================================================================================
THE ALGER |
RETIREMENT | MEETING THE CHALLENGE
FUND | OF INVESTING
ALGER GROWTH
RETIREMENT PORTFOLIO
ALGER SMALL CAP
RETIREMENT PORTFOLIO
ALGER MIDCAP GROWTH
RETIREMENT PORTFOLIO
ALGER CAPITAL APPRECIATION
RETIREMENT PORTFOLIO
ANNUAL |
REPORT | OCTOBER 31, 1998
================================================================================
<PAGE>
November 20, 1998
FELLOW SHAREHOLDERS:
THE YEAR IN REVIEW
Following three years of euphoric gains, the U.S. stock market maintained
its torrid pace during the first half of 1998, fueled by strong domestic demand,
low inflation, stable interest rates, and a neutral monetary policy. The Dow
Jones Industrial Average, which broke through the 9000 level for the first time
in history during the month of April, continued its upward trend into the summer
months, rising to an intra-day high of 9412 on July 17th. The third quarter,
however, marked an abrupt reversal in the direction of the equity markets, with
all major stock market indices posting double-digit losses for the quarter.
During this period, the DJIA plunged to an intra-day low of 7379 on September
1st, representing a 22% drop from the high -- technically a bear market.
Subsequently, it fluctuated wildly between 7400 and 8200, testing the lower part
of the band six times. Recently, however, the market has come roaring back and
is currently trading at levels close to the highs set back in July.
What forces conspired to create this extreme volatility? We believe that
the market is normally confronted by one overriding problem at a time - the
"primary worry". For example, over the last several years the "primary worry"
has been the Federal Reserve raising interest rates. This year, however, the
market was confronted by several "primary worries", causing it to fluctuate
wildly as deepening gloom about the global economy as well as political
upheavals intensified the turbulence in the financial markets:
1. Japan -- The Japanese economy was clearly in a severe recession and the
banking system was very weak. Many banks had been allowed to continue in
business despite being effectively insolvent. The new government was thought to
be inept and slow to react. The fear was that if Japan sank further into the
abyss, it would drag down the rest of Asia, possibly even forcing a devaluation
in China and thus leading to a round of competitive devaluations.
2. "Contagion" -- The financial crisis that began in Thailand in the
summer of 1997 had infected other countries in Asia by the end of 1997. By the
summer of 1998, it had spread to other parts of the world. For a while, it
looked like Russia was going to devolve into political and economic chaos.
Russia's stock market collapsed, its currency was devalued and the country
defaulted on billions of dollars of debt. Furthermore, the Duma rejected Boris
Yeltsin's choice for Prime Minister. The prospect of chaos in Russia had
implications far beyond the economy as the wholesale selling of nuclear weapons
was also a fear.
Events in Russia caused the risk premium for all investments in emerging
markets to rise dramatically and, as a result, there was a massive flight of
capital from these markets. Investors targeted Brazil in particular, whose
economy represents approximately 40% of the GDP of South America and is an
important partner of the U.S. Moreover, Brazil was in the middle of an election.
The fear developed that a collapse of Brazil would take down all of South
America.
3. Financial Market Instability -- The collapse of Long-Term Capital
Management and other smaller hedge funds hit the banking system hard, causing
substantial fear that the whole financial system was unstable.
4. The Clinton/Lewinsky Matter -- This had an important negative effect on
the market because it was perceived by foreigners as some form of coup d'etat.
You may recall that on the day the Starr report was released, the market dropped
249 points.
Against this background, the economy was clearly slowing, bringing into
question the issue of third quarter earnings and raising the possibility of a
recession in 1999. Investors, growing increasingly cautious, began to avoid risk
and every type of security began to look risky, except for the ultimate safe
haven -- U.S. Treasuries. The ensuing flight to quality drove the yield on the
30-year Treasury bond down to 4.70% by the start of October, and the spread
between U.S. Treasuries and corporate bonds widened dramatically.
Recently, however, the market has come back dramatically and we are
optimistic that this upward trend will continue. The primary catalyst for the
turnaround was the surprise move by the Federal
<PAGE>
Reserve on October 15th to lower the Fed funds rate to 5% and the discount rate
to 4.75%. This followed a 25 basis point cut of the Fed funds rate on September
29th, which the market had viewed as inadequate. This move on October 15th,
coming between Federal Open-Market Committee meetings, was a very strong
statement that the Fed would act to alleviate the credit crunch and fend off a
possible recession. The decision by the Fed on November 17th to lower both the
Fed funds rate and the discount rate by an additional 25 basis points should
continue to drive the market.
At the same time, the "primary worries" are abating:
1. Japan -- The Obuchi government succeeded in passing banking reform
legislation involving $500 billion of public money to shore up the "zombie"
banks. This is a substantial positive and should, in time, help Japan's business
and consumer confidence, perhaps leading to improved domestic spending and a
healthier economy. More importantly, the prospect of a more stable Japan has
taken some of the fear out of other Asian markets.
2. "Contagion" -- Fears began to subside that the economic and financial
turmoil was spreading around the world. The U.S. Congress approved additional
funding for the IMF. President Cardoso won reelection in Brazil. In the wake of
the elections, the Brazilian government proposed an austerity package,
considered essential both for its long-term fiscal and economic stability and
for receiving funding from the IMF. There will undoubtedly be some more nervous
moments from now until the end of the year. The only good news from Russia has
been that it has a government. The IMF has been unwilling to disburse any more
funds due to the lack of a satisfactory economic plan, and Russia is still in
talks with its creditors.
3. Financial Market Instability -- The Long-Term Capital Management/hedge
funds situation seems to have stabilized with no further rumors of major hedge
fund problems. The Fed's willingness to safeguard the financial system has
brought a great sense of relief to the market.
4. The Clinton/Lewinsky Matter -- The election is now over and voters
stated en masse that they were utterly unconcerned with the Monica Lewinsky
matter. It seems therefore increasingly improbable that Clinton will be removed
from office unless there is some new series of revelations. Consequently, we
think it is unlikely that this matter will continue to affect the stock market
in any profoundly negative way.
PORTFOLIO MATTERS
ALGER SMALL CAP RETIREMENT PORTFOLIO
The Alger Small Cap Retirement Portfolio's total return for the year was
- -1.78% which, although negative, was extremely favorable compared to the
benchmark return of -15.86% for the Russell 2000 Growth Index. Obviously, this
was a particularly difficult period for small cap growth stocks as investors
continued to place a high premium on liquidity and earnings predictability,
causing large cap stocks to drive the market. The explosive growth potential and
attractive relative valuations of smaller stocks were all but ignored by a
risk-averse investment community. The Portfolio's ability to significantly
outperform the benchmark return was not the result of increased or limited
exposure to certain sectors, as every economic sector in the small cap
discipline suffered, but rather the result of careful stock selection.
ALGER GROWTH RETIREMENT PORTFOLIO
For the year ended October 31, 1998, the Alger Growth Retirement
Portfolio's total return was 25.42% as compared to 21.99% for the S&P 500.
During this volatile period, investors once again favored larger, more
predictable stocks. Additionally, many of the market factors discussed
previously contributed to an environment wherein stocks of certain sectors
performed exceptionally well. In particular, the Portfolio's heavy exposure to
health care, retailing and technology stocks enabled it to post strong
double-digit returns. The strength in retailing was primarily attributable to
high employment, high consumer confidence and falling interest rates, while the
health care sector, including pharmaceuticals and medical devices, fared well in
the face of a slowing economy. The technology sector was driven largely by
internet companies, which emerged as a major force in 1998.
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
For the year ended October 31, 1998, the Alger MidCap Growth Retirement
Portfolio's performance
<PAGE>
exceeded that of the benchmark, returning 11.50% as compared to 6.71% for the
S&P MidCap 400 Index. The Portfolio's industry exposure was similar to that of
the Growth Portfolio, so both were helped and hurt by the same economic factors
discussed previously. Of note, holdings in the technology sector performed
particularly well, driven by continued strong capital investment by businesses
hoping to improve productivity, time to market and competitive edge. Given the
possibility of a slowing economic environment, the Portfolio is well positioned
for strong performance as mid cap growth stocks, with their generally higher
earnings growth potential, are increasingly valued by the market as earnings
growth becomes more scarce.
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
For the year ended October 31, 1998, the Alger Capital Appreciation
Retirement Portfolio's total return was 28.11%, compared to 21.99% for the S&P
500. For the third year in a row, bigger was better as investors continued to
flock toward the larger, "safer" companies. As a result, large cap stocks fared
better than mid cap stocks, which in turn fared better than small cap stocks.
Since this Portfolio employs an "allcap" (small, medium and large
capitalizations) portfolio management strategy, it was able to take advantage of
prevailing market conditions by overweighting in larger cap stocks. This
strategic positioning, coupled with careful stock selection among the small and
mid cap segments of the market, allowed this portfolio to generate returns in
excess of the benchmark.
LOOKING AHEAD
While recent events will likely result in slower economic growth in coming
quarters, we believe that the outlook for the U.S. economy remains constructive.
The positives - low inflation, low interest rates, high levels of employment,
reasonably high levels of consumer confidence, a well-capitalized banking
system, and prudent monetary and fiscal policies - should offset the negative
impact of a weakening import/export sector. Growth in the U.S. will slow, but we
do not foresee a recession on the horizon.
Since economic growth will likely slow both here and abroad, the rate of
gain in corporate earnings will not be as robust as in recent years.
High-quality growth companies, however, have the ability to generate high levels
of earnings even in a weak economic environment. Today, growth stocks, which
typically sell at a premium to the market, are trading at only slightly more
than the market multiple. As stability returns to the market, we believe growth
stocks will regain their normal premium to the market. As a result, we believe
that The Alger Fund portfolios, which consist of quality growth stocks, should
produce superior performance in the months ahead.
Respectfully submitted,
/s/ David D. Alger
------------------
David D. Alger
President
<PAGE>
- --------------------------------------------------------------------------------
ALGER GROWTH RETIREMENT PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1998 (UNAUDITED)
================================================================================
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION November 8, 1993
- --------------------------------------------------------------------------------
[TABLE BELOW REPRESENTS DATA PRESENTED AS A LINE CHART IN ORIGINAL]
Alger
Growth
Retirement S&P 500
---------- -------
11/8/93 10000 10000
10/31/94 10380 10410
10/31/95 14231 13162
10/31/96 15396 16333
10/31/97 19836 21579
10/31/98 24878 26324
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Growth Retirement Portfolio and the S&P 500 Index
on November 8, 1993, the inception date of the Alger Growth Retirement
Portfolio. The figures for both the Alger Growth Retirement Portfolio and the
S&P 500 Index, an unmanaged index of common stocks, include reinvestment of
dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH October 31, 1998
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 11/8/93
----------------------
Alger Growth
Retirement Portfolio 25.42% 20.08%
S&P 500 Index 21.99% 21.45%
-------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
4
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER GROWTH RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
SHARES COMMON STOCKS--87.7% VALUE
------ -----
AIRLINES--.7%
5,100 US Airways Group Inc.* ............... $ 288,471
-----------
BROADCASTING--1.5%
11,900 Comcast Corp., Cl. A. Special ........ 587,563
-----------
BUSINESS SERVICES--1.8%
10,600 IMS Health Inc. ...................... 704,900
-----------
COMMUNICATIONS--6.6%
11,500 America Online Inc. .................. 1,461,225
3,800 COX Communications Inc. Cl. A.* ...... 208,525
17,800 MCI Worldcom Inc.* ................... 983,450
-----------
2,653,200
-----------
COMMUNICATION EQUIPMENT--4.1%
12,300 Ascend Communications, Inc.* ......... 593,475
16,650 Cisco Systems, Inc.* ................. 1,048,950
-----------
1,642,425
-----------
COMPUTER RELATED & BUSINESS
EQUIPMENT--8.7%
14,000 Compaq Computer Corp. ................ 442,750
7,200 Dell Computer Corp.* ................. 471,600
21,000 EMC Corp.* ........................... 1,351,875
8,300 International Business Machines Corp. 1,232,035
-----------
3,498,260
-----------
COMPUTER SOFTWARE--4.9%
14,500 Compuware Corp.* ..................... 785,726
11,000 Microsoft Corporation* ............... 1,164,625
-----------
1,950,351
-----------
CONGLOMERATE--3.0%
20,186 Tyco International Ltd. .............. 1,250,280
-----------
DRUG DISTRIBUTION--2.8%
7,500 Cardinal Health, Inc. ................ 709,223
5,500 McKesson Corp. ....................... 423,500
-----------
1,132,723
-----------
FINANCIAL SERVICES--13.2%
13,700 BankAmerica Corp. .................... 786,901
13,300 Bank of New York Inc. ................ 419,788
20,500 Citigroup Inc. ....................... 964,792
14,900 Federal Home Loan Mortgage Corporation 856,750
3,900 Firstar Corp. ........................ 221,325
9,140 First Union Corp. .................... 530,120
17,500 Household International Inc. ......... 639,853
17,000 Kansas City Southern Industries, Inc. 656,625
3,100 SunAmerica Inc. ...................... 218,550
-----------
5,294,704
-----------
FOOD CHAINS--7.5%
10,700 Fred Meyer, lnc.* .................... 570,449
21,200 Kroger Co.* .......................... 1,176,600
27,200 Safeway Inc.* ........................ 1,300,514
-----------
3,047,563
-----------
INSURANCE--1.8%
8,625 American International Group, Inc. ... 735,281
-----------
LEISURE & ENTERTAINMENT--1.0%
12,500 Carnival Corp. ....................... 404,688
-----------
MEDICAL DEVICES--.5%
3,000 Medtronic, Inc. ...................... 195,000
-----------
PHARMACEUTICALS--11.9%
7,500 Bristol Myers Squibb Co. ............. 829,223
3,000 Elan Corp PLC-ADR* ................... 210,189
11,600 Pfizer Inc. .......................... 1,244,830
10,900 Schering-Plough Corporation .......... 1,121,338
1,600 SmithKline Beecham PLC ADS ........... 102,000
16,200 Warner-Lambert Co. ................... 1,269,675
-----------
4,777 255
-----------
POLLUTION CONTROL--2.5%
22,000 Waste Management, Inc. ............... 992,750
-----------
RETAILING--10.2%
18,400 CVS Corp. ............................ 840,659
24,900 Home Depot, Inc. ..................... 1,083,150
28,500 Staples Inc.* ........................ 929,813
17,900 Wal-Mart Stores Inc. ................. 1,235,100
-----------
4,088,722
-----------
SEMICONDUCTORS--4.5%
11,200 Intel Corp. .......................... 998,906
13,000 Texas Instruments, Incorporated ...... 831,194
-----------
1,830,100
-----------
TRANSPORTATION--.5%
6,200 Burlington Northern Santa Fe Co. ..... 191,425
-----------
Total Common Stocks
(Cost $27,454,539) .................. 35,265,661
-----------
5
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT SHORT-TERM CORPORATE NOTES--12.3%...... VALUE
- ---------- -----
$1,000,000 Aetna Services, Inc.,
5.26%, 11/06/98...................... $ 999,269
950,000 Bayerische Vereinsbank A.G.,
5.22%, 11/05/98...................... 949,449
600,000 General Electric Capital Corporation,
5.13%, 11/05/98...................... 599,658
450,000 Merrill Lynch & Co., Inc.,
5.25%, 11/10/98...................... 449,410
1,000,000 Montauk Funding Corp.,
5.18%, 11/06/98 (a).................. 999,280
950,000 National Australia Funding, Inc.,
5.22%, 11/05/98...................... 949,449
Total Short-Term Corporate Notes
(Cost $4,946,515).................... 4,946,515
-----------
Total Investments
(Cost $32,401,054)(b).................... 100.0% 40,212,176
Liabilities in Excess of Other Assets..... (.0) (16,404)
----- -----------
Net Assets................................ 100.0% $40,195,772
===== ===========
* Non-income producing security.
(a) Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity to qualified institutional buyers.
(b) At October 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $32,401,054, amounted to
$7,811,122 which consisted of aggregate gross unrealized appreciation of
$8,091,502 and aggregate gross unrealized depreciation of $280,380.
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER GROWTH RETIREMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
FROM
NOVEMBER 8, 1993
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
----------------------------------------------------------- TO OCTOBER 31,
1998 1997 1996 1995 1994(i)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..............$ 10.78 $ 9.32 $ 11.65 $ 10.38 $ 10.00
---------- ---------- --------- ---------- ---------
Net investment income (loss) ...................... (0.01)(ii) (0.02)(ii) (0.01) (0.01) (0.03)
Net realized and unrealized gain on investments ... 2.82 2.65 0.91 3.59 0.41
---------- ---------- --------- ---------- ---------
Total from investment operations ............ 2.81 2.63 0.90 3.58 0.38
Distributions from net realized gains ............. (1.22) (1.17) (3.23) (2.31) --
---------- ---------- --------- ---------- ---------
Net asset value, end of period ....................$ 12.37 $ 10.78 $ 9.32 $ 11.65 $ 10.38
========== ======= ========= ========== =========
Total Return ...................................... 25.4% 28.8% 8.2% 37.1% 3.8%
========== ======= ========= ========== =========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) ...$ 40,196 $ 22,922 $ 11,325 $ 13,042 $ 9,365
========== ======= ========= ========== =========
Ratio of expenses to average net assets...... 1.11% 1.13% 1.07% 1.11% 1.26%
========== ======= ========= ========== =========
Ratio of net investment income (loss) to
average net assets ......................... (.06%) (.22%) (.09%) (.18%) (.29%)
========== ======= ========= ========== =========
Portfolio Turnover Rate ..................... 130.31% 159.38% 142.83% 133.42% 103.79%
========== ======= ========= ========== =========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
ALGER SMALL CAP RETIREMENT PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1998 (UNAUDITED)
================================================================================
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION November 8, 1993
- --------------------------------------------------------------------------------
[TABLE BELOW REPRESENTS DATA PRESENTED AS A LINE CHART IN ORIGINAL]
Small Cap Russell 2000 Growth Index
--------- -------------------------
11/8/93 10000 10000
10/31/94 10830 10006
10/31/95 17999 12063
10/31/96 19654 13671
10/31/97 23388 16565
10/31/98 22971 13940
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Small Cap Retirement Portfolio and the Russell 2000
Growth Index on November 8, 1993, the inception date of the Alger Small Cap
Retirement Portfolio. The figures for the Alger Small Cap Retirement Portfolio
and the Russell 2000 Growth Index, an unmanaged index of common stocks, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH October 31, 1998
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 11/8/93
---------------------------
Alger Small Cap
Retirement Portfolio (1.78)% 18.17%
Russell 2000 Growth Index (15.86)% 6.90%
---------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
8
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER SMALL CAP RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
SHARES COMMON STOCKS--93.6% VALUE
------ -----
ADVERTISING--1.2%
15,850 Outdoor Systems, Inc.* ............... $ 349,699
-----------
AIRLINES--2.9%
4,000 ASA Holdings Inc. .................... 143,500
9,200 Continental Airlines Inc. Cl. B.* .... 364,550
14,000 SkyWest Inc. ......................... 357,000
-----------
865,050
-----------
APPAREL--.6%
5,900 AnnTaylor Stores Corporation* ........ 171,100
-----------
BIO-TECHNOLOGY--3.9%
7,400 Centocor, Inc.* ...................... 329,300
7,000 IDEC Pharmaceuticals Corporation* .... 209,125
9,200 Medimmune Inc.* ...................... 618,700
-----------
1,157,125
-----------
BROADCASTING--1.4%
7,500 Jacor Communications Inc.* ........... 412,500
-----------
BUILDING & CONSTRUCTION--.5%
7,000 Champion Enterprises Inc.* ........... 139,125
-----------
BUSINESS SERVICES--4.5%
10,000 IMS Health Inc. ...................... 665,000
15,000 Rent-Way Inc.* ....................... 354,375
12,400 United Stationers Inc.* .............. 328,600
-----------
1,347,975
-----------
COMMUNICATIONS--2.7%
4,000 America Online Inc. .................. 508,252
8,000 Cox Radio, Inc. Cl. A.* .............. 299,504
-----------
807,756
-----------
COMMUNICATION EQUIPMENT--2.9%
10,500 Ascend Communications, lnc.* ......... 506,625
4,800 Dycom Industries Inc.* ............... 168,302
7,200 Visual Networks, Inc.* ............... 205,200
-----------
880,127
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--1.2%
13,100 Maxtor Corp.* ........................ 139,188
5,700 Sanmina Corporation* ................. 233,700
-----------
372,888
-----------
COMPUTER SERVICES--4.7%
9,600 Ceridian Corp.* ...................... 550,800
8,400 Keane Inc.* .......................... 279,300
5,000 QRS Corp.* ........................... 190,000
3,000 Yahoo Inc.* .......................... 392,532
-----------
1,412,632
-----------
COMPUTER SOFTWARE--2.7%
8,700 Citrix Systems, Inc.* ................ 616,613
3,700 Intuit Inc.* ......................... 186,850
-----------
803,463
-----------
CONSUMER PRODUCTS--.6%
8,800 Furniture Brands International Inc.* . 189,200
-----------
DRUG DISTRIBUTION--7.5%
20,800 Bergen Brunswig Corp. Cl. A. ......... 1,015,310
5,800 McKesson Corp. ....................... 446,600
23,200 Omnicare, Inc. ....................... 801,862
-----------
2,263,772
-----------
FINANCIAL SERVICES--11.0%
20,000 Dime Bancorp Inc. .................... 476,260
17,700 Finova Group Inc. .................... 862,875
5,000 First Union Corp. .................... 290,000
13,200 Kansas City Southern Industries Inc. _ 509,850
14,800 National Commerce Bancorp ............ 262,700
11,000 North Fork Bancorporation Inc. ....... 218,625
31,000 Sovereign Bancorp Inc. ............... 406,875
5,000 Wilmington Trust Corp. ............... 275,315
-----------
3,302,500
-----------
FOOD CHAINS--3.6%
39,600 Food Lion Inc. Cl. A. ................ 435,600
12,000 Fred Meyer, Inc.* .................... 639,756
-----------
1,075,356
-----------
FOODS & BEVERAGES--4.9%
7,100 Earthgrains Company .................. 213,000
17,800 Starbucks Corp.* ..................... 772,075
10,200 U.S. Foodservice* .................... 484,500
-----------
1 ,469,575
-----------
MEDICAL DEVICES--2.2%
5,000 Allegiance Corp. ..................... 185,940
13,700 Biomet Inc. .......................... 464,951
-----------
650,891
-----------
MEDICAL SERVICES--5.9%
18,500 Hooper Holmes Inc. ................... 440,541
10,000 Impath Inc.* ......................... 306,250
5,000 Lincare Holdings Inc.* ............... 199,690
30,000 MedQuist Inc.* ....................... 808,140
-----------
1,754,621
-----------
PHARMACEUTICALS--6.5%
14,600 Alza Corp.* .......................... 698,975
9,700 Elan Corp PLC-ADR* ................... 679,611
13,700 Forest Laboratories, Inc.* ........... 572,838
-----------
1,951,424
-----------
POLLUTION CONTROL--.9%
6,127 Waste Manangement, Inc. .............. 276,481
-----------
RESTAURANTS & LODGING--2.0%
11,160 CKE Restaurants Inc. ................. 293,653
9,000 Outback Steakhouse, Inc.* ............ 311,625
-----------
605,278
-----------
9
<PAGE>
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--(Continued) VALUE
------ -----
RETAILING--17.9%
27,400 Bed Bath & Beyond Inc.* .............. $ 755,224
23,500 BJ's Wholesale Club Inc.* ............ 844,543
10,000 Borders Group Inc.* .................. 253,750
23,900 Dollar General Corp. ................. 570,613
4,200 Ethan Allen Interiors Inc. ........... 144,375
34,200 Family Dollar Stores Inc. ............ 619,875
23,400 Linens'n Things Inc.* ................ 723,949
27,200 Office Depot Inc.* ................... 680,000
12,000 Pacific Sunwear of California Inc.* .. 259,500
18,300 Williams Sonoma Inc.* ................ 498,675
-----------
5,350,504
-----------
TRANSPORTATION--1.4 %
15,400 Coach USA Inc.* ...................... 412,920
-----------
Total Common Stocks
(Cost $25,442,102) .................. 28,021,962
-----------
PRINCIPAL
AMOUNT SHORT-TERM CORPORATE NOTES--4.0%
--------
$650,000 General Electric Capital Corporation,
5.13%, 11/05/98 ..................... 649,630
400,000 National Australia Funding, Inc.,
5.22%, 11/05/98 ..................... 399,768
150,000 Republic Industries Funding Corp.,
5.25%, 11/12/98 ..................... 149,759
-----------
Total Short-Term Corporate Notes
(Cost $1,199,157)................... 1,199,157
-----------
Total Investments
(Cost $26,641,259)(a)................... 97.6% 29,221,119
Other Assets In Excess of Liabilities..... 2.4 716,591
----- -----------
Net Assets................................ 100.0% $29,937,710
===== ===========
* Non-income producing security.
(a) At October 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $26,641,259, amounted to
$2,579,860 which consisted of aggregate gross unrealized appreciation of
$3,674,261 and aggregate gross unrealized depreciation of $1,094,401.
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER SMALL CAP RETIREMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
FROM
NOVEMBER 8, 1993
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
----------------------------------------------------------- TO OCTOBER 31,
1998 1997 1996 1995 1994(i)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 18.00 $ 17.87 $ 17.92 $ 10.83 $ 10.00
---------- --------- --------- ---------- ---------
Net investment income (loss)....................... (0.08) (0.10) (0.05) (0.07) (0.07)
Net realized and unrealized gain on investments.... 0.02 3.13 1.72 7.23 0.90
---------- --------- --------- ---------- ---------
Total from investment operations................. (0.06) 3.03 1.67 7.16 0.83
Distributions from net realized gains.............. (1.57) (2.90) (1.72) (0.07) --
---------- --------- --------- ---------- ---------
Net asset value, end of period.....................$ 16.37 $ 18.00 $ 17.87 $ 17.92 $ 10.83
========== ========= ========= ========== =========
Total Return....................................... (1.8)% 19.0% 9.2% 66.2% 8.3%
========== ========= ========= ========== =========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted)........$ 29,938 $ 31,499 $ 30,043 $ 23,002 $ 9,513
========== ========= ========= ========== =========
Ratio of expenses to average net assets ......... 1.03% 1.06% 1.05% 1.13% 1.47%
========== ========= ========= ========== =========
Ratio of net investment income (loss) to
average net assets.............................. (.55%) (.62%) (.54%) (.73%) (.80%)
========== ========= ========= ========== =========
Portfolio Turnover Rate.......................... 169.97% 134.25% 182.49% 104.84% 186.76%
========== ========= ========= ========== =========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1998 (UNAUDITED)
================================================================================
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION November 8, 1993
- --------------------------------------------------------------------------------
[TABLE BELOW REPRESENTS DATA PRESENTED AS A LINE CHART IN ORIGINAL]
MidCap S&P 500
------ -------
11/8/93 10000 10000
10/31/94 11660 10292
10/31/95 17968 12475
10/31/96 19088 14637
10/31/97 24544 19417
10/31/98 27366 20721
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger MidCap Growth Retirement Portfolio and the S&P
MidCap 400 Index on November 8, 1993, the inception date of the Alger MidCap
Growth Retirement Portfolio. Figures for the Alger MidCap Growth Retirement
Portfolio and the S&P MidCap 400 Index, an unmanaged index of common stocks,
include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH October 31, 1998
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 11/8/93
---------------------------
Alger MidCap Growth
Retirement Portfolio................... 11.50% 22.40%
S&P MidCap 400 Index................... 6.71% 15.75%
--------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
12
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
SHARES COMMON STOCKS--93.6% VALUE
------ -----
AIRLINES--4.5%
1,000 ASA Holdings Inc. .................... $ 35,875
2,600 Continental Airlines Inc. Cl. B.* .... 103,025
2,000 SkyWest Inc. ......................... 51,000
2,000 US Airways Group Inc.* ............... 113,126
-----------
303,026
-----------
APPAREL--.5%
800 Tommy Hilfiger Corporation* .......... 37,150
-----------
BIO-TECHNOLOGY--2.5%
3,800 Centocor, Inc.* ...................... 169,100
-----------
BROADCASTING--3.4%
3,300 Comcast Corp. Cl. A. Special ......... 162,938
1,200 Jacor Communications Inc.* ........... 66,000
-----------
228,938
-----------
BUILDING & CONSTRUCTION--1.5%
5,000 Champion Enterprises Inc.* ........... 99,375
-----------
BUSINESS SERVICES--2.6%
2,600 IMS Health Inc. ...................... 172,900
-----------
COMMUNICATIONS--5.2%
2,200 America Online Inc. .................. 279,539
1,200 COX Communications Inc. Cl. A.* ...... 65,850
-----------
345,389
-----------
COMMUNICATION EQUIPMENT--2.0%
2,800 Ascend Communications, Inc.* ......... 135,100
-----------
COMPUTER RELATED & BUSINESS
EQUIPMENT--2.0%
1,900 Quantum Corp.* ....................... 33,369
2,400 Sanmina Corporation* ................. 98,400
-----------
131,769
-----------
COMPUTER SERVICES--2.6%
3,000 Ceridian Corp.* ...................... 172,125
-----------
COMPUTER SOFTWARE--6.3%
2,200 Citrix Systems, Inc.* ................ 155,925
3,600 Compuware Corp.* ..................... 195,077
1,400 Intuit Inc.* ......................... 70,700
-----------
421,702
-----------
CONSUMER PRODUCTS--1.3%
4,000 Furniture Brands International Inc.* . 86,000
-----------
DRUG DISTRIBUTION--7.4%
800 Bergen Brunswig Corp. Cl. A. ......... 39,050
700 Cardinal Health Inc. ................. 66,194
2,600 McKesson Corp. ....................... 200,200
5,400 Omnicare, Inc. ....................... 186,640
-----------
492,084
-----------
FINANCIAL SERVICES--14.2%
5,000 Dime Bancorp Inc. .................... 119,065
2,000 Finova Group Inc. .................... 97,500
2,900 Firstar Corp. ........................ 164,575
5,500 Kansas City Southern Industries, Inc. 212,438
1,100 Paine Webber Group Inc. .............. 36,782
7,040 Sovereign Bancorp Inc. ............... 92,400
1,100 State Street Corp. ................... 68,613
2,200 SunAmerica Inc. ...................... 155,100
-----------
946,473
-----------
FOOD CHAINS--1.6%
2,000 Fred Meyer, lnc.* .................... 106,626
-----------
FOODS & BEVERAGES--3.3%
5,000 Starbucks Corp.* ..................... 216,875
-----------
INSURANCE--2.0%
1,500 Fremont General Corp. ................ 74,063
1,500 MGIC Investment Corp. ................ 58,500
-----------
132,563
-----------
LEISURE & ENTERTAINMENT--2.7%
8,000 International Game Technology ........ 180,504
-----------
MANUFACTURING--2.2%
4,000 Leggett & Platt Inc. ................. 93,500
3,000 Wabash National Corp. ................ 53,250
-----------
146,750
-----------
MEDICAL DEVICES--3.9%
3,000 Allegiance Corp. ..................... 111,564
1,000 Biomatrix Inc.* ...................... 47,000
2,900 Biomet Inc. .......................... 98,420
-----------
256,984
-----------
PHARMACEUTICALS--4.6%
1,600 Alza Corp.* .......................... 76,600
2,000 Elan Corp PLC-ADR* . ................. 140,126
2,100 Forest Laboratories, Inc.* ........... 87,807
-----------
304,533
-----------
POLLUTION CONTROL--1.3%
1,950 Waste Manangement, Inc. .............. 87,994
-----------
RESTAURANTS & LODGING--2.1%
4,000 Outback Steakhouse, Inc.* ............ 138,500
-----------
RETAILING--9.1%
5,000 Bed Bath & Beyond Inc.* .............. 137,815
4,000 Borders Group Inc.* .................. 101,500
1,000 CVS Corp. ............................ 45,688
4,500 Office Depot Inc.* ................... 112,500
3,100 Staples Inc.* ........................ 101,138
4,000 Williams Sonoma Inc.* ................ 109,000
-----------
607,641
-----------
13
<PAGE>
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--(CONTINUED) VALUE
------ -----
SEMICONDUCTORS--3.2%
6,400 Microchip Technology Incorporated* ... $ 173,203
1,000 Micron Technology Inc.* .............. 38,000
-----------
211,203
-----------
TRANSPORTATION--1.5%
3,700 Coach USA Inc.* ...................... 99,208
-----------
Total Common Stocks
(Cost $5,777,763).................... 6,230,512
-----------
PRINCIPAL
AMOUNT SHORT-TERM CORPORATE NOTES--5.6%
---------
$150,000 Aetna Services, Inc.,
5.30%, 11/09/98...................... 149,823
225,000 Petroleo Brasileiro S.A.,
5.15%, 11/02/98...................... 224,968
-----------
Total Short-Term Corporate Notes
(Cost $374,791)...................... 374,791
-----------
Total Investments
(Cost $6,152,554)(a)..................... 99.1% 6,605,303
Other Assets in Excess of Liabilities..... .9 61,315
----- -----------
Net Assets................................ 100.0% $ 6,666,618
===== ===========
* Non-income producing security.
(a) At October 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $6,152,554, amounted to $452,749
which consisted of aggregate gross unrealized appreciation of $660,030 and
aggregate gross unrealized depreciation of $207,281.
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
FROM
NOVEMBER 8, 1993
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
----------------------------------------------------------- TO OCTOBER 31,
1998 1997 1996 1995 1994(i)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 11.36 $ 14.48 $ 16.34 $ 11.66 $ 10.00
---------- --------- --------- ---------- ---------
Net investment income (loss) ...................... (0.06)(ii) (0.15) (0.07) (0.07) (0.09)
Net realized and unrealized gain on investments ... 1.78 3.46 1.09 6.07 1.75
---------- --------- --------- ---------- ---------
Total from investment operations ............ 1.72 3.31 1.02 6.00 1.66
Distributions from net realized gains ............. (4.25) (6.43) (2.88) (1.32) --
---------- --------- --------- ---------- ---------
Net asset value, end of period ............... $ 8.83 $ 11.36 $ 14.48 $ 16.34 $ 11.66
========== ========= ========= ========== =========
Total Return ...................................... 11.5% 28.6% 6.2% 54.1% 16.6%
========== ========= ========= ========== =========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 6,667 $ 6,435 $ 9,726 $ 10,914 $ 6,774
========== ========= ========= ========== =========
Ratio of expenses to average net assets ..... 1.22% 1.31% 1.16% 1.23% 1.53%
========== ========= ========= ========== =========
Ratio of net investment income (loss) to
average net assets ......................... (.52%) (.79%) (.45%) (.69%) (.89%)
========== ========= ========= ========== =========
Portfolio Turnover Rate ..................... 184.23% 183.31% 170.21% 132.74% 134.06%
========== ========= ========= ========== =========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1998 (UNAUDITED)
================================================================================
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION November 8, 1993
- --------------------------------------------------------------------------------
[TABLE BELOW REPRESENTS DATA PRESENTED AS A LINE CHART IN ORIGINAL]
Cap App S&P 500
------- -------
11/8/93 10000 10000
10/31/94 10080 10410
10/31/95 15564 13162
10/31/96 16515 16333
10/31/97 20820 21579
10/31/98 26672 26324
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Capital Appreciation Retirement Portfolio and the
S&P 500 Index on November 8, 1993, the inception date of the Alger Capital
Appreciation Retirement Portfolio. Figures for the Portfolio and the S&P 500
Index, an unmanaged index of common stocks, include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH October 31, 1998
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 11/8/93
---------------------------
Alger Capital Appreciation
Retirement Portfolio................... 28.11% 21.77%
S&P 500 Index.......................... 21.99% 21.45%
-------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
16
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
SHARES COMMON STOCKS--88.5% VALUE
------ -----
BROADCASTING--.9%
1,000 Comcast Corp. Cl. A. Special ......... $ 49,375
-----------
BUSINESS SERVICES--3.1%
2,600 IMS Health Inc. ...................... 172,900
-----------
COMMUNICATIONS--9.2%
2,100 America Online Inc. .................. 266,832
4,500 MCI Worldcom Inc.* ................... 248,625
-----------
515,457
-----------
COMMUNICATION EQUIPMENT--5.4%
3,200 Ascend Communications, lnc.* ......... 154,400
2,300 Cisco Systems, Inc.* ................. 144,900
-----------
299,300
-----------
COMPUTER RELATED & BUSINESS
EQUIPMENT--1.3%
1,100 EMC Corp.* ........................... 70,813
-----------
COMPUTER SERVICES--2.3%
1,000 Yahoo Inc.* .......................... 130,845
-----------
COMPUTER SOFTWARE--7.2%
1,000 Citrix Systems, Inc.* ................ 70,875
3,200 Compuware Corp.* ..................... 173,402
1,500 Microsoft Corporation* ............... 158,813
-----------
403,090
-----------
CONGLOMERATE--3.3%
3,000 Tyco International Ltd. .............. 185,815
-----------
DRUG DISTRIBUTION--6.0%
2,000 Cardinal Health, Inc. ................ 189,126
1,900 McKesson Corp. ....................... 146,300
-----------
335,426
-----------
FINANCIAL SERVICES--7.7%
1,800 Bank of New York Inc. ................ 56,813
2,200 Federal Home Loan Mortgage Corporation 126,500
3,000 First Union Corp. .................... 174,000
2,000 U.S. Bancorp Inc. .................... 73,000
-----------
430,313
-----------
FOOD CHAINS--4.7%
2,300 Kroger Co.* .......................... 127,650
2,800 Safeway Inc.* ........................ 133,876
-----------
261,526
-----------
INSURANCE--3.4%
2,200 American International Group, Inc. ... 187,550
-----------
MEDICAL DEVICES--1.3%
2,000 Allegiance Corp. ..................... 74,376
-----------
PHARMACEUTICALS--18.1%
3,000 Alza Corp.* .......................... 143,625
700 Bristol Myers Squibb Co. ............. 77,394
1,900 Elan Corp PLC-ADR* ................... 133,120
2,000 Pfizer Inc. .......................... 214,626
1,800 Schering-Plough Corporation .......... 185,175
200 SmithKline Beecham PLC ADS ........... 12,750
3,100 Warner-Lambert Co. ................... 242,963
-----------
1 ,009,653
-----------
POLLUTION CONTROL--1.6%
2,000 Waste Manangement, Inc. .............. 90,250
-----------
RETAILING--13.0%
2,000 Bed Bath & Beyond Inc.* .............. 55,126
4,000 CVS Corp. ............................ 182,752
4,100 Home Depot, lnc. ..................... 178,350
1,000 Linens'n Things Inc.* ................ 30,938
2,000 Rite Aid Corp. ....................... 79,376
2,900 Wal-Mart Stores Inc. ................. 200,100
-----------
726,642
-----------
Total Common Stocks
(Cost $3,861,841) ................... 4,943,331
-----------
PRINCIPAL
AMOUNT SHORT-TERM CORPORATE NOTES--11.3%
---------
$175,000 Aetna Services, Inc.,
5.26%, 11/06/98...................... 174,872
100,000 General Electric Capital Corporation,
5.13%, 11/05/98...................... 99,943
160,000 Merrill Lynch & Co., Inc.,
5.10%, 11/06/98...................... 159,887
100,000 National Australia Funding, Inc.,
5.22%, 11/05/98...................... 99,942
100,000 New Jersey Natural Gas Company,
5.07%, 11/10/98...................... 99,873
-----------
Total Short-Term Corporate Notes
(Cost $634,517)...................... 634,517
-----------
Total Investments
(Cost $4,496,358)(a)..................... 99.8% 5,577,848
Other Assets in Excess of Liabilities..... .2 8,831
----- -----------
Net Assets................................ 100.0% $ 5,586,679
===== ===========
* Non-income producing security.
(a) At October 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $4,496,358, amounted to
$1,081,490 which consisted of aggregate gross unrealized appreciation of
$1,088,834 and aggregate gross unrealized depreciation of $7,344.
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO(I)
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
FROM
NOVEMBER 8, 1993
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
----------------------------------------------------------- TO OCTOBER 31,
1998 1997 1996 1995 1994(i)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 9.70 $ 9.88 $ 12.72 $ 10.08 $ 10.00
--------- --------- --------- ---------- ---------
Net investment income (loss) ...................... (0.08)(iii) (0.10)(iii) (0.07) (0.19) (0.23)
Net realized and unrealized gain on investments ... 2.96 2.51 0.83 5.30 0.31
--------- --------- --------- ---------- ---------
Total from investment operations ............ 2.88 2.41 0.76 5.11 0.08
Distributions from net realized gains ............. (3.60) (2.59) (3.60) (2.47) --
--------- --------- --------- ---------- ---------
Net asset value, end of period .................... $ 8.98 $ 9.70 $ 9.88 $ 12.72 $ 10.08
========= ========= ========= ========== =========
Total Return ...................................... 28.1% 26.1% 6.1% 54.4% 0.8%
========= ========= ========= ========== =========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) ... $ 5,587 $ 4,520 $ 6,703 $ 8,116 $ 5,251
========= ========= ========= ========== =========
Ratio of expenses excluding interest to
average net assets ......................... 1.37% 1.47% 1.37% 1.43% 1.78%
========= ========= ========= ========== =========
Ratio of expenses including interest to
average net assets.......................... 1.44% 1.62% 1.44% 2.70% 2.87%
========= ========= ========= ========== =========
Ratio of net investment income (loss) to
average net assets ......................... (0.79%) (1.02%) (0.94%) (2.32%) (2.53%)
========= ========= ========= ========== =========
Portfolio Turnover Rate ..................... 177.09% 159.56% 203.46% 188.53% 229.11%
========= ========= ========= ========== =========
Amount of debt outstanding at end of period.. -- $ 127,000 -- $ 302,600 $ 955,600
========= ========= ========= ========== =========
Average amount of debt outstanding during
the period ................................. $ 49,890 $ 127,915 $ 62,130 $ 939,600 $ 826,076
========= ========= ========= ========== =========
Average daily number of shares outstanding
during the period........................... 505,939 511,947 595,051 565,805 515,270
========= ========= ========= ========== =========
Average amount of debt per share during
the period ................................. $ 0.10 $ 0.25 $ 0.10 $ 1.66 $ 1.60
========= ========= ========= ========== =========
</TABLE>
(i) Prior to April 12, 1996, the Alger Capital Appreciation Retirement
Portfolio was the Alger Defined Contribution Leveraged AllCap Portfolio.
(ii) Ratios have been annualized; total return has not been annualized.
(iii) Amount was computed based on average shares outstanding during the period.
See Notes to Financial Statements.
18
<PAGE>
THE ALGER RETIREMENT FUND
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<CAPTION>
MIDCAP CAPITAL
GROWTH SMALL CAP GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value (identified cost*)--
see accompanying schedules of investments ................ $40,212,176 $29,221,119 $6,605,303 $5,577,848
Cash ....................................................... 28,367 21,566 70,454 32,066
Receivable for investment securities sold .................. 451,973 877,690 187,434 --
Receivable for shares of beneficial interest sold .......... 48,242 84,157 74 131
Dividends receivable ....................................... 12,360 8,477 1,741 908
Prepaid expenses and other assets .......................... 1,280 1,606 1,139 935
----------- ----------- ---------- ----------
Total Assets ............................................ 40,754,398 30,214,615 6,866,145 5,611,888
----------- ----------- ---------- ----------
LIABILITIES:
Payable for investment securities purchased ................ 434,844 231,085 185,350 12,492
Payable for shares of beneficial interest redeemed ......... 44,871 -- -- --
Interest payable ........................................... -- -- -- 63
Accrued investment management fees ......................... 23,693 19,998 4,132 3,694
Accrued expenses ........................................... 55,218 25,822 10,045 8,960
----------- ----------- ---------- ----------
Total Liabilities ....................................... 558,626 276,905 199,527 25,209
----------- ----------- ---------- ----------
NET ASSETS ................................................. $40,195,772 $29,937,710 $6,666,618 $5,586,679
=========== =========== ========== ==========
Net Assets Consist of:
Paid-in capital .......................................... $31,023,818 $23,573,014 $5,071,850 $3,719,382
Undistributed net investment income
(accumulated loss) ...................................... (114,232) (675,733) (247,678) (430,980)
Undistributed net realized gain .......................... 1,475,064 4,460,569 1,389,697 1,216,787
Net unrealized appreciation .............................. 7,811,122 2,579,860 452,749 1,081,490
----------- ----------- ---------- ----------
NET ASSETS ................................................ $40,195,772 $29,937,710 $6,666,618 $5,586,679
=========== =========== ========== ==========
Shares of beneficial interest outstanding--Note 6 .......... 3,250,527 1,828,282 755,048 622,114
=========== =========== ========== ==========
NET ASSET VALUE PER SHARE .................................. $ 12.37 $ 16.37 $ 8.83 $ 8.98
=========== =========== ========== ==========
*Identified cost ........................................... $32,401,054 $26,641,259 $6,152,554 $4,496,358
=========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
THE ALGER RETIREMENT FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
MIDCAP CAPITAL
GROWTH SMALL CAP GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends ................................................ $ 185,003 $ 75,069 $ 26,323 $ 23,458
Interest ................................................. 141,783 76,503 21,280 8,828
---------- ---------- ---------- ----------
Total income ............................................. 326,786 151,572 47,603 32,286
---------- ---------- ---------- ----------
Expenses:
Management fees--Note 3(a) ............................... 233,792 271,624 53,808 42,366
Shareholder servicing fees ............................... 53,453 9,290 -- --
Interest on line of credit utilized--Note 5 .............. -- -- -- 3,278
Custodian fees ........................................... 12,539 12,533 7,898 5,939
Transfer agent fees--Note 3(c) ........................... 2,500 2,500 2,500 2,500
Shareholder reports ...................................... 16,819 8,931 4,929 5,335
Professional fees ........................................ 13,817 9,201 3,230 2,607
Trustees' fees ........................................... 5,625 5,625 5,625 5,625
Miscellaneous ............................................ 7,496 8,038 4,392 4,108
---------- ---------- ---------- ----------
Total Expenses .......................................... 346,041 327,742 82,382 71,758
---------- ---------- ---------- ----------
NET INVESTMENT LOSS (19,255) (176,170) (34,779) (39,472)
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ......................... 1,413,023 4,024,832 1,177,672 858,170
Net change in unrealized appreciation (depreciation)
on investments ......................................... 4,786,718 (4,420,878) (406,271) 387,238
---------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments ......................................... 6,199,741 (396,046) 771,401 1,245,408
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $6,180,486 $ (572,216) $ 736,622 $1,205,936
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
THE ALGER RETIREMENT FUND
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN CASH:
Cash flows from operating activities:
Dividends received .......................................... $ 23,610
Interest received ........................................... 8,828
Interest paid ............................................... (6,452)
Operating expenses paid ..................................... (73,608)
Purchase of investment securities ........................... (8,802,973)
Purchase of short-term securities, net ...................... (634,517)
Proceeds from disposition of investment securities .......... 9,744,750
Other ....................................................... 800
-----------
Net cash provided by operating activities ................. 260,438
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid ........................................... (1,478,868)
Proceeds from shares sold and distributions reinvested ....... 3,209,698
Payments on shares redeemed .................................. (1,870,360)
Decrease in bank loan payable ................................ (127,000)
-----------
Net cash used in financing activities ...................... (266,530)
-----------
Net decrease in cash ........................................... (6,092)
Cash--beginning of year ......................................... 38,158
-----------
Cash--end of year ............................................... $ 32,066
===========
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations ......... $ 1,205,936
Increase in investments ...................................... (28,917)
Decrease in receivable for investment securities sold ........ 579,279
Decrease in dividends receivable ............................. 152
Decrease in payable for investment securities purchased ...... (243,102)
Net realized gain on investments ............................. (858,170)
Net increase in unrealized appreciation on investments ....... (387,238)
Decrease in accrued expenses and other liabilities ........... (9,003)
Net decrease in other assets ................................. 1,501
-----------
Net cash provided by operating activities .................... $ 260,438
===========
See Notes to Financial Statements.
21
<PAGE>
THE ALGER RETIREMENT FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
MIDCAP CAPITAL
GROWTH SMALL CAP GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net investment loss ........................................ $ (19,255) $ (176,170) $ (34,779) $ (39,472)
Net realized gain on investments ........................... 1,413,023 4,024,832 1,177,672 858,170
Net change in unrealized appreciation (depreciation)
on investments ........................................... 4,786,718 (4,420,878) (406,271) 387,238
----------- ----------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations .......................................... 6,180,486 (572,216) 736,622 1,205,936
Distributions to Shareholders:
Net realized gains ....................................... (3,068,529) (2,665,137) (2,238,027) (1,478,868)
Net increase from shares of beneficial
interest transactions--Note 6 ............................ 14,161,744 1,675,769 1,732,580 1,339,209
----------- ----------- ---------- ----------
Total increase (decrease) ................................ 17,273,701 (1,561,584) 231,175 1,066,277
Net Assets:
Beginning of year ........................................ 22,922,071 31,499,294 6,435,443 4,520,402
----------- ----------- ---------- ----------
End of year .............................................. $40,195,772 $29,937,710 $6,666,618 $5,586,679
=========== =========== ========== ==========
Undistributed net investment income (accumulated loss) ..... $ (114,232) $ (675,733) $ (247,678) $ (430,980)
=========== =========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
THE ALGER RETIREMENT FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
MIDCAP CAPITAL
GROWTH SMALL CAP GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net investment loss ........................................ $ (39,856) $ (183,928) $ (59,155) $ (53,473)
Net realized gain on investments ........................... 3,114,186 2,873,373 2,320,462 1,541,633
Net change in unrealized appreciation (depreciation)
on investments ........................................... 1,425,496 2,392,360 (384,563) (303,678)
----------- ----------- ---------- ----------
Net increase in net assets resulting
from operations .......................................... 4,499,826 5,081,805 1,876,744 1,184,482
Distributions to Shareholders:
Net realized gains ........................................ (1,975,055) (4,300,802) (2,483,218) (1,016,205)
Net increase (decrease) from shares of beneficial
interest transactions--Note 6 ............................. 9,072,144 675,556 (2,684,006) (2,351,246)
----------- ----------- ---------- ----------
Total increase (decrease) ................................ 11,596,915 1,456,559 (3,290,480) (2,182,969)
Net Assets:
Beginning of year ......................................... 11,325,156 30,042,735 9,725,923 6,703,371
----------- ----------- ---------- ----------
End of year ............................................... $22,922,071 $31,499,294 $ 6,435,443 $4,520,402
=========== =========== ========== ==========
Undistributed net investment income (accumulated loss) ..... $ (94,977) $ (499,563) $ (212,899) $ (391,508)
=========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
THE ALGER RETIREMENT FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1--General:
The Alger Retirement Fund (the "Fund"), is a diversified, open-end
registered investment company organized as a business trust under the laws of
the Commonwealth of Massachusetts. The Fund operates as a series company and
currently issues four classes of shares of beneficial interest --Growth
Portfolio, Small Cap Portfolio, MidCap Growth Portfolio and Capital Appreciation
Portfolio (the "Portfolios"). The investment objective of each Portfolio is
long-term capital appreciation. Each Portfolio seeks to achieve its objective by
investing primarily in equity securities.
NOTE 2--Significant Accounting Policies:
(a) INVESTMENT VALUATION: Investments of the Portfolios are valued on each
day the New York Stock Exchange (the "NYSE") is open as of the close of the NYSE
(currently 4:00 p.m. Eastern time). Listed and unlisted securities for which
such information is regularly reported are valued at the last reported sales
price or, in the absence of reported sales, at the mean between the bid and
asked price or, in the absence of a recent bid or asked price, the equivalent as
obtained from one or more of the major market makers for the securities to be
valued.
Securities for which market quotations are not readily available are
valued at fair value, as determined in good faith pursuant to procedures
established by the Board of Trustees.
Short-term securities having a remaining maturity of sixty days or less
are valued at amortized cost which approximates market value.
(b) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income is recognized on the
accrual basis.
(c) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are
recorded on the ex-dividend date. With respect to all Portfolios, dividends from
net investment income and distributions from net realized gains, offset by any
loss carryforward, are declared and paid annually after the end of the fiscal
year in which earned.
(d) FEDERAL INCOME TAXES: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. Each Portfolio is
treated as a separate entity for the purpose of determining such compliance.
(e) EXPENSES: The Fund accounts separately for the assets, liabilities and
operations of each Portfolio. Expenses directly attributable to each Portfolio
are charged to that Portfolio's operations; expenses which are applicable to all
Portfolios are allocated among them. Organizational expenses are being amortized
from the date operations commenced over a five year period.
(f) OTHER: These financial statements have been prepared using estimates
and assumptions that affect the reported amounts therein. Actual results may
differ from those estimates.
NOTE 3--Investment Management Fees and Other Transactions with Affiliates:
(a) INVESTMENT MANAGEMENT FEES: Fees incurred by each Portfolio, pursuant
to the provisions of its Investment Management Agreement with Fred Alger
Management, Inc. ("Alger Management"), are payable monthly and are computed
based on the value of the average daily net assets of each Portfolio at the
following annual rates:
Growth Portfolio ................................... .75%
Small Cap Portfolio ................................ .85
MidCap Growth Portfolio ............................ .80
Capital Appreciation Portfolio ..................... .85
(b) BROKERAGE COMMISSIONS: During the year ended October 31, 1998, the
Growth Portfolio, the Small Cap Portfolio, the MidCap Growth Portfolio and the
Capital Appreciation Portfolio paid Fred Alger & Company, Incorporated ("Alger
Inc."), the Fund's distributor, commissions of $90,047, $98,978, $26,725 and
$15,330, respectively, in connection with securities transactions.
(c) TRANSFER AGENT FEES: Alger Shareholder Services, Inc. ("Alger
Services"), an affiliate of Alger Management, serves as transfer agent for the
Fund. During the year ended October 31, 1998, each Portfolio incurred fees of
$2,500 for services provided by Alger Services.
(d) OTHER TRANSACTIONS WITH AFFILIATES: Certain trustees and officers of
the Fund are directors and officers of Alger Management, Alger Inc. and Alger
Services. At October 31, 1998, Alger Management and its affiliates owned 790,316
shares, 313,158 shares, 750,218 shares and 573,982 shares of the Growth
Portfolio, the Small Cap Portfolio, the MidCap Growth Portfolio and the Capital
Appreciation Portfolio, respectively.
NOTE 4--Securities Transactions:
The following summarizes the securities transactions by the Fund, other
than short-term securities, for the year ended October 31, 1998:
PURCHASES SALES
--------- -----
Growth Portfolio ................................ $45,305,778 $36,885,466
Small Cap Portfolio ............................. 51,387,228 52,957,481
MidCap Growth Portfolio ......................... 11,548,398 12,255,424
Capital Appreciation Portfolio .................. 8,559,871 9,163,585
23
<PAGE>
Note 5--Lines of Credit:
The Capital Appreciation Portfolio has both committed and uncommitted
lines of credit with banks where it may borrow up to 1/3 of the value of its
assets, as defined, to purchase additional securities. To the extent the Capital
Appreciation Portfolio borrows under these lines, the Capital Appreciation
Portfolio must pledge securities with a total value of at least twice the amount
borrowed. Such borrowings have variable interest rates and are payable on
demand. For the year ended October 31, 1998, the Capital Appreciation Portfolio
had borrowings which averaged $49,890 at a weighted average interest rate of
6.58%.
Note 6--Share Capital:
The Fund has an unlimited number of authorized shares of beneficial
interest of $.001 par value which are presently divided into four classes of
shares.
During the year ended October 31, 1998, transactions of shares of
beneficial interest were as follows:
SHARES AMOUNT
------ ------
Growth Portfolio
Shares sold 1,675,676 $20,656,143
Dividends reinvested 234,212 3,061,151
--------- -----------
1,909,888 23,717,294
Shares redeemed (785,459) (9,555,550)
--------- -----------
Net increase 1,124,429 $14,161,744
========= ===========
Small Cap Portfolio
Shares sold 548,888 $10,042,134
Dividends reinvested 135,827 2,664,934
684,715 12,707,068
Shares redeemed (605,971) (11,031,299)
--------- -----------
Net increase 78,744 $ 1,675,769
========= ===========
MidCap Growth Portfolio
Shares sold 67,899 $ 636,842
Dividends reinvested 225,973 2,207,761
--------- -----------
293,872 2,844,603
Shares redeemed (105,276) (1,112,023)
--------- -----------
Net increase 188,596 $ 1,732,580
========= ===========
Capital Appreciation Portfolio
Shares sold 195,667 $ 1,756,200
Dividends reinvested 154,943 1,453,369
--------- -----------
350,610 3,209,569
Shares redeemed (194,575) (1,870,360)
--------- -----------
Net increase 156,035 $ 1,339,209
========= ===========
During the year ended October 31, 1997, transactions of shares of
beneficial interest were as follows:
SHARES AMOUNT
------ ------
Growth Portfolio
Shares sold 1,343,787 $13,575,916
Dividends reinvested 192,126 1,975,054
--------- -----------
1,535,913 15,550,970
Shares redeemed (624,471) (6,478,826)
--------- -----------
Net increase 911,442 $ 9,072,144
========= ===========
Small Cap Portfolio
Shares sold 617,566 $11,165,492
Dividends reinvested 268,632 4,300,803
--------- -----------
886,198 15,466,295
Shares redeemed (817,952) (14,790,739)
--------- -----------
Net increase 68,246 $ 675,556
========= ===========
MidCap Growth Portfolio
Shares sold 21,594 $ 305,835
Dividends reinvested 246,596 2,483,217
--------- -----------
268,190 2,789,052
Shares redeemed (373,350) (5,473,058)
--------- -----------
Net decrease (105,160) $(2,684,006)
========= ===========
Capital Appreciation Portfolio
Shares sold 35,643 $ 370,227
Dividends reinvested 111,426 1,016,205
--------- -----------
147,069 1,386,432
Shares redeemed (359,545) (3,737,678)
--------- -----------
Net decrease (212,476) $(2,351,246)
========= ===========
24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
of The Alger Retirement Fund:
We have audited the accompanying statements of assets and liabilities of
The Alger Retirement Fund (a Massachusetts business trust comprising,
respectively, the Alger Growth Retirement Portfolio, Alger Small Cap Retirement
Portfolio, Alger MidCap Growth Retirement Portfolio, and Alger Capital
Appreciation Retirement Portfolio), including the schedules of investments, as
of October 31, 1998, and the related statements of operations and cash flows for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
four years in the period then ended, and for the period ended October 31, 1994.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting The Alger Retirement Fund as of
October 31, 1998, the results of their operations and cash flows for the year
then ended, the changes in their net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years in
the period then ended, and for the period ended October 31, 1994, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
December 11, 1998
25
