- ----------
THE ALGER
RETIREMENT
FUND
75 Maiden Lane
New York, New York 10038
(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 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 25, 1998
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
MANAGEMENT, INVESTMENT MANAGER
INC.
FRED ALGER
& COMPANY, DISTRIBUTOR
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 25, 1998
<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
RETIREMENT 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 ....................................................... .21% .51% .38% .77%*
---- ---- ---- ----
Total Fund Operating Expenses ........................................ 1.06% 1.31% 1.13% 1.62%
==== ==== ==== ====
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 $ 13 $ 12 $ 16
Three Years .......................................................... 34 42 36 51
Five Years ........................................................... 58 72 62 88
Ten Years ............................................................ 129 158 137 192
* Included in Other Expenses of the Capital Appreciation Retirement Portfolio
is 0.15% of interest expense.
</TABLE>
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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 12,
1997 on the Fund's financial statements as of October 31, 1997. 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, 1997
<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 ............... $ 17.87 $ 14.48 $ 9.32 $ 9.88
------- ------- ------- --------
Net investment loss ..................... (0.10) (0.15) (0.02)(i) (0.10)(i)
Net realized and unrealized gain on investments .. 3.13 3.46 2.65 2.51
------- ------- ------- --------
Total from investment operations ............... 3.03 3.31 2.63 2.41
Distributions from net realized gains ............ (2.90) (6.43) (1.17) (2.59)
------- ------- ------- --------
Net asset value, end of year ..................... $ 18.00 $ 11.36 $ 10.78 $ 9.70
======= ======= ======= ========
Total Return ..................................... 19.0% 28.6% 28.8% 26.1%
======= ======= ======= ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) ......... $31,499 $ 6,435 $22,922 $ 4,520
======= ======= ======= ========
Ratio of expenses excluding interest
to average net assets .......................... 1.06% 1.31% 1.13% 1.47%
======= ======= ======= ========
Ratio of expenses including interest
to average net assets .......................... 1.06% 1.31% 1.13% 1.62%
======= ======= ======= ========
Ratio of net investment loss
to average net assets .......................... (.62%) (.79%) (.22%) (1.02%)
======= ======= ======= ========
Portfolio Turnover Rate .......................... 134.25% 183.31% 159.38% 159.56%
======= ======= ======= ========
Average Commission Rate Paid ..................... $ .0701 $ .0699 $ .0718 $ .0711
======= ======= ======= ========
Amount of debt outstanding at end of year ........................................................... $127,000
========
Average amount of debt outstanding during the year .................................................. $127,915
========
Average daily number of shares outstanding during the year .......................................... 511,947
========
Average amount of debt per share during the year .................................................... $ .25
========
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(i) Amount was computed based on average shares outstanding during the year.
</TABLE>
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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, 1996
<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 .............. $ 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 ......................... 1.05% 1.16% 1.07% 1.44%
======= ======= ======= ========
Ratio of net investment loss
to average net assets ......................... (.54%) (.45%) (.09%) (.94%)
======= ======= ======= ========
Portfolio Turnover Rate ......................... 182.49% 170.21% 142.83% 203.46%
======= ======= ======= ========
Average Commission Rate Paid .................... $ .0629 $ .0682 $ .0716 $ .0668
======= ======= ======= ========
Amount of 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
========
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* Prior to April 12, 1996, the Alger Capital Appreciation Retirement Portfolio
was the Alger Defined Contribution Leveraged AllCap Portfolio.
</TABLE>
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v
<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 ......................... 1.13% 1.23% 1.11% 2.70%
======= ======= ======= ========
Ratio of net investment loss
to average net assets ......................... (.73%) (.69%) (.18%) (2.32%)
======= ======= ======= ========
Portfolio Turnover Rate ......................... 104.84% 132.74% 133.42% 188.53%
======= ======= ======= ========
Amount of 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
========
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* Prior to April 12, 1996, the Alger Capital Appreciation Retirement Portfolio
was the Alger Defined Contribution Leveraged AllCap Portfolio.
</TABLE>
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vi
<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>
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 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 .......................... 1.47% 1.53% 1.26% 2.87%
======= ======= ======= ========
Ratio of net investment loss
to average net assets .......................... (0.80)% (0.89)% (0.29)% (2.53)%
======= ======= ======= ========
Portfolio Turnover Rate .......................... 186.76% 134.06% 103.79% 229.11%
======= ======= ======= ========
Amount of 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
========
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* 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.
</TABLE>
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vii
<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 January 31, 1998,
had approximately $7.8 billion under management--$4.5 billion in mutual fund
accounts and $3.3 billion in other advisory accounts.
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
1
<PAGE>
security, other than obligations issued or guaranteed by the U. S. Government,
its agencies or 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 a Portfolio the flexibility to take advantage of
new opportunities for investments in accordance with its
2
<PAGE>
investment objective or to meet redemptions, each Portfolio may hold up to 15
percent of its net assets in money market 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, 1997, the range of market capitalization of the
companies in the Russell Index was $20 million to $2.97 billion; the range of
market capitalization of the companies in the S&P Index at that date was $21
million to $2.934 billion. The combined range as of that date was $20 million to
$2.97 billion. The Portfolio may invest up to 35% of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization outside this combined range and in excess of that amount (up to
100% of its assets) during temporary defensive periods.
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, 1997, the
range of market capitalization of these companies was $213 million to $13.737
billion. The Portfolio may invest up to 35% of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization outside the range of companies included in the S&P MidCap 400
Index and in excess of that amount (up to 100% of its assets) during temporary
defensive periods.
ALGER 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
3
<PAGE>
that, at the time of purchase, have total market capitalization of less than $1
billion.
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 is
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 oppor-
4
<PAGE>
tunities, the results of an equity investment managed by a particular management
firm may not match those of the market as a whole.
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 including all collateral on such loans,
less liabilities exclusive of the obligation to return such collateral, and will
be
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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.
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
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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.
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
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<PAGE>
will be based upon predictions as to anticipated market trends, which could
prove to be inaccurate.
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 331/3 percent 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.
David D. Alger, Seilai Khoo and Ronald Tartaro are primarily responsible
for the day-to-day management of the Portfolios of the Fund. Mr. Alger has been
employed by Alger Management since 1971, as Executive Vice President and
Director of Research until 1995 and as President since 1995. Ms. Khoo has been
employed by Alger Management since 1989 as a senior research analyst until 1995
and as a Senior Vice President since 1995. Mr. Tartaro has been employed by
Alger Management since 1990 as a senior research analyst until 1995 and as a
Senior Vice President since 1995. Mr. Alger, Ms. Khoo and Mr. Tartaro also serve
as portfolio managers for other mutual funds and investment accounts managed by
Alger Management.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 992-3362.
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 (normally 4:00 p.m. Eastern time). The NYSE is
currently open on each Monday through Friday, except (i) January 1st, Dr. Martin
Luther King, Jr. Day, 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
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
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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 generally being 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 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.
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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 2, 1998, Wells Fargo Bank, Trustee for Mentor Graphics, owned
beneficially or of record 57.38% of the Alger Small Cap Retirement Portfolio.
Northern Trust Company, Trustee for IHC 401K, owned beneficially or of record
53.61% 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 owned beneficially or of record 35.00% and 41.64%,
respectively, of the Alger MidCap Growth Retirement Portfolio; and 38.27% and
38.75%, respectively, of the Alger Capital Appreciation Retirement Portfolio at
February 2, 1998. 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
IN-
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TENDED 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 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 25, 1998
<PAGE>
PROSPECTUS
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. This Prospectus sets forth
information about three of these portfolios (the "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 three
Portfolios discussed in this Prospectus are:
o Alger Small Cap Retirement Portfolio
o Alger MidCap 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 25, 1998
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.
INVESTMENT MANAGER
DISTRIBUTOR
================================================================================
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
FEBRUARY 25, 1998
<PAGE>
================================================================================
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 Capital Appreciation
Retirement Portfolio .............................................. 3
Selecting Among the Portfolios .......................................... 4
Certain Securities and Investment
Techniques .............................................................. 4
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
================================================================================
ii
<PAGE>
================================================================================
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 CAPITAL
CAP GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None None None
Maximum Sales Load Imposed on Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fees None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees .85% .80% .85%
Other Expenses .21% .51% .77%*
---- ---- ----
Total Fund Operating Expenses 1.06% 1.31% 1.62%
==== ==== ====
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 $ 13 $ 16
Three Years 34 42 51
Five Years 58 72 88
Ten Years 129 158 192
</TABLE>
* Included in Other Expenses of the Capital Appreciation Retirement Portfolio
is 0.15% of interest expense.
================================================================================
iii
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
The Financial Highlights have been audited by Arthur Andersen LLP, the Fund's
independent public accountants, as indicated in their report dated December 12,
1997 on the Fund's financial statements as of October 31, 1997. 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, 1997
<TABLE>
<CAPTION>
MIDCAP CAPITAL
SMALL CAP GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- -----------
<S> <C> <C> <C>
Net asset value, beginning of year ....................... $ 17.87 $ 14.48 $ 9.88
----------- ----------- -----------
Net investment loss ...................................... (0.10) (0.15) (0.10)(i)
Net realized and unrealized gain on
investments ............................................. 3.13 3.46 2.51
----------- ----------- -----------
Total from investment operations ....................... 3.03 3.31 2.41
Distributions from net realized gains .................... (2.90) (6.43) (2.59)
----------- ----------- -----------
Net asset value, end of year ............................. $ 18.00 $ 11.36 $ 9.70
=========== =========== ===========
Total Return ............................................. 19.0% 28.6% 26.1%
=========== =========== ===========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) ................ $ 31,499 $ 6,435 $ 4,520
=========== =========== ===========
Ratio of expenses excluding interest
to average net assets .................................. 1.06% 1.31% 1.47%
=========== =========== ===========
Ratio of expenses including interest
to average net assets .................................. 1.06% 1.31% 1.62%
=========== =========== ===========
Ratio of net investment loss
to average net assets .................................. (.62%) (.79%) (1.02%)
=========== =========== ===========
Portfolio Turnover Rate .................................. 134.25% 183.31% 159.56%
=========== =========== ===========
Average Commission Rate Paid ............................. $ .0701 $ .0699 $ .0711
=========== =========== ===========
Amount of debt outstanding at end of year ...................................................... $ 127,000
===========
Average amount of debt outstanding during the year ............................................. $ 127,915
===========
Average daily number of shares outstanding during the year ..................................... 511,947
===========
Average amount of debt per share during the year ............................................... $ .25
===========
</TABLE>
- ------------
(i) Amount was computed based on average shares outstanding during the year.
================================================================================
iv
<PAGE>
================================================================================
THE ALGER RETIREMENT FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the year ended October 31, 1996
<TABLE>
<CAPTION>
MIDCAP CAPITAL
SMALL CAP GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO*
---------- ---------- -----------
<S> <C> <C> <C>
Net asset value, beginning of year ........................ $ 17.92 $ 16.34 $ 12.72
----------- ----------- -----------
Net investment (loss) ..................................... (0.05) (0.07) (0.07)
Net realized and unrealized gain on
investments .............................................. 1.72 1.09 0.83
----------- ----------- -----------
Total from investment operations ........................ 1.67 1.02 0.76
Distributions from net realized gains ..................... (1.72) (2.88) (3.60)
----------- ----------- -----------
Net asset value, end of year .............................. $ 17.87 $ 14.48 $ 9.88
=========== =========== ===========
Total Return .............................................. 9.2% 6.2% 6.1%
=========== =========== ===========
Ratios and Supplememtal Data:
Net assets, end of year (ooo's omitted)................... $ 30,043 $ 9,726 $ 6,703
=========== =========== ===========
Ratio of expenses excluding interest
to average net assets .................................... 1.05% 1.16% 1.37%
=========== =========== ===========
Ratio of expenses including interest
to average net assets .................................... 1.05% 1.16% 1.44%
=========== =========== ===========
Ratio of net investment loss
to average net assets ................................... (.54%) (.45%) (.94%)
=========== =========== ===========
Portfolio Turnover Rate ................................... 182.49% 170.21% 203.46%
=========== =========== ===========
Average Commission Rate Paid .............................. $ .0629 $ .0682 $ .0668
=========== =========== ===========
Amount of 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>
- ------------
* Prior to April 12, 1996, the Alger Capital Appreciation Retirement Portfolio
was the Alger Defined Contribution Leveraged AllCap Portfolio.
================================================================================
v
<PAGE>
================================================================================
THE ALGER RETIREMENT FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the year ended October 31, 1995
<TABLE>
<CAPTION>
MIDCAP CAPITAL
SMALL CAP GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO*
---------- ---------- -----------
<S> <C> <C> <C>
Net asset value, beginning of year ........................ $ 10.83 $ 11.66 $ 10.08
----------- ----------- -----------
Net investment loss ....................................... (0.07) (0.07) (0.19)
Net realized and unrealized gain on
investments .............................................. 7.23 6.07 5.30
----------- ----------- -----------
Total from investment operations ........................ 7.16 6.00 5.11
Distributions from net realized gains ..................... (0.07) (1.32) (2.47)
----------- ----------- -----------
Net asset value, end of year .............................. $ 17.92 $ 16.34 $ 12.72
=========== =========== ===========
Total Return 66.2% 54.1% 54.4%
=========== =========== ===========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) .................. $ 23,002 $ 10,914 $ 8,116
=========== =========== ===========
Ratio of expenses excluding interest
to average net assets .................................... 1.13% 1.23% 1.43%
=========== =========== ===========
Ratio of expenses including interest
to average net assets .................................... 1.13% 1.23% 2.70%
=========== =========== ===========
Ratio of net investment loss
to average net assets .................................... (.73%) (.69%) (2.32%)
=========== =========== ===========
Portfolio Turnover Rate ................................... 104.84% 132.74% 188.53%
=========== =========== ===========
Amount of 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>
- ------------
* Prior to April 12, 1996, the Alger Capital Appreciation Retirement Portfolio
was the Alger Defined Contribution Leveraged AllCap Portfolio.
================================================================================
vi
<PAGE>
================================================================================
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>
MIDCAP CAPITAL
SMALL CAP GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO**
---------- ---------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $ 10.00 $ 10.00 $ 10.00
-------- -------- -----------
Net investment loss ....................................... (0.07) (0.09) (0.23)
Net realized and unrealized gain on investments ........... 0.90 1.75 0.31
-------- -------- -----------
Total from investment operations ........................ 0.83 1.66 0.08
-------- -------- -----------
Net asset value, end of period ............................ $ 10.83 $ 11.66 $ 10.08
======== ======== ===========
Total Return .............................................. 8.3% 16.6% 0.8%
======== ======== ===========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) ................ $ 9,513 $ 6,774 $ 5,251
======== ======== ===========
Ratio of expenses excluding interest
to average net assets ................................... 1.47% 1.53% 1.78%
======== ======== ===========
Ratio of expenses including interest
to average net assets ................................... 1.47% 1.53% 2.87%
======== ======== ===========
Ratio of net investment loss
to average net assets ................................... (0.80)% (0.89)% (2.53)%
======== ======== ===========
Portfolio Turnover Rate ................................... 186.76% 134.06% 229.11%
======== ======== ===========
Amount of 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
==========
* 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.
</TABLE>
================================================================================
vii
<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 January 31, 1998,
had approximately $7.8 billion under management--$4.5 billion in mutual fund
accounts and $3.3 billion in other advisory accounts.
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
1
<PAGE>
security, other than obligations issued or guaranteed by the U. S. Government,
its agencies or 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 a Portfolio the flexibility to take advantage of
new opportunities for investments in accordance with its
2
<PAGE>
investment objective or to meet redemptions, each Portfolio may hold up to 15
percent of its net assets in money market 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, 1997, the range of market capitalization of the
companies in the Russell Index was $20 million to $2.97 billion; the range of
market capitalization of the companies in the S&P Index at that date was $21
million to $2.934 billion. The combined range as of that date was $20 million to
$2.97 billion. The Portfolio may invest up to 35% of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization outside this combined range and in excess of that amount (up to
100% of its assets) during temporary defensive periods.
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, 1997, the
range of market capitalization of these companies was $213 million to $13.737
billion. The Portfolio may invest up to 35% of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization outside the range of companies included in the S&P MidCap 400
Index and in excess of that amount (up to 100% of its assets) during temporary
defensive periods.
ALGER 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 in-
3
<PAGE>
crease 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 is
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 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 those of the
market as a whole.
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.
4
<PAGE>
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, including all collateral on such loans
less liabilities exclusive of the obligation to return such collateral, 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.
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.
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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.
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
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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.
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 331/3 percent 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
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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.
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
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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.
David D. Alger, Seilai Khoo and Ronald Tartaro are primarily responsible
for the day-to-day management of the Portfolios of the Fund. Mr. Alger has been
employed by Alger Management since 1971, as Executive Vice President and
Director of Research until 1995 and as President since 1995. Ms. Khoo has been
employed by Alger Management since 1989 as a senior research analyst until 1995
and as a Senior Vice President since 1995. Mr. Tartaro has been employed by
Alger Management since 1990 as a senior research analyst until 1995 and as a
Senior Vice President since 1995. Mr. Alger, Ms. Khoo and Mr. Tartaro also serve
as portfolio managers for other mutual funds and investment accounts managed by
Alger Management.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 992-3362.
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.
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
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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 (normally 4:00 p.m. Eastern time). The NYSE is
currently open on each Monday through Friday, except (i) January 1st, Dr. Martin
Luther King, Jr. Day, 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
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 generally being required. The Fund believes such exchange provides a
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<PAGE>
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 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
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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 Fund's 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 2, 1998, Wells Fargo Bank, Trustee for Mentor Graphics, owned
beneficially or of record 57.38% of the Alger Small Cap 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 35.00% and 41.64%, respectively, of the Alger MidCap Growth
Retirement Portfolio; and 38.27% and 38.75%, respectively, of the Alger Capital
Appreciation Retirement Portfolio at February 2, 1998. 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 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
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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
ALGER SMALL CAP
RETIREMENT PORTFOLIO
ALGER MIDCAP GROWTH
RETIREMENT PORTFOLIO
ALGER CAPITAL APPRECIATION
RETIREMENT PORTFOLIO
PROSPECTUS
FEBRUARY 25, 1998
================================================================================
<PAGE>
PROSPECTUS
- ----------
THE ALGER|75 Maiden Lane
RETIREMENT|New York, New York 10038
FUND|(800) 992-3362
ALGER GROWTH RETIREMENT PORTFOLIO
================================================================================
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. This Prospectus sets forth
information about the Alger Growth Retirement Portfolio (the "Portfolio"). The
Portfolio seeks long-term capital appreciation by investing in a diversified,
actively managed portfolio of equity securities, primarily of companies with
total market capitalization of $1 billion or greater.
Shares of the Portfolio are 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 25, 1998
containing further information about all portfolios of the Fund, including the
Portfolio, 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|
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
February 25, 1998
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
The Portfolio's Expenses......................... iii
Financial Highlights ............................ iv
Alger Growth Retirement Portfolio ............... 1
Fred Alger Management, Inc. ..................... 1
Investment Objective and Policies ............... 1
Certain Securities and Investment
Techniques .................................. 3
Management ...................................... 5
Net Asset Value ................................. 7
Purchases and Redemptions ....................... 7
Dividends and Distributions ..................... 8
Taxes ........................................... 8
Organization .................................... 9
Performance ..................................... 9
Investor and Shareholder Information ............ 10
- --------------------------------------------------------------------------------
ii
<PAGE>
- --------------------------------------------------------------------------------
THE PORTFOLIO'S EXPENSES
The Table below is designed to assist you in understanding the various costs
and expenses that you will bear as a shareholder. The Table does not reflect any
charges or deductions which are, or may be, imposed by the Plans.
The Example below asssumes that all dividends and distributions are
reinvested and that the annual percentage amounts listed under Annual Portfolio
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.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases ........................... None
Maximum Sales Load Imposed on Reinvested Dividends ................ None
Deferred Sales Load ............................................... None
Redemption Fees ................................................... None
Exchange Fees ..................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)*
Management Fees ................................................... .75%
Other Expenses .................................................... .38
Total Portfolio Expenses .......................................... 1.13%
====
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 .......................................................... $ 12
Three Years ....................................................... 36
Five Years ........................................................ 62
Ten Years ......................................................... 137
* Based on expenses incurred during the Portfolio's last fiscal year,
restated to reflect the estimated future effect of compensating providers
of record-keeping and/or administrative services to participating
retirement plans. See "Management--Expenses."
- --------------------------------------------------------------------------------
iii
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights have been audited by Arthur Andersen LLP, the
Fund's independent public accountants, as indicated in their report dated
December 12, 1997 on the Fund's financial statements as of October 31, 1997,
which are included in the Fund's Statement of Additional Information. The
Financial Highlights should be read in conjunction with the Fund's financial
statements and related notes. The Statement of Additional Information may be
obtained from the Fund without charge.
<TABLE>
<CAPTION>
THE ALGER RETIREMENT FUND
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994(i)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 9.32 $ 11.65 $ 10.38 $ 10.00
--------- --------- ---------- ---------
Net investment loss .................................. (0.02)(ii) (0.01) (0.01) (0.03)
Net realized and unrealized gain on investments ...... 2.65 0.91 3.59 0.41
--------- --------- ---------- ---------
Total from investment operations ................... 2.63 0.90 3.58 0.38
Distributions from net realized gains ................ (1.17) (3.23) (2.31) --
--------- --------- ---------- ---------
Net asset value, end of period ....................... $ 10.78 $ 9.32 $ 11.65 $ 10.38
========= ========= ========== =========
Total Return ........................................ 28.8% 8.2% 37.1% 3.8%
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) .......... $ 22,922 $ 11,325 $ 13,042 $ 9,365
--------- --------- ---------- ---------
Ratio of expenses to average net assets ............ 1.13% 1.07% 1.11% 1.26%
========= ========= ========== =========
Ratio of net investment loss
to average net assets ........................... (0.22%) (0.09%) (0.18%) (0.29%)
========= ========= ========== =========
Portfolio Turnover Rate ............................. 159.38% 142.83% 133.42% 103.79%
========= ========= ========== =========
Average Commission Rate Paid ........................ $ .0718 $ .0716
========= =========
(i) For the period November 8, 1993 (commencement of operations) through October
31, 1994. Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
iv
<PAGE>
ALGER GROWTH
RETIREMENT PORTFOLIO
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 the
Portfolio is net asset value per share. Shares of the Portfolio are only
available for investment through defined contribution retirement plans (the
"Plans") which elect to make the Portfolio an investment option for participants
in such Plans. Individuals, including participants in such Plans, cannot
directly invest in the Portfolio but may do so only through a participating
Plan. The Fund reserves the right to make shares of the Portfolio 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 Portfolio. 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
Portfolio. Participants in a Plan cannot contact the Fund directly to request
the purchase or redemption of the Portfolio's 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 Portfolio's shares. The assets
of the Portfolio 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 Portfolio in accordance with the
Portfolio's investment objectives and stated investment policies, makes
investment decisions for the Portfolio, places orders to purchase and sell
securities on behalf of the Portfolio and employs professional securities
analysts who provide research services exclusively to the Portfolio and other
accounts for which Alger Management or its affiliates serve as investment
adviser. 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 January 31, 1998,
had approximately $7.8 billion under management--$4.5 billion in mutual fund
accounts and $3.3 billion in other advisory accounts.
INVESTMENT OBJECTIVE
AND POLICIES
The following is a brief description of the investment objective and
policies of the Portfolio. No assurance can be given that the Portfolio's
objective 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 Portfolio's investments. These restrictions and the
Portfolio's investment objective are "fundamental" policies, which means that
they may not be changed without a majority vote of shareholders of the
Portfolio. Except for the investment objective
1
<PAGE>
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 Portfolio include, among others, (i) a
prohibition on the Portfolio's purchasing a security, other than obligations
issued or guaranteed by the U. S. Government, its agencies or 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 the Portfolio's total assets may be
invested without regard to the five percent limitation; (ii) a prohibition on
the 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 the 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 during temporary defensive periods, the 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.
The Portfolio will not 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, the 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. The Portfolio may lend its
securities and enter into "short sales against the box." See "Certain Securities
and Investment Techniques." The Portfolio 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.
The investment objective of the Portfolio is long-term capital
appreciation. Income is a consideration in the selection of investments but is
not an investment objective of the Portfolio. The Portfolio seeks to achieve its
objective by investing in equity securities, such as common or preferred stocks
or securities convertible into or exchangeable for equity securities, including
warrants and rights.
It is anticipated that the Portfolio will invest primarily in companies
whose securities are traded on domestic stock exchanges or in the
over-the-counter market.
2
<PAGE>
These companies may still be in the developmental stage, may be older companies
that appear to be entering a new stage of growth progress owing to factors such
as management changes or development of new technology, products or markets or
may be companies providing products or services with a high unit volume growth
rate. In order to afford the Portfolio the flexibility to take advantage of new
opportunities for investments in accordance with its investment objective, the
Portfolio may hold up to 15 percent of its net assets in money market
instruments and repurchase agreements and in excess of that amount (up to 100%
of its assets) during temporary defensive periods. This amount may be higher
than that maintained by other funds with similar investment objectives. See
"Certain Securities and Investment Techniques."
Investors considering equity investing through the Portfolio 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.
CERTAIN SECURITIES AND
INVESTMENT TECHNIQUES
The Portfolio may use the investment strategies and invest in the types of
securities described below, which may involve certain risks. The Statement of
Additional Information contains more detailed information about these practices
and information about other investment practices of the Portfolio.
REPURCHASE AGREEMENTS
Under the terms of a repurchase agreement, the 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
The 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
The 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 Portfolio may invest in restricted securities issued under Rule 144A of
the Securities Act of
3
<PAGE>
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. Examples of factors that the Fund's Board of
Trustees will take into account in evaluating the liquidity of a Rule 144A
security, both with respect to the initial purchase and on an ongoing basis,
will include, among others: (1) the frequency of trades and quotes for the
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). In accordance with Rule
144A, the Board has delegated its responsibility to Alger Management to
determine the liquidity of each restricted security purchased by the Portfolio
pursuant to the Rule, subject to the Board's oversight and review. Because
institutional trading in restricted securities is relatively new, it is not
possible to predict how institutional markets will develop. If institutional
trading in restricted securities were to decline to limited levels, the
liquidity of the Portfolio could be adversely affected.
LENDING OF PORTFOLIO SECURITIES
In order to generate income and to offset expenses, the Portfolio may lend
portfolio securities to brokers, dealers and other financial organizations.
Loans of securities by the Portfolio, if and when made, may not exceed 331/3
percent of the Portfolio's total assets, including all collateral on such loans
less liabilities exclusive of the obligation to return such collateral, 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.
OTHER INVESTMENTS
The 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.
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 Portfolio 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 Portfolio may
4
<PAGE>
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 Portfolio's investment objective of
capital appreciation by managing this Portfolio actively, which may result in
high portfolio turnover. Increased portfolio turnover will have the effect of
increasing the 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.
INVESTMENT MANAGER
Alger Management serves as the Fund's investment manager. In that capacity,
Alger Management, among other things, analyzes the Portfolio's assets, arranges
for the purchase and sale of the Portfolio's 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 Portfolio's 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 the 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.
Alger Management has been engaged in the business of rendering investment
advisory services since 1964 and as of January 31, 1998, had approximately $7.8
billion under management--$4.5 billion in mutual fund accounts and $3.3 billion
in other advisory accounts.
PORTFOLIO MANAGERS
David D. Alger, Seilai Khoo and Ronald Tartaro are primarily responsible
for the day-to-day management of the portfolios of the Fund. Mr. Alger has been
employed by Alger Management since 1971, as Executive Vice President and
Director of Research until 1995 and as President since 1995. Ms. Khoo has been
employed by Alger Management since 1989, as a senior research analyst until 1995
and as a Senior Vice President since 1995. Mr. Tartaro
5
<PAGE>
has been employed by Alger Management since 1990, as a senior research analyst
until 1995 and as a Senior Vice President since 1995. Mr. Alger, Ms. Khoo and
Mr. Tartaro also serve as portfolio managers for other mutual funds and
investment accounts managed by Alger Management.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 992-3362.
FEES
The Portfolio pays Alger Management a management fee computed daily and
paid monthly at an annual rate of 0.75% of the Portfolio's average daily net
assets.
EXPENSES
Operating expenses for the 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 the
Portfolio while retaining the ability to be reimbursed by the Portfolio for such
amounts prior to the end of the fiscal year. This will have the effect of
lowering the 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.
The Portfolio 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.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves
as transfer agent for the Fund. Certain record-keeping services that would
otherwise be performed by Alger Shareholder Services, Inc. may be performed by
other entities providing similar services to their customers who invest in the
Portfolio. The Fund, Alger Shareholder Services, Inc., Alger Inc. or any of its
affiliates may elect to enter into a contract to pay them for such services.
6
<PAGE>
NET ASSET VALUE
The net asset value per share of the 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 (normally 4:00 p.m. Eastern time). The NYSE is
currently open on each Monday through Friday, except (i) January 1st, Dr. Martin
Luther King, Jr. Day, Washington's Birthday (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 the 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 Portfolio that are traded on a securities exchange or
other recognized market are valued on the basis of market quotations. Those
assets 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 Portfolio will be Plan Sponsors
which establish or maintain Plans. Participants may invest in shares of the
Portfolio only through their respective Plan Sponsor. Participants cannot
contact the Fund directly to purchase shares of the Portfolio. 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 Portfolio.
Orders for shares of the Portfolio 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 the Portfolio are effected at the net asset value
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 Portfolio within seven days after the request is received.
Neither the Fund nor the Portfolio assesses 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 Portfolio with a minimum of 100 shares of each company
generally being required. The Fund believes such exchange provides a means by
which holders of certain securities may invest in the Portfolio 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 Let-
7
<PAGE>
ter 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 Portfolio'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 of the Fund will be treated separately in determining the
amounts of dividends of investment income and distributions of capital gains
payable to holders of its shares. Dividends and distributions will be
automatically reinvested on the payment date for each shareholder's account in
additional shares of the Portfolio at net asset value. Dividends will be
declared and paid annually. Distributions of any net realized capital gains
earned by the Portfolio usually will be made annually after the close of the
fiscal year in which the gains are earned.
TAXES
The Fund intends that the Portfolio will qualify separately as a "regulated
investment company" within the meaning of the Internal 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, the 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
8
<PAGE>
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 Fund's portfolios, have been authorized. No
series of shares has any preference over any other series.
When matters are submitted for shareholder vote, shareholders of the
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 2, 1998, Northern Trust Company, Trustee for IHC 401k, owned
beneficially or of record 53.61% of the Alger Growth Retirement Portfolio and
may therefore be deemed to control the Portfolio.
PERFORMANCE
The 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 the Portfolio from the
beginning date of the measuring period to the end of the measuring period. These
figures reflect changes in the price of the Portfolio's shares and assume that
any income dividends and/or capital gains distributions made by the Portfolio
during the period were reinvested in shares of the Portfolio. Figures will be
given for recent 1, 5 and 10 year periods, and may be given for other periods as
well (such as from commencement of the Portfolio's operations, or on a
year-by-year basis). 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
9
<PAGE>
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 the Portfolio will vary based on changes in market conditions.
In addition, since the deduction of the Portfolio's expenses is reflected in the
total return and yield figures, "total return" and "yield" will also vary based
on the level of the Portfolio's expenses.
From time to time, advertisements or reports to shareholders may compare
the yield or performance of the Portfolio to that of other mutual funds with a
similar investment objective. The performance of the Portfolio 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. In addition,
evaluations of the Portfolio 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 the 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 Portfolio, including current
performance quotations, as well as for assistance in 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.
10
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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 PORTFOLIO'S
SHARES, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER
MAY NOT LAWFULLY BE MADE.
-----
INVESTMENT MANAGER:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
DISTRIBUTOR:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
TRANSFER AGENT:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
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|MEETING THE CHALLENGE
RETIREMENT|OF INVESTING
FUND|
ALGER GROWTH
RETIREMENT PORTFOLIO
PROSPECTUS|February 25, 1998
================================================================================
<PAGE>
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++
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 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 25, 1998, 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 ........................... 7
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 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.
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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.
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 further
obligation on the part of the Portfolio. If the Portfolio exercises an option on
a futures contract it will be obligated to post initial margin (and potential
subsequent variation margin) for the resulting futures position just as it would
for any position. Futures contracts and options thereon are generally settled by
entering into an offsetting transaction but there can be no assurance that the
position can be offset prior to settlement at an advantageous price, nor that
delivery will occur.
The Portfolio will not enter into a futures contract or related option (except
for closing transactions) if, immediately thereafter, the sum of the amount of
its initial margin and premiums on open futures contracts and options thereon
would exceed 5% of the Portfolio's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 12 below have been adopted by the
Fund with respect to each of the Portfolios as fundamental policies. Under the
Investment Company Act of 1940, as amended (the "Act"), a "fundamental" policy
may not be changed without the vote of a "majority of the outstanding voting
securities" of the Fund, which is defined in the Act as the lesser of (a) 67
percent or more of the shares present at a Fund meeting if the holders of more
than
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<PAGE>
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.
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.
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<PAGE>
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 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
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<PAGE>
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. For
the fiscal year ended October 31, 1995, the Fund paid an aggregate of
approximately $82,777 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 $107,038 in
commissions in connection with portfolio transactions, to Alger Inc. For the
fiscal year ended October 31, 1997, the Fund paid an aggregate of approximately
$162,299 in commissions in connection with Portfolio transactions to Alger Inc.
The commissions paid to Alger Inc. during the fiscal year ended October 31, 1997
constituted 98% of the aggregate brokerage commissions paid by the Fund; during
that year, 96% of the aggregate dollar amount of transactions by the Fund
involving the payment of brokerage commissions was effected through Alger Inc.
Alger Inc. does not engage in principal transactions with the Fund and,
accordingly, 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 assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. Although this method
provides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a Portfolio
would receive if it sold the instrument.
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 par-
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<PAGE>
ticipating 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 (normally 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 SEC. 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 (63) 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 (54) 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 (46) Executive Vice President, Treasurer and Director of Alger Management and
Treasurer Properties and Associates; Executive Vice President and Treasurer of Alger Inc.,
ARI, Services, and Agency; Director and Treasurer of International.
Mary E. Marsden-Cochran (45) Vice President, General Counsel and Secretary, Associates, Alger
Secretary Management, Alger Inc., Properties, ARI, Services and Agency (2/96-present); Secretary of
International (7/96-present); Associate General Counsel and Vice President, Smith Barney Inc.
(12/94-2/96). Blue Sky Attorney, AMT Capital (1/94-11/94).
Frederick A. Blum (44) Senior Vice President of Alger Inc.
Assistant Secretary and
Assistant Treasurer
Arthur M. Dubow (64) Trustee of the Arthur Dubow Foundation; private investor since 1985; Director of Coolidge
Trustee Investment Corporation; formerly Chairman of the Board of Institutional Shareholder
P.O. Box 969 Services, Inc.; formerly President of Fourth Estate, Inc.
Wainscott, NY 11975
Stephen E. O'Neil (65 Of counsel to the law firm of Kohler & Barnes PC; private investor since 1981; Director of
Trustee NovaCare, Inc. and Brown Forman Distillers Corporation; formerly President and Vice Chairman
805 Third Avenue of City Investing Company and Director of Centerre Bancorporation and Syntro Corporation.
New York, NY 10022
Nathan E. Saint-Amand, M.D. (60) Medical doctor in private practice.
Trustee
2 East 88th Street
New York, NY 10128
John T. Sargent (73) Private investor since 1987; Director of 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, 1997. The following table provides
compensation amounts paid to disinterested Trustees of the Fund for the fiscal
year ended October 31, 1997.
-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.
For the fiscal years ended October 31, 1995, October 31, 1996 and October 31,
1997, Alger Management earned under the terms of the Management Agreements
$81,537, $87,258 and $136,841, respectively, in respect of the Alger Growth
Retirement Portfolio; $130,610, $223,623 and $251,536, respectively, in respect
of the Alger Small Cap Retirement Portfolio; $66,230, $80,088 and $59,911,
respectively, in respect of the Alger MidCap Growth Retirement Portfolio; and
$55,348, $58,658 and $44,688, 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; and (3) diversify its holdings so that, at the end
of each fiscal quarter of the Portfolio (a) at least 50% of the market value of
the Portfolio's assets is represented by cash, U.S. Government securities and
other securities, with those other securities limited, with respect to any one
issuer, to an amount no greater than 10% of the outstanding voting securities of
the issuer, and (b) not more than 25% of the market value of the Portfolio's
assets is invested in the securities of any one issuer (other than U.S.
Government securities or securities of other regulated investment companies) or
of two or more issuers that
-10-
<PAGE>
the Portfolio controls and that are determined to be in the same or similar
trades or businesses or related trades or businesses. In meeting these
requirements, a Portfolio may be restricted in the utilization of certain of the
investment techniques described above and in the Fund's prospectus.
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., ("Services") 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 2, 1998, Wells Fargo Bank, Trustee for Mentor Graphics,
owned beneficially or of record 57.38% of the Alger Small Cap Retirement
Portfolio. Northern Trust Company, Trustee for IHC 401K, owned beneficially or
of record 53.61% 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 "Alger Plans") owned beneficially or
of record 35.00% and 41.64%, respectively, of the Alger MidCap Growth Retirement
Portfolio; and 38.27% and 38.75%, respectively, of the Alger Capital
Appreciation Retirement Portfolio at February 2, 1998. The only participants in
the Alger Plans are past and present employees of Alger Inc. (a Delaware
corporation), Alger Management (a New York corporation), Services (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 2, 1998,
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 2, 1998 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> <C> <C> <C> <C>
Fred Alger & Company, 6.29% / 6.29% 15.09% / 15.09% 35.00% / 35.00% 38.27% / 38.27%
Incorporated et al
Pension Plan
Fred Alger & Company, 7.56% / 7.56% 16.09% / 16.09% 41.64% / 41.64% 38.75% / 38.75%
Incorporated et al
Profit Sharing Plan
Fred Alger & Company, * / * * / * 22.00% / 22.00% 21.09% / 21.09%
Incorporated
401(k) Plan
Wells Fargo Bank 10.26% / + * / * * / * * / *
T'tee Kelly Group Tax
Def Inv Pl
P.O. Box 9800
Calabasas,
CA 91378
U.S. Bank 8.14% / + * / * * / * * / *
Trustee for The
Spacelabs Issop
P. O. Box 3168
Portland, OR
97208
U.S. Bank 6.38% / + * / * * / * * / *
Trustee for Spacelabs
Med Retirement Plan
P. O. Box 3168
Portland, OR
97208
Wells Fargo Bank, Trustee 57.38% / + * / * * / * * / *
fbo Mentor Graphics
P.O. Box 9800
Calabasas,
CA 91302
Northern Trust Company * / * 53.61% / + * / * * / *
T'tee FBO IHC 401K
P.O. Box 92956
Chicago, IL 60675
Northern Trust Company * / * 8.45% / + * / * * / *
T'tee FBO IHC 403B
P.O. Box 92956
Chicago, IL 60675
Officers and Trustees *** / *** *** / *** *** / *** *** / ***
of the Fund in the
Aggregate**
- -------------
*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, 12.69%; Midcap Growth Retirement Portfolio,
30.14%; Capital Appreciation Retirement Portfolio, 36.33%.
***Indicates group owns less than 1% of the Portfolio's shares.
+The Fund regards the underlying Plan as the beneficial owner.
</TABLE>
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.
-12-
<PAGE>
Meetings of shareholders normally will not be held for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Under the Act, shareholders of record of no less than two-thirds of the
outstanding shares of the Fund may remove a Trustee through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. Under the Trust Agreement, the Trustees are required to call a meeting
of shareholders for the purpose of voting on the question of removal of any such
Trustee when requested in writing to do so by the shareholders of record of not
less than 10 percent of the Fund's outstanding shares.
Massachusetts law provides that shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Trustee. The
Trust Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility that the
Fund believes is remote. Upon payment of any liability incurred by the Fund, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Fund. The Trustees intend to conduct the operations of the
Fund in a manner so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.
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 ayment 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 10/31/97 10/31/97
------------- --------
Alger Small Cap Retirement
Portfolio 23.79% 19.00%
Alger MidCap Growth
Retirement Portfolio 25.30% 28.58%
Alger Growth Retirement
Portfolio 18.77% 28.84%
Alger Capital Appreciation
Retirement Portfolio 20.23% 26.07%
* 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
YIELD = 2[(----- + 1)6 - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = The average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
IN GENERAL
Current performance information for the Portfolios may be obtained by calling
the Fund at the telephone number provided on the cover page of this Statement of
-13-
<PAGE>
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 Brothers
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, 1997, are
contained in the Annual Report to Shareholders for that fiscal year, and are
hereby incorporated by reference. A copy of the Annual Report to Shareholders
may be obtained by telephoning the Fund at (800) 992-3362.
-14-
<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
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COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
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THE ALGER|MEETING THE CHALLENGE
RETIREMENT|OF INVESTING
FUND|
STATEMENT|
OF ADDITIONAL|February 25, 1998
INFORMATION|
================================================================================
