As filed with the Securities and Exchange Commission
on February 27, 1997
Securities Act File No. 33-68124
Investment Company Act File No. 811-7986
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 6 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 8 [x]
(Check appropriate box or boxes)
THE ALGER RETIREMENT FUND
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(Exact Name of Registrant as Specified in Charter)
75 Maiden Lane
New York, New York 10038
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(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
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(Name and Address of Agent for Service)
Page 1 of ___ Pages
Exhibit Index at Page ____
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b), or
[X] on February 28, 1997 pursuant to paragraph (b), or
[ ] 60 days after filing pursuant to paragraph (a), or
[ ] on [date] pursuant to paragraph (a) of Rule 485
----------
DECLARATION PURSUANT TO RULE 24f-2
Registrant has registered an indefinite number or amount of securities
under the Securities Act of 1933, as amended, pursuant to Rule 24f-2(a)(1) under
the Investment Company Act of 1940, as amended. The Rule 24f-2 Notice for
Registrant's fiscal year ended October 31, 1996 was filed on December 20, 1996.
<PAGE>
THE ALGER RETIREMENT FUND
FORM N-1A
CROSS REFERENCE SHEET
PART A
ITEM NO. PROSPECTUS HEADING
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1. Cover Page ............................ Front Cover Page
2. Synopsis .............................. Portfolio Expenses
3. Condensed Financial Information ....... Financial Highlights
4. General Description of Registrant ..... Front Cover Page; The Alger
Retirement Fund; Investment
Objectives and Policies; Selecting
Among the Portfolios; Certain
Securities and Investment
Techniques; Organization
5. Management of the Fund ................ Management
6. Capital Stock and Other Securities .... Front Cover Page; Management;
Dividends and Distributions; Taxes
7. Purchase of Securities Being Offered .. Purchases and Redemptions; Net
Asset Value
8. Redemption or Repurchase .............. Purchases and Redemptions
9. Pending Legal Proceedings ............. Not Applicable
PART B HEADING IN STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
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10. Cover Page ............................ Front Cover Page
11. Table of Contents ..................... Contents
<PAGE>
12. General Information and History ....... Organization
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
"Dividends and Distributions" and
"Organization"
19. Purchase, Redemption and Pricing of
Securities Being Offered ............ Net Asset Value; Purchases;
Redemptions
20. Tax Status ............................ Taxes; See in the Prospectus
"Taxes"
21. Underwriters .......................... Purchases
22. Calculation of Performance Data ....... Determination of Performance; See
in the Prospectus "Performance"
23. Financial Statements .................. Financial Statements
PART C
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Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
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THE ALGER | 75 MAIDEN LANE
RETIREMENT | NEW YORK, NEW YORK 10038
FUND | (800) 992-3362
================================================================================
The Alger Retirement Fund (the "Fund"), formerly known as The Alger
Defined Contribution Trust, is a registered investment company--a mutual
fund--that presently offers interests in four Portfolios. Each Portfolio has
distinct investment objectives and policies and a shareholder's interest is
limited to the Portfolio in which he or she owns shares. The investment
objectives of each Portfolio are highlighted beginning on page 1. The four
Portfolios are:
o Alger Small Cap Retirement Portfolio
o Alger MidCap Growth Retirement Portfolio
o Alger Growth Retirement Portfolio
o Alger Capital Appreciation Retirement Portfolio
SHARES OF THE PORTFOLIOS ARE AVAILABLE FOR INVESTMENT WITHOUT A SALES
CHARGE TO DEFINED CONTRIBUTION RETIREMENT PLANS (THE "PLANS") WHICH ELECT TO
MAKE THE FUND AN INVESTMENT OPTION FOR PARTICIPANTS IN SUCH PLANS.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
This Prospectus, which should be retained for future reference, is
designed to provide you with certain essential information that you should know
before investing. A "Statement of Additional Information" dated February 28,
1997 containing further information about the Fund has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be obtained,
without charge, by contacting the Fund at the address or phone number above.
FRED ALGER | FRED ALGER |
MANAGEMENT, | INVESTMENT MANAGER & COMPANY, | DISTRIBUTOR
INC. | INCORPORATED |
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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FEBRUARY 28, 1997
<PAGE>
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CONTENTS
PAGE
----
The Portfolios' Expenses.......................................... iii
Financial Highlights.............................................. iv
The Alger Retirement Fund......................................... 1
Fred Alger Management, Inc........................................ 1
Investment Objectives and Policies................................ 1
All Portfolios.................................................. 2
Alger Small Cap Retirement Portfolio............................ 3
Alger MidCap Growth
Retirement Portfolio.......................................... 3
Alger Growth Retirement Portfolio............................... 3
Alger Capital Appreciation
Retirement Portfolio.......................................... 4
Selecting Among the Portfolios.................................... 4
Certain Securities and Investment
Techniques.................................................... 5
Management........................................................ 8
Net Asset Value................................................... 10
Purchases and Redemptions......................................... 10
Dividends and Distributions....................................... 11
Taxes............................................................. 11
Organization...................................................... 12
Performance....................................................... 12
Investor and Shareholder Information.............................. 13
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ii
<PAGE>
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THE PORTFOLIOS' EXPENSES
The Table below is designed to assist an investor in the Portfolios in
understanding the various costs and expenses that he or she will bear directly
or indirectly. The Table does not reflect any charges or deductions which are,
or may be, imposed by the Plans.
The Example below assumes that all dividends and distributions are
reinvested and that the annual percentage amounts listed under Annual Fund
Operating Expenses remain the same in each of the periods shown. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES; ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
ALGER ALGER ALGER
SMALL MIDCAP ALGER CAPITAL
CAP GROWTH GROWTH APPRECIATION
ETIREMENT RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO*
--------- --------- --------- ------------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases................................... None None None None
Maximum Sales Load Imposed on Reinvested Dividends........................ None None None None
Deferred Sales Load....................................................... None None None None
Redemption Fees........................................................... None None None None
Exchange Fees............................................................. None None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees........................................................... .85% .80% .75% .85%
Other Expenses............................................................ .20% .36% .32% .59%**
---- ---- ---- ----
Total Fund Operating Expenses............................................. 1.05% 1.16% 1.07% 1.44%
==== ==== ==== ====
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
One Year.................................................................. $ 11 $ 12 $ 11 $ 15
Three Years............................................................... 33 37 34 46
Five Years................................................................ 58 64 59 79
Ten Years................................................................. 128 141 131 172
</TABLE>
* Prior to April 12, 1996, the Alger Capital Appreciation Retirement Portfolio
was the Alger Defined Contribution Leveraged AllCap Portfolio.
** Included in Other Expenses of the Capital Appreciation Retirement Portfolio
is 0.07% of interest expense.
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iii
<PAGE>
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FINANCIAL HIGHLIGHTS
The Financial Highlights have been audited by Arthur Andersen LLP, the Fund's
independent public accountants, as indicated in their report dated December 16,
1996 on the Fund's financial statements as of October 31, 1996. These financial
statements are incorporated by reference into the Statement of Additional
Information. An Annual Report of the Fund is available by contacting the Fund at
(800) 992-3362. In addition to financial statements, the Annual Report contains
further information about performance of the Fund.
THE ALGER RETIREMENT FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the year ended October 31, 1996
<TABLE>
<CAPTION>
MIDCAP CAPITAL
SMALL CAP GROWTH GROWTH PPRECIATION
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO*
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year................... $ 17.92 $ 16.34 $ 11.65 $ 12.72
------- ------- ------- ---------
Net investment (loss)................................ (0.05) (0.07) (0.01) (0.07)
Net realized and unrealized gain on
investments........................................ 1.72 1.09 0.91 0.83
------- ------- ------- ---------
Total from investment operations................. 1.67 1.02 0.90 0.76
Distributions from net realized gains................ (1.72) (2.88) (3.23) (3.60)
------- ------- ------- ---------
Net asset value, end of year......................... $ 17.87 $ 14.48 $ 9.32 $ 9.88
======= ======= ======= =========
Total Return......................................... 9.2% 6.2% 8.2% 6.1%
======= ======= ======= =========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) ........... $30,043 $ 9,726 $11,325 $ 6,703
======= ======= ======= =========
Ratio of expenses excluding interest
to average net assets ......................... 1.05% 1.16% 1.07% 1.37%
======= ======= ======= =========
Ratio of expenses including interest
to average net assets(i)......................... 1.05% 1.16% 1.07% 1.44%
======= ======= ======= =========
Ratio of net investment income (loss)
to average net assets............................ (.54%) (.45%) (.09%) (0.94%)
======= ======= ======= =========
Portfolio Turnover Rate.............................. 182.49% 170.21% 142.83% 203.46%
======= ======= ======= =========
Average Commission Rate Paid......................... $ .0629 $ .0682 $ .0716 $ .0668
======= ======= ======= =========
Debt outstanding at end of year.................................................................................. $ --
=========
Average amount of debt outstanding during the year............................................................... $ 62,130
=========
Average daily number of shares outstanding during the year....................................................... 595,051
=========
Average amount of debt per share during the year................................................................. $ .10
=========
</TABLE>
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* Prior to April 12, 1996, the Alger Capital Appreciation Retirement
Portfolio was the Alger Defined Contribution Leveraged AllCap Portfolio.
(i) Reflects total expenses, including fees offset by earnings credits. The
expense ratios net of earnings credits for the year ended October 31, 1996
for the Small Cap, MidCap Growth, Growth and Capital Appreciation
Retirement Portfolios would have been 1.03%, 1.14%, 1.06% and 1.42%,
respectively.
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iv
<PAGE>
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THE ALGER RETIREMENT FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the year ended October 31, 1995
<TABLE>
<CAPTION>
MIDCAP CAPITAL
SMALL CAP GROWTH GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO*
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year........................ $ 10.83 $ 11.66 $ 10.38 $ 10.08
------- ------- ------- ---------
Net investment (loss)..................................... (0.07) (0.07) (0.01) (0.19)
Net realized and unrealized gain on
investments............................................. 7.23 6.07 3.59 5.30
------- ------- ------- ---------
Total from investment operations...................... 7.16 6.00 3.58 5.11
Distributions from net realized gains..................... (0.07) (1.32) (2.31) (2.47)
------- ------- ------- ---------
Net asset value, end of year.............................. $ 17.92 $ 16.34 $ 11.65 $ 12.72
======= ======= ======= =========
Total Return.............................................. 66.2% 54.1% 37.1% 54.4%
======= ======= ======= =========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) ................ $23,002 $10,914 $13,042 $ 8,116
======= ======= ======= =========
Ratio of expenses excluding interest
to average net assets ................................ 1.13% 1.23% 1.11% 1.43%
======= ======= ======= =========
Ratio of expenses including interest
to average net assets(i).............................. 1.13% 1.23% 1.11% 2.70%
======= ======= ======= =========
Ratio of net investment income (loss)
to average net assets................................. (.73%) (.69%) (.18%) (2.32%)
======= ======= ======= =========
Portfolio Turnover Rate................................... 104.84% 132.74% 133.42% 188.53%
======= ======= ======= =========
Debt outstanding at end of year.......................................................................... $ 302,600
=========
Average amount of debt outstanding during the year....................................................... $ 939,600
=========
Average daily number of shares outstanding during the year............................................... 565,805
=========
Average amount of debt per share during the year......................................................... $ 1.66
=========
</TABLE>
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* Prior to April 12, 1996, the Alger Capital Appreciation Retirement Portfolio
was the Alger Defined Contribution Leveraged AllCap Portfolio.
(i) Reflects total expenses, including fees offset by earnings credits. The
expense ratios net of earnings credits would have been 1.06%, 1.16%, 1.08%
and 2.66% for the Small Cap, MidCap Growth, Growth and Capital Appreciation
Retirement Portfolios, respectively.
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v
<PAGE>
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THE ALGER RETIREMENT FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period from
November 8, 1993 (commencement of operations) through October 31, 1994*
<TABLE>
<CAPTION>
SMALL MIDCAP CAPITAL
CAP GROWTH GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO**
---------- --------- --------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......................... $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- ----------
Net investment (loss)......................................... (0.07) (0.09) (0.03) (0.23)
Net realized and unrealized gain on investments............... 0.90 1.75 0.41 0.31
-------- -------- -------- ----------
Total from investment operations.......................... 0.83 1.66 0.38 0.08
-------- -------- -------- ----------
Net asset value, end of period................................ $ 10.83 $ 11.66 $ 10.38 $ 10.08
======== ======== ======== ==========
Total Return.................................................. 8.3% 16.6% 3.8% 0.8%
======== ======== ======== ==========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted)................... $ 9,513 $ 6,774 $ 9,365 $ 5,251
======== ======== ======== ==========
Ratio of expenses excluding interest
to average net assets..................................... 1.47% 1.53% 1.26% 1.78%
======== ======== ======== ==========
Ratio of expenses including interest
to average net assets(i).................................. 1.47% 1.53% 1.26% 2.87%
======== ======== ======== ==========
Ratio of net investment income (loss)
to average net assets..................................... (0.80)% (0.89)% (0.29)% (2.53)%
======== ======== ======== ==========
Portfolio Turnover Rate....................................... 186.76% 134.06% 103.79% 229.11%
======== ======== ======== ==========
Debt outstanding at end of period........................................................................... $ 955,600
==========
Average amount of debt outstanding during the period........................................................ $ 826,076
==========
Average daily number of shares outstanding during the period................................................ 515,270
==========
Average amount of debt per share during the period.......................................................... $ 1.60
==========
</TABLE>
* Ratios have been annualized; total return has not been annualized.
** Prior to April 12, 1996, the Alger Capital Appreciation Retirement Portfolio
was the Alger Defined Contribution Leveraged AllCap Portfolio.
(i) The expense ratios for the period ended October 31, 1994 do not reflect the
effect of fees offset by earnings credits.
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vi
<PAGE>
THE ALGER RETIREMENT FUND
The Fund is a diversified, open-end management investment company that
offers a selection of four Portfolios, each with the investment objective of
long-term capital appreciation. The offering price of the shares of each
portfolio is net asset value per share. Shares of the Portfolios are only
available for investment through defined contribution retirement plans (the
"Plans") which elect to make the Fund an investment option for participants in
such Plans. Individuals, including participants in such Plans, cannot directly
invest in the Fund but may do so only through a participating Plan. The Fund
reserves the right to make shares of the Portfolios available to other
investors, as may be approved by the Trustees from time to time. The Fund's
Board of Trustees may establish additional Portfolios at any time.
Only the Plans may be record holders of the shares of the Portfolios.
Within the limitations applicable to a Plan, a participant in such Plan (a
"Participant") may direct the Plan to purchase or redeem shares of the Fund.
Participants in a Plan cannot contact the Fund directly to request the purchase
or redemption of the Portfolios' shares. Instead, Participants must contact
their Plan Sponsor or its agent designated for the purpose of processing
purchase and redemption requests. References in this Prospectus to shareholders
are to Plan Sponsors as the record holders of the Fund's shares.
The assets of the Fund are not plan assets of any of the Plans.
FRED ALGER MANAGEMENT, INC.
Subject to the supervision and direction of the Fund's Board of Trustees,
Fred Alger Management, Inc. ("Alger Management") is responsible for the overall
administration of the Fund, manages the Portfolios in accordance with the
Portfolios' investment objectives and stated investment policies, makes
investment decisions for the Portfolios, places orders to purchase and sell
securities on behalf of the Portfolios and 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. Alger Management is generally engaged in the business of rendering
investment advisory services to mutual funds, institutions and, to a lesser
extent, individuals. Alger Management has been engaged in the business of
rendering investment advisory services since 1964 and as of December 31, 1996,
had approximately $7.1 billion under management--$5.2 billion in mutual fund
accounts and $1.9 billion in other advisory accounts.
INVESTMENT OBJECTIVES
AND POLICIES
The following is a brief description of the investment objectives and
policies of each Portfolio. No assurance can be given that any Portfolio's
objective(s) will be achieved. Certain instruments and techniques discussed in
this summary are described in greater detail in this Prospectus under the
caption "Certain Securities and Investment Techniques" and in the Statement of
Additional Information.
The Statement of Additional Information contains specific investment
restrictions that govern the Portfolios' investments. These restrictions and the
Portfolios' investment objectives are "fundamental" policies, which means that
they may not be changed without a majority vote of shareholders of the affected
Portfolio. Except for the investment objectives and the investment restrictions
specifically identified as fundamental, all investment policies and practices
described in this Prospectus and in the Statement of Additional Information are
not fundamental, so the Fund's Board of Trustees may change them without
shareholder approval. The fundamental restrictions applicable to the Portfolios
include, among others, (i) a prohibition on any Portfolio's purchasing a
security, other than obligations issued or guaranteed by the U. S. Government,
its agencies or
1
<PAGE>
instrumentalities ("U. S. Government securities"), if as a result more than five
percent of the assets of the Portfolio would be invested in the securities of
the issuer or the Portfolio would own more than 10 percent of the outstanding
voting securities of the issuer, except that 25 percent of a Portfolio's total
assets may be invested without regard to the five percent limitation; (ii) a
prohibition on any Portfolio's investing more than 25 percent of its total
assets in the securities of issuers in a particular industry with exceptions for
U.S. Government securities; and (iii) a prohibition on any Portfolio's borrowing
money or pledging its assets, except for temporary or emergency purposes in an
amount not exceeding 10 percent of the Portfolio's total assets, except that the
Alger Capital Appreciation Retirement Portfolio may borrow for investment
purposes (see "Certain Securities and Investment Techniques--Leverage Through
Borrowing").
Each Portfolio may invest a portion of its assets in money market
instruments, including, but not limited to, certificates of deposit, time
deposits and bankers' acceptances issued by domestic bank and thrift
institutions, U.S. Government securities, commercial paper and repurchase
agreements.
No Portfolio will invest more than 15 percent of its net assets in
"illiquid" securities, which include restricted securities, securities for which
there is no readily available market and repurchase agreements with maturities
of greater than seven days; however, restricted securities that are determined
by the Board of Trustees to be liquid are not subject to this limitation (see
"Certain Securities and Investment Techniques--Restricted Securities"). In
addition, each Portfolio will limit its investments in warrants and rights to
not more than five percent of its net assets, of which not more than two percent
of its net assets may be invested in warrants not listed on a recognized
domestic stock exchange. Warrants or rights acquired as part of a unit attached
to securities at the time of acquisition are not subject to these limitations,
which may be changed without shareholder approval. Each Portfolio may lend its
securities and enter into "short sales against the box." See "Certain Securities
and Investment Techniques." The Portfolios will only invest in convertible debt
securities rated in one of the three highest rating categories by any nationally
recognized statistical rating organization ("NRSRO"). See the Statement of
Additional Information for a description of these ratings.
ALL PORTFOLIOS
The investment objective of each Portfolio is long-term capital
appreciation. Income is a consideration in the selection of investments but is
not an investment objective of a Portfolio. Each 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 capitalization criteria outlined below for each
Portfolio are not mutually exclusive and a given security may be owned by more
than one or all of the Portfolios.
It is anticipated that each 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. The risks involved in investing in
smaller companies are discussed below under "Alger Small Cap Retirement
Portfolio." In order to afford the Portfolio the flexibility to take advantage
of new opportunities for investments in accordance with its investment objective
or to meet redemptions, each Portfolio may hold up to 15 percent of its net
assets in money market
2
<PAGE>
instruments and repurchase agreements and in excess of this 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. See
"Certain Securities and Investment Techniques."
ALGER SMALL CAP RETIREMENT PORTFOLIO
Except during temporary defensive periods, the Alger Small Cap Retirement
Portfolio, formerly known as Alger Defined Contribution Small Cap 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--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, 1996, the range of market capitalization of the
companies in the Russell Index was $20 million to $2.02 billion; the range of
market capitalization of the companies in the S&P Index at that date was $38
million to $2.475 billion. The combined range as of that date was $20 million to
$2.475 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.
Investing in smaller, newer issuers generally involves greater risk than
investing in larger, more established issuers. Companies in which the Portfolio
is likely to invest may have limited product lines, markets or financial
resources and may lack management depth. The securities issued by 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.
ALGER MIDCAP GROWTH
RETIREMENT PORTFOLIO
Except during temporary defensive periods, the Alger MidCap Growth
Retirement Portfolio, formerly known as Alger Defined Contribution MidCap Growth
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, 1996, the
range of market capitalization of these companies was $192 million to $6.518
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 GROWTH RETIREMENT PORTFOLIO
Except during temporary defensive periods, the Alger Growth Retirement
Portfolio, formerly known as Alger Defined Contribution Growth Portfolio,
invests at least 65 percent of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market
capitalization of $1 billion or greater.
The Portfolio may invest up to 35 percent of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization of less than $1 billion.
3
<PAGE>
ALGER CAPITAL APPRECIATION
RETIREMENT PORTFOLIO
Except during temporary defensive periods, the Alger Capital Appreciation
Retirement Portfolio, formerly known as Alger Defined Contribution Leveraged
AllCap Portfolio, invests at least 85 percent of its net assets in equity
securities of companies of any size. The Portfolio may purchase put and call
options and sell (write) covered call and put options on securities and
securities indexes to increase gain and to hedge against the risk of unfavorable
price movements, and may enter into futures contracts on securities indexes and
purchase and sell call and put options on these futures contracts. The Portfolio
may also borrow money 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 assets, less liabilities other than such borrowing. See
"Certain Securities and Investment Techniques."
SELECTING AMONG THE PORTFOLIOS
Set forth below is information that may be of assistance in selecting a
Portfolio suitable for a particular investor's needs. Further assistance in the
investment process is available by calling (800) 992-3362. Available at this
number will be licensed, registered representatives who are knowledgeable about
the Fund and each of the Portfolios. There is no charge for making this call.
Each of the Portfolios, like all other investments, can provide two types
of return: income return and capital return. Income return is the income
received from an investment, such as interest on bonds and money market
instruments and dividends from common and preferred stocks. Capital return is
the change in the market value of an investment, such as an increase in the
price of a common stock or of shares of a Portfolio. Total return is the sum of
income return and capital return. Thus, if a Portfolio over a year produces four
percent in income return and its shares increase in value by three percent, its
total return is seven percent. In general, the more that capital return is
emphasized over income return in an investment program, the more risk associated
with the program.
Growth funds such as the Portfolios seek primarily capital return. They
invest primarily in common stocks and offer the opportunity of the greatest
return over the long term but can be risky since their prices fluctuate with
changes in stock market prices, as described in the preceding paragraph.
Further, growth funds that invest in smaller companies, such as the Alger Small
Cap Retirement Portfolio, offer potential for significant price gains if the
companies are successful, but there is also the risk that the companies will not
succeed and the price of the companies' shares will drop in value. Growth funds
that invest in larger, more established companies, such as the Alger Growth
Retirement Portfolio and the Alger MidCap Growth Retirement Portfolio, generally
offer relatively less opportunity for capital return but a greater degree of
safety. In addition, funds that leverage through borrowing, such as the Alger
Capital Appreciation Retirement Portfolio, offer an opportunity for greater
capital appreciation, but at the same time increase exposure to capital risk.
Investors considering equity investing through the Portfolios should
carefully consider the inherent risks. Expectations of future inflation rates
should be considered in making investment decisions and even though over the
long term stocks may present attractive opportunities, the results of an equity
investment managed by a particular management firm may not match the market as a
whole.
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CERTAIN SECURITIES AND
INVESTMENT TECHNIQUES
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.
SHORT SALES
Each 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.
RESTRICTED SECURITIES
Each Portfolio may invest in restricted securities, which are securities
subject to legal or contractual restrictions on their resale. These restrictions
might prevent the sale of the securities at a time when a sale would otherwise
be desirable. In order to sell securities that are not registered under the
federal securities laws it may be necessary for the Portfolio to bear the
expense of registration. No restricted securities will be acquired if the
acquisition would cause the aggregate value of all illiquid securities to exceed
15 percent of the Portfolio's net assets.
The Portfolios 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 trustees (or the fund's adviser acting subject to the board's
supervision) determines that the securities are in fact liquid. The Fund's Board
of Trustees has delegated its responsibility to Alger Management to determine
the liquidity of each restricted security purchased by a Portfolio pursuant to
the Rule, subject to the Board's 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
Portfolios could be adversely affected.
LENDING OF PORTFOLIO SECURITIES
In order to generate income and to offset expenses, each Portfolio may
lend portfolio securities to brokers, dealers and other financial organizations.
Loans of securities by a Portfolio, if and when made, may not exceed 331/3
percent of the Portfolio's total assets and will be collateralized by cash,
letters of credit or U. S. Government securities that are maintained at all
times in an amount equal to at least 100 percent of the current market value of
the loaned securities.
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OPTIONS TRANSACTIONS
The Alger Capital Appreciation Retirement Portfolio may purchase or sell
(that is, write) listed options on securities as a means of achieving additional
return or of hedging the value of its portfolio. The Portfolio may write covered
call options on common stocks that it owns or has an immediate right to acquire
through conversion or exchange of other securities in an amount not to exceed
25% of total assets. The Portfolio may only buy or sell options that are listed
on a national securities exchange.
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.
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. There can be no
assurance that a closing purchase transaction can be effected when the Portfolio
so desires.
An option may be closed out only on an exchange that 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. 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 write put and call options on stock indexes for the
purpose of increasing its gross income and to protect its portfolio against
declines in the value of the securities it owns or increases in the value of
securities to be acquired. In addition, the Portfolio may purchase put and call
options on stock indexes in order to hedge its investments against a decline in
value or to attempt to reduce the risk of missing a market or industry segment
advance. Options on stock indexes are similar to options on specific securities.
However, because options on stock indexes do not involve the delivery of an
underlying security, the option represents the holder's right to obtain, from
the writer, cash in an amount equal to a fixed multiple of the amount by which
the exercise price exceeds (in the case of a put) or is less than (in the case
of a call) the closing value of the underlying stock index on the exercise date.
Therefore, while one purpose of writing such options is to generate additional
income for the Portfolio, the Portfolio recognizes that it may be required to
deliver an amount of cash in excess of the market value of a stock index at such
time as an option written by the Portfolio is exercised by the holder. The
writing and purchase of options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. The successful use of protective puts for
hedging purposes depends in part on Alger Management's ability to predict future
price fluctuations and the degree of correlation between the options and
securities markets.
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STOCK INDEX FUTURES AND OPTIONS ON
STOCK INDEX FUTURES
The Alger Capital Appreciation Retirement Portfolio may purchase and sell
stock index futures contracts and options on stock index futures contracts.
These investments may be made solely for hedging or other permissible risk
management purposes, such as protecting the price of a security the Portfolio
intends to buy, but not for purposes of speculation. Aggregate initial margins
and premiums on such investments may not constitute more than 5% of the
Portfolio's assets. Hedging and other risk management transactions are
undertaken to reduce or eliminate any of several kinds of price fluctuation
risk. For example, 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.
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.
There can be no assurance of the Portfolio's successful use of stock
index futures as a hedging device. Due to the risk of an imperfect correlation
between securities in the Portfolio that are the subject of a hedging
transaction and the futures contract used as a hedging device, it is possible
that the hedge will not be fully effective in that, for example, losses on the
portfolio securities may be in excess of gains on the futures contract or losses
on the futures contract may be in excess of gains on the portfolio securities
that were the subject of the hedge. 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 a 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.
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LEVERAGE THROUGH BORROWING
The Alger Capital Appreciation Retirement Portfolio may borrow from banks
for investment purposes. This borrowing is known as leveraging. The Portfolio
may use up to 33 1/3% of its assets for leveraging. The Investment Company Act
of 1940, as amended, requires the Portfolio 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. Leveraging may exaggerate the effect on net asset value of any increase or
decrease in the market value of the Portfolio's securities. Money borrowed for
leveraging will be subject to interest costs which may or may not be recovered
by appreciation of the securities purchased; in certain cases, interest costs
may exceed the return received on the securities purchased. The Portfolio also
may be required to maintain minimum average balances in connection with such
borrowing or to pay a commitment or other fee to maintain a line of credit;
either of these requirements would increase the cost of borrowing over the
stated interest rate.
PORTFOLIO TURNOVER
A Portfolio's turnover rate is calculated by dividing the lesser of
purchases or sales of securities for the fiscal year by the monthly average of
the value of the Portfolio's securities, with obligations with less than one
year to maturity excluded. A 100 percent turnover rate would occur, for example,
if all included securities were replaced once during the year.
The Portfolios will not normally engage in the trading of securities for
the purpose of realizing short-term profits, but will adjust their holdings as
considered advisable in view of prevailing or anticipated market conditions, and
turnover will not be a limiting factor should Alger Management deem it advisable
to purchase or sell securities.
In Alger Management's view, companies are organic entities that
continuously undergo changes in response to, among other things, economic,
market, environmental, technological, political and managerial factors.
Generally, securities will be purchased for capital appreciation and not for
short-term trading profits. However, the Portfolios may dispose of securities
without regard to the time they have been held when such action, for defensive
or other purposes, appears advisable. Moreover, it is Alger Management's
philosophy to pursue the Portfolios' investment objective of capital
appreciation by managing these Portfolios actively, which may result in high
portfolio turnover. Increased portfolio turnover will have the effect of
increasing a Portfolio's brokerage and custodial expenses.
MANAGEMENT
BOARD OF TRUSTEES
The affairs of the Fund are managed under the supervision of its Board of
Trustees. The Statement of Additional Information contains general background
information about each Trustee and executive officer of the Fund. By virtue of
the responsibilities assumed by Alger Management, the Fund requires no employees
other than its executive officers. None of the Fund's executive officers devotes
full time to the affairs of the Fund.
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INVESTMENT MANAGER
Alger Management serves as the Fund's investment manager. In that
capacity, Alger Management, among other things, analyzes the Portfolios' assets,
arranges for the purchase and sale of the Portfolios' securities and selects
broker-dealers that, in its judgment, provide prompt and reliable execution at
favorable prices and reasonable commission rates. It is anticipated that the
Fund's distributor, Fred Alger & Company, Incorporated ("Alger Inc."), an
affiliate of Alger Management, 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. In addition, Alger Management may select broker-dealers
that provide it with brokerage and research services and may cause a Portfolio
to pay these broker-dealers commissions that exceed those other broker-dealers
may have charged, if it views the commissions as reasonable in relation to the
value of the brokerage and research services received. 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.
Alger Management is a wholly owned subsidiary of Alger Inc. which in turn
is a wholly owned subsidiary of 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.
As compensation for the investment management services rendered, each
Portfolio pays Alger Management a separate 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 Small Cap Retirement Portfolio and
Alger Capital Appreciation Retirement Portfolio--.85 percent; Alger MidCap
Growth Retirement Portfolio--.80 percent; Alger Growth Retirement Portfolio--.75
percent. The management fees paid by the Portfolios exceed those paid by most
other investment companies.
David D. Alger, Seilai Khoo and Ronald Tartaro are primarily responsible
for the day-to-day management of the Portfolios of the Fund. Mr. Alger has been
employed by Alger Management as Executive Vice President and Director of
Research since 1971 and as President since 1995. Ms. Khoo has been employed by
Alger Management as a senior research analyst since 1989 and as a Senior Vice
President since 1995. Mr. Tartaro has been employed by Alger Management as a
senior research analyst since 1990 and as a Senior Vice President since 1995.
Mr. Alger, Ms. Khoo and Mr. Tartaro also serve as portfolio managers for other
mutual funds and investment accounts managed by Alger Management.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 992-3362.
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.
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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. From time
to time, Alger Management, in its sole discretion and as it deems appropriate,
may assume certain expenses of one or more of the Portfolios while retaining the
ability to be reimbursed by the applicable Portfolio for such amounts prior to
the end of the fiscal year. This will have the effect of lowering the applicable
Portfolio's overall expense ratio and of increasing yield to investors, or the
converse, at the time such amounts are assumed or reimbursed, as the case may
be.
Each Portfolio of the Fund may compensate certain entities other than
Alger Inc. and its affiliates for providing record-keeping and/or administrative
services to participating retirement plans. This compensation may be paid at an
annual rate of up to .25% of the net asset value of shares of the Portfolio held
by those plans.
NET ASSET VALUE
The net asset value per share of each Portfolio is calculated on each day
on which the New York Stock Exchange, Inc. (the "NYSE") is open as of the close
of regular trading on the NYSE (currently 4:00 p.m. Eastern time). The NYSE is
currently open on each Monday through Friday, except (i) January 1st,
Presidents' Day (the third Monday in February), Good Friday, Memorial Day (the
last Monday in May), July 4th, Labor Day (the first Monday in September),
Thanksgiving Day (the fourth Thursday in November) and December 25th or (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. Net asset
value per share of a Portfolio is computed by dividing the value of the
Portfolio's net assets by the total number of its shares outstanding.
The assets of the Portfolios that are traded on a securities exchange or
other recognized market are valued on the basis of market quotations. Assets of
those Portfolios for which quotations are not readily available are valued at
fair value as determined in good faith under procedures approved by the Board of
Trustees. Instruments with remaining maturities of 60 days or less are valued on
the basis of amortized cost, as described in the Statement of Additional
Information.
PURCHASES AND REDEMPTIONS
All direct purchasers of shares of the Portfolios will be Plan Sponsors
which establish or maintain Plans. Participants may invest in shares of the
Portfolios only through their respective Plan Sponsor. Participants cannot
contact the Fund directly to purchase or redeem shares of the Portfolios.
Instead, Participants must contact their Plan Sponsor or its agent for the
purpose of processing purchase requests. There is no minimum amount for initial
or subsequent investments for any Plan Sponsor. Participants should contact
their Plan Sponsor for information concerning the appropriate procedure for
investing in the Fund.
Orders received by the Fund or the Fund's transfer agent are effected on
days on which the NYSE is open for trading. For orders received before the close
of regular trading on the NYSE, purchases and redemptions of the shares of each
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Portfolio are effected at the respective net asset values per share determined
as of the close of regular trading on the NYSE on that same day. Orders received
after the close of regular trading on the NYSE are effected at the next
calculated net asset value. See "Net Asset Value." All orders for the purchase
of shares are subject to acceptance or rejection by the Fund. Payment for
redemptions will be made by the Fund's transfer agent on behalf of the Fund and
the relevant Portfolios within seven days after the request is received. The
Fund does not assess any fees, either when it sells or when it redeems its
shares.
Investors may exchange stock of companies acceptable to Alger Management
for shares of the Portfolios of the Fund with a minimum of 100 shares of each
company being generally required. The Fund believes such exchange provides a
means by which holders of certain securities may invest in the Portfolios of the
Fund without the expense of selling the securities in the public market. The
investor should furnish either in writing or by telephone to Alger Management a
list with a full and exact description of all securities proposed for exchange.
Alger Management will then notify the investor as to whether the securities are
acceptable and, if so, will send a Letter of Transmittal to be completed and
signed by the investor. Alger Management has the right to reject all or any part
of the securities offered for exchange. The securities must then be sent in
proper form for transfer with the Letter of Transmittal to the Custodian of the
Fund's assets. The investor must certify that there are no legal or contractual
restrictions on the free transfer and sale of the securities. Upon receipt by
the Custodian, the securities will be valued as of the close of business on the
day of receipt in the same manner as the Portfolio's securities are valued each
day. Shares of the Portfolio having an equal net asset value as of the close of
the same day will be registered in the investor's name. There is no sales charge
on the issuance of shares of the Portfolio, no charge for making the exchange
and no brokerage commission on the securities accepted, although applicable
stock transfer taxes, if any, may be deducted. The exchange of securities by the
investor pursuant to this offer may constitute a taxable transaction and may
result in a gain or loss for federal income tax purposes. The tax treatment
experienced by investors may vary depending upon individual circumstances. Each
investor should consult a tax adviser to determine Federal, state and local tax
consequences.
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.
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will be treated separately in determining the amounts of
dividends of net investment income and distributions of capital gains payable to
holders of its shares. Dividends and distributions will be automatically
reinvested on the payment date for each shareholder's account in additional
shares of the Portfolio that paid the dividend or distribution at net asset
value. Dividends will be declared and paid annually. Distributions of any net
realized capital gains earned by a Portfolio usually will be made annually after
the close of the fiscal year in which the gains are earned.
TAXES
Each Portfolio will be treated as a separate taxpayer with the result
that, for federal income tax purposes, the amounts of net investment income and
capital gains earned will be determined on a Portfolio-by-Portfolio (rather than
on a Fund-wide) basis.
The Fund intends that each Portfolio will qualify separately as a
"regulated investment company" within the meaning of the Internal
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Revenue Code of 1986, as amended (the "Code") for each taxable year of each
Portfolio. If so qualified, and providing certain distribution requirements are
met, a Portfolio will not be subject to federal income tax on its net investment
income and net capital gains that it distributes to its shareholders.
With respect to participants in the Plans, dividends from net investment
income and net realized capital gains ordinarily will not be subject to taxation
until such dividends are distributed to such participants from their Plan
accounts. Generally, distributions from a Plan will be taxable as ordinary
income at the rate applicable to the participant at the time of distribution. In
certain cases, distributions made to a participant from a Plan prior to the date
on which the participant reaches age 591/2 are subject to a penalty tax
equivalent to 10% of the amount so distributed, in addition to the ordinary
income tax payable on such amount for the year in which it is distributed.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. Participants should consult
their Plan Sponsors or tax advisers regarding the tax consequences of
participation in the Plan or of any Plan contributions or withdrawals.
ORGANIZATION
The Fund was organized on July 14,1993 under the laws of the Commonwealth
of Massachusetts and is a business entity commonly known as a "Massachusetts
business trust." The Fund offers shares of beneficial interest of separate
series, par value $.001 per share. An unlimited number of shares of four series,
representing the shares of the Portfolios, have been authorized. No series of
shares has any preference over any other series.
When matters are submitted for shareholder vote, shareholders of each
Portfolio will have one vote for each full share held and proportionate,
fractional votes for fractional shares held. A separate vote of a Portfolio is
required on any matter affecting the Portfolio on which shareholders are
entitled to vote, such as approval of a Portfolio's agreement with Alger
Management. Shareholders of one Portfolio are not entitled to vote on a matter
that does not affect that Portfolio but that does require a separate vote of the
other Portfolios. There normally will be no annual meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of 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. Any Trustee may be removed from office on the vote of
shareholders holding at least two-thirds of the Fund's outstanding shares at a
meeting called for that purpose. The Trustees are required to call such a
meeting on the written request of shareholders holding at least 10 percent of
the Fund's outstanding shares.
CONTROL SHAREHOLDERS
At February 24, 1997, Wells Fargo Bank, Trustee for Mentor Graphics, owned
beneficially or of record 57.16% of the Alger Small Cap Retirement Portfolio.
Northern Trust Company, Trustee for IHC 401K, owned beneficially or of record
44.24% of the Alger Growth Retirement Portfolio. The Fred Alger & Company,
Incorporated et al Pension Plan and the Fred Alger Company, Incorporated et al
Profit Sharing Plan (the "Plans") owned beneficially or of record 33.48% and
48.64%, respectively, of the Alger MidCap Growth Retirement Portfolio; and
33.40% and 52.53%, respectively, of the Alger Capital Appreciation Retirement
Portfolio at February 24, 1997. These shareholders may be deemed to control the
specified portfolios.
PERFORMANCE
Each Portfolio may include quotations of "total return" and/or "yield" in
advertisements or reports to shareholders or prospective investors. BOTH "TOTAL
RETURN" AND/OR "YIELD" FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. Total return figures show the aggregate
or average percentage change in value of an investment in a Portfolio from the
beginning date of the measuring period to the end of the measuring period. These
figures reflect changes in the price of the Portfolio's shares and assume that
any income dividends and/or capital gains distributions made by the Portfolio
during the period were reinvested in shares of the Portfolio. Figures will be
given for recent 1, 5 and 10 year periods, and may be given for other periods as
well (such as
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from commencement of the Portfolio's operations, or on a year-by-year basis).
When considering "average" total return figures for periods longer than one
year, it is important to note that the Portfolio's annual total return for any
one year in the period might have been greater or less than the average for the
entire period. The Portfolio may also use "aggregate" total return figures for
various periods, representing the cumulative change in value of an investment in
the Portfolio for the specific period (again reflecting changes in Portfolio
share prices and assuming reinvestment of dividends and distributions) as well
as "actual annual" and "annualized" total return figures. Total returns 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). The "yield" of
the Portfolio refers to "net investment income" generated by the Portfolio over
a specified thirty-day period. This income is then "annualized." That is, the
amount of "net investment income" generated by the Portfolio during that
thirty-day period is assumed to be generated over a 12-month period and is shown
as a percentage of the investment. "Total return" and "yield" for a Portfolio
will vary based on changes in market conditions. In addition, since the
deduction of a Portfolio's expenses is reflected in the total return and yield
figures, "total return" and "yield" will also vary based on the level of the
Portfolio's expenses.
From time to time, advertisements or reports to shareholders may compare
the yield or performance of a Portfolio to that of other mutual funds with a
similar investment objective. The performance of a Portfolio 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 to various unmanaged indices, such as the S&P 500. In addition,
evaluations of the Portfolios published by nationally recognized ranking
services and by financial publications that are nationally recognized, such as
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 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.
INVESTOR AND SHAREHOLDER INFORMATION
Investors and shareholders may contact the Fund toll-free at (800)
992-3362 for further information regarding the Fund and the Portfolios, as well
as for assistance in selecting a Portfolio and obtaining a Statement of
Additional Information. The Fund's Annual Report contains additional performance
information and is available on request and without charge by contacting the
Fund at the toll-free number listed above.
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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 OR THE STATEMENT
OF ADDITIONAL INFORMATION 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 LAWFULLY BE MADE.
INVESTMENT MANAGER:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
DISTRIBUTOR:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
TRANSFER AGENT:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
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
THE ALGER |
RETIREMENT | MEETING THE CHALLENGE
FUND | OF INVESTING
ALGER SMALL CAP
RETIREMENT PORTFOLIO
ALGER MIDCAP GROWTH
RETIREMENT PORTFOLIO
ALGER GROWTH
RETIREMENT PORTFOLIO
ALGER CAPITAL APPRECIATION
RETIREMENT PORTFOLIO
PROSPECTUS
FEBRUARY 28, 1997
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<PAGE>
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THE ALGER |
RETIREMENT | MEETING THE CHALLENGE
FUND | OF INVESTING
ALGER SMALL CAP
RETIREMENT PORTFOLIO
ALGER MIDCAP GROWTH
RETIREMENT PORTFOLIO
ALGER GROWTH
RETIREMENT PORTFOLIO
ALGER CAPITAL APPRECIATION
RETIREMENT PORTFOLIO
STATEMENT |
OF ADDITIONAL | FEBRUARY 28, 1997
INFORMATION |
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<PAGE>
THE ALGER | 75 MAIDEN LANE
RETIREMENT | NEW YORK, NEW YORK 10038
FUND | (800) 992-3362
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The Alger Retirement Fund (the "Fund"), formerly known as The Alger Defined
Contribution Trust, is a registered investment company--a mutual fund-- that
presently offers interests in the following four portfolios (the "Portfolios"):
* Alger Small Cap Retirement Portfolio
* Alger MidCap Growth Retirement Portfolio
* Alger Growth Retirement Portfolio
* Alger Capital Appreciation Retirement Portfolio
Shares of the Fund are available for investment without a sales charge through
defined contribution retirement plans (the "Plans") which elect to make the Fund
an investment option for participants in such Plans. Individuals, including
participants in such Plans, cannot directly invest in the Fund but may do so
only through a participating Plan.
A Prospectus for the Fund dated February 28, 1997, which provides the basic
information investors should know before investing, may be obtained without
charge by contacting the Fund at the address or phone number above. This
Statement of Additional Information, which is not a prospectus, is intended to
provide additional information regarding the activities and operations of the
Fund, and should be read in conjunction with the Prospectus. Unless otherwise
noted, terms used in this Statement of Additional Information have the same
meaning as assigned to them in the Prospectus.
CONTENTS
Investment Objectives and Policies...................................... 2
Net Asset Value......................................................... 7
Purchases and Redemptions............................................... 8
Management.............................................................. 8
Taxes................................................................... 10
Custodian............................................................... 11
Transfer Agent.......................................................... 11
Certain Shareholders.................................................... 11
Organization............................................................ 12
Determination of Performance............................................ 13
Financial Statements ................................................... 14
Appendix................................................................ A-l
<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.
USE OF RATINGS AS INVESTMENT CRITERIA
The ratings of the nationally recognized statistical rating organizations, which
are described in the Appendix to this Statement of Additional Information,
represent their opinions as to the quality of corporate obligations. It should
be emphasized that ratings are general and not absolute standards of quality,
and obligations with the same maturity, interest rate and rating may have
different yields while obligations of the same maturity and interest rate with
different ratings may have the same yield. After being purchased by a Portfolio,
an obligation may cease to be rated or its rating may be reduced below the
minimum required for purchase by a Portfolio. In such case, although neither
event will require the sale of the obligation by a Portfolio, Fred Alger
Management, Inc. ("Alger Management") will consider the event in determining
whether a Portfolio should continue to hold the obligation.
U.S. GOVERNMENT SECURITIES
Examples of the types of U.S. Government securities that the Portfolios may hold
include, in addition to those described in the Prospectus and direct obligations
of the U.S. Treasury, the obligations of the Federal Housing Administration,
Farmers Home Administration, Small Business Administration, General Services
Administration, Central Bank for Cooperatives, Federal Farm Credit Banks,
Federal Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks
and Maritime Administration.
LENDING OF PORTFOLIO SECURITIES
The Portfolios have the authority to 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 either investing the cash collateral in short-term
securities or by earning income in the form of interest paid by the borrower
when U.S. Government securities are used as collateral. Each Portfolio will
adhere to the following conditions whenever its securities are loaned: (a) the
Portfolio must receive at least 100 percent cash collateral or equivalent
securities from the borrower; (b) the borrower must increase this collateral
whenever the market value of the securities including accrued interest exceeds
the value of the collateral; (c) the Portfolio must be able to terminate the
loan at any time; (d) the Portfolio must receive reasonable interest on the
loan, as well as any dividends, interest or other distributions on the loaned
securities and any increase in market value; (e) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and (f) voting rights on
the loaned securities may pass to the borrower; provided, however, that if a
material event adversely affecting the investment occurs, the Fund's Board of
Trustees must terminate the loan and regain the right to vote the securities.
REPURCHASE AGREEMENTS
Each Portfolio may engage in repurchase agreement transactions with banks,
registered broker-dealers and government securities dealers approved by the
Fund's Board of Trustees. 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. Thus, 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 a part of
the income from the agreement. Alger Management, acting under the supervision of
the Fund's Board of Trustees, reviews the creditworthiness of those banks and
dealers with
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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.
RULE 144A SECURITIES
Rule 144A under the Securities Act of 1933 is designed to facilitate efficient
trading of unregistered securities among institutional investors. The Rule
permits the resale to qualified institutions of restricted securities that, when
issued, were not of the same class as securities listed on a U.S.
securities exchange or quoted on NASDAQ.
OPTIONS (ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO ONLY)
A call option written by the Portfolio 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
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<PAGE>
will exist for any particular option. In such event it might not be possible to
effect closing transactions in particular options, so that the Portfolio would
have to exercise its option in order to realize any profit and would incur
brokerage commissions upon the exercise of the options. If the Portfolio, as a
covered call option writer, is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise or
otherwise covers the position.
In addition to options on securities, the Portfolio may also purchase and sell
call and put options on securities indexes. A stock index reflects in a single
number the market value of many different stocks. Relative values are assigned
to the stocks included in an index and the index fluctuates with changes in the
market values of the stocks. The options give the holder the right to receive a
cash settlement during the term of the option based on the difference between
the exercise price and the value of the index. By writing a put or call option
on a securities index, the Portfolio is obligated, in return for the premium
received, to make delivery of this amount. The Portfolio may offset its position
in stock index options prior to expiration by entering into a closing
transaction on an exchange or it may let the option expire unexercised.
Use of options on securities indexes entails the risk that trading in the
options may be interrupted if trading in certain securities included in the
index is interrupted. The Portfolio will not purchase these options unless Alger
Management is satisfied with the development, 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 RETIREMENT PORTFOLIO ONLY)
The Portfolio may enter into stock index futures contracts or purchase or sell
put and call options on such futures as a hedge against anticipated market
changes and for risk management purposes. 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. 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.
The Portfolio's use of stock index futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the Commodity Futures Trading Commission and will be
entered into only for bona fide hedging, risk management or other portfolio
management purposes. Typically, maintaining a futures contract or selling an
option thereon requires the Portfolio to deposit with a financial intermediary
as security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 10% of the face amount of
the contract (but may be higher in some circumstances). Additional cash or
assets (variation margin) may be required to be deposited thereafter on a daily
basis as the mark to market value of the contract fluctuates. In addition to the
initial deposit and variation margin, the Portfolio will maintain in a
segregated account with its custodian liquid securities in an amount equal to
the difference between (i) the sum of the total deposit and variation margin
payments and (ii) the contract amount. The purchase of an option on stock index
futures involves payment of a premium for the option without any fur-
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ther obligation on the part of the Portfolio. If the Portfolio exercises an
option on a futures contract it will be obligated to post initial margin (and
potential subsequent variation margin) for the resulting futures position just
as it would for any position. Futures contracts and options thereon are
generally settled by entering into an offsetting transaction but there can be no
assurance that the position can be offset prior to settlement at an advantageous
price, nor that delivery will occur.
The Portfolio will not enter into a futures contract or related option (except
for closing transactions) if, immediately thereafter, the sum of the amount of
its initial margin and premiums on open futures contracts and options thereon
would exceed 5% of the Portfolio's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 12 below have been adopted by the
Fund with respect to each of the Portfolios as fundamental policies. Under the
Investment Company Act of 1940, as amended (the "Act"), a "fundamental" policy
may not be changed without the vote of a "majority of the outstanding voting
securities" of the Fund, which is defined in the Act as the lesser of (a) 67
percent or more of the shares present at a Fund meeting if the holders of more
than 50 percent of the outstanding shares of the Fund are present or represented
by proxy or (b) more than 50 percent of the outstanding shares. A fundamental
policy affecting a particular Portfolio may not be changed without the vote of a
majority of the outstanding voting securities of the affected Portfolio.
Investment restrictions 13 through 18 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 a 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 total assets may be invested
without regard to this limitation.
2. Purchasing more than 10 percent of the voting securities of any one issuer or
more than 10 percent of the securities of any class of any one issuer. This
limitation shall not apply to investments in U.S. Government securities.
3. Selling securities short or purchasing securities on margin, except that the
Portfolio may obtain any short-term credit necessary for the clearance of
purchases and sales of securities. These restrictions shall not apply to
transactions involving selling securities "short against the box."
4. Borrowing money, except that (a) all Portfolios other than the Alger Capital
Appreciation Retirement Portfolio may borrow for temporary or emergency (but not
leveraging) purposes including the meeting of redemption requests that might
otherwise require the untimely disposition of securities, in an amount not
exceeding 10 percent of the value of the Portfolio's total assets (including the
amount borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made; and (b) the
Alger Capital Appreciation Retirement Portfolio may borrow from banks for
investment purposes as set forth in the Prospectus. Whenever borrowings
described in (a) exceed five percent of the value of the Portfolio's total
assets, the Portfolio, other than the Alger Capital Appreciation Retirement
Portfolio, will not make any additional investments. Immediately after any
borrowing 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(b) above.
6. Issuing senior securities, except that the Alger Capital Appreciation
Retirement Portfolio may borrow from banks for investment purposes so long as
the Portfolio maintains the required asset coverage.
7. Underwriting the securities of other issuers, except insofar as the Portfolio
may be deemed to be an underwriter under the Securities Act of 1933, as amended,
by virtue of disposing of portfolio securities.
8. Making loans to others, except through purchasing qualified debt obligations,
lending portfolio securities or entering into repurchase agreements.
9. Investing in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation, reorganization, acquisition of
assets or offer of exchange.
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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 there shall be no limit on the purchase of U.S. Government securities.
11. Investing in commodities except that the Alger Capital Appreciation
Retirement 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. 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.
13. Investing more than 15 percent 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 and contractual
restrictions on resale issued pursuant to Rule 144A of the Securities Act of
1933 may be purchased if they are determined to be liquid, and such purchases
would not be subject to the 15 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.
14. Investing in oil, gas or other mineral leases, or exploration or development
programs, except that the Portfolio may invest in the securities of companies
that invest in or sponsor those programs.
15. 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.
16. Making investments for the purpose of exercising control or management.
17. 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.
18. 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.
Except in the case of the 300 percent limitation set forth in Investment
Restriction No. 4, the percentage limitations contained in the foregoing
restrictions apply at the time of the purchase of the securities and a later
increase or decrease in percentage resulting from a change in the values of the
securities or in the amount of the Portfolio's assets will not constitute a
violation of the restriction.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities and other financial instruments for a
Portfolio are made by Alger Management, which also is responsible for placing
these transactions, subject to the overall review of the Fund's Board of
Trustees. Although investment requirements for each Portfolio are reviewed
independently from those of the other accounts managed by Alger Management and
those of the other Portfolios, investments of the type the Portfolios may make
may also be made by these other accounts or Portfolios. When a Portfolio and one
or more other Portfolios or accounts managed by Alger Management are prepared to
invest in, or desire to dispose of, the same security or other financial
instrument, available investments or opportunities for sales will be allocated
in a manner believed by Alger Management to be equitable to each. In some cases,
this procedure may affect adversely the price paid or received by a Portfolio or
the size of the position obtained or disposed of by a Portfolio.
Transactions in equity securities are in most 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
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<PAGE>
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, as amended, provided to
the Portfolio involved, the other Portfolios and/or other accounts over which
Alger Management or its affiliates exercise investment discretion to the extent
permitted by law. The Fund will consider sales of its shares as a factor in the
selection of broker-dealers to execute over-the-counter transactions, subject to
the requirements of best price and execution. Alger Management's fees under its
agreements with the Portfolios are not reduced by reason of its receiving
brokerage and research services. 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 received by the Portfolios. During the period from November 8, 1993
(commencement of operations) through October 31, 1994, and for the fiscal year
ended October 31, 1995, the Fund paid an aggregate of approximately $72,284, and
$82,777 respectively, in commissions to broker-dealers in connection with
portfolio transactions all of which was paid to Alger Inc. For the fiscal year
ended October 31, 1996, the Fund paid an aggregate of approximately $118,085 in
commissions in connection with portfolio transactions, $107,038 of which was
paid to Alger Inc. and $11,047 of which was paid to other brokers. Alger Inc.
does not engage in principal transactions with the Fund and, accordingly,
receives no compensation in connection with securities purchased or sold in that
manner, which include securities traded in the over-the-counter markets, money
market investments and most debt securities.
NET ASSET VALUE
The Prospectus discusses the time at which the net asset values of the
Portfolios are determined for purposes of sales and redemptions. The following
is a description of the procedures used by the Fund in valuing the Portfolio's
assets.
The assets of the Portfolios 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 money market instruments with maturities of 60 days or less 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 assum-
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<PAGE>
ing 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.
PURCHASES AND REDEMPTIONS
Shares of the Portfolios are only available for investment through defined
contribution retirement plans (the "Plans") which elect to make the Fund an
investment option for participants in such Plans. Individuals, including
participants in such Plans, cannot directly invest in the Fund but may do so
only through a participating Plan. However, the Fund reserves the right to make
shares of the Portfolios available to other investors, as may be approved by the
Board of Trustees from time to time.
Only the Plans may be record holders of the shares of the Portfolios. Within the
limitations applicable to a Plan, a participant in such Plan (a "Participant")
may direct the Plan to purchase or redeem shares of the Fund. Participants in a
Plan cannot contact the Fund directly to request the purchase or redemption of
the shares. Instead, Participants must contact their Plan Sponsor or its agent
designated for the purpose of processing purchase and redemption requests.
References in the Prospectus and Statement of Additional Information to
shareholders are to Plan Sponsors as the record holders of the Fund's shares.
The assets of the Fund are not plan assets of any of the Plans.
Shares of the Portfolios are offered by the Fund on a continuous basis to Plan
Sponsors of defined contribution retirement plans and are distributed by Alger
Inc. as principal underwriter for the Fund pursuant to a distribution agreement
(the "Distribution Agreement"). The Distribution Agreement provides that Alger
Inc. accepts orders for shares at net asset value as no sales commission or load
is charged.
Purchases and redemptions of shares of a Portfolio will be effected on days on
which the New York Stock Exchange (the "NYSE") is open for trading. Such
purchases and redemptions of the shares of each Portfolio are effected at their
respective net asset values per share determined as of the close of regular
trading on the NYSE (currently 4:00 p.m. Eastern time) on that same day. See
"Net Asset Value." Payment for redemptions will be made by the Fund's transfer
agent on behalf of the Fund and the relevant Portfolios within seven days after
receipt of redemption requests.
The Fund may suspend the right of redemption of shares of any Portfolio and may
postpone payment for any period: (i) during which the NYSE is closed (other than
customary weekend and holiday closings) or during which trading on the NYSE is
restricted; (ii) when the SEC determines that a state of emergency exists which
may make payment or transfer not reasonably practicable; (iii) as the SEC may by
order permit for the protection of the shareholders of the Fund; or (iv) at any
other time when the Fund may, under applicable laws and regulations, suspend
payment on the redemption of its shares.
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 a 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.
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, The Alger Fund, The Alger American
Fund and Spectra Fund, registered open-end management investment companies for
which Alger Management serves as investment adviser. Fred M. Alger III and David
D. Alger are "interested persons" of the Fund, as defined in the Act. Fred M.
Alger III and David D. Alger are brothers. Unless otherwise noted, the address
of each person named below is 75 Maiden Lane, New York, New York 10038.
-8-
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
<S> <C>
Fred M. Alger III Chairman of the Board of Alger Associates, Inc. ("Associates"), Alger Inc.,
Chairman of the Board Alger Management, Alger Properties, Inc. ("Properties"), Alger Shareholder Services, Inc.
("Services"), Alger Life Insurance Agency, Inc. ("Agency"), Fred Alger International Advisory S.A.
("International") The Alger American Asset Growth Fund ("Asset Growth") and Analysts Resources,
Inc. ("ARI").
David D. Alger President and Director of Associates, Alger Management,
President and Trustee Alger Inc., Properties, Services, International and Agency; Executive Vice President and Director
of ARI.
Gregory S. Duch Executive Vice President, Treasurer and Director of Alger Management and
Treasurer Properties; Executive Vice President and Treasurer of Associates, Alger Inc.,
ARI, Services, and Agency; Director and Treasurer of International.
Mary E. Marsden-Cochran General Counsel and Secretary, Associates, Alger Management, Alger Inc.,
Secretary 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 Senior Vice President of Associates, Alger Management, Alger Inc.,
Assistant Secretary and Properties, ARI, Services and Agency.
Assistant Treasurer
Arthur M. Dubow Private investor since 1985; Director of Coolidge Investment Corporation;
Trustee formerly Chairman of the Board of Institutional Shareholder Services, Inc.;
P.O. Box 969 formerly President of Fourth Estate, Inc.
Wainscott, NY 11975
Stephen E. O'Neil Of counsel to the law firm of Kohler & Barnes PC;
Trustee private investor since 1981; Director of NovaCare, Inc. and Brown Forman
805 Third Avenue Distillers Corporation; formerly President and Vice Chairman of City Investing Company and
New York, NY 10022 Director of Centerre Bancorporation and Syntro Corporation.
Nathan Emile Saint-Amand, M. D. Medical doctor in private practice.
Trustee
2 East 88th Street
New York, NY 10128
John T. Sargent Private investor since 1987; Director of Atlantic Mutual Insurance Co.;
Trustee formerly Director of River Bank America.
14 E. 69th Street
New York, NY 10021
</TABLE>
No director, officer or employee of Alger Management or its affiliates will
receive any compensation from the Fund for serving as an officer or Trustee of
the Fund. The Fund pays each Trustee who is not a director, officer or employee
of Alger Management or its affiliates a quarterly fee of $1,500.
The Fund did not offer its Trustees any pension or retirement benefits during or
prior to the fiscal year ended October 31, 1996. The following table provides
compensation amounts paid to disinterested Trustees of the Fund for the fiscal
year ended October 31, 1996.
-9-
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
TOTAL COMPENSATION PAID TO TRUSTEES FROM
THE ALGER RETIREMENT FUND,
AGGREGATE THE ALGER FUND,
COMPENSATION FROM THE ALGER AMERICAN FUND,
THE ALGER CASTLE CONVERTIBLE FUND, INC. AND
NAME OF PERSON, POSITION RETIREMENT FUND SPECTRA FUND
------------------------ ------------------- ---------------------------------------
<S> <C> <C>
Arthur M. Dubow, Trustee $6,000 $28,250
Stephen E. O'Neil, Trustee $6,000 $28,250
Nathan E. Saint-Amand, Trustee $6,000 $28,250
John T. Sargent, Trustee $6,000 $28,250
</TABLE>
INVESTMENT MANAGER
Alger Management serves as investment manager to each of the Portfolios pursuant
to separate written agreements (the "Management Agreements"). Certain of the
services provided by, and the fees paid by the Portfolios to, Alger Management
under the Management Agreements are described in the Prospectus. Alger
Management pays the salaries of all officers who are employed by both it and the
Fund. Alger Management has agreed to maintain office facilities for the Fund,
furnish the Fund with statistical and research data, clerical, accounting and
bookkeeping services, and certain other services required by the Fund, and to
compute the net asset value, net income and realized capital gains or losses of
the Portfolios. Alger Management prepares semi-annual reports for the SEC and
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 any 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 period from November 8, 1993 (commencement of operations) through
October 31, 1994, and for the fiscal years ended October 31, 1995 and October
31, 1996, Alger Management earned under the terms of the Management Agreements
$65,445, $81,537 and $87,258, respectively, in respect of the Alger Growth
Retirement Portfolio; $64,542, $130,610 and $223,623, respectively, in respect
of the Alger Small Cap Retirement Portfolio; $46,090, $66,230 and $80,088,
respectively, in respect of the Alger MidCap Growth Retirement Portfolio; and
$41,006, $55,348 and $58,658, respectively, in respect of the Alger Capital
Appreciation Retirement Portfolio.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountants for the Fund.
TAXES
The following is a summary of selected federal income tax considerations that
may affect the Fund and its shareholders. The summary is not intended to
substitute for individual tax advice and investors are urged to consult their
own tax advisers as to the federal, state and local tax consequences of
investing in the Fund.
Each Portfolio intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). If
qualified as a regulated investment company, a Portfolio will pay no federal
income taxes on its taxable net investment income (that is, taxable income other
than net realized capital gains) and its net realized capital gains that are
distributed to shareholders. To qualify under Subchapter M, a Portfolio must,
among other things: (1) distribute to its shareholders at least 90% of its
taxable net investment income and net realized short-term capital gains; (2)
derive at least 90% of its gross income from dividends, interest, payments with
respect to loans of securities, gains from the sale or other disposition of
securities, or other income (including, but not limited to, gains from options,
futures and forward contracts) derived with respect to the Portfolio's business
of investing in securities; (3) derive less than 30% of its annual gross income
from the sale or other disposition of securities, options, futures or forward
contracts held for less than three months; and (4) diversify its holdings so
that, at the end of each fiscal quarter of the Portfolio (a) at least 50% of the
market value of the Portfolio's assets is represented by cash, U.S. Government
securities and other securities, with those other securities limited, with
respect to any one issuer, to an amount no greater 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 securi-
-10-
<PAGE>
ties or securities of other regulated investment companies) or of two or more
issuers that the Portfolio controls and that are determined to be in the same or
similar trades or businesses or related trades or businesses. In meeting these
requirements, a Portfolio may be restricted in the selling of securities held by
the Portfolio for less than three months and in the utilization of certain of
the investment techniques described above and in the Fund's prospectus.
CUSTODIAN
State Street Bank & Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as custodian for the Fund pursuant to a custodian agreement under
which it holds the Portfolios' assets.
TRANSFER AGENT
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 Services processes purchases and
redemptions of shares of the Portfolio, maintains the shareholder account
records for each Portfolio, handles certain communications between shareholders
and the Fund and distributes any dividends and distributions payable by the
Fund.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders of the
Portfolios. At February 24, 1997, Wells Fargo Bank, Trustee for Mentor Graphics,
owned beneficially or of record 57.16% of the Alger Small Cap Retirement
Portfolio. Northern Trust Company, Trustee for IHC 401K, owned beneficially or
of record 44.24% of the Alger Growth Retirement Portfolio. The Fred Alger &
Company, Incorporated et al Pension Plan and the Fred Alger Company,
Incorporated et al Profit Sharing Plan (the "Plans") owned beneficially or of
record 33.48% and 48.64%, respectively, of the Alger MidCap Growth Retirement
Portfolio; and 33.40% and 52.53%, respectively, of the Alger Capital
Appreciation Retirement Portfolio at February 24, 1997. The only participants in
the Plans are past and present employees of Alger Inc. (a Delaware corporation),
Alger Management (a New York corporation), Alger Shareholder Services, Inc. (a
Delaware corporation) and Analysts Resources, Inc. (a Delaware corporation), all
of which are directly or indirectly wholly owned subsidiaries of Alger
Associates, Inc. ("Associates") (a Delaware corporation). The shareholders
identified above may be deemed to control the specified Portfolios, which may
have the effect of proportionately diminishing the voting power of other
shareholders of these Portfolios. It can be expected, however, that this effect
will diminish as other investors purchase additional shares of the Portfolios.
As of February 24, 1997, Fred M. Alger III and David D. Alger were the majority
shareholders of Associates and may be deemed to control that company and its
subsidiaries.
The following table contains information regarding persons known to the Fund who
own beneficially or of record five percent or more of the shares of any
Portfolio. Unless otherwise noted, the address of each owner is 75 Maiden Lane,
New York, New York 10038. All holdings are expressed as a percentage of a
Portfolio's outstanding shares as of February 24, 1997 and record and beneficial
holdings are in each instance denoted as follows: record/beneficial.
-11-
<PAGE>
<TABLE>
<CAPTION>
ALGER ALGER
ALGER ALGER MIDCAP CAPITAL
SMALL CAP GROWTH GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
NAME AND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
ADDRESS (RECORD/ (RECORD/ (RECORD/ (RECORD/
OF SHAREHOLDERS BENEFICIAL) BENEFICIAL) BENEFICIAL) BENEFICIAL)
- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fred Alger & Company,
Incorporated et al
Pension Plan 6.85% / 6.85% 20.54% / 20.54% 33.48% / 33.48% 33.40% / 33.40%
Fred Alger & Company,
Incorporated et al
Profit Sharing Plan 8.63% / 8.63% 21.95% / 21.95% 48.64% / 48.64% 52.53% / 52.53%
Fred Alger & Company,
Incorporated
401(k) Plan * / * 5.14% / 5.14% 16.83% / 16.83% 12.94% / 12.94
Wells Fargo Bank
T'tee Kelly Group Tax
Def Inv Pl 8.42% / + -0- / -0- -0- / -0- -0- / -0-
P.O. Box 9800
Calabasas,
CA 91378
U.S. Bank
Trustee for The
Spacelabs Issop
P. O. Box 3168
Portland, OR 97208 15.53% / + -0- / -0- -0- / -0- -0- / -0-
Wells Fargo Bank, Trustee
fbo Mentor Graphics
P.O. Box 9800
Calabasas,
CA 913702 57.16% / + -0- / -0- -0- / -0- -0- / -0-
Northern Trust Company
T'tee FBO IHC 401K
P.O. Box 92956
Chicago, IL 60675 -0- / -0- 44.34% / 44.34% -0- / -0- -0- / -0-
Northern Trust Co.
T'tee FBO IHC 403B
P.O. Box 92956
Chicago, IL 60675 -0- / -0- 6.44% / + -0- / -0- -0- / -0-
Officers and Trustees
of the Fund in the
Aggregate** *** / *** *** / *** *** / *** *** / ***
</TABLE>
- -------------
*Indicates shareholder owns less than 5% of the Portfolio's shares.
**Certain officers and Trustees of the Fund are participants in one or more of
the Fred Alger & Company, Incorporated Pension Plan, Profit Sharing Plan and
401(k) Plan and may therefore, as a group, be deemed to be indirect holders of
the following interests in the Portfolios: Small Cap Retirement Portfolio,
6.83%; Growth Retirement Portfolio, 17.27%; Midcap Growth Retirement Portfolio,
31.83%; Capital Appreciation Retirement Portfolio, 50.14%.
***Indicates group owns less than 1% of the Portfolio's shares.
+The Fund regards the underlying Plan as the beneficial owner.
ORGANIZATION
The Fund has been organized as a business trust under the laws of the
Commonwealth of Massachusetts pursuant to an Agreement and Declaration of Trust
dated July 14, 1993 (the "Trust Agreement"). The word "Alger" in the Fund's name
has been adopted pursuant to a provision contained in the Agreement and
Declaration of Trust. Under that provision, Associates may terminate the Fund's
license to use the word "Alger" in its name when Alger Management ceases to act
as the Fund's investment manager.
Shares do not have cumulative voting rights, which means that holders of more
than 50 percent of the shares voting for the election of Trustees can elect all
Trustees. Shares are transferable but have no preemptive, conversion or
subscription rights. Shareholders generally vote by Portfolio, except with
respect to the election of Trustees and the ratification of the selection of
independent accountants. In the interest of economy and convenience,
certificates representing shares of a Portfolio are physically issued only upon
specific written request of a shareholder.
Meetings of shareholders normally will not be held for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Under the Act, shareholders of record of no less than two-thirds of the
outstanding shares of the Fund may remove a Trustee through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. Under the Trust Agreement, the Trustees are required to call a meeting
of shareholders for the purpose of voting on the question of removal of any such
Trustee when requested in writing to do so by the shareholders of record of not
less than 10 percent of the Fund's outstanding shares.
-12-
<PAGE>
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.
On April 12, 1996, the names of the Fund and its underlying portfolios were
changed as follows:
From: To:
The Alger Defined The Alger Retirement Fund
Contribution Trust
Alger Defined Contribution Alger Small Cap Retirement
Small Cap Portfolio Portfolio
Alger Defined Contribution Alger MidCap Growth
MidCap Growth Portfolio Retirement Portfolio
Alger Defined Contribution Alger Growth Retirement
Growth Portfolio Portfolio
Alger Defined Contribution Alger Capital Appreciation
Leveraged AllCap Portfolio Retirement Portfolio
DETERMINATION OF PERFORMANCE
The "total return" and "yield" described in the Prospectus as to each of the
Portfolios, are computed according to formulas prescribed by the SEC. These
performance figures are calculated in the following manner:
A. Total Return--A Portfolio's average annual total return described in the
Prospectus is computed according to the following formula:
P (1+T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year periods at the
end of the 1, 5 and 10 year periods (or fractional portion
thereof);
The average annual total returns for the Portfolios for the periods indicated
below were as follows:
PERIOD FROM
INCEPTION* YEAR-ENDED
THROUGH 10/31/96 10/31/96
------------- --------
Alger Small Cap Retirement
Portfolio .............................. .... 25.45% 9.20%
Alger MidCap Growth
Retirement Portfolio ................... .... 24.22% 6.24%
Alger Growth Retirement
Portfolio .............................. .... 15.58% 8.19%
Alger Capital Appreciation
Retirement Portfolio ................... .... 18.33% 6.11%
* Commenced operations on November 8, 1993.
B. Yield--a Portfolio's net annualized yield described in the Prospectus is
computed according to the following formula:
a-b 6
YIELD = 2[(----- + 1) - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
IN GENERAL
Current performance information for the Portfolios may be obtained by calling
the Fund at the telephone number provided on the cover page of this Statement of
Additional Information. A Portfolio's quoted performance may not be indicative
of future performance. A Portfolio's performance will depend upon factors such
as the Portfolio's expenses and the types and maturities of instruments held by
the Portfolio.
From time to time, in advertisements or in reports to shareholders, the
performances of the Portfolios may be quoted and compared to those of other
funds and accounts with similar investment objectives. Similarly, the
performance of the Portfolios, for example, might be compared to rankings
prepared by Lipper Analytical Services Inc., which is a widely recognized,
independent service that monitors the performance of mutual funds, as well as to
various unmanaged indices, such as the S&P 500, the Russell 2000 Growth Index,
the Wilshire Small Company Growth Index, the Lehman Government/Corporate Bond
Index or the S&P MidCap 400 Index. In addition, the evaluations of the
Portfolios published by nationally recognized ranking services or articles
regarding performance, rankings and other Portfolio characteristics may appear
in national publications including, but not limited to, Barron's, Business Week,
Forbes, Institutional Investor, Investor's Business Daily, Kiplinger's Personal
Finance, Money, Morningstar, The New York Times, USA Today and The Wall Street
Journal and may be included in advertisements or communications to shareholders.
Any given performance comparison should not be considered as representative of
such Portfolio's performance for any future period.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended October 31, 1996, together
with the Report of Independent Public Accountants thereon, all of which are
contained in the Annual Report to Shareholders for that fiscal year, are hereby
incorporated by reference and a copy may be obtained by telephoning the Fund at
(800) 992-3362.
-13-
<PAGE>
APPENDIX
CORPORATE BOND RATINGS
Bonds rated Aa by Moody's Investors Service, Inc. ("Moody's") are judged by
Moody's 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 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.
Bonds rated Ba by Moody's are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class. Bonds which are rated B by Moody's generally
lack characteristics of a desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small.
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 AA by Standard & Poor's Corporation ("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 BB and B by S&P are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. These ratings may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories. Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions that could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
A-1
<PAGE>
APPENDIX
(continued)
Bonds rated AAA by Fitch Investors Service, Inc. ("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 AA 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-1 are judged by Duff and Phelps, Inc. ("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.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers rated Prime-1, or related supporting institutions,
are considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2, or related supporting
institutions, are considered to have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of issuers rated Prime-l, 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 liquidity is maintained.
Commercial paper ratings of S&P are current assessments of the likelihood of
timely payment of debts having original maturities of no more than 365 days.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues deter mined
to possess overwhelming safety characteristics are denoted A-1+. Capacity for
timely payment on commercial paper rated A-2 is strong, but the relative degree
of safety is not as high as for issues designated A-1. The rating Fitch-1
(Highest Grade) is the highest commercial paper rating assigned by Fitch. Paper
rated Fitch-1 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-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 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.
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, New York 10176
================================================================================
THE ALGER |
RETIREMENT | MEETING THE CHALLENGE
FUND | OF INVESTING
STATEMENT |
OF ADDITIONAL | FEBRUARY 28, 1997
INFORMATION |
================================================================================
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial Statements included in Part A:
Condensed Financial Information
(2) Financial Statements incorporated by reference into Part B:
For each Portfolio:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets for the years ended
October 31, 1996 and October 31, 1995
Financial Highlights
Notes to Financial Statements
Report of Independent Public Accountants
(b) Exhibits:
Exhibit No. Description of Exhibit
1 Agreement and Declaration of Trust (1)
1a Certificate of Amendment dated March 30, 1996
2 By-laws of Registrant (1)
3 Not applicable
4 Specimen Share Certificates (1)
5 Investment Management Agreements (1)
6 Distribution Agreement (1)
7 Not applicable
8 Custody Agreement
9 Transfer Agency Agreement (1)
10 Opinion and Consent of Sullivan & Worcester (1)
11 Consent of Arthur Andersen LLP
<PAGE>
12 Not applicable
13 Subscription Agreement (1)
14 Not applicable
15 Not applicable
16 Schedule for computation of performance quotations
provided in the Statement of Additional Information
- -----------------------
(1) Incorporated by reference to Registrant's Registration Statement (the
"Registration Statement") filed with the Securities and Exchange
Commission (the "SEC") on August 27, 1993.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
Set forth below is information regarding the number of record holders of
each class of Registrant's securities as of January 31, 1997.
Title or Class Number of Record Holders
-------------- ------------------------
Alger Small Cap Retirement Portfolio 7
Alger MidCap Growth Retirement Portfolio 4
Alger Growth Retirement Portfolio 7
Alger Capital Appreciation Retirement Portfolio 4
<PAGE>
Item 27. Indemnification
Under Section 8.4 of Registrant's Agreement and Declaration of Trust, any
past or present Trustee or officer of Registrant (including persons who serve at
Registrant's request as directors, officers or Trustees of another organization
in which Registrant has any interest as a shareholder, creditor or
otherwise[hereinafter referred to as a "Covered Person"]) is indemnified to the
fullest extent permitted by law against liability and all expenses reasonably
incurred by him in connection with any action, suit or proceeding to which he
may be a party or otherwise involved by reason of his being or having been a
Covered Person. This provision does not authorize indemnification when it is
determined, in the manner specified in the Agreement and Declaration of Trust,
that such Covered Person has not acted in good faith in the reasonable belief
that his actions were in or not opposed to the best interests of Registrant.
Moreover, this provision does not authorize indemnification when it is
determined , in the manner specified in the Agreement and Declaration of Trust,
that such Covered Person would otherwise be liable to Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties. Expenses may be paid by Registrant in advance
of the final disposition of any action, suit or proceeding upon receipt of an
undertaking by such Covered Person to repay such expenses to Registrant in the
event that it is ultimately determined that indemnification of such expenses is
not authorized under the Agreement and Declaration of Trust and either (i) the
Covered Person provides security for such undertaking, (ii) Registrant is
insured against losses from such advances, or (iii) the disinterested Trustees
or independent legal counsel determines, in the manner specified in the
Agreement and Declaration of Trust, that there is reason to believe the Covered
Person will be found to be entitled to indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to Trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission (the "SEC") such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Alger Management, which serves as investment manager to Registrant, is
generally engaged in rendering investment advisory services to institutions and,
to a lesser extent, individuals. Alger Management presently serves as investment
adviser to one closed-end investment company and to three 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).
<PAGE>
Item 29. Principal Underwriter
(a) Alger Inc. acts as principal underwriter for Registrant, The Alger Fund
and The Alger American Fund and Spectra Fund and has acted as subscription
agent for Castle Convertible 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.
Item 32. Undertakings
(a) Not applicable.
(b) Registrant hereby undertakes to call a meeting of its shareholders for
the purpose of voting upon the question of removal of a director or directors of
Registrant when requested in writing to do so by the holders of at least 10% of
Registrant's outstanding shares. Registrant undertakes further, in connection
with the meeting, to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940, as amended, relating to communications with the
shareholders of certain common law trusts.
(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 27 day of February, 1997.
THE ALGER RETIREMENT FUND
By: /s/ David D. Alger
-------------------------------
David D. Alger, President
ATTEST: /s/ Gregory S. Duch
--------------------------------------
Gregory S. Duch, Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board February 27, 1997
- ----------------------------
Fred M. Alger III
/s/ David D. Alger President and Trustee February 27, 1997
- ---------------------------- (Chief Executive Officer)
David D. Alger
/s/ Gregory S. Duch Treasurer February 27, 1997
- ---------------------------- (Chief Financial and
Gregory S. Duch Accounting Officer)
* Trustee February 27, 1997
- ----------------------------
Nathan E. Saint-Amand
* Trustee February 27, 1997
- ----------------------------
Stephen E. O'Neil
* Trustee February 27, 1997
- ----------------------------
Arthur M. Dubow
* Trustee February 27, 1997
- ----------------------------
John T. Sargent
* By:/s/Gregory S. Duch
-------------------------
Gregory S. Duch
Attorney-in-Fact
<PAGE>
Securities Act File No. 33-68124
Investment Company Act File No. 811-7986
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. 6 X
---
and/or
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ---
---
Amendment No. 8 x
---
(Check appropriate box or boxes)
THE ALGER RETIREMENT FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
--------------------------
E X H I B I T S
--------------------------
<PAGE>
INDEX TO EXHIBITS
Exhibit Page Number in Sequential
No. Number System
- ------ -------------------------
1a Certificate of Amendment to
Declaration of Trust........................
8 Custody Agreement with State Street Bank &
Trust Company...............................
11 Consent of Arthur Andersen LLP .............
16 Schedule for computation of performance
quotations provided in the Statement
of Additional Information ..................
Exhibit 1a.
THE ALGER DEFINED CONTRIBUTION TRUST
(hereafter "The Alger Retirement Fund")
Certificate of Amendment
The undersigned, being the Secretary of The Alger Defined Contribution Trust,
(hereinafter referred to as the "Trust"), a trust with transferable shares of
the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Section 9.3 of the Agreement and Declaration of Trust, dated July 14, 1993, as
amended (hereinafter, as so amended, referred to as the "Declaration of Trust"),
and the affirmative vote of a Majority of the Trustees at a meeting duly called
and held on March 1, 1996, the Declaration of Trust is amended as follows:
1. Section 1.1 of the Declaration is hereby amended to change the name of the
Trust to "The Alger Retirement Fund."
2. The names of the Portfolios established by Section 6.2 of the Declaration of
Trust and by the Certificate of Designation filed August 18, 1993 are hereby
amended to be as follows:
Alger Small Cap Retirement Portfolio
Alger Midcap Growth Retirement Portfolio
Alger Growth Retirement Portfolio
Alger Capital Appreciation Retirement Portfolio
IN WITNESS WHEREOF, the undersigned has set his/her hand and seal this 30 day of
March 1996.
/s/ Mary Marsden-Cochran
------------------------
Mary Marsden-Cochran
Secretary
CUSTODIAN CONTRACT
Between
THE ALGER RETIREMENT FUND
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Custodian and Property to be Held By
It.....................................................................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States.................2
2.1 Holding Securities............................................2
2.2 Delivery of Securities........................................2
2.3 Registration of Securities....................................4
2.4 Bank Accounts.................................................4
2.5 Availability of Federal Funds.................................5
2.6 Collection of Income..........................................5
2.7 Payment of Fund Monies........................................5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased..........................................7
2.9 Appointment of Agents.........................................7
2.10 Deposit of Fund Assets in U.S. Securities System..............7
2.11 Fund Assets Held in the Custodian's Direct
Paper System..................................................8
2.12 Segregated Account............................................9
2.13 Ownership Certificates for Tax Purposes......................10
2.14 Proxies......................................................10
2.15 Communications Relating to Portfolio
Securities...................................................10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States............................10
3.1 Appointment of Foreign Sub-Custodians........................10
3.2 Assets to be Held............................................11
3.3 Foreign Securities Systems...................................11
3.4 Holding Securities...........................................11
3.5 Agreements with Foreign Banking Institutions.................11
3.6 Access of Independent Accountants of the Fund................12
3.7 Reports by Custodian.........................................12
3.8 Transactions in Foreign Custody Account......................12
3.9 Bank Accounts................................................12
3.10 Liability of Foreign Sub-Custodians..........................12
3.11 Liability of Custodian.......................................13
3.12 Monitoring Responsibilities..................................13
3.13 Branches of U.S. Banks.......................................13
3.14 Tax Law......................................................14
<PAGE>
3.15 Rule 17f-5...................................................14
4. Payments for Sales or Repurchases or Redemptions
of Shares of the Fund.................................................14
5. Proper Instructions...................................................15
6. Actions Permitted Without Express Authority...........................15
7. Evidence of Authority.................................................16
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income.....................16
9. Records...............................................................16
10. Opinion of Fund's Independent Accountants.............................16
11. Reports to Fund by Independent Public Accountants.....................17
12. Compensation of Custodian.............................................17
13. Responsibility of Custodian...........................................17
14. Effective Period, Termination and Amendment...........................19
15. Successor Custodian...................................................19
16. Interpretive and Additional Provisions................................20
17. Additional Funds......................................................20
18. Massachusetts Law to Apply............................................20
19. Prior Contracts.......................................................20
20. Shareholder Communications Election...................................21
21. Limitation of Liability...............................................21
22. Headings .............................................................21
23. Notices .............................................................22
<PAGE>
CUSTODIAN CONTRACT
This Contract between The Alger Retirement Fund, a business trust organized
and existing under the laws of the Commonwealth of Massachusetts, having its
principal place of business at 75 Maiden Lane, New York, NY 10038, hereinafter
called the "Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund currently offers shares in four series, Alger Small Cap
Retirement Portfolio, Alger MidCap Growth Retirement Portfolio, Alger Growth
Retirement Portfolio and Alger Capital Appreciation Retirement Portfolio(such
series together with all other series subsequently established by the Fund and
made subject to this Contract in accordance with paragraph 17, being herein
referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Declaration of
Trust. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian
all securities and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect to all
securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian or a sub-custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
<PAGE>
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto, but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury
and certain federal agencies (each, a "U.S. Securities System") and (b)
commercial paper of an issuer for which State Street Bank and Trust Company
acts as issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian (the "Direct Paper
System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same
2
<PAGE>
aggregate face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to
the broker or its clearing agent, against a receipt, for examination
in accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, but only against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of the
Portfolio, which may be in the form of cash or obligations issued by
the United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Fund
on behalf of the Portfolio requiring a pledge of assets by the Fund on
behalf of the Portfolio, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio of the Fund;
3
<PAGE>
13) For delivery in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of Shares in connection with distributions in kind, as may be
described from time to time in the currently effective prospectus and
statement of additional information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of
4
<PAGE>
1940. Funds held by the Custodian for a Portfolio may be deposited by it to
its credit as Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust company and the funds
to be deposited with each such bank or trust company shall on behalf of
each applicable Portfolio be approved by vote of a majority of the Board of
Trustees of the Fund. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only in
that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfolio as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to bearer domestic securities if, on the date
of payment by the issuer, such securities are held by the Custodian or its
agent and shall credit such income, as collected, to such Portfolio's
custodian account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due each Portfolio
on securities loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund with
such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to which
the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing instructions
when deemed appropriate by the parties, the Custodian shall pay out monies
of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of title
to such options, futures contracts or options on futures contracts to
the Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a custodian and
has been designated by the Custodian as its subcustodian or as its
agent (pursuant to Section 2.9 hereof), as the case may be, for this
purpose) registered in the name of
5
<PAGE>
the Portfolio or in the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for transfer; (b) in the case
of a purchase effected through a U.S. Securities System, in accordance
with the conditions set forth in Section 2.10 hereof; (c) in the case
of a purchase involving the Direct Paper System, in accordance with
the conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund on behalf of the
Portfolio and the Custodian, or another bank, or a broker-dealer which
is a member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's account
at the Federal Reserve Bank, with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio of
securities owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the
Portfolio; or (e) for transfer to a time deposit account of the
Portfolio in any bank, whether domestic or foreign; such transfer may
be effected prior to receipt of a confirmation from a broker and/or
the applicable bank pursuant to Proper Instructions from the Fund on
behalf of the Portfolio as defined in Article 5;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as
set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of
the Portfolio: interest, taxes, management, accounting, transfer agent
and legal fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be made.
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2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except
as specifically stated otherwise in this Contract, in any and every case
where payment for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time direct;
provided, however, that the Fund shall be notified of such appointment and
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder. The Fund acknowledges that the
Custodian has notified the Fund that Chemical Bank acts as agent for the
Custodian for the delivery and safekeeping of physical securities in New
York.
2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "U.S. Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and regulations,
if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in an
account ("Account") of the Custodian in the U.S. Securities System
which shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio. The
Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities System
that payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of
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the Custodian to reflect such transfer and payment for the account of
the Portfolio. Copies of all advices from the U.S. Securities System
of transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon request,
the Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio
in the form of a written advice or notice and shall furnish to the
Fund on behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities System for
the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any report
obtained by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio resulting from use of the U.S.
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be entitled
to be subrogated to the rights of the Custodian with respect to any
claim against the U.S. Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if and
to the extent that the Portfolio has not been made whole for any such
loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct Paper
System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from the Fund on
behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
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3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities sold
for the account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio,
in the form of a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets reflecting
each day's transaction in the U.S. Securities System for the account
of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund
may reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper Instructions
from the Fund on behalf of each applicable Portfolio establish and maintain
a segregated account or accounts for and on behalf of each such Portfolio,
into which account or accounts may be transferred cash and/or securities,
including securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD
(or any futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio, (ii) for
purposes of segregating cash or government securities in connection with
options purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii) for
the purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies and
(iv) for other proper corporate purposes, but only, in the case of clause
(v), upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an officer
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of the Fund and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Portfolio Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Portfolio shall notify the Custodian at
least three business days prior to the date on which the Custodian is to
take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside
of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated
on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this Contract, together with a
certified resolution of the Fund's Board of Trustees, the Custodian and the
Fund may agree to amend Schedule A hereto from time to time to designate
additional foreign banking institutions and foreign securities depositories
to act as sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's assets.
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3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in a foreign clearing agency which acts as a securities
depository or in a book-entry system for the central handling of securities
in a country or a foreign securities depository or clearing agency which
operates a transnational system for the central handling of securities or
equivalent book entries, located outside the United States (each a "Foreign
Securities System") only through arrangements implemented by the foreign
banking institutions serving as sub-custodians pursuant to the terms hereof
(Foreign Securities Systems and U.S. Securities Systems are collectively
referred to herein as the "Securities Systems"). Where possible, such
arrangements shall include entry into agreements containing the provisions
set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities and other non-cash
property for all of its customers, including each Portfolio, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash
property of the Portfolio which are maintained in such account shall
identify by book-entry those securities and other non-cash property
belonging to the Portfolio and (ii) the Custodian shall require that
securities and other non-cash property so held by the foreign sub-custodian
be held separately from any assets of the foreign sub-custodian or of
others.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a foreign
banking institution shall provide that: (a) the assets of each Portfolio
will not be subject to any right, charge, security interest, lien or claim
of any kind in favor of the foreign banking institution or its creditors or
agent, except a claim of payment for their safe custody or administration;
(b) beneficial ownership for the assets of each Portfolio will be freely
transferable without the payment of money or value other than for custody
or administration; (c) adequate records will be maintained identifying the
assets as belonging to each applicable Portfolio; (d) officers of or
auditors employed by, or other representatives of the Custodian, including
to the extent permitted under applicable law the independent public
accountants for the Fund, will be given access to the books and records of
the foreign banking institution relating to its actions under its agreement
with the Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian or
its agents.
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3.6 Access of Independent Accountants of the Fund. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, and in any event upon the Fund's reasonable
request, statements in respect of the securities and other assets of the
Portfolio(s) held by foreign sub-custodians, including but not limited to
an identification of entities having possession of such securities and
other assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking institution
for the Custodian on behalf of each applicable Portfolio indicating, as to
securities acquired for a Portfolio, the identity of the entity having
physical possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provisions of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign
securities of the Fund held outside the United States by foreign
sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the account
of each applicable Portfolio may be effected in accordance with the
customary established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser
or dealer) against a receipt with the expectation of receiving later
payment for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such
securities.
3.9 Bank Accounts. The Custodian (or its foreign sub-custodian) may open and
maintain outside the United States a bank account or bank accounts on
behalf of the Fund or its applicable Portfolios in foreign banking
institutions, subject only to draft or order by the Custodian or its
foreign sub-custodian, acting pursuant to the terms of this Contract to
hold cash received by or from or for the account of the Fund on behalf of
its applicable Portfolios.
3.10 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold
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<PAGE>
harmless, the Custodian and the Fund from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the Fund,
it shall be entitled to be subrogated to the rights of the Custodian with
respect to any claims against a foreign banking institution as a
consequence of any such loss, damage, cost, expense, liability or claim if
and to the extent that the Fund has not been made whole for any such loss,
damage, cost, expense, liability or claim.
3.11 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.13 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this paragraph
3.10, in delegating custody duties to State Street London Ltd., the
Custodian shall not be relieved of any responsibility to the Fund for any
loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be similar
in kind and scope to that furnished to the Fund in connection with the
initial approval of this Contract. In addition, the Custodian will promptly
inform the Fund in writing in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the case
of any foreign sub-custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this Contract,
the provisions hereof shall not apply where the custody of the Portfolios
assets are maintained in a foreign branch of a banking institution which is
a "bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by
paragraph 1 of this Contract.
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(b) Cash held for each Portfolio of the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Portfolio
with the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.14 Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or any
state or political subdivision thereof other than for income, franchise or
similar taxes imposed on or assessed against the Custodian as custodian. It
shall be the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the Fund
by the tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Custodian with regard to such tax
law shall be to use reasonable efforts to assist the Fund with respect to
any claim for exemption or refund under the tax law of jurisdictions for
which the Fund has provided such information.
3.15 Rule 17f-5. This Article 3 shall be governed by, and interpreted in
accordance with, and the practices, arrangements and other matters
contemplated hereby shall be conducted in conformity with, Rule 17f-5 under
the Investment Company Act of 1940, as amended, as such Rule is interpreted
in publications of the Securities and Exchange Commission and its staff; in
any conflict between this Article 3 and the Rule (as interpreted), the Rule
shall govern.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or from the
transfer agent of the Fund ("Transfer Agent") and deposit into the account of
the appropriate Portfolio such payments as are received for Shares of that
Portfolio issued or sold from time to time by the Fund. The Custodian will
provide timely notification to the Fund on behalf of each such Portfolio and the
Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor payable-through
drafts drawn on the Custodian by a holder of Shares, which payable-through
drafts have been furnished by the Fund to the holder of Shares, when presented
to the Custodian in accordance
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with such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing signed
or initialled by one or more person or persons as the Board of Trustees shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give oral instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three - party agreement which requires a segregated asset account in
accordance with Section 2.12. The Fund shall provide the Custodian with a list
of authorized persons, certified as to their authority by the Secretary or
Assistant Secretary of the Fund and updated as appropriate from time to time.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
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7. Evidence of Authority
The Custodian shall be protected in acting as provided herein upon any
instructions, notice, request, consent, certificate or other instrument or paper
reasonably believed by it to be genuine and to have been properly executed by or
on behalf of the Fund. The Custodian may receive and accept a certified copy of
a vote of the Board of Trustees of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Trustees pursuant to the
Declaration of Trust as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Custodian of written notice to
the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of
Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding Shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the
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Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's registration statement and
amendments thereto and Form N-SAR or other annual reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state. In addition, the Custodian
shall supply the Fund and its independent public accountants with such
information as they may reasonably request from time to time in order to monitor
the performance of the Custodian under this Contract.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as set forth in the attached [Appendix A], which may
be changed as agreed from time to time between the Fund on behalf of each
applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. Except as otherwise specifically stated herein in
Section 2.8, the Custodian shall be held to the exercise of reasonable care in
carrying out the provisions of this Contract, but shall be kept indemnified by
and shall be without liability to the Fund for any action taken or omitted by it
in good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted in good
faith and without negligence in conformity with such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian, nominee
or agent, the Custodian shall be without liability to the Fund for any loss,
liability, claim or expense resulting from or caused by; (i) events or
circumstances beyond the reasonable control of the Custodian or any
sub-custodian or Securities System or any agent or nominee of any of the
foregoing, including, without limitation,
17
<PAGE>
nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts; (ii) errors by the Fund or the Investment Advisor
in their instructions to the Custodian provided such instructions have been in
accordance with this Contract; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body in charge of
registering or transferring securities in the name of the Custodian, the Fund,
the Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including
non-receipt of bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System; and
(vii) any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent jurisdiction. The
Custodian shall promptly inform the Fund in writing of any of the foregoing
matters; as they arise. Upon the occurrence of any of the foregoing events which
causes or may cause any loss, damage or expense to the Fund, the Custodian shall
use all commercially reasonable efforts and take all reasonable steps under the
circumstances to mitigate the effects of such event and to avoid continuing harm
to the Fund.
If the Fund on behalf of the Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it as shall be agreed by the parties in writing.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses incurred on behalf of the applicable Portfolio,
assessments, claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio other than property held in a
segregated account pursuant to Section 2.10 hereof shall be security therefor
and should the Fund fail to repay the Custodian promptly upon written notice
from the Custodian, the Custodian shall, upon written notice to the Fund, be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
18
<PAGE>
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities System by such Portfolio, as required by
Rule 17f-4 under the Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under Section 2.11 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the initial use of
the Direct Paper System by such Portfolio ; provided further, however, that
neither party shall amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Declaration of
Trust, and further provided, that the Fund on behalf of one or more of the
Portfolios may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund or for one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities,
19
<PAGE>
funds and other properties held by the Custodian on behalf of each applicable
Portfolio and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract on behalf of each applicable
Portfolio and to transfer to an account of such successor custodian all of the
securities of each such Portfolio held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the prospectus or the Declaration of Trust
of the Fund. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
17. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to Alger Small Cap Retirement Portfolio, Alger MidCap Growth Retirement
Portfolio, Alger Growth Retirement Portfolio and Alger Capital Appreciation
Retirement Portfolio with respect to which it desires to have the Custodian
render services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Portfolio hereunder and such
written agreement shall be made a schedule to this Contract.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
20
<PAGE>
20. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
21. Limitation of Liability
The Fund is a business trust organized under the laws of the Commonwealth
of Massachusetts and under a Declaration of Trust, to which reference is hereby
made, a copy of which is on file at the office of the Secretary of State of the
Commonwealth of Massachusetts, and to any and all amendments thereto so filed or
hereafter filed. The obligations of the Fund entered into hereunder in the name
of the Fund or on behalf thereof by any of its trustees, officers, employees or
agents are undertaken not individually but in such capacities, and are not
binding upon any of the trustees, officers, employees or shareholders of the
Fund personally, but bind only the assets of the Fund or of the particular
Portfolio in question, as the case may be.
22. Headings
The section headings contained in this Contract are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Contract.
21
<PAGE>
23. Notices
Except as may be otherwise provided herein, any notice or other instrument
in writing authorized or required by this Contract to be given by either party
hereto shall be sufficiently given if addressed to such party and mailed or
delivered to it at the address set forth below:
(a) If to the Fund, to:
The Alger Retirement Fund
30 Montgomery Street
Jersey City, NJ 07302
Attention: Gregory S. Duch
(b) If the Custodian, to:
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Attention: Robert Bagdasarian
or at such other place as the receiving party may from time to time designate in
writing.
22
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the____ day of July, 1996.
ATTEST THE ALGER RETIREMENT FUND
/s/Mary Marsden-Cochran By /s/Gregory S. Duch
- ----------------------- ---------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/Francine Hayes By /s/Donald E. Lozar
- ----------------------- ---------------------------------
Executive Vice President
23
<PAGE>
Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of The Alger Retirement
Fund for use as sub-custodians for the Fund's securities and other assets:
Country Subcustodian Central Depository
Austria GiroCredit Bank Oesterreichische
Aktiengesellschaft Kontrollbank AG
der Sparkassen (Wertpapiersammelbank
Division)
Belgium Generale Bank Caisse Interprofessionnelle
de Depots et de Virements
de Titres S.A. (CIK);
Banque Nationale de Belgique
Denmark Den Danske Bank Vaerdipapircentralen -
The Danish Securities
Center (VP)
Finland Merita Bank Limited The Central Share Register of
Finland
France Banque Paribas Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres
(SICOVAM);
Banque de France,
Saturne System
Germany Dresdner Bank A.G. The Deutscher Kassenverein AG
Ireland Bank of Ireland None;
The Central Bank of Ireland,
The Gilt Settlement Office
(GSO)
Italy Morgan Guaranty Trust Monte Titoli S.p.A.;
Company
Banca d'Italia
Netherlands MeesPierson N.V. Nederlands Centraal
Instituut voor Giraal
Effectenverkeer B.V.
(NECIGEF)
Norway Christiania Bank og Verdipapirsentralen -
Kreditkasse The Norwegian Registry
of Securities (VPS)
<PAGE>
SCHEDULE A (CONT.)
Country Subcustodian Central Depository
Portugal Banco Comercial Portugues Central de Valores
Mobiliarios (Central)
Spain Banco Santander, S.A. Servicio de Compensacion y
Liquidacion de Valores (SCLV);
Banco de Espana,
Anotaciones en Cuenta
Sweden Skandinaviska Enskilda Vardepapperscentralen VPC AB
Banken The Swedish Central Securities
Depository
Switzerland Union Bank of Switzerland Schweizerische Effekten -
Giro AG (SEGA)
United Kingdom State Street Bank and None;
Trust Company
The Bank of England,
The Central Gilts Office (CGO);
The Central Moneymarkets
Office (CMO)
Euroclear (The Euroclear System)/ State Street London Limited Cedel (Cedel Bank
societe anonyme)/ State Street London Limited
Certified:
/s/Mary Marsden-Cochran
- -------------------------
Fund's Authorized Officer
Date: 07/15/96
-----------------
ARTHUR
ANDERSEN
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated December 16, 1996 on the financial statements of
The Alger Retirement Fund for the period ended October 31, 1996 and to all
references to our Firm included in or made a part of the registration statement
of The Alger Retirement Fund filed on Form N-1A (Amendment No. 8), Investment
Company Act File No. 811-07986 with the Securities and Exchange Commission.
/s/Arthur Andersen LLP
----------------------
ARTHUR ANDERSEN LLP
New York, New York
February 27, 1997
Exhibit 16
AVERAGE ANNUAL RETURN COMPUTATION
The Average Annual Return for each Portfolio was
computed according to the following formula:
n
FORMULA: P(1+T) =ERV
Where: P= a hypothetical investment of $1,000
T= average annual total return
n= number of years
ERV= Ending Redeemable Value of a hypothetical
$1,000 payment made at the beginning of
the 1, 5, or 10 year (or other) periods at the
end of the 1, 5 or 10 year (or other)
periods (or fractional portion thereof)
<TABLE>
<CAPTION>
ENDING AVERAGE
PERIOD REDEEMABLE ANNUAL RATE
PORTFOLIO COVERED VALUE OF RETURN FORMULA*
- --------- ------- ----- --------- --------
<S> <C> <C> <C> <C>
ALGER DEFINED
CONTRIBUTION SMALL
CAP 11/8/93 (commencement
of operations)
through 10/31/96** 1,799.88 34.54% @RATE(1799.88,1000,1.98)
YEAR ENDED 10/31/96 1,661.94 66.19% @RATE(1661.94,1000,1)
ALGER DEFINED
CONTRIBUTION MIDCAP
GROWTH: 11/8/93 (commencement
of operations)
through 10/31/96** 1,796.78 34.42% @RATE(1796.78,1000,1.98)
YEAR ENDED 10/31/96 1,540.98 54.10% @RATE(1540.98,1000,1)
ALGER DEFINED
CONTRIBUTION GROWTH: 11/8/93 (commencement
of operations)
through 10/31/96** 1,423.07 19.50% @RATE(1423.07,1000,1.98)
YEAR ENDED 10/31/96 1,370.97 37.10% @RATE(1370.97,1000,1)
ALGER DEFINED
CONTRIBUTION
LEVERAGED ALLCAP: 11/8/93 (commencement
of operations)
through 10/31/96** 1,556.36 25.02% @RATE(1556.36,1000,1.98)
YEAR ENDED 10/31/96 1,544.00 54.40% @RATE(1544.00,1000,1)
*LOTUS 123 @RATE FUNCTION:
@RATE(FV,PV,TERM) The periodic interest rate necessary for
present value "pv", to grow to future
value "fv", over the number of compounding periods in "term".
**Period equals 2.98 years.
</TABLE>
