As filed with the Securities and Exchange Commission
on December 28, 1998
Securities Act File No. 33-68124
Investment Company Act File No. 811-7986
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 10 [x]
(Check appropriate box or boxes)
THE ALGER RETIREMENT FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1 World Trade Center
Suite 9333
New York, New York 10048
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 212-806-8800
MR. GREGORY S. DUCH
FRED ALGER MANAGEMENT, INC.
1 WORLD TRADE CENTER
SUITE 9333
NEW YORK, NY 10048
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Page 1 of ___ Pages
Exhibit Index at Page ____
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b), or
[ ] on [date] pursuant to paragraph (b), or
[ ] 60 days after filing pursuant to paragraph (a), or
[X] on February 26, 1999 pursuant to paragraph (a)(2) of Rule 485
----------
<PAGE>
THE ALGER RETIREMENT FUND
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A
Item No. Prospectus Heading
- -------- ------------------
<S> <C>
1. Cover Page..................................... Front Cover Page
2. Synopsis ...................................... Risk/Return Summary:
Investments, Risks & Performance
3. Condensed Financial Information ............... Financial Highlights
4. General Description of Registrant ............. Risk/Return Summary:
Investments, Risks & Performance;
Management & Organization
5. Management of the Fund ........................ Management & Organization
6. Capital Stock and Other Securities ............ Management & Organization;
Shareholder Information
7. Purchase of Securities Being Offered .......... Fees and Expenses; Shareholder Information
8. Redemption or Repurchase ...................... Shareholder Information
Fund Shares
9. Pending Legal Proceedings ..................... Not Applicable
Part B Heading in Statement of
Item No. Additional Information
- -------- ----------------------
10. Cover Page .................................... Front Cover Page
11. Table of Contents ............................. Contents
12. General Information and History ............... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
13. Investment Objectives and Policies ............ Investment Strategies and Policies;
Appendix
14. Management of the Fund ........................ Management
15. Control Persons and Principal Holders of
Securities .................................. Certain Shareholders
16. Investment Advisory and Other Services ........ Management; Custodian and Transfer
Agent; Purchases; See in the Prospectus
"Management and Organization"
17. Brokerage Allocation and Other Practices ...... Investment Strategies and Policies; Management
18. Capital Stock and Other Securities ............ Organization; See in the Prospectus
"Shareholder Information" and
"Management and Organization"
19. Purchase, Redemption and Pricing of Secu-
rities Being Offered ......................... Net Asset Value; Purchases; Redemp-
tions
20. Tax Status .................................... Taxes; See in the Prospectus
"Shareholder Information"
21. Underwriters .................................. Purchases; Management
22. Calculation of Performance Data ............... Determination of Performance
23. Financial Statements .......................... Financial Statements incorporated by
reference--"Determination of Performance";
See in the Prospectus "Financial Highlights"
</TABLE>
Part C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
THE ALGER
RETIREMENT FUND
AVAILABLE FOR INVESTMENT BY DEFINED
CONTRIBUTION PLANS
PROSPECTUS
FEBRUARY 26, 1999
ALGER SMALL CAP RETIREMENT PORTFOLIO
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
ALGER GROWTH RETIREMENT PORTFOLIO
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
As with all mutual funds, the Securities and Exchange Commission has not
determined if the information in this Prospectus is accurate or complete,
nor has it approved or disapproved these securities. It is a criminal
offense to represent otherwise.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or other
government agency.
<PAGE>
TABLE OF CONTENTS
2 ........... Risk/Return Summary: Investments,
Risks & Performance
2 ..... Investments
Alger Small Cap
Retirement Portfolio .......................... 2
Alger MidCap Growth
Retirement Portfolio .......................... 2
Alger Growth
Retirement Portfolio .......................... 2
Alger Capital Appreciation
Retirement Portfolio .......................... 3
3 ..... Risks
Alger Small Cap
Retirement Portfolio .......................... 3
Alger MidCap Growth
Retirement Portfolio .......................... 4
Alger Growth
Retirement Portfolio .......................... 4
Alger Capital Appreciation
Portfolio ..................................... 4
5 ..... Performance
Alger Small Cap
Retirement Portfolio .......................... 5
Alger MidCap Growth
Retirement Portfolio .......................... 5
Alger Growth
Retirement Portfolio .......................... 5
Alger Capital Appreciation
Retirement Portfolio .......................... 5
6 ........... FEES AND EXPENSES
7 ........... Management and Organization
7 ........... Shareholder Information
Distributor ................................... 7
Transfer Agent ................................ 7
Purchasing and Redeeming
Fund Shares ................................... 8
9 ........... Financial Highlights
Alger Small Cap
Retirement Portfolio .......................... 9
Alger Mid Cap Growth
Retirement Portfolio ..........................10
Alger Growth
Retirement Portfolio ..........................11
Alger Capital Appreciation
Portfolio .....................................12
Back Cover: How to obtain more information
<PAGE>
[GRAPHIC OMITTED]
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENTS: THE ALGER RETIREMENT FUND
The investment goal and primary approach of each portfolio is discussed
individually below. The Fund's Manager, Fred Alger Management, Inc., normally
seeks out and invests in rapidly growing companies that show growth potential.
It is Management's opinion that these companies tend to fall into one of two
categories:
* High Unit Volume Growth
Vital, creative companies which offer goods or services to a rapidly expanding
marketplace. They include both established and emerging firms, offering new or
improved products, or firms simply fulfilling an increased demand for an
existing line.
* Positive Life Cycle Change
Companies experiencing a major change which is expected to produce
advantageous results. These changes may be as varied as new management,
products or technologies; restructuring or reorganization; or merger and
acquisition.
The company's capitalization will dictate which portfolio(s) it will be placed
in. Other securities the portfolios sometimes invest in are discussed in the
Fund's Statement of Additional Information (see back cover).
- --------------------------------------------------------------------------------
Capitalization:
Stock price multiplied by number of shares outstanding.
- --------------------------------------------------------------------------------
ALGER SMALL CAP RETIREMENT PORTFOLIO
GOAL
THE ALGER SMALL CAP RETIREMENT PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION by
focusing on small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace.
APPROACH
Under normal circumstances, the portfolio invests primarily in the equity
securities, such as common or preferred stocks, of small capitalization
companies listed on U.S. exchanges or in the U.S. over-the-counter market. A
small capitalization company has a market capitalization within the range of
companies in the Russell(R) 2000 Growth Index or the S&P (R) SmallCap 600 Index.
The portfolio may invest up to 100% of its assets in cash, high-grade bonds, or
cash equivalents for temporary defensive reasons if the manager believes that
adverse market or other conditions warrant. This is to protect the Fund's assets
from a temporary unacceptable risk of loss, rather than directly to promote the
portfolio's investment objective.
This portfolio may appeal to investors who seek long-term capital growth and can
tolerate fluctuations in their investment's value.
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
GOAL
THE ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION by investing in midsize companies with promising growth potential.
APPROACH
Under normal circumstances, the portfolio invests primarily in the equity
securities, such as common or preferred stocks, of companies listed on U.S.
exchanges or in the U.S. over-the-counter market and having a market
capitalization within the range of companies in the S&P (R) MidCap 400 Index.
The portfolio may invest up to 100% of its assets in cash, high-grade bonds, or
cash equivalents for temporary defensive reasons if the manager believes that
adverse market or other conditions warrant. This is to protect the Fund's assets
from a temporary unacceptable risk of loss, rather than directly to promote the
portfolio's investment objective.
This portfolio may appeal to investors who seek long-term capital growth and can
tolerate fluctuations in their investment's value.
ALGER GROWTH RETIREMENT PORTFOLIO
GOAL
THE ALGER GROWTH RETIREMENT PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION by
investing primarily in companies that generally have broad product lines,
markets, financial resources and depth of management.
APPROACH
Under normal circumstances, the portfolio invests primarily in the equity
securities, such as common or preferred stocks, of large companies listed on
U.S. exchanges or in the U.S. over-the-counter market. The portfolio considers a
large company to have a market capitalization of $1 billion or greater.
The portfolio may invest up to 100% of its assets in cash, high-grade bonds, or
cash equivalents for temporary
2
<PAGE>
defensive reasons if the manager believes that adverse market or other
conditions warrant. This is to protect the Fund's assets from a temporary
unacceptable risk of loss, rather than directly to promote the portfolio's
investment objective.
This portfolio may appeal to investors who seek long-term capital growth.
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
GOAL
THE ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION by focusing on companies of all market capitalization sizes which
demonstrate promising growth potential.
APPROACH
Under normal circumstances, the portfolio invests in the equity securities, such
as common or preferred stocks, of companies of any size.
The portfolio may invest up to 100% of its assets in cash, high-grade bonds, or
cash equivalents for temporary defensive reasons if the manager believes that
adverse market or other conditions warrant. This is to protect the Fund's assets
from a temporary unacceptable risk of loss, rather than directly to promote the
portfolio's investment objective.
The portfolio also can leverage, that is, borrow money, to buy additional
securities. By borrowing money, the portfolio has the potential to increase its
returns if the increase in the value of the securities purchased exceed the
interest paid to the banks for the money borrowed.
This portfolio may appeal to investors who seek long-term capital growth and can
tolerate fluctuations in their investment's value, including fluctuations due to
leveraging.
- --------------------------------------------------------------------------------
GROWTH STOCKS: STOCKS
OF COMPANIES THAT ARE
EXPERIENCING RAPIDLY
EXPANDING REVENUES
AND PROFITS WITH EXPEC-
TATIONS FOR FUTURE
GROWTH.
- --------------------------------------------------------------------------------
RISKS
RISKS APPLICABLE TO ALL PORTFOLIOS
As with any fund that invests in stocks, your investment will go up or down in
value, and the loss of your investment, when you redeem your shares is a risk of
investing. A portfolio's price per share will fluctuate due to changes in the
market prices of its investments. Also, a Fund investment may not grow as fast
as the rate of inflation and stocks tend to be more volatile than some other
investments you could make, such as bonds. Furthermore, the returns of a fund
concentrating on "growth" stocks tend to vary more widely over time than those
of funds that focus on "value" stocks. Based on the portfolios' investment
styles and objectives, an investment in them may be better suited to long-term
investment strategies.
A portfolio may engage in short-term trading, meaning the Fund may buy a
security and sell it a short time later to take advantage of current gains if it
is believed that the security's price may soon go down. This activity may create
higher transaction costs due to commissions and another expenses. In addition, a
high level of short-term trading may increase a portfolio's realized gains,
thereby increasing the amount that must be distributed to shareholders at the
end of the year.
RISKS APPLICABLE TO ALGER SMALL CAP
RETIREMENT PORTFOLIO
A risk of investing in the portfolio is:
O the possibility of greater risk by investing in developmental stage
companies rather than larger, more established companies
3
<PAGE>
RISKS APPLICABLE TO ALGER MIDCAP GROWTH
RETIREMENT PORTFOLIO
A risk of investing in the portfolio is:
O the possibility of greater risk by investing in medium-sized companies rather
than larger, more established companies
RISKS APPLICABLE TO ALGER CAPITAL APPRECIATION
RETIREMENT PORTFOLIO
A risk of investing in the portfolio is:
O the risk that the cost of borrowing money to leverage will exceed the returns
for the securities purchased or that the securities purchased may actually go
down in value; the portfolio's net asset value can decrease more quickly than
if the portfolio had not borrowed
4
<PAGE>
[GRAPH]
Performance
The following charts show each portfolio's performance from year to year and
give you some indication of the risks of investing in the Fund. They assume
reinvestment of dividends and distributions. Remember that how a portfolio has
performed in the past is not necessarily an indication of how it will perform in
the future. The Average Annual Total Return Tables compare each portfolio's
performance with that of the appropriate benchmark index.
ALGER SMALL CAP RETIREMENT PORTFOLIO
Annual Total Return as of December 31 each year
[GRAPHIC OMITTED]
3.51 60.83 14.83 14.21 n/a
94 95 96 97 98
Best Quarter: 26.30%
Worst Quarter: -18.73%
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year (11/8/93)
- --------------------------------------------------
Small Cap % %
Russell 2000 Growth % %
ALGER GROWTH RETIREMENT PORTFOLIO
Annual Total Return as of December 31 each year
[GRAPHIC OMITTED]
-2.95 39.52 11.32 26.72 n/a
94 95 96 97 98
Best Quarter: 19.33%
Worst Quarter: -7.23%
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year (11/8/93)
- -------------------------------------------------
Growth % %
S&P 500 % %
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
Annual Total Return as of December 31 each year
[GRAPHIC OMITTED]
9.77 51.89 15.19 20.25 n/a
94 95 96 97 98
Best Quarter: 20.86%
Worst Quarter: -13.34%
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year (11/8/93)
- -------------------------------------------------
MidCap % %
S&P Midcap 400 % %
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
Annual Total Return as of December 31 each year
[GRAPHIC OMITTED]
-8.34 54.51 10.06 25.44 n/a
94 95 96 97 98
Best Quarter: 26.24%
Worst Quarter: -12.20%
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year (11/8/93)
- -------------------------------------------------
Capital Appr. % %
S&P 500 % %
5
<PAGE>
[GRAPHIC]
FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in
the Fund. The table below shows the fees and expenses that you may incur if you
buy and hold shares of the portfolios.
<TABLE>
<CAPTION>
ALGER ALGER ALGER
SMALL MIDCAP ALGER CAPITAL
CAP GROWTH GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shareholder Fees
(fees paid directly from your investment) None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .85% .80% .75% .85%
Distribution fees None None None None
Other Expenses % % % %*
Total Fund Operating Expenses % % % %
* Included in Other Expenses of the Capital Appreciation Retirement Portfolio
is 0.15% of interest expense
EXAMPLES
The example below, which reflects the shareholder fees and operating expenses
listed above, is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated, regardless of whether
you redeem all of your shares at the end of those periods or not. The Example
also assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
ALGER ALGER ALGER
SMALL MIDCAP ALGER CAPITAL
CAP GROWTH GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------
One Year $ 11 $ 13 $ 12 $ 16
Three Years 34 42 36 51
Five Years 58 72 62 88
Ten Years 129 158 137 192
</TABLE>
6
<PAGE>
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
1 World Trade Center
Suite 9333
New York, NY 10048
The Manager has been an investment adviser since 1964, and manages investments
totaling (at 12/31/98) $___ billion in mutual fund assets as well as $___
billion in other assets. The Manager makes investment decisions for the Fund and
continuously reviews and administers the portfolios' investment programs. These
management responsibilities are subject ot the Fund's Board of Trustees'
supervision. The Fund has had the same manager since its inception, and the
portfolios pay the manager fees at these annual rates based on a percentage of
daily net assets: SmallCap and Capital Appreciation--.85%; MidCap Growth--.80%;
and Growth--.75%.
PORTFOLIO MANAGERS
David Alger, Seilai Khoo and Ron Tartaro are the individuals responsible for the
day-to-day management of the portfolios' investments. Mr. Alger, a co-manager of
all portfolios, has been employed by the Manager as Executive Vice President and
Director of Research since 1971, and as President since 1995. Ms. Khoo, a
co-manager of the Small Cap and Capital Appreciation portfolios, 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, a co-manager of the
MidCap Growth and Growth portfolios, has been employed by Alger Management since
1990, as a senior research analyst until 1995 and as a Senior Vice President
since 1995.
YEAR 2000
The Fund's Manager and Distributor have advised the Fund that they are
implementing a Year 2000 plan to address any issues arising from computer
systems' potentially erroneous reading of dates in the year 2000. Specifically,
they are in the process of confirming that the Fund's service providers are
resolving any Year 2000 issues as the millennium approaches. While there can be
no assurance that there will be no impairment of services at that time, the Fund
currently does not foresee servicing issues. Currently it is not anticipated
that the Fund's shareholders' investments will be impacted negatively as a
result of the Fund's Year 2000 transition. However, people and resources have
been devoted to this important review.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
Alger Shareholder Services, Inc.
30 Montgomery Street
Jersey City, NJ 07302
The price of one share is its "net asset value", or NAV. The NAV is calculated
as of the close of business (normally 4:00 p.m. Eastern time) every day the New
York Stock Exchange is open. The Exchange is closed on the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
It may close on other days from time to time.
7
<PAGE>
The Fund generally values the assets of each portfolio on the basis of market
quotations or, where market quotations are not readily available, on the basis
of fair value as determined by the manager under procedures adopted by the Board
of Trustees.
The Fund declares and pays dividends and distributions annually . The Fund
expects that its annual distributions to shareholders will consist of both
long-term capital gains and net investment income.
Participants in defined contribution plans ordinarily will not be subject to
taxation on dividends from net investment income and net realized capital gains
until they receive a distribution of the dividends from their plan accounts.
Generally, distributions from a plan are taxable as ordinary income at the rate
applicable to each participant at the time of distribution. In certain cases,
distributions made to a participant prior to the participant's reaching age
591/2 are subject to a penalty tax equivalent to 10% of the distributed amount,
in addition to the ordinary income tax payable on such amount.
Because everyone's tax situation is unique, see a tax advisor about federal,
state and local tax consequences of investing in the Fund.
- --------------------------------------------------------------------------------
NAV (NET ASSET VALUE) IS
COMPUTED BY ADDING TOGETHER
THE VALUE OF THE FUND'S
INVESTMENTS PLUS CASH AND
OTHER ASSETS, SUBTRACTING ITS
LIABILITIES AND THEN DIVIDING
THE RESULT BY THE NUMBER OF ITS
OUTSTANDING SHARES.
- --------------------------------------------------------------------------------
PURCHASING AND REDEEMING FUND SHARES
Plan sponsors are the sole direct purchasers of fund shares. You may buy and
redeem shares only through your plan sponsor, and not directly through the fund.
There is no minimum initial or subsequent investment for any plan sponsor.
Please contact your plan sponsor for information concerning the procedure for
investing in the fund.
Plan sponsors can buy and redeem shares on any day the New York Stock Exchange
is open. They will be processed at the NAV next calculated after a purchase or
redemption request is received and accepted by the transfer agent.
The Fund may redeem some shares "in kind", which means that some of the proceeds
will be paid with securities the Fund owns instead of cash.
8
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
portfolio's financial performance for the periods shown. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP whose
report, along with the Fund's financial statements, are included in the Annual
Report, which is available upon request.
ALGER SMALLCAP RETIREMENT PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
PERIOD
ENDED
YEAR ENDED OCTOBER 31, OCT. 31*
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $17.87 $17.92 $10.83 $10.00
------- ------- ------- ------- -------
Net investment loss (0.10) (0.05) (0.07) (0.07)
Net realized and unrealized gain (loss)
on investments 3.13 1.72 7.23 0.90
------- ------- ------- ------- -------
Total from investment operations 3.03 1.67 7.16 0.83
------- ------- ------- ------- -------
Dividends from net investment income
Distributions from net realized gains (2.90) (1.72) (0.07)
------- ------- ------- ------- -------
Total Distributions
------- ------- ------- ------- -------
Net asset value, end of year $18.00 $17.87 $17.92 $10.83
======= ======= ======= ======= =======
Total Return 19.0% 9.2% 66.2% 8.3%
======= ======= ======= ======= =======
Ratio for Supplemental data:
Net assets, end of year
(000's omitted) $31,499 $30,043 $23,002 $9,513
======= ======= ======= ======= =======
Ratio of expenses to average net assets 1.06% 1.05% 1.13% 1.47%
======= ======= ======= ======= =======
Ratio of net investment income (loss)
to average net assets (.62%) (.54%) (.73%) (0.80)%
======= ======= ======= ======= =======
Portfolio Turnover Rate 134.25% 182.49% 104.84% 186.75%
</TABLE>
* Ratios have been annualized; total return has not been annualized.
9
<PAGE>
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
PERIOD
ENDED
YEAR ENDED OCTOBER 31, OCT. 31*
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $14.48 $16.34 $11.66 $10.00
------- ------- ------- ------- -------
Net investment income (loss) (0.15) (0.07) (0.07) (0.09)
Net realized and unrealized gain (loss)
on investments 3.46 1.09 7.23 1.75
------- ------- ------- ------- -------
Total from investment operations 3.31 1.02 7.16 1.66
------- ------- ------- ------- -------
Dividends from net investment income
Distributions from net realized gains (6.43) (2.88) (0.07)
------- ------- ------- ------- -------
Total Distributions
------- ------- ------- ------- -------
Net asset value, end of year $11.36 $14.48 $17.92 $11.66
======= ======= ======= ======= =======
Total Return 28.6% 6.2% 66.2% 16.6%
======= ======= ======= ======= =======
Ratio for Supplemental data:
Net assets, end of year
(000's omitted) $6,435 $9,726 $23,002 $6,774
======= ======= ======= ======= =======
Ratio of expenses to average net assets 1.31% 1.16% 1.13% 1.53%
======= ======= ======= ======= =======
Ratio of net investment income(loss)
to average net assets (.79%) (.45%) (.73%) (0.89)%
======= ======= ======= ======= =======
Portfolio Turnover Rate 183.31% 170.21% 104.84% 134.06%
</TABLE>
* Ratios have been annualized; total return has not been annualized.
10
<PAGE>
ALGER GROWTH RETIREMENT PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
PERIOD
ENDED
YEAR ENDED OCTOBER 31, OCT. 31*
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $9.32 $11.65 $10.38 $10.00
------- ------- ------- ------- -------
Net investment income (loss) (0.02)(i) (0.01) (0.01) (0.03)
Net realized and unrealized gain (loss)
on investments 2.65 0.91 3.59 0.41
------- ------- ------- ------- -------
Total from investment operations 2.63 0.90 3.58 0.38
------- ------- ------- ------- -------
Dividends from net investment income
Distributions from net realized gains (1.17) (3.23) (2.31)
------- ------- ------- ------- -------
Total Distributions
------- ------- ------- ------- -------
Net asset value, end of year $10.78 $9.32 $11.65 $10.38
======= ======= ======= ======= =======
Total Return 28.8% 8.2% 37.1% 3.8%
======= ======= ======= ======= =======
Ratio for Supplemental data:
Net assets, end of year
(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 income(loss)
to average net assets (.22%) (.09%) (.18%) (0.29)%
======= ======= ======= ======= =======
Portfolio Turnover Rate 159.38% 142.83% 133.42% 103.79%
======= ======= ======= ======= =======
(i) Amount was computed based on average shares outstanding during the year.
* Ratios have been annualized; total return has not been annualized.
</TABLE>
11
<PAGE>
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
PERIOD
ENDED
YEAR ENDED OCTOBER 31, OCT. 31*
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $9.98 $10.72 10.08 $10.00
------- ------- ------- ------- -------
Net investment income (loss) (0.10)(i) (0.07) (0.19) (0.23)
Net realized and unrealized gain (loss)
on investments 2.51 0.83 5.30 0.31
------- ------- ------- ------- -------
Total from investment operations 2.41 0.76 5.11 0.08
------- ------- ------- ------- -------
Dividends from net investment income
Distributions from net realized gains (2.59) (3.60) (2.47)
------- ------- ------- ------- -------
Total Distributions
------- ------- ------- ------- -------
Net asset value, end of year $9.70 $9.88 $12.72 $10.08
======= ======= ======= ======= =======
Total Return 26.1% 6.1% 54.4% 0.8%
======= ======= ======= ======= =======
Ratio for Supplemental data:
Net assets, end of year
(000's omitted) $4,520 $6,703 $8,116 $5,251
======= ======= ======= ======= =======
Ratio of expenses to average net assets 1.47% 1.37% 1.43% 1.78%
======= ======= ======= ======= =======
Ratio of net investment income(loss)
to average net assets (1.02%) (.94%) (2.32%) (2.53)%
======= ======= ======= ======= =======
Portfolio Turnover Rate 159.56% 203.46% 188.53% 229.11%
</TABLE>
(i) Amount was computed based on average shares outstanding during the year.
* Ratios have been annualized; total return has not been annualized.
12
<PAGE>
FOR FUND INFORMATION:
By telephone: 1-800-992-3362
By mail: The Alger Retirement Fund
1 World Trade Center
Suite 9333
New York, NY 10048
STATEMENT OF ADDITIONAL INFORMATION
For more detailed information about the Fund and its policies, please read the
Statement of Additional Information, which is incorporated by reference into (is
legally made a part of) this Prospectus. You can get a free copy of the
Statement of Additional Information by calling the Fund's toll-free number or by
writing to the address above. The Statement of Additional Information is on file
with the Securities and Exchange Commission.
ANNUAL AND SEMI-ANNUAL REPORTS
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the period of the report.
You can receive free copies of these reports by calling the Fund's toll-free
number or by writing to the address above. Another way you can obtain copies is
by visiting the SEC's Public Reference Room or by forwarding your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009. Information on the operation of the Public Reference Room is
available by calling 1-800-SEC-0330.
FRED ALGER & COMPANY, INCORPORATED, DISTRIBUTOR
THE ALGER RETIREMENT FUND
SEC FILE #811-7986
<PAGE>
|
THE ALGER |
RETIREMENT | MEETING THE CHALLENGE
FUND | OF INVESTING
|
ALGER SMALL CAP
RETIREMENT PORTFOLIO
ALGER MIDCAP GROWTH
RETIREMENT PORTFOLIO
ALGER GROWTH
RETIREMENT PORTFOLIO
ALGER CAPITAL APPRECIATION
RETIREMENT PORTFOLIO
|
STATEMENT |
OF ADDITIONAL | FEBRUARY 26, 1999
INFORMATION |
|
<PAGE>
|
THE ALGER | 1 WORLD TRADE CENTER
RETIREMENT | SUITE 9333
FUND | NEW YORK, NEW YORK 10048
| (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").
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 Portfolios are:
* 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.
The Fund's financial statements for the year ended October 31, 199_ are
contained in its annual report to shareholders and are incorporated by reference
into this Statement of Additional Information.
A Prospectus for the Fund dated February 26, 1999, 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
The Portfolios............................................................ 2
Investment Strategies and Policies........................................ 3
Net Asset Value........................................................... 11
Purchases and Redemptions................................................. 11
Expenses.................................................................. 12
Management................................................................ 13
Dividends and Distributions............................................... 15
Taxes..................................................................... 15
Custodian................................................................. 15
Transfer Agent............................................................ 15
Certain Shareholders...................................................... 16
Organization.............................................................. 17
Determination of Performance.............................................. 18
Financial Statements...................................................... 19
Appendix................................................................. A-1
<PAGE>
THE PORTFOLIOS
IN GENERAL
The Alger Retirement Fund (the "Fund") is a diversified, open-end management
investment company that offers a selection of four Portfolios. Currently, the
shares of the Fund are available only to defined contribution retirement plans
(the "Plans"); however, the Fund reserves the right to make shares of the
Portfolios available to other investors as may be approved by its Board of
Trustees from time to time. The Trustees also 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.
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 opportunities, the results of an equity investment
managed by a particular management firm may not match those of the market as a
whole.
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.
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. The Portfolio may invest up to 35% of its total assets in equity
securities of companies that,
-2-
<PAGE>
at the time of purchase, have total market capitalization outside this combined
range and in excess of that amount (up to 100% of its assets) during temporary
defensive periods.
ALGER 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. The Portfolio may invest up to 35% of its total
assets in equity securities of companies that, at the time of purchase, have
total market capitalization outside the range of companies included in the S&P
MidCap 400 Index and in excess of that amount (up to 100% of its assets) during
temporary defensive periods.
ALGER GROWTH RETIREMENT PORTFOLIO
Except during temporary defensive periods, the Alger Growth Retirement
Portfolio, formerly known as Alger Defined Contribution Growth Portfolio,
invests at least 65 percent of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market
capitalization of $1 billion or greater.
The Portfolio may invest up to 35 percent of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization of less than $1 billion.
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.
INVESTMENT STRATEGIES AND POLICIES
CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The Prospectus discusses the investment objectives of each Portfolio and the
primary strategies 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.
MONEY MARKET INSTRUMENTS
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.
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
-3-
<PAGE>
Farm Credit Banks, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Land Banks and Maritime Administration.
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.
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 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.
ILLIQUID AND 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 pur-
-4-
<PAGE>
chased 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). If institutional trading in restricted securities were to decline to
limited levels, the liquidity of the Fund's Portfolios could be adversely
affected.
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.
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.
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.
OPTIONS (ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO ONLY)
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 although, as in the past, it
does not currently intend to rely on these strategies extensively, if at all.
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.
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 not
purchase or write options that appear to lack 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.
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
-5-
<PAGE>
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.
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.
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 would 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 might 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 any trading by the Portfolio in put and call options,
there can be no assurance that the Portfolio will succeed in any option-trading
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 or for risk management purposes although, as in the past, it does not
currently intend to rely on these strategies
-6-
<PAGE>
extensively, if at all. 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. No assurance
can be given that such closing transactions can be effected or that there would
be a correlation between price movements in the options on stock index futures
and price movements in the Portfolio's securities which were the subject of the
hedge. In addition, the Portfolio's purchase of such options would be based upon
predictions as to anticipated market trends, which could prove to be inaccurate.
The Portfolio's use, if any, 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, if at all, 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 would 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.
There can be no assurance of the Portfolio's successful use of stock index
futures as a hedging device or that the Portfolio will use this strategy. 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 would 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. If the
Portfolio uses futures or options thereon for hedging, the risk of imperfect
correlation will increase 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, if it uses
a hedging strategy, 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.
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.
BORROWING
The Alger Capital Appreciation Retirement Portfolio may borrow from banks for
investment purposes. This borrowing is known as leveraging. The Portfolio may
also borrow from banks for temporary or emergency purposes. 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
-7-
<PAGE>
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.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 12 below have been adopted by the
Fund with respect to each of the Portfolios as fundamental policies. Under the
Investment Company Act of 1940, as amended (the "Act"), a "fundamental" policy
may not be changed without the vote of a "majority of the outstanding voting
securities" of the Fund, which is defined in the Act as the lesser of (a) 67
percent or more of the shares present at a Fund meeting if the holders of more
than 50 percent of the outstanding shares of the Fund are present or represented
by proxy or (b) more than 50 percent of the outstanding shares. A fundamental
policy affecting a particular Portfolio may not be changed without the vote of a
majority of the outstanding voting securities of the affected Portfolio. Each
Portfolio's investment objective is a fundamental policy. 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 may borrow for temporary or
emergency purposes including the meeting of redemption requests that might
otherwise require the untimely disposition of securities, in an amount not
exceeding 10 percent of the value of the Portfolio's total assets (including the
amount borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made; and (b) the
Alger Capital Appreciation Retirement Portfolio may also borrow from banks for
investment (leveraging) purposes. 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.
-8-
<PAGE>
11. Investing in commodities except that the Alger Capital Appreciation
Retirement Portfolio may purchase or sell stock index futures contracts and
related options thereon if thereafter no more than 5 percent of its total assets
are invested in margin and premiums.
12. Purchasing or selling real estate or real estate limited partnerships,
except that the Portfolio may purchase and sell securities secured by real
estate, mortgages or interests therein and securities that are issued by
companies that invest or deal in real estate.
13. Investing more than 15 percent of its net assets in securities which are
illiquid by virtue of legal or contractual restrictions on resale or the absence
of a readily available market. However, securities with legal and contractual
restrictions on resale issued pursuant to Rule 144A of the Securities Act of
1933 may be purchased if they are determined to be liquid, and such purchases
would not be subject to the 15 percent limit stated above. The Board of Trustees
will in good faith determine the specific types of securities deemed to be
liquid and the value of such securities.
14. Investing in oil, gas or other mineral leases, or exploration or development
programs, except that the Portfolio may invest in the securities of companies
that invest in or sponsor those programs.
15. Purchasing any security if as a result the Portfolio would then have more
than five percent of its total assets invested in securities of issuers
(including predecessors) that have been in continual operation for less than
three years. This limitation shall not apply to investments in U.S. Government
securities.
16. Making investments for the purpose of exercising control or management.
17. Investing in warrants, except that the Portfolio may invest in warrants if,
as a result, the investments (valued at the lower of cost or market) would not
exceed five percent of the value of the Portfolio's net assets, of which not
more than two percent of the Portfolio's net assets may be invested in warrants
not listed on a recognized domestic stock exchange. Warrants acquired by the
Portfolio as part of a unit or attached to securities at the time of acquisition
are not subject to this limitation.
18. Purchasing or retaining the securities of any issuer if, to the knowledge of
the Fund, any of the officers, directors or trustees of the Fund or Alger
Management individually owns more than .5 percent of the outstanding securities
of the issuer and together they own beneficially more than five percent of the
securities.
Except in the case of the 300 percent limitation set forth in Investment
Restriction No. 4, the percentage limitations contained in the foregoing
restrictions apply at the time of the purchase of the securities and a later
increase or decrease in percentage resulting from a change in the values of the
securities or in the amount of the Portfolio's assets will not constitute a
violation of the restriction.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities and other financial instruments for a
Portfolio are made by Alger Management, which also is responsible for placing
these transactions, subject to the overall review of the Fund's Board of
Trustees. Although investment requirements for each Portfolio are reviewed
independently from those of the other accounts managed by Alger Management and
those of the other Portfolios, investments of the type the Portfolios may make
may also be made by these other accounts or Portfolios. When a Portfolio and one
or more other Portfolios or accounts managed by Alger Management are prepared to
invest in, or desire to dispose of, the same security or other financial
instrument, available investments or opportunities for sales will be allocated
in a manner believed by Alger Management to be equitable to each. In some cases,
this procedure may affect adversely the price paid or received by a Portfolio or
the size of the position obtained or disposed of by a Portfolio.
Transactions in equity securities are in most cases effected on U.S. stock
exchanges and involve the payment of negotiated brokerage commissions. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the prices of those securities include undisclosed
commissions or mark-ups. Purchases and sales of money market instruments and
debt securities usually are principal transactions. These securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. The cost of securities purchased from underwriters
includes an underwriting commission or 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.
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<PAGE>
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.
To the extent consistent with applicable provisions of the Act and the rules and
exemptions adopted by the Securities and Exchange Commission (the "SEC")
thereunder, as well as other regulatory requirements, the Fund's Board of
Trustees has determined that portfolio transactions will be executed through
Fred Alger & Company, Incorporated ("Alger Inc.") if, in the judgment of Alger
Management, the use of Alger Inc. is likely to result in price and execution at
least as favorable as those of other qualified broker-dealers and if, in
particular transactions, Alger Inc. charges the Portfolio involved a rate
consistent with that charged to comparable unaffiliated customers in similar
transactions. Such transactions will be fair and reasonable to the Portfolio's
shareholders. Over-the-counter purchases and sales are transacted directly with
principal market makers except in those cases in which better prices and
executions may be obtained elsewhere. Principal transactions are not entered
into with affiliates of the Fund except pursuant to exemptive rules or orders
adopted by the SEC.
In selecting brokers or dealers to execute portfolio transactions on behalf of a
Portfolio, Alger Management seeks the best overall terms available. In assessing
the best overall terms available for any transaction, Alger Management will
consider the factors it deems relevant, including the breadth of the market in
the investment, the price of the investment, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis. In
addition, Alger Management is authorized, in selecting parties to execute a
particular transaction and in evaluating the best overall terms available, to
consider the brokerage and research services, as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended, provided to
the Portfolio involved, the other Portfolios and/or other accounts over which
Alger Management or its affiliates exercise investment discretion to the extent
permitted by law. The Fund will consider sales of its shares as a factor in the
selection of broker-dealers to execute over-the-counter transactions, subject to
the requirements of best price and execution. Alger Management's fees under its
agreements with the Portfolios are not reduced by reason of its receiving
brokerage and research services. The Fund's Board of Trustees will periodically
review the commissions paid by the Portfolios to determine if the commissions
paid over representative periods of time are reasonable in relation to the
benefits received by the Portfolios. For the fiscal year ended October 31, 1996,
the Fund paid an aggregate of approximately $107,038 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, 1997, the Fund paid an
aggregate of approximately $162,299 in commissions in connection with portfolio
transactions, all to Alger Inc. For the fiscal year ended October 31, 1998, the
Fund paid an aggregate of approximately $_________in commissions in connection
with Portfolio transactions. The commissions paid to Alger Inc. during the
fiscal year ended October 31, 1998 were $_________and constituted % of the
aggregate brokerage commissions paid by the Fund; during that year, % 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.
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<PAGE>
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
generally open on each Monday through Friday. 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 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 participating Plan. However, the Fund reserves the right to make
shares of the Portfolios available to other investors, as may be approved by the
Board of Trustees from time to time.
Only the Plans may be record holders of the shares of the Portfolios. Within the
limitations applicable to a Plan, a participant in such Plan (a "Participant")
may direct the Plan to purchase or redeem shares of the Fund. Participants in a
Plan cannot contact the Fund directly to request the purchase or redemption of
the shares. Instead, Participants must contact their Plan Sponsor or its agent
designated for the purpose of processing purchase and redemption requests.
References in the Prospectus and Statement of Additional Information to
shareholders are to Plan Sponsors as the record holders of the Fund's shares.
The assets of the Fund are not plan assets of any of the Plans.
Shares of the Portfolios are offered by the Fund on a continuous basis to Plan
Sponsors of defined contribution retirement plans and are distributed by Alger
Inc. as principal underwriter for the Fund pursuant to a distribution agreement
(the "Distribution Agreement"). The Distribution Agreement provides that Alger
Inc. accepts orders for shares at net asset value as no sales commission or load
is charged. Each of the officers of the Fund and Messrs. David D. Alger and Fred
M. Alger III, Trustees of the Fund, are "affiliated persons," as defined in the
Act, of the Fund and of Alger Inc.
Purchases and redemptions of shares of a Portfolio are 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.
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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.
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
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.
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.
EXPENSES
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
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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.
MANAGEMENT
TRUSTEES AND OFFICERS OF THE FUND
The Fund is governed by a Board of Trustees which is responsible for protecting
the interests of shareholders under Massachusetts law.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 1 World Trade Center, Suite 9333, New York, New York 10048.
<TABLE>
<CAPTION>
NAME, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
<S> <C>
Fred M. Alger III (64) 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 (55) President and Director of Associates, Alger Management,
President and Trustee Alger Inc., Properties, Services, International and Agency; Executive Vice President and
Director of ARI; Director of Asset Growth.
Gregory S. Duch (47) Executive Vice President, Treasurer and Director of Alger Management
Treasurer and Properties and Associates; Executive Vice President and Treasurer of Alger Inc., ARI,
Services, and Agency; Director and Treasurer of International.
Mary E. Marsden-Cochran (46) Vice President, General Counsel and Secretary, Associates, Alger
Secretary Management, Alger Inc., Properties, ARI, Services and Agency (2/96-present); Secretary
of International (7/97-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 (45) Senior Vice President of Alger Inc.
Assistant Secretary and
Assistant Treasurer
Arthur M. Dubow (65) Trustee of the Arthur Dubow Foundation; private investor since 1985;
Trustee Director of Coolidge Investment Corporation; formerly Chairman of the
P.O. Box 969 Board of Institutional Shareholder Services, Inc.; formerly President of
Wainscott, NY 11975 Fourth Estate, Inc.
Stephen E. O'Neil (66) Of counsel to the law firm of Kohler & Barnes PC; private investor
Trustee since 1981; Director of NovaCare, Inc. and Brown Forman Corporation
805 Third Avenue formerly President and Vice Chairman of City Investing Company and
New York, NY 10022 Director of Centerre Bancorporation and Syntro Corporation.
Nathan E. Saint-Amand, M.D. (61) Medical doctor in private practice.
Trustee
2 East 88th Street
New York, NY 10128
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
John T. Sargent (74) 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, 1998. The following table provides
compensation amounts paid to disinterested Trustees of the Fund for the fiscal
year ended October 31, 1998.
<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 $4,500 $21,187.50
</TABLE>
INVESTMENT MANAGER
Alger Management serves as investment manager to each of the Portfolios pursuant
to separate written agreements (the "Management Agreements") and under the
supervision of the Fund's Board of Trustees. Alger Management pays the salaries
of all officers who are employed by both it and 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. 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.
In addition, Alger Management analyzes the Portfolios' assets, provides
administrative services, 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 bears
all expenses in connection with the performance of its services under the
Management Agreements.
For the fiscal years ended October 31, 1996, October 31, 1997 and October 31,
1998, Alger Management earned under the terms of the Management Agreements
$87,258, $136,841 and $_______, respectively, in respect of the Alger Growth
Retirement Portfolio; $223,623, $251,536 and $________, respectively, in respect
of the Alger Small Cap Retirement Portfolio; $80,088, $59,911 and $________,
respectively, in respect of the Alger MidCap Growth Retirement Portfolio; and
$58,658, $44,688 and $________, respectively, in respect of the Alger Capital
Appreciation Retirement Portfolio.
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<PAGE>
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.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountants for the Fund.
SHAREHOLDER SERVICING FEES
Shareholder servicing fees paid by the Fund are not tied exclusively to the
shareholder servicing expenses actually incurred by Alger Inc., and the payments
may exceed expenses actually incurred by Alger Inc. The Board of Trustees
evaluates the appropriateness of the shareholder servicing fees and their
payment terms on a periodic basis and in doing so considers all relevant
factors, including expenses borne by Alger Inc. and the amounts of the
shareholder servicing fees it receives. During the fiscal year ended October 31,
1998, the Fund paid Alger Inc. $______ in shareholder servicing fees.
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
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 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.
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 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.
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.
CUSTODIAN
State Street Bank & Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as custodian of the Fund's assets pursuant to a custodian
agreement.
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 Ser-
-15-
<PAGE>
vices 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. Under the transfer agency agreement,
Services is compensated on a per-account and, for certain transactions, a
per-transaction basis.
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.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders of the
Portfolios. At ______________, Wells Fargo Bank, Trustee for Mentor Graphics,
owned beneficially or of record % of the Alger Small Cap Retirement
Portfolio. Northern Trust Company, Trustee for IHC 401K, owned beneficially or
of record % 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 % and %, respectively, of the Alger MidCap Growth Retirement
Portfolio; and % and %, respectively, of the Alger Capital
Appreciation Retirement Portfolio at February _, 1999. 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 _, 1999,
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 1 World Trade
Center, Suite 9333, New York, New York 10048. All holdings are expressed as a
percentage of a Portfolio's outstanding shares as of ______________ and record
and beneficial holdings are in each instance denoted as follows:
record/beneficial.
<TABLE>
<CAPTION>
Alger Alger
ALGER ALGER MIDCAP CAPITAL
SMALL CAP GROWTH GROWTH APPRECIATION
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
NAME AND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
ADDRESS (RECORD/ (RECORD/ (RECORD/ (RECORD/
OF SHAREHOLDERS BENEFICIAL) BENEFICIAL) BENEFICIAL) BENEFICIAL)
- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fred Alger & Company, % / % % / % % / % % / %
Incorporated et al
Pension Plan
Fred Alger & Company, % / % % / % % / % % / %
Incorporated et al
Profit Sharing Plan
Fred Alger & Company, / / % / % % / %
Incorporated
401(k) Plan
Wells Fargo Bank % / / / /
T'tee Kelly Group Tax
Def Inv Pl
P.O. Box 9800
Calabasas,
CA 91378
U.S. Bank % / / / /
Trustee for The
Spacelabs Issop
P. O. Box 3168
Portland, OR
97208
U.S. Bank % / / / /
Trustee for Spacelabs
Med Retirement Plan
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
P. O. Box 3168
Portland, OR
97208
<S> <C> <C> <C> <C>
Wells Fargo Bank, Trustee % / / / /
fbo Mentor Graphics
P.O. Box 9800
Calabasas,
CA 91302
Northern Trust Company / % / / /
T'tee FBO IHC 401K
P.O. Box 92956
Chicago, IL 60675
Northern Trust Company / % / / /
T'tee FBO IHC 403B
P.O. Box 92956
Chicago, IL 60675
Officers and Trustees / / / /
of the Fund in the
Aggregate**
</TABLE>
- -------------
*Indicates shareholder owns less than 5% of the Portfolio's shares.
**Certain officers and Trustees of the Fund are participants in one or more of
the Fred Alger & Company, Incorporated Pension Plan, Profit Sharing Plan and
401(k) Plan and may therefore, as a group, be deemed to be indirect holders of
the following interests in the Portfolios: Small Cap Retirement Portfolio,
____%; Growth Retirement Portfolio, _____%; Midcap Growth Retirement Portfolio,
_____%; Capital Appreciation Retirement Portfolio, _____%.
***Indicates group owns less than 1% of the Portfolio's shares.
+The Fund regards the underlying Plan as the beneficial owner.
ORGANIZATION
The Fund has been organized as a business trust under the laws of the
Commonwealth of Massachusetts pursuant to an Agreement and Declaration of Trust
dated July 14, 1993 (the "Trust Agreement"). The 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. 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.
The Fund is classified as a "diversified" investment company under the
Investment Company Act of 1940. A "diversified" investment company is required,
with respect to 75% of its assets, to limit its investment in an one issued
(other than the U.S. government) to no more than 5% of the investment company's
total assets. The Fund intends to continue to qualify as a "regulated investment
company" under the Internal Revenue Code; one of the requirements for such
qualification is a quarterly diversification test, applicable to 50% (rather
than 75%) of the Fund's assets, similar to the requirement stated above.
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 have equal voting rights, which cannot be adversely modified
other than by majority vote. 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.
Although, as a Massachusetts business trust, the Fund is not required by law to
hold annual shareholder meetings, it may hold meetings from time to time on
important matters, and shareholders have the right to call a meeting to remove a
Trustee or to take other action described in the Fund's Declaration of Trust.
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.
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
-17-
<PAGE>
holding at least two-thirds of the Fund's outstanding shares at a meeting called
for that purpose.
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" as to each of the Portfolios, are computed
according to formulas prescribed by the SEC. These performance figures are
calculated in the following manner:
A. Total Return--A Portfolio's average annual total return described in the
Prospectus is computed according to the following formula:
P (1+T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5, or 10 year periods at the end of
the 1, 5 and 10 year periods (or fractional portion thereof);
The average annual total returns for the Portfolios for the periods indicated
below were as follows:
PERIOD FROM
INCEPTION* YEAR-ENDED
THROUGH 10/31/98 10/31/98
---------------- ----------
Alger Small Cap Retirement
Portfolio _____% _____%
Alger MidCap Growth
Retirement Portfolio _____% _____%
Alger Growth Retirement
Portfolio _____% _____%
Alger Capital Appreciation
Retirement Portfolio _____% _____%
* 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
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.
-18-
<PAGE>
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, 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(R), 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, 199_, 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.
-19-
<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.
1 World Trade Center
Suite 9333
New York, New York 10048
- --------------------------------------------------------------------------------
DISTRIBUTOR:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
- --------------------------------------------------------------------------------
TRANSFER AGENT:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
- --------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
- --------------------------------------------------------------------------------
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
- --------------------------------------------------------------------------------
|
THE ALGER |
RETIREMENT | MEETING THE CHALLENGE
FUND | OF INVESTING
|
|
STATEMENT |
OF ADDITIONAL | FEBRUARY 26, 1999
INFORMATION |
|
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibit No. Description of Exhibit
1 Agreement and Declaration of Trust [EDGAR 2/98] (3)
1a Certificate of Amendment dated August 16, 1993 (3)
1b Certificate of Designation - Alger Defined Contribution
Leveraged AllCap Portfolio [EDGAR 2/98] (3)
1c Certificate of Amendment dated March 30, 1996 (2)
2 By-laws of Registrant (1) [EDGAR 2/98]
3 Not applicable
4 Specimen Share Certificates (1)
5 Investment Management Agreements (1)
5a Investment Management Agreement for Alger Defined Contribution
MidCap Growth Portfolio (1) [EDGAR 2/98]
5a(i) Amendment dated September 11, 1996 (3)
5b Investment Management Agreement for Alger Defined Contribution
Leveraged AllCap Portfolio (1) [EDGAR 2/98]
5b(i) Amendment dated September 11, 1996 [EDGAR 2/98] (3)
5c Investment Management Agreement for Alger Defined
Contribution Small Cap Portfolio (1) [EDGAR 2/98]
5c(i) Amendment dated September 11, 1996 [EDGAR 2/98] (3)
5d Investment Management Agreement for Alger Defined Contribution
Growth Portfolio (1) [EDGAR 2/98]
5d(i) Amendment dated September 11, 1996 [EDGAR 2/98] (3)
6 Distribution Agreement (1)[EDGAR 2/98]
6a Amendment dated September 11, 1996 [EDGAR 2/98] (3)
7 Not applicable
8 Custody Agreement (2)
9 Transfer Agency Agreement (1) [EDGAR 2/98]
10 Opinion and Consent of Sullivan & Worcester
11 Consent of Arthur Andersen LLP
<PAGE>
12 Not applicable
13 Form of Subscription Agreement (1) [EDGAR 2/98]
14 Not applicable
15 Not applicable
- -----------------
(1) Incorporated by reference to Registrant's Registration Statement (the
"Registration Statement") filed with the Securities and Exchange
Commission (the "SEC") on August 27, 1993.
(2) Incorporated by reference to Post-Effective Amendment No. 6 filed with
the SEC on February 27, 1997
(3) Incorporated by reference to Post-Effective Amendment No. 7 filed with
the SEC on February 25, 1998.
Item 24. Persons Controlled by or Under Common Control with Registrant
None.
Item 25. Indemnification
Under Section 8.4 of Registrant's Agreement and Declaration of Trust, any
past or present Trustee or officer of Registrant (including persons who serve at
Registrant's request as directors, officers or Trustees of another organization
in which Registrant has any interest as a shareholder, creditor or
otherwise[hereinafter referred to as a "Covered Person"]) is indemnified to the
fullest extent permitted by law against liability and all expenses reasonably
incurred by him in connection with any action, suit or proceeding to which he
may be a party or otherwise involved by reason of his being or having been a
Covered Person. This provision does not authorize indemnification when it is
determined, in the manner specified in the Agreement and Declaration of Trust,
that such Covered Person has not acted in good faith in the reasonable belief
that his actions were in or not opposed to the best interests of Registrant.
Moreover, this provision does not authorize indemnification when it is
determined , in the manner specified in the Agreement and Declaration of Trust,
that such Covered Person would otherwise be liable to Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties. Expenses may be paid by Registrant in advance
of the final disposition of any action, suit or proceeding upon receipt of an
undertaking by such Covered Person to repay such expenses to Registrant in the
event that it is ultimately determined that indemnification of such expenses is
not authorized under the Agreement and Declaration of Trust and either (i) the
Covered Person provides security for such undertaking, (ii) Registrant is
insured against losses from such advances, or (iii) the disinterested Trustees
or independent legal counsel determines, in the manner specified in the
Agreement and Declaration of Trust, that there is reason to believe the Covered
Person will be found to be entitled to indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to Trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission (the "SEC") such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
Alger Management, which serves as investment manager to Registrant, is
generally engaged in rendering investment advisory services to institutions and,
to a lesser extent, individuals. Alger Management presently serves as investment
adviser to one closed-end investment company and to three other open-end
investment companies. The list required by this Item 26 regarding any other
business, profession, vocation or employment of a substantial nature engaged in
by officers and directors of Alger Management during the past two years is
incorporated by reference to Schedules A and D of Form ADV filed by Alger
Management pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-06709).
Item 27. Principal Underwriter
(a) Alger Inc. acts as principal underwriter for Registrant, The Alger
American Fund, Spectra Fund and The Alger Fund and has acted as subscription
agent for Castle Convertible Fund, Inc. and Spectra Fund, Inc.
(b) The information required by this Item 27 with respect to each director,
officer or partner of Alger Inc. is incorporated by reference to Schedule A of
Form BD filed by Alger Inc. pursuant to the Securities Exchange Act of 1934 (SEC
File No. 8-6423).
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts and records of Registrant are maintained by Mr. Gregory S.
Duch, Fred Alger & Company, Incorporated, 30 Montgomery Street, Jersey City, NJ
07302.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, Registrant has duly caused this Amendment to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
New York and State of New York on the 28th day of December, 1998.
THE ALGER RETIREMENT FUND
By: /s/ David D. Alger
-------------------------------
David D. Alger, President
ATTEST: /s/ Gregory S. Duch
--------------------------------------
Gregory S. Duch, Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Fred M. Alger III Chairman of the Board December 28, 1998
- ----------------------------
Fred M. Alger III
/s/ David D. Alger President and Trustee December 28, 1998
- ---------------------------- (Chief Executive Officer)
David D. Alger
/s/ Gregory S. Duch Treasurer December 28, 1998
- ---------------------------- (Chief Financial and
Gregory S. Duch Accounting Officer)
*/s/ Nathan E. Saint-Amand Trustee December 28, 1998
- ----------------------------
Nathan E. Saint-Amand
*/s/ Stephen E. O'Neil Trustee December 28, 1998
- ----------------------------
Stephen E. O'Neil
*/s/ Arthur M. Dubow Trustee December 28, 1998
- ----------------------------
Arthur M. Dubow
*/s/ John T. Sargent Trustee December 28, 1998
- ----------------------------
John T. Sargent
* By:/s/Gregory S. Duch
-------------------------
Gregory S. Duch
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit Page
- ------- ----
10 Opinion and Consent of Sullivan and Worcester 1
11 Consent of Independent Accounts 2
SULLIVAN & WORCESTER LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
FAX NO. 617-338-2660
Boston
December 28, 1998
The Trustees of The Alger Retirement Fund
75 Maiden Lane
New York, New York 10038
Re: The Alger Retirement Fund
AMENDMENT TO REGISTRATION STATEMENT ON FORM N1-A
Ladies and Gentlemen:
You have requested our opinion as to certain matters of Massachusetts law
in connection with the filing by The Alger Retirement Fund, a trust with
transferable shares established under Massachusetts law (the` "TRUST"), of
Post-Effective Amendment No. 8 to the Trust's Registration Statement on Form
N-1A (the "REGISTRATION STATEMENT") under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), Registration No. 33-68124, and Amendment No. 10 to its
Registration Statement under the Investment Company Act, Registration No.
811-7986 (collectively, the "AMENDMENT").
We acted as Massachusetts counsel to the Trust in connection with the
execution and delivery of its Declaration of Trust dated July 14, 1993 (the
"ORIGINAL DESIGNATION"), and the several amendments thereto filed August 18,
1993 and April 16, 1996 (the Original Declaration as so amended, the
"DECLARATION"), and the authorization by the Trustees of the Trust of the
issuance and sale of shares of beneficial interest, one mill ($.001) par value,
of the several series authorized by the Declaration (the "SHARES") which are to
be registered pursuant to the Amendment. In this connection, we have examined
and are familiar with the Declaration, the Bylaws of the Trust, the Amendment,
substantially in the form in which it is to be filed with the Securities and
Exchange Commission (the "SEC"), the forms of the Prospectus (the "PROSPECTUS")
and the Statement of Additional Information (the "SAI") included in the
Amendment, certificates of officers of the Trust as to actions of the Trustees,
certificates of the officers of the Trust and of public officials as to other
matters of fact, and such questions of law and fact, as we have considered
necessary or appropriate for purposes of the opinions expressed herein. We have
assumed the genuineness of the signatures on, and the authenticity of, all
documents furnished to us, and the conformity to the originals of documents
submitted to us as certified copies, which facts we have not independently
verified.
Based upon and subject to the foregoing, we hereby advise you that, in our
opinion, under Massachusetts law:
1. The Trust is validly existing as a trust with transferable shares of the
type commonly called a Massachusetts business trust.
2. The Trust is authorized to issue an unlimited number of Shares; the
Shares have been duly and validly authorized by all requisite action of
the Trustees of the Trust, and no action of the shareholders of the
Trust is required in such connection.
3. The Shares subject to the Registration Statement, when duly sold, issued
and paid for as contemplated by the Prospectus and the SAI, will be
validly and legally issued, and fully paid and nonassessable by the
Trust.
With respect to the opinion stated in paragraph 3 above, we wish to point
out that the shareholders of a Massachusetts business trust may under some
circumstances be subject to assessment at the instance of creditors to pay the
obligations of such trust in the event that its assets are insufficient for the
purpose.
The letter expresses our opinions as to the provisions of the Declaration
and the laws of The Commonwealth of Massachusetts applying to business trusts
generally, but does not extend to the Massachusetts Securities Act, or to
federal securities or other laws.
We hereby consent to the reference to us in the Prospectus, and to the
filing of this opinion with the SEC as an exhibit to the Registration Statement.
In giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended.
Very truly yours,
/s/ Sullivan & Worcester LLP
----------------------------
SULLIVAN & WORCESTER LLP
[ARTHUR
ANDERSEN LOGO]
---------------------------
Arthur Anderson LLP
---------------------------
1345 Avenue of the Americas
New York, NY 10105-0032
Writer's Direct Dial
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
dated December 12, 1997 on the financial statements of The Alger Retirement Fund
for the year ended October 31, 1997 and to all references to our Firm included
in or made a part of the registration statement of The Alger Retirement Fund
filed on Form N-1A (Amendment No. 10), Investment Company Act File No. 811-7986
with the Securities and Exchange Commission.
/s/ARTHUR ANDERSEN LLP
-------------------
ARTHUR ANDERSEN LLP
New York, New York
December 22, 1998
