/a n/a n/a
--Class B n/a 8.11% 15.97% n/a 20.71% n/a
--Class C+++ n/a n/a n/a n/a n/a (1.86%)
Alger Growth Portfolio*
--Class A++ 17.34% n/a n/a n/a n/a n/a
--Class B n/a 19.94% 19.93% n/a 18.06% n/a
--Class C+++ n/a n/a n/a n/a n/a (4.97%)
Alger Balanced Portfolio**
--Class A++ 12.88% n/a n/a n/a n/a n/a
--Class B n/a 14.25% 11.51% 10.60% n/a n/a
--Class C+++ n/a n/a n/a n/a n/a (3.29%)
Alger MidCap Growth
Portfolio*** --Class A++ 13.07% n/a n/a n/a n/a n/a
--Class B n/a 16.37% n/a 22.72% n/a n/a
--Class C+++ n/a n/a n/a n/a n/a (1.70%)
Alger Capital Appreciation
Portfolio+--Class A++ 15.46% n/a n/a n/a n/a n/a
--Class B n/a 16.00% n/a 27.85% n/a n/a
--Class C+++ n/a n/a n/a n/a n/a (6.97%)
</TABLE>
* Commenced operations on November 11, 1986.
** Commenced operations on June 1, 1992.
*** Commenced operations on May 24, 1993.
+ Commenced operations on November 1, 1993.
++ Initially offered January 1, 1997.
+++ Initially offered August 1, 1997.
B. Yield--a Class's net annualized yield described in the Prospectus is computed
according to the following formula:
a-b
YIELD = 2[(----- + 1)6 - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = The average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day
of the period.
IN GENERAL
Current performance information for the Classes of the Portfolios may be
obtained by calling the Fund at (800) 992-3863. Quoted performance may not be
indicative of future performance. The performance of a Class will depend upon
factors such as its expenses and the types and maturities of securities held by
the Portfolio.
From time to time, advertisements or reports to shareholders may compare the
yield or performance of a Portfolio with 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 with
rankings prepared by Lipper Analytical Services Inc., which is a widely
recognized, independent service that monitors the performance of mutual funds,
as well as with various unmanaged indices, such as the S&P 500 Index, the
Russell 2000 Growth Index, the S&P SmallCap 600 Index, the Wilshire Small
Company Growth Index, the Lehman Brothers Government/Corporate Bond Index or the
S&P MidCap 400 Index. In addition, evaluations of the Portfolios published by
nationally recognized ranking services or articles regarding performance,
rankings and other Portfolio characteristics may appear in national publications
including, but not limited to, BARRON'S, BUSINESS WEEK, FORBES, INSTITUTIONAL
INVESTOR, INVESTOR'S BUSINESS DAILY, KIPLINGER'S PERSONAL FINANCE, MONEY,
MORNINGSTAR, THE NEW YORK TIMES, USA TODAY and THE WALL STREET JOURNAL and may
be included in advertisements or communications to shareholders. Any given
performance comparison should not be considered as representative of such
Portfolio's performance for any future period.
FINANCIAL STATEMENTS
The Fund's audited financial statements for the year ended October 31, 1997, are
contained in the Annual Report to Shareholders for that fiscal year and are
hereby incorporated by reference. Copies of the Annual Report to Shareholders
may be obtained by telephoning (800) 992-3863.
-23-
<PAGE>
APPENDIX
Description of the highest commercial paper, bond and other short and long term
rating categories assigned by Standard & Poor's Corporation ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), "Fitch" Investors Service, Inc. ("Fitch")
and Duff and Phelps, Inc. ("Duff").
COMMERCIAL PAPER AND SHORT-TERM RATINGS
The designation A-l by S&P indicates that the degree of safety reading timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-l.
The rating Prime-l (P-l) is the highest commercial paper rating assigned by
Moody's. Issuers of P-l paper must have a superior capacity for repayment of
short term promissory obligations and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return of funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by many of the
characteristics cited above but to a lesser degree Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The rating Fitch-l (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-l is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-l is the highest commercial paper rating assigned by Duff. Paper
rated Duff-l is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
BOND AND LONG-TERM RATINGS
Bonds rated AA by S&P are judged by S&P to be high-grade obligations and in the
majority of instances differ only in small degree from issues rated AAA (S&P's
highest rating). Bonds rated AAA are considered by S&P to be the highest grade
obligations and possess the ultimate degree of protection as to principal and
interest. With AA bonds, as with AAA bonds, prices move with the long-term money
market. Bonds rated A by S&P have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
S&P's BBB rated bonds, or medium-grade category bonds, are borderline between
definitely sound obligations and those where the speculative elements begin to
predominate. These bonds have adequate asset coverage and normally are protected
by satisfactory earnings. Their susceptibility to changing conditions,
particularly to depressions, necessitates constant watching. These bonds
generally are more responsive to business and trade conditions than to interest
rates. This group is the lowest that qualifies for commercial bank investment.
Bonds rated Aa by Moody's are judged to be of high quality by all standards.
Together with bonds rated Aaa (Moody's highest rating) they comprise what are
generally known as high-grade bonds. Aa bonds are rated lower than Aaa bonds
because margins of protection may not be as large as those of Aaa bonds, or
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present that make the long-term risks appear somewhat larger than
those applicable to Aaa securities. Bonds that are
A-1
<PAGE>
APPENDIX
(continued)
rated A by Moody's possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment in the future.
Moody's Baa rated bonds are considered as medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions and
liable to but slight market fluctuation other than through changes in the money
rate. The prime feature of an AAA bond is a showing of earnings several times or
many times interest requirements, with such stability of applicable earnings
that safety is beyond reasonable question whatever changes occur in conditions.
Bonds rated AA by Fitch are judged by Fitch to be of safety virtually beyond
question and are readily salable, whose merits are not unlike those of the AAA
class, but whose margin of safety is less strikingly broad. The issue may be the
obligation of a small company, strongly secured but influenced as to rating by
the lesser financial power of the enterprise and more local type of market.
Bonds rated Duff-l are judged by Duff to be of the highest credit quality with
negligible risk factors; only slightly more than U.S. Treasury debt. Bonds rated
Duff-2, 3 and 4 are judged by Duff to be of high credit quality with strong
protection factors. Risk is modest but may vary slightly from time to time
because of economic conditions.
A-2
<PAGE>
INVESTMENT MANAGER:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
- ----------------------------------------------
DISTRIBUTOR:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
- ----------------------------------------------
TRANSFER AGENT:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
INDEPENDENT PUBLIC ACCOUNTANTS:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
- ----------------------------------------------
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, NY 10176
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial Statements included in Part A:
Condensed Financial Information
(2) Financial Statements incorporated in Part B by reference to
the Annual Report to Shareholders for the fiscal year ended
October 31, 1997:
(i) Report of Independent Accountants;
(ii) Financial Statements as of October 31, 1997 and for
the period then ended.
(b) Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
1(a) Agreement and Declaration of Trust. EDGAR 6/2/97 (1)
1(b) Certificate of Designation relating to Alger High Yield
Portfolio. EDGAR 6/2/97 (3)
1(c) Certificate of Designation relating to Alger Income and
Growth Portfolio. EDGAR 6/2/97 (3)
1(d) Certificate of Designation relating to Alger Balanced
Portfolio. EDGAR 6/2/97 (8)
1(e) Certificate of Designation relating to Alger MidCap Growth
Portfolio. EDGAR 6/2/97 (9)
1(f) Certificate of Designation relating to Alger Leveraged AllCap
Portfolio. EDGAR 6/2/97 (10)
1(g) Certificate of Amendment relating to Alger Capital Appreciation
Portfolio. EDGAR 6/2/97
1(h) Certificate of Termination relating to Alger Income and Growth
Portfolio. EDGAR 6/2/97
1(i) Certificate of Amendment relating to the creation of Class A
Shares. (12)
2 By-laws of Registrant. EDGAR 6/2/97 (1)
4 Specimen Share Certificates. EDGAR 6/2/97 (3) (8) (9) (10)
<PAGE>
Exhibit No. Description of Exhibit
----------- ----------------------
4(a)(i) Specimen Share Certificate for Alger Balanced Portfolio -
Class A
4(a)(ii) Specimen Share Certificate for Alger Balanced Portfolio -
Class B
4(a)(iii) Specimen Share Certificate for Alger Balanced Portfolio -
Class C
4(b)(i) Specimen Share Certificate for Alger MidCap Growth Portfolio-
Class A
4(b)(ii) Specimen Share Certificate for Alger MidCap Growth Portfolio-
Class B
4(b)(iii) Specimen Share Certificate for Alger MidCap Growth Portfolio-
Class C
4(c)(i) Specimen Share Certificate for Alger Capital Appreciation
Portfolio - Class A
4(c)(ii) Specimen Share Certificate for Alger Capital Appreciation
Portfolio - Class B
4(c)(iii) Specimen Share Certificate for Alger Capital Appreciation
Portfolio - Class C
4(d)(i) Specimen Share Certificate for Alger Growth Portfolio -
Class A
4(d)(ii) Specimen Share Certificate for Alger Growth Portfolio -
Class B
4(d)(iii) Specimen Share Certificate for Alger Growth Portfolio -
Class C
4(e)(i) Specimen Share Certificate for Alger Small Capitalization
Portfolio - Class A
4(e)(ii) Specimen Share Certificate for Alger Small Capitalization
Portfolio - Class B
4(e)(iii) Specimen Share Certificate for Alger Small Capitalization
Portfolio - Class C
5 Investment Management Agreements. EDGAR 6/2/97 (6)
5(a) Investment Management Agreement for Alger Balanced
Portfolio (8)
5(b) Investment Management Agreement for Alger MidCap Growth
Portfolio (9)
5(c) Investment Management Agreement for Alger Leveraged AllCap
Portfolio (11)
5(d) Investment Management Agreement for Alger Small Capitalization
Portfolio (6)
5(e) Investment Management Agreement for Alger Money Market Portfolio
(6)
5(f) Investment Management Agreement for Alger Growth Portfolio (6)
6(a) Distribution Agreement EDGAR 6/2/97 (6)
6(a)(ii) Amendment to Distribution Agreement. [Form of] (13)
6(b) Selected Dealer and Shareholder Servicing Agreement
EDGAR 6/2/97 (4)
8 Custody Agreement EDGAR 6/2/97
10(a) Opinion and Consent of Sullivan & Worcester (8)
10(b) Opinion and Consent of Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP (13)
11 Consent of Arthur Andersen LLP
13 Form of Subscription Agreement EDGAR 6/2/97 (2)
13(a) Purchase Agreement for Alger Balanced Portfolio
EDGAR 6/2/97 (8)
13(b) Purchase Agreement for Alger MidCap Growth Portfolio
EDGAR 6/2/97 (9)
13(c) Purchase Agreement for Alger Leveraged AllCap Portfolio
EDGAR 6/2/97 (11)
13(d) Purchase Agreement for Alger Small Capitalization Portfolio
EDGAR 6/2/97 (Form of)
13(e) Purchase Agreement for Alger Growth Portfolio
EDGAR 6/2/97 (Form of)
14 Retirement Plans EDGAR 7/30/97 (5)
<PAGE>
Exhibit No. Description of Exhibit
----------- ----------------------
15 Plan of Distribution EDGAR 6/2/97 (2)
15(b) Plan of Distribution for Class C Shares of The Alger Fund.
[Form of] (13)
16 Schedule for computation of performance quotations provided in
the Statement of Additional Information
19(a) Rule 18f-3 Plan for Alger Balanced Portfolio - Class C. [Form of]
(13)
19(b) Rule 18f-3 Plan for Alger MidCap Growth Portfolio - Class C.
[Form of] (13)
19(c) Rule 18f-3 Plan for Alger Capital Appreciation Portfolio - Class
C. [Form of] (13)
19(d) Rule 18f-3 Plan for Alger Growth Portfolio - Class C. [Form of]
(13)
19(e) Rule 18f-3 Plan for Alger Small Capitalization Portfolio - Class
C. [Form of] (13)
- ----------
(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.
(12) Incorporated by reference to Post-Effective Amendment No. 22 filed with the
SEC on December 20, 1996.
(13) Incorporated by reference to Post-Effective Amendment No. 24 filed with the
SEC on June 2, 1997.
<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 February 2, 1998.
Title or Class Number of Record Holders
-------------- ------------------------
Alger Money Market Portfolio 18,904
Alger Small Capitalization Portfolio - Class A 1,769
Alger Small Capitalization Portfolio - Class B 51,243
Alger Small Capitalization Portfolio - Class C 118
Alger Growth Portfolio - Class A 1,582
Alger Growth Portfolio - Class B 31,248
Alger Growth Portfolio - Class C 124
Alger Balanced Portfolio - Class A 105
Alger Balanced Portfolio - Class B 2,890
Alger Balanced Portfolio - Class C 23
Alger Midcap Growth Portfolio - Class A 587
Alger Midcap Growth Portfolio - Class B 19,080
Alger Midcap Growth Portfolio - Class C 42
Alger Capital Appreciation Portfolio - Class A 1,779
Alger Capital Appreciation Portfolio - Class B 32,347
Alger Capital Appreciation Portfolio - Class C 318
Item 27. Indemnification
Under Section 8.4 of Registrant's Agreement and Declaration of Trust, any
past or present Trustee or officer of Registrant (including persons who serve at
Registrant's request as directors, officers or Trustees of another organization
in which Registrant has any interest as a shareholder, creditor or
otherwise[hereinafter referred to as a "Covered Person"]) is indemnified to the
fullest extent permitted by law against liability and all expenses reasonably
incurred by him in connection with any action, suit or proceeding to which he
may be a party or otherwise involved by reason of his being or having been a
Covered Person. This provision does not authorize indemnification when it is
determined, in the manner specified in the Agreement and Declaration of Trust,
that such Covered Person has not acted in good faith in the reasonable belief
that his actions were in or not opposed to the best interests of Registrant.
Moreover, this provision does not authorize indemnification when it is
determined , in the manner specified in the Agreement and Declaration of Trust,
that such Covered Person would otherwise be liable to Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties. Expenses may be paid by Registrant in advance
of the final disposition of any action, suit or proceeding upon receipt of an
undertaking by such Covered Person to repay such expenses to Registrant in the
event that it is ultimately determined that indemnification of such expenses is
not authorized under the Agreement and Declaration of Trust and either (i) the
Covered Person provides security for such undertaking, (ii) Registrant is
insured against losses from such advances, or (iii) the disinterested Trustees
or independent legal counsel determines, in the manner specified in the
Agreement and Declaration of Trust, that there is reason to believe the Covered
Person will be found to be entitled to indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to Trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission (the "SEC") such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Alger Management, which serves as investment manager to Registrant, is
generally engaged in rendering investment advisory services to institutions and,
to a lesser extent, individuals. Alger Management presently serves as investment
adviser to two closed-end investment companies and to two other open-end
investment companies. The list required by this Item 28 regarding any other
business, profession, vocation or employment of a substantial nature engaged in
by officers and directors of Alger Management during the past two years is
incorporated by reference to Schedules A and D of Form ADV filed by Alger
Management pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-06709).
Item 29. Principal Underwriter
(a) Alger Inc. acts as principal underwriter for Registrant, The Alger
American Fund, Spectra Fund and The Alger Retirement Fund and has acted as
subscription agent for Castle Convertible Fund, Inc. and Spectra Fund, Inc.
(b) The information required by this Item 29 with respect to each director,
officer or partner of Alger Inc. is incorporated by reference to Schedule A of
Form BD filed by Alger Inc. pursuant to the Securities Exchange Act of 1934 (SEC
File No. 8-6423).
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts and records of Registrant are maintained by Mr. Gregory S.
Duch, Fred Alger & Company, Incorporated, 30 Montgomery Street, Jersey City, NJ
07302.
Item 31. Management Services
Not applicable.
<PAGE>
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to provide its annual report without
charge to any recipient of its Prospectus who requests the
information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, Registrant 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 25th day of
February, 1998.
THE ALGER FUND
/s/ David D. Alger
By: ---------------------------
David D. Alger, President
/s/ Gregory S. Duch
ATTEST: --------------------------
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
- --------- ----- ----
- ------------------------- Chairman of the Board February 25, 1998
Fred M. Alger III
/s/ David D. Alger
- ------------------------- President and Trustee February 25, 1998
David D. Alger (Chief Executive Officer)
/s/ Gregory S. Duch
- ------------------------- Treasurer February 25, 1998
Gregory S. Duch (Chief Financial and
Accounting Officer)
- ------------------------- Trustee February 25, 1998
Nathan E. Saint-Amand
- ------------------------- Trustee February 25, 1998
Stephen E. O'Neil
- ------------------------- Trustee February 25, 1998
Arthur M. Dubow
- ------------------------- Trustee February 25, 1998
John T. Sargent
/s/ Gregory S. Duch
*By ---------------------
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. 26 [x]
and/or
Registration Statement Under the Investment Company Act of 1940 [ ]
Amendment No. 28 [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>
Exhibit No. Description of Exhibit
- ----------- ----------------------
11 Consent of Arthur Andersen LLP
16 Schedule for computation of performance quotations
provided in the Statement of Additional Information
INDEX TO EXHIBITS
-----------------
Page Number
in Sequential
Exhibit No. Number System
- ----------- --------------
11 Consent of Arthur Andersen LLP 1
16 Schedule for computation of performance quotations 2
provided in the Statement of Additional Information
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated December 3, 1997 on the financial statements of
The Alger Fund for the year ended October 31, 1997 and to all references to our
Firm included in or made a part of the registration statement of The Alger Fund
filed on Form N-1A (Amendment No. 28), 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 24, 1998
AVERAGE ANNUAL RETURN COMPUTATION
The Average Annual Return for each Portfolio was
computed according to the following formula:
<TABLE>
<CAPTION>
n
FORMULA: P(1+T) =ERV
<S> <C> <C> <C>
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>
<TABLE>
<CAPTION>
ENDING AVERAGE
PERIOD REDEEMABLE ANNUAL RATE
PORTFOLIO COVERED VALUE OF RETURN FORMULA *
--------- ------- ----- --------- ---------
CLASS A:
<S> <C> <C> <C> <C>
ALGER SMALL 1/1/97 (commencement of
CAPITALIZATION: operations) through 10/31/97** 1,070.40 7.04% @RATE(1070.40,1000,1)
ALGER GROWTH: 1/1/97 (commencement of
operations) through 10/31/97** 1,173.40 17.34% @RATE(1173.40,1000,1)
ALGER BALANCED: 1/1/97 (commencement of
operations) through 10/31/97** 1,128.83 12.88% @RATE(1128.83,1000,1)
ALGER MIDCAP GROWTH: 1/1/97 (commencement of
operations) through 10/31/97** 1,130.73 13.07% @RATE(1130.73,1000,1)
ALGER CAPTIAL 1/1/97 (commencement of
APPRECIATION operations) through 10/31/97** 1,154.57 15.46% @RATE(1154.57,1000,1)
CLASS B:
ALGER SMALL
CAPITALIZATION: 10 YEARS ENDED 10/31/97 6,565.51 20.71% @RATE(6565.51,1000,10)
5 YEARS ENDED 10/31/97 2,098.01 15.97% @RATE(2098.01,1000,5)
YEAR ENDED 10/31/97 1,081.10 8.11% @RATE(1081.10,1000,1)
ALGER GROWTH: 10 YEARS ENDED 10/31/97 5,261.29 18.06% @RATE(5261.29,1000,10)
5 YEARS ENDED 10/31/97 2,481.14 19.93% @RATE(2481.14,1000,5)
YEAR ENDED 10/31/97 1,199.36 19.94% @RATE(1199.36,1000,1)
ALGER BALANCED: 6/1/92 (commencement of
operations) through 10/31/97*** 1,725.97 10.60% @RATE(1725.97,1000,5.42)
5 YEARS ENDED 10/31/97 1,724.51 11.51% @RATE(1724.51,1000,5)
YEAR ENDED 10/31/97 1,142.49 14.25% @RATE(1142.49,1000,1)
ALGER MIDCAP GROWTH: 5/24/93 (commencement of
operations) through 10/31/97**** 2,482.39 22.72% @RATE(2482.39,1000,4.44)
YEAR ENDED 10/31/97 1,163.70 16.37% @RATE(1163.70,1000,1)
ALGER CAPTIAL 11/1/93 (commencement of
APPRECIATION: operations) through 10/31/97***** 2,671.83 27.85% @RATE(2671.83,1000,4)
YEAR ENDED 10/31/97 1,159.99 16.00% @RATE(1159.99,1000,1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENDING AVERAGE
PERIOD REDEEMABLE ANNUAL RATE
PORTFOLIO COVERED VALUE OF RETURN FORMULA *
--------- ------- ----- --------- ---------
CLASS C:
<S> <C> <C> <C> <C>
ALGER SMALL 8/1/97 (commencement of
CAPITALIZATION: operations) through 10/31/97** 981.42 -1.86% @RATE(981.42,1000,1)
ALGER GROWTH: 8/1/97 (commencement of
operations) through 10/31/97** 950.33 -4.97% @RATE(950.33,1000,1)
ALGER BALANCED: 8/1/97 (commencement of
operations) through 10/31/97** 967.13 -3.29% @RATE(967.13,1000,1)
ALGER MIDCAP GROWTH: 8/1/97 (commencement of
operations) through 10/31/97** 982.95 -1.70% @RATE(982.95,1000,1)
ALGER CAPTIAL 8/1/97 (commencement of
APPRECIATION operations) through 10/31/97** 930.26 -6.97% @RATE(930.26,1000,1)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
* 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".
** Not annualized.
*** Period equals 5.42 years.
**** Period equals 4.44 years.
***** Period equals 4 years.
</TABLE>
<PAGE>
ALGER MONEY MARKET PORTFOLIO YIELD COMPUTATION
The Alger Money Market Portfolio's yield for the 7 days ended
10/31/97 was computed according to the following formula:
yield= a*(365/7)
Where: a= $.0009253548 (which equals the net change, exclusive
of capital changes, in the value of a
hypothetical pre-exisiting account in the
Portfolio having a balance of one share at the
beginning of the 7 day period)
yield= 4.83%
The Alger Money Market Portfolio's effective yield for the 7
days ended 10/31/97 was computed according to the following formula:
365/7
effective yield= ((a+1) )-1
Where: a= $.0009253548 (which equals the net change, exclusive
of capital changes, in the value of a
hypothetical pre-exisiting account in the
Portfolio having a balance of one share at the
beginning of the 7 day period)
effective yield= 4.94%
