THE ALGER RETIREMENT FUND
MEETING THE CHALLENGE OF INVESTING
Alger Growth
Retirement Portfolio
Alger Small Cap
Retirement Portfolio
Alger MidCap Growth
Retirement Portfolio
Alger Capital Appreciation
Retirement Portfolio
ANNUAL REPORT
October 31, 1997
<PAGE>
Fellow Shareholders: December 3 , 1997
A YEAR-TO-DATE REVIEW
While the fiscal year ended October 31, 1997 resulted in strong performance
returns for all of the major stock market indices, the road was not a smooth
one. Thus far, the calendar year can be divided into two parts. The first part
took place from January all the way through the 27th of October. This period was
generally very positive for the market, but was punctuated by several sharp
downward corrections (e.g., March--April and August--September). The main focus
of investors during this period was the same as it had been since March of
1996--whether or not the Fed would raise rates. Against this background, it is
important to understand that most economists have consistently misunderstood the
nature of the market and the economy. While it is true that the economy was
strong for the first three quarters of 1997, dropping the unemployment rate to a
twenty-four year low of 4.7%, there was no resulting increase in inflation as
most observers had been expecting. In fact, inflation dropped throughout the
year until it finally attained a level which is the lowest in thirty-two years.
The broadest measure of this low inflation is the implicit price deflator, which
fell to a 1.4% annual rate in the third quarter. This occurred despite a 4.9%
increase in GDP in the first quarter, a 3.3% increase in the second quarter and
a 3.3% (revised) increase in the third quarter.
Because of the concern about a possible build-up in inflationary pressures,
investors and economists have been primarily concerned with the level of
economic activity. As recently as October 8th, for example, the market was still
focusing on excess strength in the economy. That day, comments from Alan
Greenspan hit both the stock and bond markets hard. In his comments, Greenspan
rebutted the developing theory that there was a new economic paradigm which
allowed for rapid economic expansion without inflation due to improved
productivity. On that day, just over two months ago, the long-bond traded at
6.37% in response to his comments. A week later, the PPI, which had been
negative for six months, shot up .5% in September, further aggravating the
situation.
As it had for eighteen months, Wall Street was nervously awaiting the Federal
Open-Market Committee meeting in November and many expected a rate increase.
Then, on October 27th, the market underwent a gigantic change with the Dow
falling 554 points to 7161, the largest point drop in the history of the market.
This drop was occasioned by a collapse of the Hong Kong market which in turn had
been precipitated by weaknesses in currency markets of other Asian countries. By
November 19th, the stock market had recovered most of its loss and closed at
7725, higher than its close of October 24th, the Friday before the big slide.
Recently the Dow re-penetrated 8000. It is fair to say, however, that most of
the rebound has been dominated by blue-chip stocks and utilities, which has
caused the S&P 500 to outdistance other market indices as well as growth stocks
in general. The fabric of the market is now very different than it was prior to
the events of late October. The differences are as follows:
1. It seems fairly obvious that the Federal Reserve will not raise rates. It
declined to do so in November, and most probably will refrain from doing so
in the near future. This is because turmoil in the currency markets,
especially in Asia, has taken center stage. Consequently, raising rates
would exacerbate the trade imbalance by leading to a stronger dollar and
further hurt weak Asian countries.
2. There is a rapidly emerging viewpoint that the problem with the economy is
not potential inflation, but potential deflation. This is a result of
pressures brought to bear on the American economy by the stronger dollar,
as well as weakness in Asian economies forcing them into competitive
exporting.
The other side of the coin is, of course, that our own exports will
doubtlessly suffer. To put things in perspective, exports from the United
States account for 11% of our GDP, with 2% aimed at the affected countries
of Japan, Korea, Malaysia, Thailand, Philippines and Indonesia. Presumably,
our exports to
<PAGE>
these countries could fall as much as 20% which would mean a reduction in
GDP of 1/2 of 1%. Obviously, this is a very crude number, but it gives an
indication of the effect.
3. The debt market has reacted to the turmoil in Asia, creating an offsetting
impulse in the market. The long-bond has now fallen to a yield of 6.01%,
down from 6.91% six months ago. This has caused a considerable flattening
of the yield curve. Ninety-day T-bills are actually higher than they were
six months ago and are trading at 5.24%, or only 77 basis points lower than
the long-bond. This flattening of the yield curve suggests that three
things can happen:
1) The price on the long-bond will drop to reassert a more normal
relationship.
2) The Fed will lower interest rates to avert an economic slowdown.
3) The economy will probably slow, causing the entire structure of the
yield curve to fall, ultimately leading the Fed to lower interest rates,
perhaps after the yield curve inverts.
I believe that given the possibility of a slowing economy, number one is
unlikely, number two is remote at present, and number three is quite
likely, perhaps in 1998.
4. In terms of valuation, the increase in the bond market has made stocks much
more attractive. Presently, the earnings yield on the S&P 500 is 80% of the
yield on the long-bond, which is higher than the fifteen year average. On
our short-term model, the Dow is fully valued but not over valued. On
balance, I would say valuation looks good. One possibility is that p/e
ratios will get to 20 times 1998 EPS next year, driven by low inflation and
low interest rates. As our bottom-up forecast of Dow earnings is $486 per
share, this suggests a Dow of 9720. Let's all hope! Furthermore, while
growth stocks have rallied somewhat this year, at 1.4 times the market
multiple they are still at historically low p/e levels. This is a function
of the significant drop in interest rates. Since quality growth stocks have
typically traded at 1.5 to 2 times the market multiple, we believe that
there is considerable room for further multiple expansion in the months
ahead.
PORTFOLIO MATTERS
ALGER SMALL CAP RETIREMENT PORTFOLIO
The Portfolio's total return for the year was 19.00% versus a return
of 21.17% for the Russell 2000 Growth Index. The Portfolio's return slightly
lagged that of the comparative index due in large part to its relative
underweighting throughout the year in a few select industries, including
financial services and retail. While financial and retail companies did not, in
our opinion, offer the most exciting growth opportunities in 1997, stocks in
these industries, particularly those with predominantely U.S. exposure, held up
very well during what has been an extremely turbulent small cap market.
Additionally, while our comparative index includes growth stocks, the growth
stocks which we typically hold in the Portfolio tend to be faster growing and,
as a result, are more volatile during periods of economic uncertainty. For most
of 1997, investors have been primarily concerned that the economy was growing
too quickly, unemployment levels were too low, and inflation was just around the
corner. It was presumed that these concerns would lead to a series of increases
in Federal Reserve driven rates. In general, when the market is apprehensive
about the economic future, it is not willing to pay high p/e multiples for small
cap growth stocks. As a consequence, very fast growing small cap companies
experienced a severe multiple compression. This is evidenced in the Small Cap
Retirement Portfolio, which at October 31 had a p/e multiple of only 27.9
despite a 1 year estimated EPS growth rate of 45%. The result is that we are
entering fiscal year 1998 with very attractive valuations relative to the broad
market.
ALGER GROWTH RETIREMENT PORTFOLIO
For the year ended October 31, 1997, the Alger Growth Retirement Portfolio's
total return was 28.84% compared to 32.11% for the S&P 500. As stated
previously, for most of 1997 the worries impacting both the bond and stock
markets have been that the economy was growing too quickly, unemployment levels
were too low, and inflation was just around the corner. While the level of
economic activity in 1997 has been stronger than we anticipated, inflation
continues to be moderate to non-existent. However, the economic uncertainty
which
<PAGE>
prevailed throughout most of the year resulted in defensive positioning of
investors. As a result, there was a "flight to quality" with investors favoring
blue-chip type stocks with predictable earnings over traditional growth stocks
with more explosive earnings potential. Stocks of companies which are expected
to increase their earnings at a faster rate, which are the types of stocks in
which this Portfolio typically invests, did not fare as well.
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
For the year ended October 31, 1997, the Alger MidCap Growth Retirement
Portfolio's total return was 28.58% compared to 32.67% for the S&P MidCap 400
Index. Many of the same factors which affected the Small Cap Retirement and
Growth Retirement Portfolios were in evidence for the MidCap Growth Retirement
Portfolio. Most notable, in addition to the general underperformance of the
growth style relative to the major averages, was the Portfolio's relative
underweighting in the financial service and retail industries. While the
relative performance was disappointing, the Portfolio is currently well
diversified and boasts very attractive valuations relative to the market based
on 1998 estimates.
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
For the year ended October 31, 1997, the Alger Capital Appreciation Retirement
Portfolio's total return was 26.07%, compared to 32.11% for the S&P 500. The
shortfall relative the S&P 500 is mainly stylistic in nature. This Portfolio
employs an "allcap" (small, medium and large capitalizations) portfolio
management strategy. Exposure to small cap growth stocks in the first half of
the year negatively impacted the Portfolio's return relative to the larger
averages, specifically the S&P 500. Additionally, as was the case with the other
Portfolios, the past year proved difficult for traditional growth stocks in
general. Given the possibility of a slowing economy and low inflation in the
coming year, we expect that growth stocks, which are currently selling at low
multiples, should do very well.
LOOKING AHEAD
How can we summarize? I believe that the problems in southeast Asia have a
deflationary component and will result in some slowing of our economy over the
next few years. On the other hand, I believe our economy seems to be in
sufficiently good shape due to low unemployment levels and high productivity to
withstand some slowing. I believe the fourth quarter will be slower than the
third, with growth of possibly 2.5%. Evidence that the economy is starting to
slow is beginning to appear. The most obvious data point is the National
Association of Purchasing Managers Index released several days ago. It fell to
54.4 in November from 56 in October. While this is still positive, it is well
below July's peak of 58.6. Auto sales have also been slow and retail sales are
not that robust, dropping 1.8% in the first week of November. However, those who
are predicting a dire slowdown may be sorely disappointed. The lower interest
rates are spurring real estate activity, leading housing starts to an eight
month high in October. Consumer confidence also remains strong despite the
problems in Asia. This is hardly surprising since most Americans have a very
localized view of the world and probably will not be concerned about Asia until
they see some actual effects on their own economic conditions.
This, plus the low inflation should keep the Federal Reserve from raising rates
for some time. Moreover, an overall pattern of lower interest rates could result
by year-end. I believe there is a strong chance that the yield on the long-bond
will fall below 6% by year-end. Because of the slowing economy, I believe
earnings will increase next year, but modestly. P/E ratios, however, could reach
very high levels because of the lack of inflation and lower interest rates.
Thus, I am still bullish on stocks, especially domestic growth stocks.
Respectfully submitted,
\s\ David D. Alger
------------------
David D. Alger
President
<PAGE>
- --------------------------------------------------------------------------------
ALGER GROWTH RETIREMENT PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Growth Retirement Portfolio invests in companies which generally have
broader product lines, markets, financial resources and depth of management than
smaller, newer companies.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION NOVEMBER 8, 1993
- --------------------------------------------------------------------------------
[CHART]
[The following table represents a graph in the printed piece]
Alger
Growth
Retirement S&P 500
11/8/93 10000 10000
10/31/94 10380 10410
10/31/95 14231 13162
10/31/96 15396 16333
10/31/97 19836 21579
ENDING VALUE
ALGER GROWTH RETIREMENT:
$19,836
ENDING VALUE
S&P 500 INDEX:
$21,579
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Growth Retirement Portfolio and the S&P 500 Index
on November 8, 1993, the inception date of the Alger Growth Retirement
Portfolio. The figures for both the Alger Growth Retirement Portfolio and the
S&P 500 Index, an unmanaged index of common stocks, include reinvestment of
dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH OCTOBER 31, 1997
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN
SINCE INCEPTION
1 YEAR 11/8/93
-------------------------------------
ALGER GROWTH
RETIREMENT PORTFOLIO 28.84% 18.77%
S&P 500 INDEX 32.11% 21.31%
-------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
4
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER GROWTH RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
SHARES COMMON STOCKS--90.1% VALUE
------ -----
AEROSPACE--4.1%
5,000 AMR Corp.* .......................................... $ 582,190
5,300 Gulfstream Aerospace Corp.* ......................... 153,700
3,500 Sundstrand Corp. .................................... 190,313
-----------
926,203
-----------
APPAREL--.7%
4,100 Tommy Hilfiger Corporation* ......................... 162,207
-----------
APPLIANCES & TOOLS--3.2%
16,400 Sunbeam Corp. ....................................... 743,132
-----------
BIO-TECHNOLOGY--.6%
5,000 BioChem Pharma Inc.* ................................ 125,315
-----------
BROADCASTING--2.4%
21,100 Westinghouse Electric Corp. ......................... 557,842
-----------
CHEMICALS--.6%
2,300 Du Pont E.I. De Nemours & Co. ....................... 130,812
-----------
COMMUNICATIONS--2.7%
3,600 America Online Inc.* ................................ 277,200
10,300 WorldCom Inc.* ...................................... 346,338
-----------
623,538
-----------
COMMUNICATION EQUIPMENT--6.3%
9,300 Bay Networks Inc.* .................................. 294,113
4,500 CIENA Corporation* .................................. 247,500
8,300 Cisco Systems, Inc.* ................................ 680,857
4,300 Tellabs, Inc.* ...................................... 232,200
-----------
1,454,670
-----------
COMPUTER RELATED & BUSINESS EQUIPMENT--5.0%
9,700 Compaq Computer Corporation* ........................ 618,375
4,700 Electronics For Imaging Inc.* ....................... 219,725
3,100 International Business Machines Corp. ............... 303,995
-----------
1,142,095
-----------
COMPUTER SOFTWARE--5.4%
5,700 HBO & Company ....................................... 247,950
3,400 Microsoft Corporation* .............................. 442,000
9,400 Oracle Corp.* ....................................... 336,341
4,700 Parametric Technology Corporation* .................. 207,388
-----------
1,233,679
-----------
CONGLOMERATE--3.0%
1,400 General Electric Co. ................................ 90,388
16,086 Tyco International Ltd. ............................. 607,247
-----------
697,635
-----------
CONSUMER PRODUCTS--2.2%
13,900 CUC International Inc.* ............................. 410,050
3,000 Fortune Brands Inc. ................................. 99,189
-----------
509,239
-----------
ENERGY & ENERGY SERVICES--4.3%
6,100 Diamond Offshore Drilling Inc. ...................... 379,725
5,000 Nabors Industries Inc.* ............................. 205,625
4,500 Schlumberger Ltd. ................................... 393,750
-----------
979,100
-----------
FINANCIAL SERVICES--10.2%
4,498 Banc One Corp. ...................................... 234,458
6,200 Bank of New York Inc. ............................... 291,791
1,300 Citicorp ............................................ 162,582
6,800 Federal Home Loan Mortgage Corporation .............. 257,550
3,400 First Union Corp. ................................... 166,814
1,000 Household International Inc. ........................ 113,250
10,300 Money Store Inc. (The) .............................. 292,263
9,225 Morgan Stanley, Dean Witter, Discover & Co. ......... 452,025
2,500 Paine Webber Group Inc. ............................. 110,470
7,350 Schwab (Charles) Corporation (The) .................. 250,819
-----------
2,332,022
-----------
FOODS & BEVERAGES--.8%
5,100 PepsiCo., Inc. ...................................... 187,745
-----------
HEALTH CARE--2.0%
3,900 Guidant Corp. ....................................... 224,250
1,200 McKesson Corp. ...................................... 128,776
4,000 Omnicare, Inc. ...................................... 111,252
-----------
464,278
-----------
INSURANCE--3.0%
3,650 American International Group, Inc. .................. 372,530
5,200 MGIC Investment Corp. ............................... 313,628
-----------
686,158
-----------
LEISURE & ENTERTAINMENT--4.0%
10,100 Carnival Corporation Cl. A .......................... 489,850
13.700 International Game Technology ....................... 350,213
2,900 Mirage Resorts, Incorporated* ....................... 72,500
-----------
912,563
-----------
MEDICAL SERVICES--2.2%
2,000 AmeriSource Health Corp Cl. A* ...................... 118,750
3,700 Cardinal Health, Inc. ............................... 274,725
5,000 PhyCor, Inc.* ....................................... 115,315
-----------
508,790
-----------
PHARMACEUTICALS--9.9%
6,500 Bristol Myers Squibb Co. ............................ 570,375
6,000 Eli Lilly & Company ................................. 401,250
2,400 Merck & Co., Inc. ................................... 214,200
2,300 Pfizer Inc. ......................................... 162,725
9,700 Schering-Plough Corporation ......................... 543,811
2,400 Warner-Lambert Co. .................................. 343,651
-----------
2,236,012
-----------
POLLUTION CONTROL--1.3%
8,100 USA Waste Services, Inc.* ........................... 299,700
-----------
REAL ESTATE--.5%
2,000 Starwood Lodging Trust .............................. 119,626
-----------
RETAILING--6.4%
7,400 General Nutrition Companies, Inc.* .................. 233,100
10,950 Home Depot, Inc. .................................... 609,094
4,400 Staples Inc.* ....................................... 115,500
14,700 WaI-Mart Stores Inc. ................................ 516,338
-----------
1,474,032
-----------
SEMICONDUCTORS--6.7%
2,000 Adaptec, Inc.* ...................................... 96,876
9,600 Altera Corporation* ................................. 426,000
9,600 Linear Technology Corporation ....................... 603,600
3,100 Maxim Integrated Products, Inc.* .................... 205,375
2,000 Texas Instruments, Incorporated ..................... 213,376
-----------
1,545,227
-----------
5
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER GROWTH RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1997
SHARES COMMON STOCKS (CONTINUED) VALUE
------ -----
SEMICONDUCTOR CAPITAL EQUIPMENT--.8%
3,200 Applied Materials Inc.* ............................. $ 106,800
2,200 Teradyne, Inc.* ..................................... 82,364
-----------
189,164
-----------
TOYS--.8%
4,500 Mattel Inc. ......................................... 174,938
-----------
TRANSPORTATION--1.0%
1,200 Burlington Northern Santa Fe Co. .................... 114,000
2,000 Textron Inc. ........................................ 115,626
-----------
229,626
-----------
Total Common Stocks
(Cost $17,620,944) .................................. 20,645,348
-----------
PRINCIPAL
AMOUNT SHORT-TERM CORPORATE NOTES--15.8%
- ---------
$575,000 Bell Atlantic Network Funding Co.,
5.60%, 11/14/97 ................................... 573,837
500,000 Cooperative Association of Tractor Dealers Inc.,
5.57%, 11/6/97 .................................... 499,613
620,000 Ford Motor Credit Company,
5.60%, 11/13/97 ................................... 618,843
310,000 GTE Corporation,
5.62%, 11/4/97 .................................... 309,855
575,000 McDonald's Corp.,
5.57%, 11/5/97 .................................... 574,644
500,000 Triple-A One Plus Funding Corp.,
5.57%, 11/4/97 (a) ................................ 499,768
550,000 USAA Capital Corporation,
5.55%, 11/6/97 .................................... 549,576
-----------
Total Short-Term Corporate Notes
(Cost $3,626,136) ................................. 3,626,136
-----------
Total Investments
(Cost $21,247,080) (b) ............................... 105.9% 24,271,484
Liabilities In Excess of Other Assets .................. (5.9) (1,349,413)
----- -----------
Net Assets ............................................. 100.0% $22,922,071
===== ===========
* Non-income producing security.
(a) Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity only to qualified institutional buyers.
(b) At October 31, 1997, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $21,247,080, amounted to
$3,024,404 which consisted of aggregate gross unrealized appreciation of
$3,334,666 and aggregate gross unrealized depreciation of $310,262.
See Notes to Financial Statements.
6
<PAGE>
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THE ALGER RETIREMENT FUND
ALGER GROWTH RETIREMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
FROM
NOVEMBER 8, 1993
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
----------------------------------------- TO OCTOBER 31,
1997 1996 1995 1994(I)
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 9.32 $ 11.65 $ 10.38 $ 10.00
-------- -------- -------- --------
Net investment income (loss) ...................... (0.02)(ii) (0.01) (0.01) (0.03)
Net realized and unrealized gain on investments ... 2.65 0.91 3.59 .41
-------- -------- -------- --------
Total from investment operations ............. 2.63 0.90 3.58 .38
Distributions from net realized gains ............. (1.17) (3.23) (2.31) --
-------- -------- -------- --------
Net asset value, end of period .................... $ 10.78 $ 9.32 $ 11.65 $ 10.38
======== ======== ======== ========
Total Return ...................................... 28.8% 8.2% 37.1% 3.8%
======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) .... $ 22,922 $ 11,325 $ 13,042 $ 9,365
======== ======== ======== ========
Ratio of expenses to average net assets ...... 1.13% 1.07%(iii) 1.11%(iii) 1.26%(iii)
======== ======== ======== ========
Ratio of net investment income (loss) to
average net assets ........................ (.22%) (.09%) (.18%) (.29%)
======== ======== ======== ========
Portfolio Turnover Rate ...................... 159.38% 142.83% 133.42% 103.79%
======== ======== ======== ========
Average Commission Rate Paid ................. $ .0718 $ .0716
======== ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Reflects total expenses, including custody fees offset by earnings credits
resulting from balances left on deposit. The expense ratio net of earnings
credits would have been 1.06% and 1.08% for the years ended October 31,
1996 and 1995, respectively. The expense ratio for the period ended
October 31, 1994 has been reduced to reflect the effect of custody fees
offset by earnings credits.
See Notes to Financial Statements.
7
<PAGE>
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ALGER SMALL CAP RETIREMENT PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Small Cap Retirement Portfolio invests in small, fast-growing
companies that offer innovative products, services, or technologies to a rapidly
expanding marketplace.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION NOVEMBER 8, 1993
- --------------------------------------------------------------------------------
[CHART]
[The following table represents a graph in the printed piece]
Alger Russell
Small 2000
Cap Growth
Retirement Index
11/8/93 10000 10000
10/31/94 10830 10600
10/31/95 17999 12064
10/31/96 19654 13679
10/31/97 23388 16565
ENDING VALUE
ALGER SMALL CAP RETIREMENT:
$23,388
ENDING VALUE
RUSSELL 2000 GROWTH INDEX:
$16,565
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Small Cap Retirement Portfolio and the Russell 2000
Growth Index on November 8, 1993, the inception date of the Alger Small Cap
Retirement Portfolio. The figures for the Alger Small Cap Retirement Portfolio
and the Russell 2000 Growth Index, an unmanaged index of common stocks, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH OCTOBER 31, 1997
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN
SINCE INCEPTION
1 YEAR 11/8/93
-------------------------------------
ALGER SMALL CAP
RETIREMENT PORTFOLIO 19.00% 23.79%
RUSSELL 2000 GROWTH INDEX 21.17% 13.52%
-------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
8
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER SMALL CAP RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
SHARES COMMON STOCKS--95.2% VALUE
------ -----
AEROSPACE--1.8%
19,300 Aviall Inc.* ........................................ $ 258,137
12,500 Wyman Gordon Co.* ................................... 301,563
-----------
559,700
-----------
APPAREL--6.8%
12,000 Brylane Inc.* ....................................... 521,256
6,500 Jones Apparel Group Inc.* ........................... 330,688
7,700 Mens Wearhouse Inc.* ................................ 298,375
6,000 Nautica Enterprises Inc.* ........................... 159,750
7,600 St. John Knits Inc. ................................. 305,429
6,300 Tommy Hilfiger Corporation* ......................... 249,247
4,700 Warnaco Group Inc. Cl. A ............................ 132,775
6,800 Wolverine Worldwide Inc. ............................ 149,600
-----------
2,147,120
-----------
AUTOMOTIVE EQUIPMENT & SERVICES--1.4%
10,000 Avis Rent A Car Inc.* ............................... 274,380
7,600 Keystone Automotive Ind. Inc.* ...................... 168,150
-----------
442,530
-----------
BIO-TECHNOLOGY--3.1%
10,000 DEKALB Genetics Corp. Cl. B ......................... 358,750
12,600 Genset ADR's * ...................................... 239,400
4,700 INCYTE Pharmaceuticals, Inc. * ...................... 378,350
-----------
976,500
-----------
BUILDING & CONSTRUCTION--.5%
13,000 Morrison Knudsen Corp.* ............................. 152,750
-----------
BUSINESS SERVICES--.6%
6,300 Pierce Leahy Corp.* ................................. 176,400
-----------
COMMUNICATIONS--4.7%
3,400 America Online Inc.* ................................ 261,800
10,000 Jacor Communications Inc.* .......................... 418,750
15,000 Outdoor Systems, Inc.* .............................. 461,250
8,200 Universal Outdoor Holdings Inc.* .................... 346,450
-----------
1,488,250
-----------
COMMUNICATION EQUIPMENT--6.5%
13,600 Advanced Fibre Communications Inc.* ................. 395,257
17,400 Bay Networks Inc.* .................................. 550,275
10,400 CIENA Corporation* .................................. 572,000
8,000 MMC Networks Inc.* .................................. 175,000
6,400 Tellabs, Inc.* ...................................... 345,600
-----------
2,038,132
-----------
COMPUTER RELATED & BUSINESS EQUIPMENT--3.4%
20,000 Electronics For Imaging Inc.* ....................... 935,000
4,300 Essex International Inc.* ........................... 142,438
-----------
1,077,438
-----------
COMPUTER SERVICES--6.2%
2,500 Aris Corp.* 59,063
5,100 Cambridge Technology Partners Inc.* ................. 186,150
4,500 Keane Inc.* ......................................... 133,312
14,900 QuickResponse Service Inc.* ......................... 484,250
24,650 Technology Solutions Co.* ........................... 776,475
18,600 Transaction Network Services Inc.* .................. 309,225
-----------
1,948,475
-----------
COMPUTER SOFTWARE--8.6%
11,400 CBT Group PLC ADS* .................................. 874,950
7,000 Citrix Systems, Inc.* ............................... 514,065
9,200 HBO & Company ....................................... 400,200
8,700 Saville Systems PLC ADR* ............................ 519,825
21,600 Structural Dynamics Research Corp.* ................. 413,100
-----------
2,722,140
-----------
COMPUTER TECHNOLOGY--.8%
7,400 Digital Microwave Corp.* ............................ 266,400
-----------
CONSUMER PRODUCTS--1.5%
9,400 Coleman Co. Inc.* ................................... 140,416
19,300 Helen of Troy Ltd.* ................................. 320,863
-----------
461,279
-----------
ENERGY & ENERGY SERVICES--.8%
8,000 Hvide Marine Inc. Cl. A* ............................ 264,000
-----------
FINANCIAL SERVICES--6.5%
2,000 CMAC Investments Corp. .............................. 109,375
23,400 E*TRADE Group, Inc.* ................................ 722,475
18,300 INMC Mortgage Holdings Inc. ......................... 434,625
21,000 Money Store Inc. (The) .............................. 595,875
10,000 Sovereign Bancorp Inc. .............................. 177,500
-----------
2,039,850
-----------
FOODS & BEVERAGES--6.0%
11,800 Earthgrains Company ................................. 485,275
15,300 Fine Host Corp.* .................................... 428,400
16,800 Flowers Industries Inc. ............................. 319,200
3,300 Interstate Bakeries Corp. ........................... 210,787
6,000 JP Foodservice Inc.* ................................ 191,628
6,000 Morningstar Group Inc.* ............................. 256,500
-----------
1,891,790
-----------
FREIGHT--.6%
5,000 Expeditors International of Washington Inc. ......... 183,750
-----------
HEALTH CARE--3.0%
8,200 Bergen Brunswig Corp. Cl. A ......................... 328,517
2,900 McKesson Corp. ...................................... 311,208
11,700 Omnicare, Inc. ...................................... 325,412
-----------
965,137
-----------
INSURANCE--1.9%
3,000 Enhance Financial Services Group Inc. ............... 158,439
7,500 Vesta Insurance Group Inc. .......................... 435,937
-----------
594,376
-----------
LEISURE & ENTERTAINMENT--2.3%
10,600 Cinar Films, Inc. Cl. B.* ........................... 412,075
12,000 Family Golf Centers Inc.* ........................... 321,000
-----------
733,075
-----------
9
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER SMALL CAP RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1997
SHARES COMMON STOCKS (CONTINUED) VALUE
------ -----
MEDICAL DEVICES--3.1%
13,700 Biomet Inc. $ ....................................... 341,651
13,000 EndoSonics Corp.* ................................... 149,500
10,650 ESC Medical Systems Ltd. ............................ 418,013
2,000 Mentor Corp. ........................................ 72,876
-----------
982,040
-----------
MEDICAL SERVICES--3.7%
3,600 Express Scripts Inc. Cl. A* ......................... 202,950
30,000 Hooper Holmes Inc. .................................. 442,500
6,300 Lincare Holdings Inc.* .............................. 337,837
4,100 Pediatrix Medical Group Inc.* ....................... 173,225
-----------
1,156,512
-----------
OIL & GAS--1.8%
12,800 Global Industries Ltd* .............................. 257,600
5,000 Varco International Inc.* ........................... 304,690
-----------
562,290
-----------
PHARMACEUTICALS--2.9%
6,800 Dura Pharmaceuticals, Inc.* ......................... 328,950
11,700 Elan Corp. PLC-ADR* ................................. 583,538
-----------
912,488
-----------
POLLUTION CONTROL--1.5%
12,827 USA Waste Services, Inc.* ........................... 474,599
-----------
PUBLISHING--.5%
6,500 Big Flowers Press Holdings Inc.* .................... 143,000
-----------
RETAILING--3.9%
7,500 Bed Bath & Beyond Inc.* ............................. 238,125
11,100 Genesco Inc.* ....................................... 140,837
4,700 Linens 'n Things Inc.* .............................. 168,909
12,000 Michaels Stores Inc.* ............................... 360,756
10,700 TJX Companies, Inc. ................................. 316,988
-----------
1,225,615
-----------
SEMICONDUCTORS--6.1%
14,600 Altera Corporation* ................................. 647,875
10,200 Linear Technology Corporation ....................... 641,325
4,900 Maxim Integrated Products, Inc.* .................... 324,625
8,100 Microchip Technology Incroporated* .................. 322,987
-----------
1,936,812
-----------
SUPERMARKETS--2.3%
12,000 Fred Meyer, Inc.* ................................... 342,756
10,000 Whole Foods Market Inc.* ............................ 392,500
-----------
735,256
-----------
TRANSPORATION--2.4%
20,000 Coach USA Inc.* ..................................... 595,000
5,000 Knightsbridge Tankers Ltd. .......................... 150,000
-----------
745,000
-----------
Total Common Stocks
(Cost $23,001,966) ................................ 30,002,704
-----------
PRINCIPAL
AMOUNT SHORT-TERM CORPORATE NOTES--.8%
- ---------
$150,000 Ford Motor Credit Company,
5.60%, 11/13/97 ................................... 149,720
100,000 McDonald's Corp.,
5.57%, 11/5/97 .................................... 99,938
-----------
Total Short-Term Corporate Notes
(Cost $249,658) ................................... 249,658
-----------
Total Investments
(Cost $23,251,624)(a) 96.0% 30,252,362
Other Assets In Excess of Liabilities 4.0 1,246,932
----- -----------
Net Assets 100.0% $31,499,294
===== ===========
* Non-income producing security.
(a) At October 31, 1997, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $23,251,624, amounted to
$7,000,738 which consisted of aggregate gross unrealized appreciation of
$7,343,736 and aggregate gross unrealized depreciation of $342,998.
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER SMALL CAP RETIREMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
FROM
NOVEMBER 8, 1993
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
----------------------------------------- TO OCTOBER 31,
1997 1996 1995 1994(I)
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 17.87 $ 17.92 $ 10.83 $ 10.00
-------- -------- -------- --------
Net investment income (loss) ...................... (0.10) (0.05) (0.07) (0.07)
Net realized and unrealized gain on investments ... 3.13 1.72 7.23 .90
-------- -------- -------- --------
Total from investment operations ............. 3.03 1.67 7.16 .83
Distributions from net realized gains ............. (2.90) (1.72) (0.07) --
-------- -------- -------- --------
Net asset value, end of period .................... $ 18.00 $ 17.87 $ 17.92 $ 10.83
======== ======== ======== ========
Total Return ...................................... 19.0% 9.2% 66.2% 8.3%
======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) .... $ 31,499 $ 30,043 $ 23,002 $ 9,513
======== ======== ======== ========
Ratio of expenses to average net assets ...... 1.06% 1.05%(ii) 1.13%(ii) 1.47%(ii)
======== ======== ======== ========
Ratio of net investment income (loss) to
average net assets ......................... (.62%) (.54%) (.73%) (.80%)
======== ======== ======== ========
Portfolio Turnover Rate ...................... 134.25% 182.49% 104.84% 186.76%
======== ======== ======== ========
Average Commission Rate Paid ................. $ .0701 $ .0629
======== ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Reflects total expenses, including custody fees offset by earnings credits
resulting from balances left on deposit. The expense ratio net of earnings
credits would have been 1.03% and 1.06% for the years ended October 31,
1996 and 1995, respectively. The expense ratio for the period ended October
31, 1994 has been reduced to reflect the effect of custody fees offset by
earnings credits.
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger MidCap Growth Retirement Portfolio invests in mid-sized companies.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION NOVEMBER 8, 1993
- --------------------------------------------------------------------------------
[CHART]
[The following table represents a graph in the printed piece]
Alger S&P
MidCap MidCap
Growth 400
Retirement Index
11/8/93 10000 10000
10/31/94 11660 10292
10/31/95 17968 12475
10/31/96 19088 14637
10/31/97 24544 19417
ENDING VALUE
ALGER MIDCAP GROWTH RETIREMENT:
$24,544
ENDING VALUE
S&P MIDCAP 400 INDEX:
$19,417
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger MidCap Growth Retirement Portfolio and the S&P
MidCap 400 Index on November 8, 1993, the inception date of the Alger MidCap
Growth Retirement Portfolio. Figures for the Alger MidCap Growth Retirement
Portfolio and the S&P MidCap 400 Index, an unmanaged index of common stocks,
include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH OCTOBER 31, 1997
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN
SINCE INCEPTION
1 YEAR 11/8/93
-------------------------------------
ALGER MIDCAP GROWTH
RETIREMENT PORTFOLIO 28.58% 25.30%
S&P MIDCAP 400 INDEX 32.67% 18.14%
-------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
12
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
SHARES COMMON STOCKS--95.8% VALUE
------ -----
AEROSPACE--4.4%
900 AMR Corp.* .......................................... $ 104,794
1,200 BE Aerospace Inc.* .................................. 33,750
2,000 Continental Airlines Inc. Cl. B* .................... 86,500
1,100 Sundstrand Corp. .................................... 59,812
-----------
284,856
-----------
APPAREL--2.1%
1,200 Nautica Enterprises Inc.* ........................... 31,950
2,700 Tommy Hilfiger Corporation* ......................... 106,820
-----------
138,770
-----------
APPLIANCES & TOOLS--3.3%
4,700 Sunbeam Corp. ....................................... 212,970
-----------
BIO-TECHNOLOGY--1.6%
4,100 BioChem Pharma Inc.* ................................ 102,757
-----------
BUSINESS SERVICES--1.2%
2,000 Paychex, Inc. ....................................... 76,250
-----------
COMMUNICATIONS--.5%
400 America Online Inc.* ................................ 30,800
-----------
COMMUNICATION EQUIPMENT--6.3%
1,000 Advanced Fibre Communications Inc.* ................. 29,063
1,900 Bay Networks Inc.* .................................. 60,088
1,700 CIENA Corporation* .................................. 93,500
900 Cisco Systems Inc.* ................................. 73,828
4,000 MMC Networks Inc.* .................................. 87,500
1,100 Tellabs, Inc.* ...................................... 59,400
-----------
403,379
-----------
COMPUTER RELATED & BUSINESS EQUIPMENT--2.2%
3,000 Electronics For Imaging Inc.* ....................... 140,250
-----------
COMPUTER SOFTWARE--5.4%
500 Citrix Systems, Inc.* ............................... 36,719
5,000 HBO & Company ....................................... 217,500
1,100 Parametric Technology Corporation* .................. 48,538
1,000 Systems & Computer Technology Corp.* ................ 43,125
-----------
345,882
-----------
CONGLOMERATE--1.4%
2,362 Tyco International Ltd. ............................. 89,165
-----------
CONSUMER PRODUCTS--1.7%
3,750 CUC International Inc.* ............................. 110,625
-----------
ENERGY & ENERGY SERVICES--4.7%
2,100 Diamond Offshore Drilling Inc. ...................... 130,725
3,200 Nabors Industries Inc.* ............................. 131,600
800 Santa Fe International Corp. ........................ 39,350
-----------
301,675
-----------
FINANCIAL SERVICES--7.7%
1,800 E*TRADE Group, Inc.* ................................ 55,575
3,000 INMC Mortgage Holdings Inc. ......................... 71,250
7,700 Money Store Inc. (The) .............................. 218,488
1,700 Paine Webber Group Inc. ............................. 75,120
2,200 Sovereign Bancorp Inc. .............................. 39,050
800 Star Banc Corp. ..................................... 39,250
-----------
498,733
-----------
HEALTH CARE--6.8%
3,300 Bergen Brunswig Corp. Cl. A ......................... 132,208
2,000 Guidant Corp. ....................................... 115,000
1,200 McKesson Corp. ...................................... 128,776
2,300 Omnicare, Inc. ...................................... 63,970
-----------
439,954
-----------
INDUSTRIAL EQUIPMENT--.5%
1,000 Cal Dive International, Inc.* ....................... 31,250
-----------
INSURANCE--2.1%
2,200 MGIC Investment Corp. ............................... 132,689
Leisure & Entertainment--5.7%
2,000 Carnival Corporation Cl. A .......................... 97,000
7,900 International Game Technology ....................... 201,948
2,600 Mirage Resorts, Incorporated* ....................... 65,000
-----------
363,948
-----------
MEDICAL DEVICES--2.2%
1,000 Biomatrix Inc.* ..................................... 34,625
2,900 Biomet Inc. ......................................... 72,320
800 Safeskin Corp.* ..................................... 36,300
-----------
143,245
-----------
MEDICAL SERVICES--6.7%
2,200 AmeriSource Health Corp. Cl. A* ..................... 130,625
2,200 Cardinal Health, Inc. ............................... 163,350
1,400 PhyCor, Inc.* ....................................... 32,288
4,350 Quorum Health Group Inc.* ........................... 105,487
-----------
431,750
-----------
METALS--.5%
1,000 Titanium Metals Corporation* ........................ 31,250
-----------
OIL & GAS--1.7%
800 EVI Inc.* ........................................... 51,350
3,000 Global Industries Ltd.* ............................. 60,375
-----------
111,725
-----------
PHARMACEUTICALS--1.9%
2,500 Elan Corp. PLC-ADR* ................................. 124,688
-----------
POLLUTION CONTROL--2.8%
2,100 Allied Waste Industries Inc.* ....................... 42,787
3,750 USA Waste Services, Inc.* ........................... 138,750
-----------
181,537
-----------
REAL ESTATE--.6%
1,200 Boston Properties, Inc.* ............................ 38,400
-----------
RETAILING--7.7%
1,200 BJS Wholesale Club Inc.* ............................ 34,576
3,000 Borders Group Inc.* ................................. 77,814
3,900 CompUSA Inc.* ....................................... 127,725
7,100 General Nutrition Companies, Inc. ................... 223,650
1,300 Staples Inc.* ....................................... 34,125
-----------
497,890
-----------
SEMICONDUCTORS--9.5%
1,200 Adaptec, Inc.* ...................................... 58,126
4,300 Altera Corporation* ................................. 190,813
2,900 Linear Technology Corporation ....................... 182,338
1,900 Maxim Integrated Products, Inc.* .................... 125,875
500 Texas Instruments, Incorporated ..................... 53,344
-----------
610,496
-----------
13
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1997
SHARES COMMON STOCKS (CONTINUED) VALUE
------ -----
SEMICONDUCTOR CAPITAL EQUIPMENT--1.6%
1,000 Applied Materials Inc.* ............................. $ 33,375
1,800 Teradyne, Inc.* ..................................... 67,388
-----------
100,763
-----------
TOYS--.8%
1,300 Mattel Inc. ......................................... 50,538
-----------
TRANSPORTATION--2.2%
4,700 Coach USA Inc.* ..................................... 139,825
-----------
Total Common Stocks
(Cost $5,307,040) ................................. 6,166,060
-----------
PRINCIPAL
AMOUNT SHORT-TERM CORPORATE NOTES--5.4%
- ---------
$250,000 McDonald's Corp.,
5.57%, 11/5/97 .................................... 249,845
100,000 Mitsui & Co. (USA) Inc.,
5.51%, 11/6/97 .................................... 99,924
-----------
Total Short-Term Corporate Notes
(Cost $349,769) ................................... 349,769
-----------
Total Investments
(Cost $5,656,809) (a) ................................ 101.2% 6,515,829
Liabilities In Excess of Other Assets .................. (1.2) (80,386)
----- -----------
Net Assets ............................................. 100.0% $ 6,435,443
===== ===========
* Non-income producing security.
(a) At October 31, 1997, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $5,656,809, amounted to $859,020
which consisted of aggregate gross unrealized appreciation of $958,213 and
aggregate gross unrealized depreciation of $99,193.
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
FROM
NOVEMBER 8, 1993
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
----------------------------------------- TO OCTOBER 31,
1997 1996 1995 1994(I)
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 14.48 $ 16.34 $ 11.66 $ 10.00
-------- -------- -------- --------
Net investment income (loss) ....................... (.15) (0.07) (0.07) (0.09)
Net realized and unrealized gain on investments .... 3.46 1.09 6.07 1.75
-------- -------- -------- --------
Total from investment operations .............. 3.31 1.02 6.00 1.66
Distributions from net realized gains .............. (6.43) (2.88) (1.32) --
-------- -------- -------- --------
Net asset value, end of period ..................... $ 11.36 $ 14.48 $ 16.34 $ 11.66
======== ======== ======== ========
Total Return ....................................... 28.6% 6.2% 54.1% 16.6%
======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) ..... $ 6,435 $ 9,726 $ 10,914 $ 6,774
======== ======== ======== ========
Ratio of expenses to average net assets ....... 1.31% 1.16%(ii) 1.23%(ii) 1.53%(ii)
======== ======== ======== ========
Ratio of net investment income (loss) to
average net assets .......................... (.79%) (.45%) (.69%) (.89%)
======== ======== ======== ========
Portfolio Turnover Rate ....................... 183.31% 170.21% 132.74% 134.06%
======== ======== ======== ========
Average Commission Rate Paid .................. $ .0699 $ .0682
======== ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Reflects total expenses, including custody fees offset by earnings credits
resulting from balances left on deposit. The expense ratio net of earnings
credits would have been 1.14% and 1.16% for the years ended October 31,
1996 and 1995, respectively. The expense ratio for the period ended October
31, 1994 has been reduced to reflect the effect of custody fees offset by
earnings credits.
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Capital Appreciation Retirement Portfolio focuses on companies with
promising growth potential while using some special investment tools such as
leveraging and options and futures transactions.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION NOVEMBER 8, 1993
- --------------------------------------------------------------------------------
[CHART]
[The following table represents a graph in the printed piece]
Alger
Capital S&P
Appreciation 500
Retirement Index
11/8/93 10000 10000
10/31/94 10080 10410
10/31/95 15564 13162
10/31/96 16515 16333
10/31/97 20820 21579
ENDING VALUE
ALGER CAPITAL APPRECIATION RETIREMENT:
$20,820
ENDING VALUE
S&P 500 INDEX:
$21,579
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Capital Appreciation Retirement Portfolio and the
S&P 500 Index on November 8, 1993, the inception date of the Alger Capital
Appreciation Retirement Portfolio. Figures for the Portfolio and the S&P 500
Index, an unmanaged index of common stocks, include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH OCTOBER 31, 1997
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN
SINCE INCEPTION
1 YEAR 11/8/93
-------------------------------------
ALGER CAPITAL APPRECIATION
RETIREMENT PORTFOLIO 26.07% 20.23%
S&P 500 INDEX 32.11% 21.31%
-------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
16
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
SHARES COMMON STOCKS--95.2% VALUE
------ -----
AEROSPACE--1.6%
1,300 Sundstrand Corp. .................................... $ 70,687
----------
APPLIANCES & TOOLS--2.0%
2,000 Sunbeam Corp. ....................................... 90,626
----------
AUTOMOTIVE EQUIPMENT & SERVICES--1.2%
2,000 Avis Rent A Car Inc.* ............................... 54,876
----------
BROADCASTING--2.1%
3,600 Westinghouse Electric Corp. ......................... 95,177
----------
COMMUNICATIONS--4.7%
900 America Online Inc.* ................................ 69,300
2,000 Jacor Communications Inc.* .......................... 83,750
1,700 WorldCom Inc.* ...................................... 57,163
----------
210,213
----------
COMMUNICATION EQUIPMENT--10.9%
1,600 Advanced Fibre Communications Inc. * ................ 46,500
2,700 Bay Networks Inc.* .................................. 85,388
2,100 CIENA Corporation* .................................. 115,500
1,600 Cisco Systems, Inc.* ................................ 131,250
3,000 MMC Networks Inc.* .................................. 65,625
900 Tellabs, Inc.* ...................................... 48,600
----------
492,863
----------
COMPUTER RELATED & BUSINESS EQUIPMENT--7.0%
1,700 Compaq Computer Corporation* ........................ 108,375
3,000 Electronics For Imaging Inc.* ....................... 140,250
700 International Business Machines Corp. ............... 68,644
----------
317,269
----------
COMPUTER SERVICES--.5%
1,400 Transaction Network Services Inc.* .................. 23,275
----------
COMPUTER SOFTWARE--7.8%
1,000 Citrix Systems, Inc.* ............................... 73,438
1,400 HBO & Company ....................................... 60,900
1,100 Microsoft Corporation* .............................. 143,000
750 Oracle Corp.* ....................................... 26,836
800 Saville Systems PLC-ADR* ............................ 47,800
----------
351,974
----------
ENERGY & ENERGY SERVICES--5.1%
1,900 Diamond Offshore Drilling Inc. ...................... 118,275
600 Nabors Industries Inc.* ............................. 24,675
1,000 Schlumberger Ltd. ................................... 87,500
----------
230,450
----------
FINANCIAL SERVICES--9.4%
1,200 Bank of New York Inc. ............................... 56,476
1,900 E*TRADE Group, Inc.* ................................ 58,663
1,200 Federal Home Loan Mortgage Corporation .............. 45,450
700 First Union Corp. ................................... 34,344
700 Household International Inc. ........................ 79,275
2,000 Money Store Inc. (The) .............................. 56,750
1,980 Morgan Stanley, Dean Witter, Discover & Co. ......... 97,020
----------
427,978
----------
HEALTH CARE--6.1%
2,600 Guidant Corp. ....................................... 149,500
1,200 McKesson Corp. ...................................... 128,776
----------
278,276
----------
INSURANCE--1.8%
800 American International Group, Inc. .................. 81,650
----------
LEISURE & ENTERTAINMENT--1.8%
3,100 International Game Technology ....................... 79,245
----------
OIL & GAS--3.2%
2,400 Halliburton Co. ..................................... 143,100
----------
PHARMACEUTICALS--14.0%
1,500 Bristol Myers Squibb Co. ............................ 131,625
1,400 Elan Corp. PLC-ADR* ................................. 69,825
1,200 Eli Lilly & Company ................................. 80,250
500 Merck & Co., Inc. ................................... 44,625
800 Pfizer Inc. ......................................... 56,600
1,900 Schering-Plough Corporation ......................... 106,520
1,000 Warner-Lambert Co. .................................. 143,188
----------
632,633
----------
POLLUTION CONTROL--2.5%
3,100 USA Waste Services, Inc.* ........................... 114,700
----------
RETAILING--4.6%
2,400 Home Depot, Inc. .................................... 133,500
900 Staples Inc.* ....................................... 23,625
1,400 Wal-Mart Stores Inc. ................................ 49,175
----------
206,300
----------
SEMICONDUCTORS--7.7%
3,100 Altera Corporation* ................................. 137,562
1,900 Linear Technology Corporation ....................... 119,463
700 Maxim Integrated Products, Inc.* .................... 46,375
400 Texas Instruments, Incorporated ..................... 42,675
----------
346,075
----------
SEMICONDUCTOR CAPITAL EQUIPMENT--1.2%
1,500 Teradyne, Inc.* ..................................... 56,156
----------
Total Common Stocks
(Cost $3,609, 271) 4,303,523
----------
Total Investments
(Cost $3,609,271) (a) ................................ 95.2% 4,303,523
Other Assets In Excess of Liabilities .................. 4.8 216,879
----- ----------
Net Assets ............................................. 100.0% $4,520,402
===== ==========
* Non-income producing security.
(a) At October 31, 1997, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $3,609,271, amounted to $694,252
which consisted of aggregate gross unrealized appreciation of $758,947 and
aggregate gross unrealized depreciation of $64,695.
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO(i)
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
FROM
NOVEMBER 8, 1993
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
------------------------------------------- TO OCTOBER 31,
1997 1996 1995 1994(I)
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 9.88 $ 12.72 $ 10.08 $ 10.00
--------- --------- --------- ---------
Net investment income (loss) ....................... (0.10)(iii) (0.07) (0.19) (0.23)
Net realized and unrealized gain on investments .... 2.51 0.83 5.30 0.31
--------- --------- --------- ---------
Total from investment operations .............. 2.41 0.76 5.11 0.08
Distributions from net realized gains .............. (2.59) (3.60) (2.47) --
--------- --------- --------- ---------
Net asset value, end of period ..................... $ 9.70 $ 9.88 $ 12.72 $ 10.08
========= ========= ========= =========
Total Return ....................................... 26.1% 6.1% 54.4% 0.8%
========= ========= ========= =========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) ..... $ 4,520 $ 6,703 $ 8,116 $ 5,251
========= ========= ========= =========
Ratio of expenses excluding interest to
average net assets .......................... 1.47% 1.37% 1.43% 1.78%
========= ========= ========= =========
Ratio of expenses including interest to
average net assets .......................... 1.62% 1.44%(iv) 2.70%(iv) 2.87%(iv)
========= ========= ========= =========
Ratio of net investment income (loss) to
average net assets .......................... (1.02%) (0.94%) (2.32%) (2.53%)
========= ========= ========= =========
Portfolio Turnover Rate ............................ 159.56% 203.46% 188.53% 229.11%
========= ========= ========= =========
Average Commission Rate Paid ....................... $ .0711 $ .0668 -- --
========= ========= ========= =========
Amount of debt outstanding at end of period ........ $ 127,000 -- $ 302,600 $ 955,600
========= ========= ========= =========
Average amount of debt outstanding during
the period ....................................... $ 127,915 $ 62,130 $ 939,600 $ 826,076
========= ========= ========= =========
Average daily number of shares outstanding
during the period ................................ 511,947 595,051 565,805 515,270
========= ========= ========= =========
Average amount of debt per share during
the period ....................................... $ .25 $ .10 $ 1.66 $ 1.60
========= ========= ========= =========
</TABLE>
(i) Prior to April 12, 1996, the Alger Capital Appreciation Retirement
Portfolio was the Alger Defined Contribution Leveraged AllCap Portfolio.
(ii) Ratios have been annualized; total return has not been annualized.
(iii) Amount was computed based on average shares outstanding during the period.
(iv) Reflects total expenses, including custody fees offset by earnings credits
resulting from balances left on deposit. The expense ratio net of earnings
credits would have been 1.42% and 2.66% for the years ended October 31,
1996 and October 31, 1995, respectively. The expense ratio for the period
ended October 31, 1994 has been reduced to reflect the effect of custody
fees offset by earnings credits.
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<CAPTION>
MIDCAP CAPITAL
GROWTH SMALL CAP GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value (identified cost*)-
see accompanying schedules of investments ................ $24,271,484 $30,252,362 $6,515,829 $4,303,523
Cash ....................................................... 30,510 153,964 24,511 38,158
Receivable for investment securities sold .................. 728,226 1,214,407 151,555 579,279
Receivable for shares of beneficial interest sold .......... 81,787 120,359 -- 260
Dividends receivable ....................................... 3,834 15,120 2,221 1,060
Prepaid expenses and other assets .......................... 3,032 5,138 2,621 2,436
----------- ----------- ---------- ----------
Total Assets .......................................... 25,118,873 31,761,350 6,696,737 4,924,716
----------- ----------- ---------- ----------
LIABILITIES:
Payable for investment securities purchased ................ 2,147,396 213,775 240,820 255,594
Bank loan payable .......................................... -- -- -- 127,000
Interest payable ........................................... -- -- -- 3,237
Accrued investment management fees ......................... 14,993 24,387 4,727 3,631
Accrued shareholder servicing fees ......................... 12,855 2,903 -- --
Accrued expenses ........................................... 21,558 20,991 15,747 14,852
----------- ----------- ---------- ----------
Total Liabilities ..................................... 2,196,802 262,056 261,294 404,314
----------- ----------- ---------- ----------
NET ASSETS ................................................. $22,922,071 $31,499,294 $6,435,443 $4,520,402
=========== =========== ========== ==========
Net Assets Consist of:
Paid-in capital .......................................... $16,862,074 $21,897,245 $3,339,270 $2,380,173
Undistributed net investment income
(accumulated loss) ..................................... (94,977) (499,563) (212,899) (391,508)
Undistributed net realized gain .......................... 3,130,570 3,100,874 2,450,052 1,837,485
Net unrealized appreciation .............................. 3,024,404 7,000,738 859,020 694,252
----------- ----------- ---------- ----------
NET ASSETS ................................................. $22,922,071 $31,499,294 $6,435,443 $4,520,402
=========== =========== ========== ==========
Shares of beneficial interest outstanding--Note 6 .......... 2,126,098 1,749,538 566,452 466,080
=========== =========== ========== ==========
NET ASSET VALUE PER SHARE .................................. $ 10.78 $ 18.00 $ 11.36 $ 9.70
=========== =========== ========== ==========
*Identified cost ........................................... $21,247,080 $23,251,624 $5,656,809 $3,609,271
=========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
STATEMENTS OF OPERATIONS
For the year ended October 31, 1997
<TABLE>
<CAPTION>
MIDCAP CAPITAL
GROWTH SMALL CAP GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends ................................................ $ 116,827 $ 64,118 $ 20,326 $ 30,235
Interest ................................................. 49,091 65,130 18,726 1,619
---------- ---------- ---------- ----------
Total income ........................................... 165,918 129,248 39,052 31,854
---------- ---------- ---------- ----------
Expenses:
Management fees--Note 3(a) ............................... 136,841 251,536 59,911 44,688
Shareholder servicing fees ............................... 19,990 6,813 -- --
Interest on line of credit utilized--Note 5 .............. -- -- -- 8,295
Custodian fees ........................................... 11,342 12,597 10,686 6,346
Transfer agent fees--Note 3(c) ........................... 2,500 2,500 2,500 2,500
Shareholder reports ...................................... 10,664 16,549 4,086 3,000
Professional fees ........................................ 8,515 8,515 8,515 8,515
Trustees' fees ........................................... 6,000 6,000 6,000 6,000
Miscellaneous ............................................ 9,922 8,666 6,509 5,983
---------- ---------- ---------- ----------
Total Expenses .......................................... 205,774 313,176 98,207 85,327
---------- ---------- ---------- ----------
NET INVESTMENT (LOSS) ...................................... (39,856) (183,928) (59,155) (53,473)
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ......................... 3,114,186 2,873,373 2,320,462 1,541,633
Net change in unrealized appreciation (depreciation)
on investments ......................................... 1,425,496 2,392,360 (384,563) (303,678)
Net realized and unrealized gain (loss)
on investments ......................................... 4,539,682 5,265,733 1,935,899 1,237,955
---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................................ $4,499,826 $5,081,805 $1,876,744 $1,184,482
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
STATEMENT OF CASH FLOWS
For the year ended October 31, 1997
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH:
Cash flows from operating activities:
Dividends received ..................................................................... $ 30,137
Interest received ...................................................................... 1,619
Interest paid .......................................................................... (5,058)
Operating expenses paid ................................................................ (76,090)
Purchase of investment securities ...................................................... (8,611,423)
Proceeds from disposition of investment securities ..................................... 11,867,948
Other .................................................................................. 431
-----------
Net cash provided by operating activities ............................................ 3,207,564
-----------
Cash flows from financing activities:
Dividends paid ......................................................................... (1,016,205)
Proceeds from shares sold and dividends reinvested ..................................... 1,392,705
Payments on shares redeemed ............................................................ (3,737,678)
Increase in bank loan payable .......................................................... 127,000
-----------
Net cash used in financing activities ................................................ (3,234,178)
-----------
Net decrease in cash ..................................................................... (26,614)
Cash--beginning of year .................................................................. 64,772
-----------
Cash--end of year ........................................................................ $ 38,158
===========
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations ................................... $ 1,184,482
Decrease in investments ................................................................ 3,641,280
Increase in receivable for investment securities sold .................................. (158,034)
Increase in dividends receivable ....................................................... (98)
Decrease in payable for investment securities purchased ................................ (226,719)
Net realized gain on investments ....................................................... (1,541,633)
Net decrease in unrealized appreciation on investments ................................. 303,678
Increase in accrued expenses and other liabilities ..................................... 3,478
Net decrease in other assets ........................................................... 1,130
-----------
Net cash provided by operating activities ............................................ $ 3,207,564
===========
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended October 31, 1997
<TABLE>
<CAPTION>
MIDCAP CAPITAL
GROWTH SMALL CAP GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net investment loss ........................................ $ (39,856) $ (183,928) $ (59,155) $ (53,473)
Net realized gain on investments ........................... 3,114,186 2,873,373 2,320,462 1,541,633
Net change in unrealized appreciation (depreciation)
on investments ........................................... 1,425,496 2,392,360 (384,563) (303,678)
----------- ----------- ----------- ----------
Net increase in net assets resulting
from operations ........................................ 4,499,826 5,081,805 1,876,744 1,184,482
Dividends to Shareholders:
Net realized gains ....................................... (1,975,055) (4,300,802) (2,483,218) (1,016,205)
Net increase (decrease) from shares of beneficial
interest transactions--Note 6 ............................ 9,072,144 675,556 (2,684,006) (2,351,246)
----------- ----------- ----------- ----------
Total increase (decrease) .............................. 11,596,915 1,456,559 (3,290,480) (2,182,969)
Net Assets:
Beginning of year ........................................ 11,325,156 30,042,735 9,725,923 6,703,371
----------- ----------- ----------- ----------
End of year .............................................. $22,922,071 $31,499,294 $ 6,435,443 $4,520,402
=========== =========== =========== ==========
Undistributed net investment income (accumulated loss) ..... $ (94,977) $ (499,563) $ (212,899) $ (391,508)
=========== =========== =========== ==========
</TABLE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended October 31, 1996
<TABLE>
<CAPTION>
MIDCAP CAPITAL
GROWTH SMALL CAP GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO*
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net investment loss ........................................ $ (10,182) $ (142,689) $ (45,315) $ (64,933)
Net realized gain on investments ........................... 1,959,971 4,416,600 2,505,853 1,069,584
Net change in unrealized (depreciation)
on investments ........................................... (897,060) (1,945,398) (1,800,673) (565,660)
----------- ----------- ----------- ----------
Net increase in net assets resulting from operations ... 1,052,729 2,328,513 659,865 438,991
Dividends to Shareholders:
Net realized gains ....................................... (2,895,406) (2,507,225) (1,618,472) (1,765,311)
Net increase (decrease) from shares of beneficial
interest transactions--Note 6 ............................ 126,096 7,219,881 (229,799) (86,328)
----------- ----------- ----------- ----------
Total increase (decrease) .............................. (1,716,581) 7,041,169 (1,188,406) (1,412,648)
Net Assets:
Beginning of year ........................................ 13,041,737 23,001,566 10,914,329 8,116,019
----------- ----------- ----------- ----------
End of year .............................................. $11,325,156 $30,042,735 $ 9,725,923 $6,703,371
=========== =========== =========== ==========
Undistributed net investment income (accumulated loss) ..... $ (55,121) $ (315,635) $ (153,744) $ (338,035)
=========== =========== =========== ==========
</TABLE>
*Prior to April 12, 1996, the Alger Capital Appreciation Retirement Portfolio
was the Alger Defined Contribution Leveraged AllCap Portfolio.
See Notes to Financial Statements.
22
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1--General:
The Alger Retirement Fund (the "Fund"), is a diversified, open-end
registered investment company organized as an unincorporated business trust
under the laws of the Commonwealth of Massachusetts. The Fund operates as a
series company and currently issues four classes of shares of beneficial
interest --Growth Portfolio, Small Cap Portfolio, MidCap Growth Portfolio and
Capital Appreciation Portfolio (the "Portfolios"). The investment objective of
each Portfolio is long-term capital appreciation. Each Portfolio seeks to
achieve its objective by investing primarily in equity securities.
NOTE 2--Significant Accounting Policies:
(a) INVESTMENT VALUATION: Investments of the Portfolios are valued on each
day the New York Stock Exchange (the "NYSE") is open as of the close of the NYSE
(currently 4:00 p.m. Eastern time). Listed and unlisted securities for which
such information is regularly reported are valued at the last reported sales
price or, in the absence of reported sales, at the mean between the bid and
asked price or, in the absence of a recent bid or asked price, the equivalent as
obtained from one or more of the major market makers for the securities to be
valued.
Securities for which market quotations are not readily available are valued
at fair value, as determined in good faith pursuant to procedures established by
the Board of Trustees.
Short-term securities having a remaining maturity of sixty days or less are
valued at amortized cost which approximates market value.
(b) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income is recognized on the
accrual basis.
(c) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are
recorded on the ex-dividend date. With respect to all Portfolios, dividends from
net investment income and dividends from net realized gains, offset by any loss
carryforward, are declared and paid annually after the end of the fiscal year in
which earned.
(d) FEDERAL INCOME TAXES: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. Each Portfolio is
treated as a separate entity for the purpose of determining such compliance.
(e) EXPENSES: The Fund accounts separately for the assets, liabilities and
operations of each Portfolio. Expenses directly attributable to each Portfolio
are charged to that Portfolio's operations; expenses which are applicable to all
Portfolios are allocated among them. Organizational expenses are being amortized
from the date operations commenced over a five year period.
(f) OTHER: These financial statements have been prepared using estimates
and assumptions that affect the reported amounts therein. Actual results may
differ from those estimates.
NOTE 3--Investment Management Fees and Other Transactions with
Affiliates:
(a) INVESTMENT MANAGEMENT FEES: Fees incurred by each Portfolio, pursuant
to the provisions of Investment Management Agreements (the "Agreements") with
Fred Alger Management, Inc. ("Alger Management"), are payable monthly and are
computed based on the value of the average daily net assets of each Portfolio at
the following annual rates:
Growth Portfolio ........................... .75%
Small Cap Portfolio ........................ .85
MidCap Growth Portfolio .................... .80
Capital Appreciation Portfolio ............. .85
(b) BROKERAGE COMMISSIONS: During the year ended October 31, 1997, the
Growth Portfolio, the Small Cap Portfolio, the MidCap Growth Portfolio and the
Capital Appreciation Portfolio paid Fred Alger & Company, Incorporated ("Alger
Inc."), the Fund's distributor, commissions of $56,533, $63,778, $26,573 and
$15,415, respectively, in connection with securities transactions.
(c) TRANSFER AGENT FEES: Alger Shareholder Services, Inc. ("Alger
Services"), an affiliate of Alger Management, serves as transfer agent for the
Fund. During the year ended October 31, 1997, each Portfolio incurred fees of
$2,500 for services provided by Alger Services.
(d) OTHER TRANSACTIONS WITH AFFILIATES: Certain trustees and officers of
the Fund are directors and officers of Alger Management, Alger Inc. and Alger
Services. At October 31, 1997, Alger Management and its affiliates owned 817,802
shares, 303,901 shares, 566,452 shares and 464,863 shares of the Growth
Portfolio, the Small Cap Portfolio, the MidCap Growth Portfolio and the Capital
Appreciation Portfolio, respectively.
NOTE 4--Securities Transactions:
The following summarizes the securities transactions by the Fund, other
than short-term securities, for the year ended October 31, 1997:
PURCHASES SALES
----------- -----------
Growth Portfolio ................................. $31,943,298 $26,892,275
Small Cap Portfolio .............................. 37,930,914 42,395,948
MidCap Growth Portfolio .......................... 13,017,155 18,387,634
Capital Appreciation Portfolio ................... 8,384,704 12,019,719
23
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 5--Lines of Credit:
The Capital Appreciation Portfolio has lines of credit with banks whereby
it may borrow up to 1/3 of the value of its assets, as defined, up to a maximum
of $45,000,000. Such borrowings have variable interest rates and are payable on
demand. For the year ended October 31, 1997, the Portfolio had borrowings which
averaged $127,915 at a weighted average interest rate of 6.40%.
NOTE 6--Share Capital:
The Fund has an unlimited number of authorized shares of beneficial
interest of $.001 par value which are presently divided into four classes of
shares.
During the year ended October 31, 1997, transactions of shares of
beneficial interest were as follows:
SHARES AMOUNT
--------- -----------
Growth Portfolio
Shares sold 1,343,787 $13,575,916
Dividends reinvested 192,126 1,975,054
--------- -----------
1,535,913 15,550,970
Shares redeemed (624,471) (6,478,826)
--------- -----------
Net increase 911,442 $ 9,072,144
========= ===========
Small Cap Portfolio
Shares sold 617,566 $11,165,492
Dividends reinvested 268,632 4,300,803
--------- -----------
886,198 15,466,295
Shares redeemed (817,952) (14,790,739)
--------- -----------
Net increase 68,246 $ 675,556
========= ===========
MidCap Growth Portfolio
Shares sold 21,594 $ 305,835
Dividends reinvested 246,596 2,483,217
--------- -----------
268,190 2,789,052
Shares redeemed (373,350) (5,473,058)
--------- -----------
Net decrease (105,160) $(2,684,006)
========= ===========
Capital Appreciation Portfolio
Shares sold 35,643 $ 370,227
Dividends reinvested 111,426 1,016,205
--------- -----------
147,069 1,386,432
Shares redeemed (359,545) (3,737,678)
--------- -----------
Net decrease (212,476) $(2,351,246)
========= ===========
During the year ended October 31, 1996, transactions of shares of
beneficial interest were as follows:
SHARES AMOUNT
--------- -----------
Growth Portfolio
Shares sold 61,014 $ 717,882
Dividends reinvested 315,748 2,895,406
--------- -----------
376,762 3,613,288
Shares redeemed (281,860) (3,487,192)
--------- -----------
Net increase 94,902 $ 126,096
========= ===========
Small Cap Portfolio
Shares sold 567,108 $10,311,184
Dividends reinvested 138,215 2,507,225
--------- -----------
705,323 12,818,409
Shares redeemed (307,294) (5,598,528)
--------- -----------
Net increase 398,029 $ 7,219,881
========= ===========
MidCap Growth Portfolio
Shares sold 50,525 $ 813,902
Dividends reinvested 111,850 1,618,472
--------- -----------
162,375 2,432,374
Shares redeemed (158,661) (2,662,173)
--------- -----------
Net increase (decrease) 3,714 $ (229,799)
========= ===========
Capital Appreciation Portfolio
Shares sold 53,444 $ 588,689
Dividends reinvested 179,584 1,765,311
--------- -----------
233,028 2,354,000
Shares redeemed (192,540) (2,440,328)
--------- -----------
Net increase (decrease) 40,488 $ (86,328)
========= ===========
24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Alger Retirement Fund:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Alger Retirement Fund (a
Massachusetts business trust comprising, respectively, the Alger Growth
Retirement Portfolio, Alger Small Cap Retirement Portfolio, Alger MidCap Growth
Retirement Portfolio, and Alger Capital Appreciation Retirement Portfolio) as of
October 31, 1997, and the related statements of operations and cash flows for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
three years in the period then ended and for the period ended October 31, 1994.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting The Alger Retirement Fund as of
October 31, 1997, the results of their operations and cash flows for the year
then ended, the changes in their net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended and for the period ended October 31, 1994, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
December 12, 1997
