As filed with the Securities and Exchange Commission
on October 10, 2000
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. 11 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 13 [X]
(Check appropriate box or boxes)
THE ALGER RETIREMENT FUND
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
One 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.
ONE 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)
[ ] on [date] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on [date] pursuant to paragraph (a)(2) of Rule 485
[X] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
<PAGE>
THE ALGER
RETIREMENT FUND
PROSPECTUS
December __, 2000
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 ............ 2
Alger Balanced Retirement
Portfolio ....................... 2
Alger Socially Responsible
Growth Retirement Portfolio ..... 3
3 .... Risks
Alger Small Cap
Retirement Portfolio ............ 3
Alger MidCap Growth
Retirement Portfolio ............ 3
Alger Growth
Retirement Portfolio ............ 3
Alger Capital Appreciation
Retirement Portfolio ............ 3
Alger Balanced Retirement
Portfolio ....................... 4
Alger Socially Responsible
Growth Retirement Portfolio ..... 4
4 .... 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 .... Prior Performance of
Similar Accounts
Alger Balanced Portfolio ........ 8
Socially Responsible Accounts ... 9
<PAGE>
10 Shareholder Information
Distributor ..................... 10
Transfer Agent .................. 10
Purchasing and Redeeming
Fund Shares ..................... 10
11 Financial Highlights
Alger Small Cap
Retirement Portfolio ............ 11
Alger MidCap Growth
Retirement Portfolio ............ 12
Alger Growth
Retirement Portfolio ............ 13
Alger Capital Appreciation
Retirement Portfolio ............ 14
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. All of the portfolios, with the exception of the fixed-
income portion of the Balanced Retirement Portfolio, invest primarily in equity
securities, such as common or preferred stocks, which are listed on U.S.
exchanges or in the over-the-counter market. They invest primarily in "growth"
stocks. The Fund's Manager, Fred Alger Management, Inc., believes that these
companies tend to fall into one of two categories:
o 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.
o 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 market capitalization will dictate in which portfolio(s) the
securities will be placed. The market capitalization of a company is its price
per share multiplied by its number of outstanding shares.
ALGER SMALL CAP RETIREMENT PORTFOLIO
GOAL
THE ALGER SMALL CAP RETIREMENT PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace. Under normal
circumstances, the portfolio invests in the equity securities of small
capitalization companies. A small capitalization company has a market
capitalization within the range of companies in the Russell 2000 Growth Index(R)
or the S&P SmallCap 600 Index(R).
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
GOAL
THE ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION.
APPROACH
It focuses on midsize companies with promising growth potential. Under normal
circumstances, the portfolio invests primarily in the equity securities of
companies having a market capitalization within the range of companies in the
S&P MidCap 400 Index(R).
ALGER GROWTH RETIREMENT PORTFOLIO
GOAL
THE ALGER GROWTH RETIREMENT PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity securities of large
companies. The portfolio considers a large company to have a market
capitalization of $1 billion or greater.
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
GOAL
THE ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION.
APPROACH
Under normal circumstances, the portfolio invests in the equity securities of
companies of any size which demonstrate promising growth potential.
ALGER BALANCED RETIREMENT PORTFOLIO
GOAL
THE ALGER BALANCED RETIREMENT PORTFOLIO SEEKS CURRENT INCOME AND LONG-TERM
CAPITAL APPRECIATION.
2
<PAGE>
APPROACH
It focuses on stocks of companies with growth potential and fixed-income
securities, with emphasis on income-producing securities which appear to have
some potential for capital appreciation. Under normal circumstances, the
portfolio invests in common stocks and fixed-income securities, which include
commercial paper and bonds rated within the four highest rating categories by an
established rating agency. Ordinarily, at least 25% of the portfolio's net
assets are invested in fixed-income securities.
ALGER SOCIALLY RESPONSIBLE GROWTH RETIREMENT PORTFOLIO
GOAL
THE ALGER SOCIALLY RESPONSIBLE GROWTH RETIREMENT PORTFOLIO SEEKS LONG-TERM
CAPITAL APPRECIATION BY INVESTING IN COMPANIES OF ANY MARKET CAPITALIZATION THAT
ARE DEEMED TO BE SOCIALLY AND ETHICALLY RESPONSIBLE.
APPROACH
Under normal circumstances, the portfolio invests in equity securities of
companies of any size that, in the opinion of the Portfolio's management,
conduct their business in a manner consistent with traditional concepts of
social responsibility, while demonstrating promising growth potential. The
Portfolio does not invest in companies primarily engaged in the manufacturing or
distribution of weapons, tobacco or alcohol or the operation of gambling
establishments. Furthermore, the Portfolio seeks to avoid investments in
companies that consistently maintain policies adversarial to the environment
and/or companies that consistently employ unfair labor practices.
[GRAPHIC OMITTED]
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 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; prices of growth stocks tend to be higher in relation
to their companies' earnings and may be more sensitive to market, political and
economic developments than other stocks, making their prices more volatile.
Based on the portfolios' investment styles and objectives, an investment in
them may be better suited to investors who seek long-term capital growth and can
tolerate fluctuations in their investment's value.
A portfolio's trading in some stocks may be relatively short-term, 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 an alternative investment may provide
greater future growth. This activity may create higher transaction costs due to
commissions and other 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.
There may be additional risks applicable to a specific portfolio because of its
investment approach.
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 smaller, less-seasoned
companies rather than larger, more established companies owing to such
factors as inexperienced management and limited financial resources.
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 owing to such factors as
inexperienced management and limited financial resources.
RISKS APPLICABLE TO ALGER GROWTH RETIREMENT PORTFOLIO
The portfolio's primary risks are those summarized above in "Risks Applicable to
All Portfolios."
RISKS APPLICABLE TO ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
The portfolio's primary risks are those summarized above in "Risks Applicable to
All Portfolios."
3
<PAGE>
RISKS APPLICABLE TO ALGER BALANCED RETIREMENT PORTFOLIO
The primary risks arising from the fixed-income portion of the portfolio are:
o fixed-income securities' sensitivity to interest rate movements; their market
values tend to fall when interest rates rise and to rise when rates fall.
o the potential for a decline in the portfolio's market value in the event of
an issuer's falling credit rating or actual default.
The primary risks for the equity portion of the portfolio are those summarized
above in "Risks Applicable to All Portfolios."
This portfolio may appeal to investors who seek some long-term capital growth
while also maintaining exposure to more conservative income-producing
fixed-income investments.
RISKS APPLICABLE TO ALGER SOCIALLY RESPONSIBLE GROWTH RETIREMENT PORTFOLIO
The portfolio's primary risks are those summarized above in "Risks Applicable to
All Portfolios."
[GRAPHIC OMITTED]
PERFORMANCE
The following bar charts show each portfolio's performance from year to year and
give you some indication of the risks of investing in the portfolio. They assume
reinvestment of dividends and distributions.
The Average Annual Total Return Tables compare a portfolio's performance over
several periods with that of an appropriate benchmark index. The annual returns
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.
Each index used in the tables is a broad index designed to track a particular
market or market segment. No expenses or fees are reflected in the returns for
the indexes, which are unmanaged. All returns for the indexes assume
reinvestment of dividends and interest of the underlying securities that make up
the respective index.
o S&P 500 Index(R): An index of large company common stocks considered to be
representative of the U.S. stock market in general.
o S&P Midcap 400 Index(R): An index of common stocks designed to track
performance of medium capitalization companies.
o Russell 2000 Growth Index(R): An index of common stocks designed to track
performance of small capitalization companies with greater than average
growth orientation.
Because Alger Balanced Retirement Portfolio and Alger Socially Responsible
Growth Retirement Portfolio are new, they have no performance history.
Performance information for a mutual fund similar to Alger Balanced Retirement
Portfolio and for private accounts similar to Alger Socially Responsible Growth
Retirement Portfolio appear below under "Prior Performance of Similar Accounts."
4
<PAGE>
ALGER SMALL CAP RETIREMENT PORTFOLIO
================================================================================
Annual Total Return as of December 31 each year (%)*
[BAR CHART OMITTED]
3.51 60.83 14.83 14.21 25.01 52.16
------------------------------------------------
94 95 96 97 98 99
Best Quarter: Q4 1998 30.16%
Worst Quarter: Q3 1998 -18.73%
Average Annual Total Return as of December 31, 1999
Since
Inception
1 Year 5 Years (11/8/93)
--------------------------------------------------------------
Small Cap 52.16% 32.03% 27.14%
Russell 2000 Growth Index(R) 43.10% 18.99% 14.86%
================================================================================
* The Portfolio's total return for the period from January 1, 2000 through
September 30, 2000 was __%
ALGER GROWTH RETIREMENT PORTFOLIO
================================================================================
Annual Total Return as of December 31 each year (%)*
[BAR CHART OMITTED]
-2.95 39.52 11.32 26.72 49.97 35.24
-------------------------------------------------------
94 95 96 97 98 99
Best Quarter: Q4 1998 27.08%
Worst Quarter: Q1 1994 -7.23%
Average Annual Total Return as of December 31, 1999
Since
Inception
1 Year 5 Years (11/8/93)
--------------------------------------------------------
Growth 35.24% 31.90% 25.66%
S&P 500 Index(R) 21.04% 28.56% 23.02%
================================================================================
* The Portfolio's total return for the period from January 1, 2000 through
September 30, 2000 was __%.
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
================================================================================
Annual Total Return as of December 31 each year (%)*
[BAR CHART OMITTED]
9.77 51.89 15.19 20.25 39.21 41.77
-------------------------------------------------------
94 95 96 97 98 99
Best Quarter: Q4 1998 31.43%
Worst Quarter: Q3 1998 -13.34%
Average Annual Total Return as of December 31, 1999
Since
Inception
1 Year 5 Years (11/8/93)
--------------------------------------------------------
MidCap 41.77% 32.94% 28.88%
S&P Midcap 400 Index(R) 14.72% 23.05% 18.21%
================================================================================
* The Portfolio's total return for the period from January 1, 2000 through
September 30, 2000 was __%.
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
================================================================================
Annual Total Return as of December 31 each year (%)*
[BAR CHART OMITTED]
-8.34 54.51 10.06 25.44 63.44 88.73
-------------------------------------------------------
94 95 96 97 98 99
Best Quarter: Q4 1999 38.50%
Worst Quarter: Q2 1994 -12.20%
Average Annual Total Return as of December 31, 1999
Since
Inception
1 Year 5 Years (11/8/93)
-------------------------------------------------------
Capital Appreciation 88.73% 45.76% 35.37%
S&P 500 Index(R) 21.04% 28.56% 23.02%
================================================================================
* The Portfolio's total return for the period from January 1, 2000 through
September 30, 2000 was __%.
5
<PAGE>
[GRAPHIC OMITTED]
FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in
the Fund. The following table shows the fees and expenses that you may incur if
you buy and hold shares of the portfolios.
<TABLE>
<CAPTION>
ALGER ALGER ALGER ALGER SOCIALLY
SMALL MIDCAP ALGER CAPITAL ALGER RESPONSIBLE
CAP GROWTH GROWTH APPRECIATION BALANCED GROWTH
RETIREMENT RETIREMENT RETIREMENT RETIREMENT RETIREMENT RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY
FROM YOUR INVESTMENT) None None None None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees .85% .80% .75% .85% .75% .75%
Distribution fees None None None None None None
Other Expenses .17% .43% .32% .44% --* --*
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses 1.02% 1.23% 1.07% 1.29%
======= ======= ======= ======= ======= =======
</TABLE>
* Other expenses are estimated for the current fiscal year.
EXAMPLE
The following example, which reflects the shareholder fees and operating
expenses listed above, is intended to help you compare the cost of investing in
the portfolios with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a portfolio for the time periods
indicated, regardless of whether or not you redeem all of your shares at the end
of those periods. The example also assumes that your investment has a 5% return
each year and that the portfolios' operating expenses remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
ALGER ALGER ALGER
SMALL MIDCAP ALGER CAPITAL ALGER ALGER
CAP GROWTH GROWTH APPRECIATION BALANCED SOCIALLY RESPONSIBLE
RETIREMENT RETIREMENT RETIREMENT RETIREMENT RETIREMENT GROWTH RETIREMENT
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year $ 104 $ 125 $ 109 $ 131 $-- $--
Three Years 325 390 340 409 $-- $--
Five Years 563 676 590 708
Ten Years 1,248 1,489 1,306 1,557
</TABLE>
6
<PAGE>
Each portfolio may compensate certain entities (other than the Distributor, Fred
Alger & Company, Incorporated, and its affiliates) for providing recordkeeping
and/or administrative services to participating retirement plans, at an annual
rate of up to .25% of the net asset value of shares of the portfolio held by
those plans.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
The portfolios may invest up to 100% of their 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 attempt to protect the
portfolio's assets from a temporary unacceptable risk of loss, rather than
directly to promote the portfolio's investment objective.
Other securities the portfolios may invest in are discussed in the Fund's
Statement of Additional Information (see back cover).
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
One World Trade Center
Suite 9333
New York, NY 10048
The Manager has been an investment adviser since 1964, and manages investments
totaling (at 9/30/00) $ billion in mutual fund assets as well as $
billion in other assets. The Manager makes investment decisions for the
portfolios and continuously reviews and administers their investment programs.
These management responsibilities are subject to the supervision of the Fund's
Board of Trustees. 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 average daily net assets: SmallCap and Capital Appreciation--.85%; MidCap
Growth--.80%; Balanced, Socially Responsible Growth and Growth--.75%.
PORTFOLIO MANAGERS
David Alger, Seilai Khoo, Ron Tartaro and Bonnie Smithwick are the individuals
responsible for the day-to-day management of portfolio investments. Mr. Alger, a
co-manager of all of the portfolios since their inceptions, 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 Capital Appreciation and
Socially Responsible Growth Portfolios since their inceptions, has been employed
by Alger Management since 1989, as a senior research analyst until 1995 and as a
Senior Vice President and portfolio manager since 1995. Mr. Tartaro, a
co-manager of the MidCap Growth, Growth and Balanced portfolios since their
inceptions, has been employed by Alger Management since 1990, as a senior
research analyst until 1995 and as a Senior Vice President and portfolio manager
since 1995. Ms. Smithwick, a co-manager of the Small Cap Portfolio since June
2000, has been employed by the Manager as a portfolio manager since June 2000,
prior to which she was a Senior Vice President and financial analyst for
Bramwell Capital Management from 1996 to 2000, and Sales Director, Worldwide
Security Services, for Cititbank N.A. from 1993 to 1996.
PRIOR PERFORMANCE OF SIMILAR ACCOUNTS
Because Alger Balanced Retirement Portfolio and Alger Socially Responsible
Growth Retirement Portfolio are new, they have no historical performance
information. However, performance information is set forth below for a mutual
fund similar to Alger Balanced Retirement Portfolio and for private accounts
similar to Alger Socially Responsible Growth Retirement Portfolio.
7
<PAGE>
Please remember that the past performance set forth below is not indicative of
the future performance of the Alger Balanced Retirement Portfolio or the Alger
Socially Responsible Growth Retirement Portfolio.
Alger Balanced Retirement Portfolio has been modeled after Alger Balanced
Portfolio, a portfolio of The Alger Fund. The two portfolios are managed by the
same portfolio manager and have substantially equivalent investment objectives,
policies and strategies. The following table shows the average annual total
returns for the Alger Balanced Portfolio for the one and five year periods ended
December 31, 1999 and for the period since the portfolio's inception through
December 31, 1999. These figures are based on the actual gross investment
performance of the Class B shares of Alger Balanced Portfolio (the class of
shares with the longest operating history). From the gross investment
performance figures, the maximum Total Fund Operating Expenses for the Alger
Balanced Retirement Portfolio are deducted to arrive at the net return. Net
returns assume the reinvestment of dividends and distributions. The performance
of appropriate benchmark indexes is also presented. Please remember that the
past performance of the Alger Balanced Portfolio is not indicative of future
returns of either that portfolio or the Alger Balanced Retirement Portfolio. In
addition, Alger Balanced Retirement Portfolio's future performance may be
greater or less than the performance of Alger Balanced Portfolio due to, among
other things, differences in portfolio composition, inception dates, expenses,
asset sizes and cash flows.
ALGER BALANCED PORTFOLIO
================================================================================
Annual Total Return for Class B Shares
as of December 31 each year (%)*
[BAR CHART OMITTED]
7.65 -6.62 31.31 6.63 18.97 32.49 25.58
-----------------------------------------------------------
93 94 95 96 97 98 99
Best Quarter: Q4 1998 17.54%
Worst Quarter: Q1 1994 -5.72%
Average Annual Total Return as of December 31, 1999
Since
1 Year 5 Years Inception
-----------------------------------------------------------
Class B (Inception 6/1/92) 20.58% 22.44% 15.16%
S&P 500 Index(R) 21.04% 28.56% 20.75%
Lehman Gov't/Corp
Bond Index(R) -2.15% 7.60% 6.79%
================================================================================
* The class' total return for the period from Jan 1, 2000 through September 30,
2000 was __%
The Manager advises a number of private accounts with investment objectives,
policies and strategies that are substantially equivalent to those of Alger
Socially Responsible Growth Retirement Portfolio. The performance returns for
those accounts is set forth below. Return figures reflect the gross performance
of the accounts, adjusted to reflect the deduction of the maximum Total Fund
Operating Expenses for the Alger Socially Responsible Growth Retirement
Portfolio. Returns assume the reinvestment of dividends and distributions. You
should keep in mind that these private accounts are not registered under the
Investment Company Act and therefore were not subject to the investment
restrictions imposed by the Act during the periods for which their performance
is presented. If they had been, their performance might have been lower. Please
remember that the past performance of the private accounts set forth below is
not indicative of the future returns of either those accounts or the Alger
Socially Responsible Growth Retirement Portfolio.
8
<PAGE>
SOCIALLY RESPONSIBLE ACCOUNTS
SOCIALLY
RESPONSIBLE
YEAR ACCOUNTS S&P 500 INDEX(R)
---------------------------------------------------------
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
(9 months ended 9/30/00)
Annualized Returns
(period ended 12/31)
One Year
Five Years
Ten Years
Since Inception (date)
The S&P 500 Index(R) is an index of large company common stocks considered to
be representative of the U.S. stock market in general. The Lehman Brothers
Government/Corporate Bond Index is an index designed to track the performance of
government and corporate bonds. The indexes, which are unmanaged, reflect the
reinvestment of dividends and interest on the underlying securities that make up
the respective index, but do not reflect fees, brokerage commissions or other
expenses of investing.
9
<PAGE>
[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
NET ASSET VALUE
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. Generally, the Exchange is closed on weekends and
various national holidays. It may close on other days from time to time.
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. Short-term money market instruments held by the portfolios are
valued on the basis of amortized cost.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays dividends and distributions annually. The Fund
expects that its annual distributions to shareholders will consist primarily of
capital gains in the case of each portfolio other than Alger Balanced Retirement
Portfolio, which is expected to have distributions consisting of both capital
gains and net investment income.
Participants in defined contribution and defined benefit 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 59 1/2 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
The Fund is an investment vehicle for defined benefit and defined contribution
plans. An individual cannot invest in the Fund directly, but may do so only
through one of these sources. The Fund's shares are held in the names of the
plans.
The Fund's shares can be purchased or redeemed on any day the New York Stock
Exchange is open. Orders will be processed at the NAV next calculated after a
purchase or redemption request is received in good order by the transfer agent.
All orders for purchase of shares are subject to acceptance or rejection by the
Fund or its transfer agent. The transfer agent pays for redemptions within seven
days after it accepts a redemption request.
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.
10
<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 Portfolio 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). Information for each of the periods has been audited by Arthur
Andersen LLP whose report, along with the Fund's financial statements, is
included in the Annual Report, which is available upon request. Because Alger
Balanced Retirement Portfolio and Alger Socially Responsible Growth Retirement
Portfolio are new, no financial information is presented for these portfolios.
[Graphic Omitted]
ALGER SMALL CAP RETIREMENT PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
November 8, 1993
(commencement of
operations) to
Year Ended October 31, Oct. 31(i)
----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.37 $18.00 $17.87 $17.92 $10.83 $10.00
------- ------- ------- ------- ------- ------- -------
Net investment income (loss) (0.12)(ii) (0.08) (0.10) (0.05) (0.07) (0.07)
Net realized and unrealized gain (loss)
on investments 8.65 0.02 3.13 1.72 7.23 0.90
------- ------- ------- ------- ------- ------- -------
Total from investment operations 8.53 (0.06) 3.03 1.67 7.16 0.83
Distributions from net realized gains (2.08) (1.57) (2.90) (1.72) (0.07) --
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $22.82 $16.37 $18.00 $17.87 $17.92 $10.83
======= ======= ======= ======= ======= ======= =======
Total Return 52.7% (1.8%) 19.0% 9.2% 66.2% 8.3%
======= ======= ======= ======= ======= ======= =======
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $63,711 $29,938 $31,499 $30,043 $23,002 $9,513
======= ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets 1.02% 1.03% 1.06% 1.05% 1.13% 1.47%
======= ======= ======= ======= ======= ======= =======
Ratio of net investment income (loss)
to average net assets (0.57%) (0.55%) (0.62%) (0.54%) (0.73%) (0.80%)
======= ======= ======= ======= ======= ======= =======
Portfolio Turnover Rate 193.32% 169.97% 134.25% 182.49% 104.84% 186.76%
======= ======= ======= ======= ======= ======= =======
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
11
<PAGE>
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
November 8, 1993
(commencement of
operations) to
Year Ended October 31, Oct. 31(i)
-----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.83 $11.36 $14.48 $16.34 $11.66 $10.00
------- ------- ------- ------- ------- ------- -------
Net investment income (loss) (0.05)(ii) (0.06)(ii) (0.15) (0.07) (0.07) (0.09)
Net realized and unrealized gain (loss)
on investments 3.78 1.78 3.46 1.09 6.07 1.75
------- ------- ------- ------- ------- ------- -------
Total from investment operations 3.73 1.72 3.31 1.02 6.00 1.66
Distributions from net realized gains (0.76) (4.25) (6.43) (2.88) (1.32) --
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $11.80 $8.83 $11.36 $14.48 $16.34 $11.66
======= ======= ======= ======= ======= ======= =======
Total Return 42.4% 11.5% 28.6% 6.2% 54.1% 16.6%
======= ======= ======= ======= ======= ======= =======
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $28,233 $6,667 $6,435 $9,726 $10,914 $6,774
======= ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets 1.23% 1.22% 1.31% 1.16% 1.23% 1.53%
======= ======= ======= ======= ======= ======= =======
Ratio of net investment income (loss)
to average net assets (0.49%) (0.52%) (0.79%) (0.45%) (0.69%) (0.89%)
======= ======= ======= ======= ======= ======= =======
Portfolio Turnover Rate 165.68% 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.
12
<PAGE>
ALGER GROWTH RETIREMENT PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
November 8, 1993
(commencement of
operations) to
Year Ended October 31, Oct. 31(i)
---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.37 $10.78 $9.32 $11.65 $10.38 $10.00
------- ------- ------- ------- ------- ------- -------
Net investment income (loss) (0.05) (0.01)(ii) (0.02)(ii) (0.01) (0.01) (0.03)
Net realized and unrealized gain (loss)
on investments 5.23 2.82 2.65 0.91 3.59 0.41
------- ------- ------- ------- ------- ------- -------
Total from investment operations 5.18 2.81 2.63 0.90 3.58 0.38
Distributions from net realized gains (0.38) (1.22) (1.17) (3.23) (2.31) --
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $17.17 $12.37 $10.78 $9.32 $11.65 $10.38
======= ======= ======= ======= ======= ======= =======
Total Return 42.0% 25.4% 28.8% 8.2% 37.1% 3.8%
======= ======= ======= ======= ======= ======= =======
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $72,746 $40,196 $22,922 $11,325 $13,042 $9,365
======= ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets 1.07% 1.11% 1.13% 1.07% 1.11% 1.26%
======= ======= ======= ======= ======= ======= =======
Ratio of net investment income (loss)
to average net assets (0.39%) (0.06%) (0.22%) (0.09%) (0.18%) (0.29%)
======= ======= ======= ======= ======= ======= =======
Portfolio Turnover Rate 143.80% 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.
13
<PAGE>
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO(i)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
November 8, 1993
(commencement of
operations) to
Year Ended October 31, Oct. 31(i)
---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994
------- --------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.98 $9.70 $9.88 $12.72 $10.08 $10.00
------- --------- ------- -------- ------- -------- --------
Net investment income (loss) (0.09)(ii) (0.08)(iii) (0.10)(iii) (0.07) (0.19) (0.23)
Net realized and unrealized gain (loss)
on investments 7.63 2.96 2.51 0.83 5.30 0.31
------- --------- ------- -------- ------- -------- --------
Total from investment operations 7.54 2.88 2.41 0.76 5.11 0.08
Distributions from net realized gains (0.33) (3.60) (2.59) (3.60) (2.47) --
------- --------- ------- -------- ------- -------- --------
Net asset value, end of period $16.19 $8.98 $9.70 $9.88 $12.72 $10.08
======= ========= ======= ======== ======= ======== ========
Total Return 84.3% 28.1% 26.1% 6.1% 54.4% 0.8%
======= ======= ======= ======= ======= ======= ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $96,711 $5,587 $4,520 $6,703 $8,116 $5,251
======= ========= ======= ======== ======= ======== ========
Ratio of expenses excluding
interest to average net assets 1.28% 1.37% 1.47% 1.37% 1.43% 1.78%
======= ========= ======= ======== ======= ======== ========
Ratio of expenses including
interest to average net assets 1.29% 1.44% 1.62% 1.44% 2.70% 2.87%
======= ========= ======= ======== ======= ======== ========
Ratio of net investment income
(loss) to average net assets (0.59%) (0.79%) (1.02%) (0.94%) (2.32%) (2.53%)
======= ========= ======= ======== ======= ======== ========
Portfolio Turnover Rate 155.40% 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 $42,036 $49,890 $127,915 $62,130 $939,600 $826,076
======= ========= ======= ======== ======= ======== ========
Average daily number of shares
outstanding during the period 2,470,314 505,939 511,947 595,051 565,805 515,270
======= ========= ======= ======== ======= ======== ========
Average amount of debt per share
during the period $0.02 $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 year.
14
<PAGE>
FOR FUND INFORMATION:
By telephone: 1-800-992-3362
By mail: The Alger Retirement Fund
One 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 review and copy Fund documents is by visiting the SEC's
Public Reference Room in Washington, D.C. Copies can also be obtained, for a
duplicating fee, by E-mail request to [email protected] or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102. Information on the
operation of the Public Reference Room is available by calling 1-202-942-8090.
Fund documents are also available on the EDGAR database on the SEC's Internet
site at http://www.sec.gov.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
The Alger Retirement Fund
SEC File #811-7986 RP120
THE ALGER
RETIREMENT FUND
AVAILABLE FOR INVESTMENT BY DEFINED
CONTRIBUTION PLANS AND DEFINED
BENEFIT PLANS
PROSPECTUS
DECEMBER , 2000
ALGER SMALL CAP RETIREMENT PORTFOLIO
ALGER MIDCAP GROWTH RETIREMENT PORTFOLIO
ALGER GROWTH RETIREMENT PORTFOLIO
ALGER CAPITAL APPRECIATION RETIREMENT PORTFOLIO
ALGER BALANCED RETIREMENT PORTFOLIO
ALGER SOCIALLY RESPONSIBLE GROWTH 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>
THE ALGER
RETIREMENT
FUND
Alger Small Cap
Retirement Portfolio
Alger MidCap Growth
Retirement Portfolio
Alger Growth
Retirement Portfolio
Alger Capital Appreciation
Retirement Portfolio
Alger Balanced
Retirement Portfolio
Alger Socially Responsible
Growth Retirement Portfolio
STATEMENT |
OF ADDITIONAL | December __, 2000
INFORMATION |
<PAGE>
THE ALGER | ONE WORLD TRADE CENTER--SUITE 9333
RETIREMENT | NEW YORK, NEW YORK 10048
FUND | (800) 992-3362
================================================================================
The Alger Retirement Fund (the "Fund"), formerly known as The Alger Defined
Contribution Trust, is a registered investment company--a mutual fund--that
presently offers interests in the following six 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
* Alger Balanced Retirement Portfolio
* Alger Socially Responsible Growth Retirement Portfolio
Shares of the Fund are available for investment without a sales charge through
defined contribution retirement plans which elect to make the Fund an investment
option for participants in such plans. Shares of the Fund may also be purchased
by defined benefit retirement plans (together with defined contribution plans,
the "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, 2000 are
contained in its annual report to shareholders and is incorporated by reference
into this Statement of Additional Information.
A Prospectus for the Fund dated December __, 2000, 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 ........................................................... 15
Purchases and Redemptions ................................................. 15
Expenses .................................................................. 16
Management ................................................................ 17
Code of Ethics ............................................................ 19
Dividends and Distributions ............................................... 20
Taxes ..................................................................... 20
Custodian ................................................................. 20
Transfer Agent ............................................................ 20
Certain Shareholders ...................................................... 20
Organization .............................................................. 22
Determination of Performance .............................................. 23
Financial Statements ...................................................... 24
Appendix .................................................................. A-1
December __, 2000
<PAGE>
THE PORTFOLIOS
IN GENERAL
The Alger Retirement Fund (the "Fund") is a diversified, open-end management
investment company that offers a selection of six Portfolios.
Set forth below is information that may be of assistance in selecting a
Portfolio suitable for a particular investor's needs. Further assistance in the
investment process is available by calling (800) 992-3362. Available at this
number will be licensed, registered representatives who are knowledgeable about
the Fund and each of the Portfolios. There is no charge for making this call.
Each of the Portfolios, like all other investments, can provide two types of
return: income return and capital return. Income return is the income received
from an investment, such as interest on bonds and money market instruments and
dividends from common and preferred stocks. Capital return is the change in the
market value of an investment, such as an increase in the price of a common
stock or of shares of a Portfolio. Total return is the sum of income return and
capital return. Thus, if a Portfolio over a year produces four percent in income
return and its shares increase in value by three percent, its total return is
seven percent. In general, the more that capital return is emphasized over
income return in an investment program, the more risk is associated with the
program.
Growth funds such as the Portfolios, other than Alger Balanced Retirement
Portfolio, 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. 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, other than Alger Balanced Retirement
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 Alger Balanced Retirement
Portfolio has an objective of current income and capital appreciation. The
Portfolio seeks to achieve its objective by investing in common stocks and
investment grade fixed income securities (preferred stock and debt securities),
as well as securities convertible into common stocks. 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(R) Or the S&P SmallCap 600 Index(R), 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, 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
-2-
<PAGE>
the securities, have total market capitalization within the range of companies
included in the S&P MidCap 400 Index(R), updated quarterly. The S&P MidCap 400
Index(R) 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(R) 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% 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% 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% 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.
ALGER BALANCED RETIREMENT PORTFOLIO
The Portfolio intends to invest based on combined considerations of risk,
income, capital appreciation and protection of capital value. Normally, it will
invest in common stocks and investment grade fixed income securities (preferred
stock and debt securities), as well as securities convertible into common
stocks. Except during temporary defensive periods, the Portfolio will maintain
at least 25% of its net assets in fixed income (senior) securities. With respect
to debt securities, the Portfolio will invest only in instruments which are
rated in one of the four highest rating categories by any established rating
agency, or if not rated, which are determined by Alger Management to be of
comparable quality to instruments so rated. Debt securities rated in the lowest
of these categories have speculative characteristics; changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds. For an explanation of ratings, see Appendix A.
The Portfolio may invest up to 35% of its total assets in money market
instruments and repurchase agreements and in excess of that amount (up to 100%
of its assets) during temporary defensive periods.
ALGER SOCIALLY RESPONSIBLE GROWTH RETIREMENT PORTFOLIO
Except during temporary defensive periods, the Portfolio invests at least 85% of
its net assets in equity securities of companies of any size.
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.
BANK OBLIGATIONS
These are certificates of deposit, bankers' acceptances, and other short-term
debt obligations. Certificates of deposit are short-term obligations of
commercial banks. A bankers' acceptance is a time draft drawn on a commercial
bank by a borrower, usually in connection with international commercial
transactions. Certificates of deposit may have fixed or variable rates.
The Portfolios will not invest in any debt security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, or, in the case of domestic banks which do not have total
assets of at least $1 billion, the aggregate investment made in any one such
bank is limited to $100,000 and the principal amount of such investment is
insured in full by the Federal Deposit Insurance Corporation, (ii) in the case
of U.S. banks, it
-3-
<PAGE>
is a member of the Federal Deposit Insurance Corporation, and (iii) in the case
of foreign banks, the security is, in the opinion of Alger Management, of an
investment quality comparable to other debt securities which may be purchased by
the Portfolios. These limitations do not prohibit investments in securities
issued by foreign branches of U.S. banks, provided such U.S. banks meet the
foregoing requirements.
FOREIGN BANK OBLIGATIONS
Investments by the Portfolios in foreign bank obligations and obligations of
foreign branches of domestic banks present certain risks, including the impact
of future political and economic developments, the possible imposition of
withholding taxes on interest income, the possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls and/or the
addition of other foreign governmental restrictions that might affect adversely
the payment of principal and interest on these obligations. In addition, there
may be less publicly available and reliable information about a foreign bank
than about domestic banks owing to different accounting, auditing, reporting and
recordkeeping standards. In view of these risks, Alger Management will carefully
evaluate these investments on a case-by-case basis.
SHORT-TERM CORPORATE DEBT SECURITIES
These are outstanding nonconvertible corporate debt securities (e.g., bonds and
debentures) which have one year or less remaining to maturity. Corporate notes
may have fixed, variable, or floating rates.
COMMERCIAL PAPER
These are short-term promissory notes issued by corporations primarily to
finance short-term credit needs.
VARIABLE RATE MASTER DEMAND NOTES
These are unsecured instruments that permit the indebtedness thereunder to vary
and provide for periodic adjustments in the interest rate. Because these notes
are direct lending arrangements between the Portfolio and the issuer, they are
not normally traded. Although no active secondary market may exist for these
notes, the Portfolio may demand payment of principal and accrued interest at any
time or may resell the note to a third party. While the notes are not typically
rated by credit rating agencies, issuers of variable rate master demand notes
must satisfy Alger Management that the same criteria for issuers of commercial
paper are met. In addition, when purchasing variable rate master demand notes,
Alger Management will consider the earning power, cash flows and other liquidity
ratios of the issuers of the notes and will continuously monitor their financial
status and ability to meet payment on demand. In the event an issuer of a
variable rate master demand note were to default on its payment obligations, the
Portfolio might be unable to dispose of the note because of the absence of a
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default.
U.S. GOVERNMENT OBLIGATIONS
Bills, notes, bonds, and other debt securities issued by the U.S. Treasury are
direct obligations of the U.S. Government and differ mainly in the length of
their maturities.
U.S. GOVERNMENT AGENCY SECURITIES
These securities are issued or guaranteed by U.S. Government sponsored
enterprises and federal agencies. These include securities issued by the Federal
National Mortgage Association, Government National Mortgage Association, Federal
Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Financing Bank Farm
Credit Banks, the Small Business Administration, Federal Housing Administration
and Maritime Administration. Some of these securities are supported by the full
faith and credit of the U.S. Treasury; and the remainder are supported only by
the credit of the instrumentality, which may or may not include the right of the
issuer to borrow from the Treasury.
MORTGAGE-BACKED SECURITIES (ALGER BALANCED RETIREMENT PORTFOLIO ONLY)
The Portfolio may invest in mortgage-backed securities that are Agency
Pass-Through Certificates, Private Pass-Throughs or collateralized mortgage
obligations ("CMOs"), as defined and described below.
Agency Pass-Through Certificates are mortgage pass-through certificates
representing undivided interests in pools of residential mortgage loans.
Distribution of principal and interest on the mortgage loans underlying an
Agency Pass-Through Certificate is an obligation of or guaranteed by GNMA, FNMA
or FHLMC. GNMA is a wholly-owned corporate instrumentality of the United States
within the Department of Housing and Urban Development. The guarantee of GNMA
with respect to GNMA certificates is backed by the full faith and credit of the
United States, and GNMA is authorized to borrow from the United States Treasury
in an amount which is at any time sufficient to enable GNMA, with no limitation
as to amount, to perform its guarantee.
-4-
<PAGE>
FNMA is a federally chartered and privately owned corporation organized and
existing under federal law. Although the Secretary of the Treasury of the United
States has discretionary authority to lend funds to FNMA, neither the United
States nor any agency thereof is obligated to finance FNMA's operation or to
assist FNMA in any other manner.
FHLMC is a federally chartered corporation organized and existing under federal
law, the common stock of which is owned by the Federal Home Loan Banks. Neither
the United States nor any agency thereof is obligated to finance FHLMC's
operations or to assist FHLMC in any other manner.
The mortgage loans underlying GNMA certificates are partially or fully
guaranteed by the Federal Housing Administration or the Veterans Administration,
while the mortgage loans underlying FNMA certificates and FHLMC certificates are
conventional mortgage loans which are, in some cases, insured by private
mortgage insurance companies. Agency Pass-Through Certificates may be issued in
a single class with respect to a given pool of mortgage loans or in multiple
classes.
The residential mortgage loans evidenced by Agency Pass-Through Certificates and
upon which CMOs are based generally are secured by first mortgages on one-to
four-family residential dwellings. Such mortgage loans generally have final
maturities ranging from 15 to 30 years and provide for monthly payments in
amounts sufficient to amortize their original principal amounts by the maturity
dates. Each monthly payment on such mortgage loans generally includes both an
interest component and a principal component, so that the holder of the mortgage
loans receives both interest and a partial return of principal in each monthly
payment. In general, such mortgage loans can be prepaid by the borrowers at any
time without any prepayment penalty. In addition, many such mortgage loans
contain a "due-on-sale" clause requiring the loans to be repaid in full upon the
sale of the property securing the loans. Because residential mortgage loans
generally provide for monthly amortization and may be prepaid in full at any
time, the weighted average maturity of a pool of residential mortgage loans is
likely to be substantially shorter than its stated final maturity date. The rate
at which a pool of residential mortgage loans is prepaid may be influenced by
many factors and is not predictable with precision.
Private mortgage pass-through securities ("Private Pass-Throughs") are
structured similarly to GNMA, FNMA and FHLMC mortgage pass-through securities
and are issued by originators of and investors in mortgage loans, including
savings and loan associations, mortgage bankers, commercial banks, investment
banks and special purpose subsidiaries of the foregoing. These securities
usually are backed by a pool of conventional fixed rate or adjustable loans.
Since Private Pass-Throughs typically are not guaranteed by an entity having the
credit status of GNMA, FNMA or FHLMC, such securities generally are structured
with one or more types of credit enhancement. Such credit support falls into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provisions of advances, generally by the
entity administering the pool of assets, to ensure that the pass-through of
payments due on the underlying pool occurs in a timely fashion. Protection
against losses resulting from ultimate default enhances the likelihood of
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor from third parties, through
various means of structuring the transaction or through a combination of such
approaches. The Fund will not pay any additional fees for such credit support,
although the existence of credit support may increase the price of a security.
The ratings of securities for which third-party credit enhancement provides
liquidity protection or protection against losses from default are generally
dependent upon the continued creditworthiness of the enhancement provider. The
ratings of such securities could be subject to reduction in the event of
deterioration in the creditworthiness of the credit enhancement provider even in
cases where the delinquency and loss experience on the underlying pool of assets
is better than expected.
The Portfolio may invest in stripped mortgage-backed securities. Such securities
are created when a U.S. government agency or a financial institution separates
the interest and principal components of a mortgage-backed security and sells
them as individual securities. The holder of the "principal-only" security (PO)
receives the principal payments made by the underlying mortgage-backed security,
while the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security. The prices
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of stripped mortgage-backed securities may be particularly affected by changes
in interest rates. As interest rates fall, prepayment rates tend to increase,
which tends to reduce prices of IOs and increase prices of POs. Rising interest
rates can have the opposite effect.
CMOs are debt obligations typically issued by a private special-purpose entity
and collateralized by residential or commercial mortgage loans or Agency
Pass-Through Certificates. Because CMOs are debt obligations of private
entities, payments on CMOs generally are not obligations of or guaranteed by any
governmental entity, and their ratings and creditworthiness typically depend,
among other factors, on the legal insulation of the issuer and transaction from
the consequences of a sponsoring entity's bankruptcy.
CMOs generally are issued in multiple classes, with holders of each class
entitled to receive specified portions of the principal payments and prepayments
and/or of the interest payments on the underlying mortgage loans. These
entitlements can be specified in a wide variety of ways, so that the payment
characteristics of various classes may differ greatly from one another. For
instance, holders may hold interests in CMO tranches called Z-tranches which
defer interest and principal payments until one or other classes of the CMO have
been paid in full. In addition, for example:
o In a sequential-pay CMO structure, one class is entitled to receive all
principal payments and pre- payments on the underlying mortgage loans (and
interest on unpaid principal) until the principal of the class is repaid
in full, while the remaining classes receive only interest; when the first
class is repaid in full, a second class becomes entitled to receive all
principal payments and prepayments on the underlying mortgage loans until
the class is repaid in full, and so forth.
o A planned amortization class ("PAC") of CMOs is entitled to receive
principal on a stated schedule to the extent that it is available from the
under- lying mortgage loans, thus providing a greater (but not absolute)
degree of certainty as to the schedule upon which principal will be
repaid.
o An accrual class of CMOs provides for interest to accrue and be added to
principal (but not be paid currently) until specified payments have been
made on prior classes, at which time the principal of the accrual class
(including the accrued interest which was added to principal) and interest
there- on begins to be paid from payments on the under- lying mortgage
loans.
o As discussed above with respect to pass-through mortgage-backed
securities, an interest-only class of CMOs entitles the holder to receive
all of the interest and none of the principal on the underly- ing mortgage
loans, while a principal-only class of CMOs entitles the holder to receive
all of the principal payments and prepayments and none of the interest on
the underlying mortgage loans.
o A floating rate class of CMOs entitles the holder to receive interest at a
rate which changes in the same direction and magnitude as changes in a
specified index rate. An inverse floating rate class of CMOs entitles the
holder to receive interest at a rate which changes in the opposite
direction from, and in the same magnitude as or in a multi- ple of,
changes in a specified index rate. Floating rate and inverse floating rate
classes also may be subject to "caps" and "floors" on adjustments to the
interest rates which they bear.
o A subordinated class of CMOs is subordinated in right of payment to one or
more other classes. Such a subordinated class provides some or all of the
credit support for the classes that are senior to it by absorbing losses
on the underlying mortgage loans before the senior classes absorb any
losses. A subordinated class which is subordinated to one or more classes
but senior to one or more other classes is sometimes referred to as a
"mezzanine" class. A subordinated class generally carries a lower rating
than the classes that are senior to it, but may still carry an investment
grade rating.
It generally is more difficult to predict the effect of changes in market
interest rates on the return on mortgage-backed securities than to predict the
effect of such changes on the return of a conventional fixed-rate debt
instrument, and the magnitude of such effects may be greater in some cases. The
return on interest-only and principal-only mortgage-backed securities is
particularly sensitive to changes in interest rates and prepayment speeds. When
interest rates decline and prepayment speeds increase, the holder of an
interest-only mortgage-backed security may not even recover its initial
investment. Similarly, the return on an inverse floating rate CMO is likely to
decline more sharply in periods of increasing interest rates than that of a
fixed-rate security. For these reasons, interest-only, principal-
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only and inverse floating rate mortgage-backed securities generally have greater
risk than more conventional classes of mortgage-backed securities.
ASSET-BACKED SECURITIES (ALGER BALANCED RETIRMENT PORTFOLIO ONLY)
The Portfolio may invest in types of asset-backed securities which represent
forms of consumer credit such as automobile and credit card receivables,
manufactured (mobile) home loans, home improvement loans and home equity loans.
Asset-backed securities are generally privately issued and pass through cash
flows to investors. Interest and principal payments depend upon payment of the
underlying loans by individuals, although the securities may be supported by
letters of credit or other credit enhancements. The value of asset-backed
securities may also depend on the creditworthiness of the servicing agent for
the loan pool, the originator of the loans, or the financial institution
providing the credit enhancement.
Generally, asset-backed securities include many of the risks associated with
mortgage-related securities. In general, however, the collateral supporting
asset-backed securities is of shorter maturity than mortgage loans and is less
likely to experience substantial prepayments. Asset-backed securities involve
certain risks that are not posed by mortgage-backed securities, resulting mainly
from the fact that asset-backed securities do not usually contain the complete
benefit of a security interest in the related collateral. For example, credit
card receivables generally are unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, including the
bankruptcy laws, some of which may reduce the ability to obtain full payment. In
the case of automobile receivables, due to various legal and economic factors,
proceeds for repossessed collateral may not always be sufficient to support
payments on these securities.
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 33 1/3
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
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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.
REVERSE REPURCHASE AGREEMENTS (ALGER BALANCED RETIREMENT PORTFOLIO ONLY)
Reverse repurchase agreements are the same as repurchase agreements except that,
in this instance, the Portfolio would assume the role of seller/borrower in the
transaction. Alger Balanced Retirement Portfolio will maintain a segregated
account consisting of cash or liquid securities that at all times are in an
amount equal to its obligations under reverse repurchase agreements. The
Portfolio will invest the proceeds in money market instruments or repurchase
agreements maturing not later than the expiration of the reverse repurchase
agreement. Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Portfolio may decline below the repurchase price
of the securities. Under the Investment Company Act of 1940, as amended, reverse
repurchase agreements may be considered borrowings by the seller. Accordingly,
the Portfolio will limit its investments in reverse repurchase agreements and
other borrowings to no more than one-third of its total assets.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED PURCHASES (ALGER BALANCED RETIREMENT
PORTFOLIO ONLY)
Firm commitment agreements and "when-issued" purchases call for the purchase of
securities at an agreed price on a specified future date and would be used, for
example, when a decline in the yield of securities of a given issuer is
anticipated and a more advantageous yield may be obtained by committing
currently to purchase securities to be issued later. When the Portfolio
purchases a security under a firm commitment agreement or on a when-issued basis
it assumes the risk of any decline in value of the security occurring between
the date of the agreement or purchase and the settlement date of the
transaction. The Portfolio will not use these transactions for leveraging
purposes and, accordingly, will segregate cash or liquid securities in an amount
sufficient at all times to meet its purchase obligations under these agreements.
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, as amended. In adopting Rule 144A, the Securities
and Exchange Commission specifically stated that restricted securities traded
under Rule 144A may be treated as liquid for purposes of investment limitations
if the board of trustees (or the fund's adviser acting subject to the board's
supervision) determines that the securities are in fact liquid. The Fund's Board
of Trustees has delegated its responsibility to Alger Management to determine
the liquidity of each restricted security purchased by a Portfolio pursuant to
the Rule, subject to the Board's oversight and review. Examples of factors that
will be taken into account in evaluating the liquidity of a Rule 144A security,
both with respect to the initial purchase and on an ongoing basis, will include,
among others: (1) the frequency of trades and quotes for the security; (2) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the
security; and (4) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). 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 avail-
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able 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.
FOREIGN SECURITIES
Each Portfolio may invest up to 20% of the value of its total assets in foreign
securities (not including American Depositary Receipts, American Depositary
Shares or U.S. dollar-denominated securities of foreign issuers). Foreign
securities investments may be affected by changes in currency rates or exchange
control regulations, changes in governmental administration or economic or
monetary policy (in the United States and abroad) or changed circumstances in
dealing between nations. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes that may decrease the net return on these
investments as compared to dividends paid to the Portfolio by domestic
corporations. It should be noted that there may be less publicly available
information about foreign issuers than about domestic issuers, and foreign
issuers are not subject to uniform accounting, auditing and financial reporting
standards and requirements comparable to those of domestic issuers. Securities
of some foreign issuers are less liquid and more volatile than securities of
comparable domestic issuers and foreign brokerage commissions are generally
higher than in the United States. Foreign securities markets may also be less
liquid, more volatile and less subject to government supervision than those in
the United States. Investments in foreign countries could be affected by other
factors not present in the United States, including expropriation, confiscatory
taxation and potential difficulties in enforcing contractual obligations.
Securities purchased on foreign exchanges may be held in custody by a foreign
branch of a domestic bank.
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. 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, were unable to effect a closing purchase transaction in a secondary
market, it would not be able to sell the underlying security until the option
expired or it delivers the underlying security upon exercise or otherwise covers
the position. 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
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is also covered if the Portfolio holds a call on the same security as the call
written where the exercise price of the call held is (1) equal to or less than
the exercise price of the call written or (2) greater than the exercise price of
the call written if the difference is maintained by the Portfolio in cash, U.S.
Government securities or other high grade short-term obligations in a segregated
account held with its custodian. A put option is "covered" if the Portfolio
maintains cash or other high grade short-term obligations with a value equal to
the exercise price in a segregated account held with its custodian, or else
holds a put on the same security as the put written where the exercise price of
the put held is equal to or greater than the exercise price of the put written.
If the Portfolio has written an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Portfolio has been assigned an exercise notice, the Portfolio will be unable to
effect a closing purchase transaction. Similarly, if the Portfolio is the holder
of an option it may liquidate its position by effecting a closing sale
transaction. This is accomplished by selling an option of the same series as the
option previously purchased. There can be no assurance that either a closing
purchase or sale transaction can be effected when the Portfolio so desires.
The Portfolio will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or is
more than the premium paid to purchase the option; the Portfolio will realize a
loss from a closing transaction if the price of the transaction is less than the
premium paid to purchase the option. Since call option prices generally reflect
increases in the price of the underlying security, any loss resulting from the
repurchase of a call option may also be wholly or partially offset by unrealized
appreciation of the underlying security. Other principal factors affecting the
market value of a put or a call option include supply and demand, interest
rates, the current market price and price volatility of the underlying security
and the time remaining until the expiration date.
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 un-exercised.
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.
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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 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 could 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 although it has no current intention of doing so. This
borrowing is known as leveraging. The Portfolio may
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also borrow from banks for temporary or emergency purposes. The Portfolio may
use up to 33 1/3 percent of its assets for leveraging. The Investment Company
Act of 1940, as amended, requires the Portfolio to maintain continuous asset
coverage (that is, total assets including borrowings less liabilities exclusive
of borrowings) of 300% of the amount borrowed. If such asset coverage should
decline below 300% as a result of market fluctuations or other reasons, the
Portfolio may be required to sell some of its portfolio holdings within three
days to reduce the debt and restore the 300% asset coverage, even though it may
be disadvantageous from an investment standpoint to sell securities at that
time. Leveraging may exaggerate the effect on net asset value of any increase or
decrease in the market value of the Portfolio's securities. Money borrowed for
leveraging will be subject to interest costs which may or may not be recovered
by appreciation of the securities purchased; in certain cases, interest costs
may exceed the return received on the securities purchased. The Portfolio also
may be required to maintain minimum average balances in connection with such
borrowing or to pay a commitment or other fee to maintain a line of credit;
either of these requirements would increase the cost of borrowing over the
stated interest rate.
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.
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<PAGE>
8. Making loans to others, except through purchasing qualified debt obligations,
lending portfolio securities or entering into repurchase agreements.
9. Investing in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation, reorganization, acquisition of
assets or offer of exchange.
10. Purchasing any securities that would cause more than 25 percent of the value
of the Portfolio's total assets to be invested in the securities of issuers
conducting their principal business activities in the same industry; provided
that there shall be no limit on the purchase of U.S. Government securities.
11. Investing in commodities except that the Alger Capital Appreciation
Retirement Portfolio may purchase or sell stock index futures contracts and
related options thereon if thereafter no more than 5 percent of its total assets
are invested in margin and premiums.
12. Purchasing or selling real estate or real estate limited partnerships,
except that the Portfolio may purchase and sell securities secured by real
estate, mortgages or interests therein and securities that are issued by
companies that invest or deal in real estate.
13. Investing more than 15 percent of its net assets in securities which are
illiquid by virtue of legal or contractual restrictions on resale or the absence
of a readily available market. However, securities with legal and contractual
restrictions on resale issued pursuant to Rule 144A of the Securities Act of
1933 may be purchased if they are determined to be liquid, and such purchases
would not be subject to the 15 percent limit stated above. The Board of Trustees
will in good faith determine the specific types of securities deemed to be
liquid and the value of such securities.
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.
Although the fundamental policies of the Fund applicable to the Alger Capital
Appreciation Retirement Portfolio permit the Portfolio to trade in options on
securities, securities indexes and futures, to enter into futures contracts, to
participate in short selling securities, and to employ leveraging -- that is,
borrowing money to purchase additional securities -- the Portfolio has
discontinued the use of any of these investment techniques.
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.
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<PAGE>
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.
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 objectives 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, 1997,
the Fund paid an aggregate of approximately $162,299 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, 1998, the Fund paid an
aggregate of approximately
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$232,406 in commissions in connection with portfolio transactions, all to Alger
Inc. For the fiscal year ended October 31, 1999, the Fund paid an aggregate of
approximately $357,423 in commissions in connection with Portfolio transactions
of which $355,604 was paid to Alger Inc. The commissions paid to Alger Inc.
during the fiscal year ended October 31, 1999 constituted 99% of the aggregate
brokerage commissions paid by the Fund; during that year, 99% of the aggregate
dollar amount of transactions by the Fund involving the payment of brokerage
commissions was effected through Alger Inc. Alger Inc. does not engage in
principal transactions with the Fund and, accordingly, receives no compensation
in connection with securities purchased or sold in that manner, which include
securities traded in the over-the-counter markets, money market investments and
most debt securities.
NET ASSET VALUE
The 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 the 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.
The Fund's shares are held in the names of the Plans. Within the limitations
applicable to a Plan, a participant in a defined contribution 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 Plans 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 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, who are also 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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<PAGE>
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 closing) 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.
TELEPHONE EXCHANGES AND REDEMPTIONS
Shares of the Portfolios can be exchanged or redeemed via telephone under
certain circumstances. The Fund and Transfer Agent have reasonable procedures in
place to determine that the instructions are genuine. They include requesting
personal identification and recording calls. If the Fund and Transfer Agent
follow these procedures, they are not liable for acting in good faith on
telephone instructions. For more information on telephone exchanges and
redemptions, contact the Transfer Agent.
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
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investment management fees, fees for necessary professional and brokerage
services, costs of regulatory compliance and costs associated with maintaining
legal existence and shareholder relations. From time to time, Alger Management
in its sole discretion and as it deems appropriate, may assume certain expenses
of one or more of the Portfolios while retaining the ability to be reimbursed by
the applicable Portfolio for such amounts prior to the end of the fiscal year.
This will have the effect of lowering the applicable Portfolio's overall expense
ratio and of increasing yield to investors, or the converse, at the time such
amounts are assumed or reimbursed, as the case may be.
The Fund may compensate certain entities other than Alger Inc. and its
affiliates for providing recordkeeping and/or administrative services to
participating retirement plans. This compensation may be paid at an annual rate
of up to .25% of the net asset value of shares of the Fund held by those plans.
In addition, Alger Inc. pays a referral fee to certain companies, which fee is
not reimbursed by the Fund.
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 One World Trade Center, Suite 9333, New York, New York 10048.
NAME, AGE, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
Fred M. Alger III (65) Chairman of the Boards of Alger Associates,
Chairman of the Board Inc. ("Associates"), Alger Inc., Alger
Management, Alger Properties, Inc.
("Properties"), Alger Shareholder Services,
Inc. ("Services"), Alger Life Insurance
Agency, Inc. ("Agency"), The Alger American
Fund ("American"), The Alger Fund ("Alger")
Castle Convertible Fund, Inc. ("Castle"),
Spectra Fund ("Spectra"), Fred Alger
International Advisory S.A.
("International"), The Alger American Asset
Growth Fund ("Asset Growth") and Analysts
Resources, Inc. ("ARI").
David D. Alger (56) President and Director of Associates, Alger
President and Trustee Management, Alger Inc., Properties, Services,
Agency, International, ARI and Castle;
President and Trustee of American, Alger,
Spectra; Director of Asset Growth.
Gregory S. Duch (49) Executive Vice President, Treasurer and
Treasurer Director of Alger Management, Properties and
Associates; Executive Vice President and
Treasurer of Alger Inc., ARI, Services and
Agency; Treasurer and Director of
International; Treasurer of American,
Retirement, Castle and Spectra.
Dorothy G. Sanders (45) Senior Vice President, General Counsel and
Secretary Secretary of Alger Inc., General Counsel and
Secretary of Associates, Agency, Properties,
Services, ARI and Alger Management; Secretary
of International, American, Alger, Castle and
Spectra. Senior Vice President, Fleet
Financial Group (12/94-4/99).
Frederick A. Blum (46) Senior Vice President of Alger Inc.;
Assistant Secretary and Assistant Treasurer and Assistant Secretary
Assistant Treasurer of American, Alger, Castle and Spectra.
Charles F. Baird, Jr. (46) Managing Partner of North Castle Partners, a
Trustee private equity securities group, since 1997;
60 Arch Street Trustee of Alger and Spectra. Formerly
Greenwich, CT 06830 Managing Director of AEA Investors, Inc.
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<PAGE>
Roger P. Cheever (54) Associate Dean for Development, Harvard
Trustee University, since 1997. Trustee of Alger and
Auburn Street Spectra. Formerly Deputy Director of the
Cambridge, MA 02138-5762 Harvard 124 Mount University Fund.
Lester L. Colbert, Jr. (66) Private investor since 1988; Director of
Trustee Castle; Trustee of Alger and Spectra.
551 Fifth Avenue Formerly Chairman of the Board and Chief
Suite 3800 Executive Officer of Xidex Corporation.
New York, NY 10106
Stephen E. O'Neil (67) Attorney; Private investor since 1981;
Trustee Director of NovaCare, Inc., Brown-Forman
460 Park Avenue Corporation and Castle; Trustee of American,
10022 Alger and Spectra. Formerly President and
Vice Chairman of City Investing New York, NY
Company and Director of Centerre
Bancorporation and Syntro Corportion.
Nathan E. Saint-Amand, M.D. (62) Medical doctor in private practice; Director
Trustee of Castle; Trustee of American, Alger and
2 East 88th Street Spectra.
New York, NY 10128
B. Joseph White (53) Dean, University of Michigan Business School;
Trustee President, William Davidson Institute at the
University of Michigan University of Michigan Business School;
Business School Professor of Business Administration,
701 Tappan Street University of Michigan Business School;
Ann Arbor, MI 48109 Director, Gordon Food Service and Castle;
Trustee and Chair, Audit Committee, Equity
Residential Properties Trust; Director and
Chair, Compensation Committee, Kelly
Services, Inc.; Trustee of American, Alger
and Spectra.
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 independent Trustee a fee of $1,500 for each
meeting he attends, to a maximum of $6,000, plus travel expenses incurred for
attending the meeting.
The Fund did not offer its Trustees any pension or retirement benefits during or
prior to the fiscal year ended October 31, 2000. The following table provides
compensation amounts paid to the current disinterested Trustees of the Fund for
the fiscal year ended October 31, 1999.
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.
NAME OF PERSON, POSITION RETIREMENT FUND AND SPECTRA FUND
------------------------ --------------- ----------------
STEPHEN E. O'NEIL, TRUSTEE -- --
NATHAN E. SAINT-AMAND, TRUSTEE -- --
B. JOSEPH WHITE, TRUSTEE -- --
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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. Alger Management bears all expenses in connection with the performance
of its services under the Management Agreements.
In return for advisory services provided by Fred Alger Management, each
Portfolio has agreed to pay Fred Alger Management monthly advisory fees equal on
an annual basis to the following percentages of the Portfolios' average daily
net assets:
ANNUAL ADVISORY
FEE AS PERCENTAGE
PORTFOLIO OF AVERAGE NET ASSETS
-------- ---------------------
Alger Small Cap .85%
Retirement Portfolio
Alger Capital Appreciation .85%
Retirement Portfolio
Alger Midcap Growth .80%
Retirement Portfolio
Alger Balanced .75%
Retirement Portfolio
Alger Growth .75%
Retirement Portfolio
Alger Socially Responsible .75%
Growth Retirement Portfolio
For the fiscal years ended October 31, 1998, October 31, 1999 and October 31,
2000, Alger Management earned under the terms of the Management Agreements
$233,792, $461,489 and $_________ respectively, in respect of the Alger Growth
Retirement Portfolio; $271,624, $372,258 and $________, respectively, in respect
of the Alger Small Cap Retirement Portfolio; $53,808, $119,207 and $______,
respectively, in respect of the Alger MidCap Growth Retirement Portfolio; and
$42,366, $302,359 and $_______, respectively, in respect of the Alger Capital
Appreciation Retirement Portfolio. Alger Balanced Retirement Portfolio and Alger
Socially Responsible Growth Retirement Portfolio were not in existence during
these periods.
From time to time Alger Management or its affiliates may compensate broker
dealers, investment advisers or others who are instrumental in effecting
investments by their clients or customers in the Fund, in an amount up to 1% of
those investments.
Alger Management is a wholly owned subsidiary of Alger Inc. which in turn is a
wholly owned subsidiary of Alger Associates, Inc., a financial services holding
company. Fred M. Alger III and his brother, David D. Alger, are the majority
shareholders of Associates and may be deemed to control that company and its
subsidiaries. Fred Alger holds his shares through a limited liability company,
of which he is the president and majority shareholder.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountants for the Fund.
CODE OF ETHICS
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions, including transactions in securities that may
be purchased or held by the Fund, subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at(800) 992-3863.
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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 investment company taxable income (that is, taxable income
other than net realized long term capital gains) and its net realized long term
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 Services
processes purchases and redemptions of shares of the Portfolio, maintains the
shareholder account records for each Portfolio, handles certain communications
between shareholders and the Fund and distributes any dividends and
distributions payable by the Fund.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders of the
Portfolios. At September 15, 2000, Northern Trust Company, Trustee for IHC 401K,
owned beneficially or of record % of the Alger Growth Retirement Portfolio.
Wells Fargo Bank, Trustee for Mentor Graphics, owned beneficially or of record %
of the Alger Small Cap Retirement Portfolio at September 15, 2000. FIIOC, Agent
for Certain Employee Benefit Plans, owned beneficially or of record %, %
and %, respectively of the Alger Capital Appreciation Retirement Portfolio,
the Alger MidCap Growth Retirement Portfolio and the Alger Small Cap Retirement
Portfolio at September 15, 2000. The Merrill Lynch Trust FBO Qualified
Retirement Plans (the "Merrill Lynch Trust") owned beneficially or of record
% of the Alger MidCap Growth Retirement Portfolio at September 15, 2000.
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,
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<PAGE>
however, that this effect will diminish as other investors purchase additional
shares of the Portfolios. As of September 15, 2000, 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 One 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 September 15, 2000 and
record and beneficial holdings are in each instance denoted as follows:
record/beneficial.
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)
--------------- ----------- ----------- ----------- -----------
Wells Fargo Bank, Trustee %/+ */* */* */*
fbo Mentor Graphics
P.O. Box 9800
Calabasas, CA 91302
Merrill Lynch Trust++ %/+ %/+ %/+ %/+
FBO Qualified Ret. Plans
4800 Deer Lake Drive, East
Jacksonville, FL 32246
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
FIIOC FBO Employee %/+ */* %/+ %/+
Benefit Plans
100 Magellan Way
Covington, KY 41015
Officers and Trustees **/** **/** **/** **/**
of the Fund in the
Aggregate**
----------
* Indicates shareholder owns less than 5% of the Portfolio's shares.
** Certain officers and Trustees of the Fund are participants in one or more of
the Fred Alger & Company, Incorporated 401(k) Profit Sharing 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, ___%.
+ The Fund regards the underlying Plan as the beneficial owner.
++ The shares held by Merrill Lynch Trust include those shares used in the
calculations for "Officers and Trustees of the Fund in the Aggregate." In
addition, the portion of Merrill Lynch Trust shares allocable to employees
of Alger Inc. and its affiliates are as follows:Small Cap Retirement
Portfolio: _____%, Growth Retirement Portfolio: _____%, MidCap Growth
Retirement: _____%, and Capital Appreciation Growth: _____%.
-21-
<PAGE>
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 one issuer (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 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
-22-
<PAGE>
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
5 Years Inception*
Year Ended Ended through
10/31/00 10/31/00 10/31/00
-------- -------- --------
Alger Small Cap
Retirement % % %
Alger MidCap
Growth
Retirement % % %
Alger Growth
Retirement % % %
Alger Capital
Appreciation
Retirement % % %
Alger Balanced Retirement Portfolio and Alger Socially Responsible Growth
Retirement Portfolio had not yet commenced operations during the indicated
periods.
* 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[(cd + 1)6 - 1]
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.
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
-23-
<PAGE>
(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 ranking
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, ranking 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, 2000, are
contained in the Annual Report to Shareholders for those periods, 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.
-24-
<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.
One 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 & Hines LLP
551 Fifth Avenue
New York, New York 10176
----------------------------------------------
================================================================================
THE ALGER
RETIREMENT
FUND
STATEMENT |
OF ADDITIONAL | DECEMBER __, 2000
INFORMATION |
================================================================================
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibit No. Description of Exhibit
(a-1) Agreement and Declaration of Trust [EDGAR 2/98] (3)
(a-2) Certificate of Amendment dated August 16, 1993 (3)
(a-3) Certificate of Designation - Alger Defined Contribution
Leveraged AllCap Portfolio [EDGAR 2/98] (3)
(a-4) Certificate of Amendment dated March 30, 1996 (2)
(b) By-laws of Registrant (1) [EDGAR 2/98]
(c) See Exhibits (a-1) and (b)
(d-1) Investment Management Agreements (1)
(d-2) Investment Management Agreement for Alger Defined Contribution
MidCap Growth Portfolio (1) [EDGAR 2/98]
(d-3) Amendment dated September 11, 1996 (3)
(d-4) Investment Management Agreement for Alger Defined Contribution
Leveraged AllCap Portfolio (1) [EDGAR 2/98]
(d-5) Amendment dated September 11, 1996 [EDGAR 2/98] (3)
(d-6) Investment Management Agreement for Alger Defined
Contribution Small Cap Portfolio (1) [EDGAR 2/98]
(d-7) Amendment dated September 11, 1996 [EDGAR 2/98] (3)
(d-8) Investment Management Agreement for Alger Defined Contribution
Growth Portfolio (1) [EDGAR 2/98]
(d-9) Amendment dated September 11, 1996 [EDGAR 2/98] (3)
(e-1) Distribution Agreement (1)[EDGAR 2/98]
(e-2) Amendment dated September 11, 1996 [EDGAR 2/98] (3)
(g) Custody Agreement (2)
(h) Transfer Agency Agreement (1) [EDGAR 2/98]
(i-1) Opinion and Consent of Sullivan & Worcester (4)
(i-2) Opinion and Consent of Sullivan & Worcester (6)
(j) Consent of Arthur Andersen LLP (6)
<PAGE>
(l) Form of Subscription Agreement (1) [EDGAR 2/98]
(n) Code of Ethics
(p-1) Powers of Attorney executed by David D. Alger, Gregory S.
Duch, Stephen E. O'Neil, Nathan E. Saint-Amand and B. Joseph
White (5)
(p-2) Powers of Attorney executed by Charles F. Baird, Jr., Roger P.
Cheever and Lester L. Colbert, Jr.
-----------------
(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.
(4) Incorporated by reference to Post-Effective Amendment No. 8 filed with
the SEC on December 28, 1998.
(5) Incorporated by reference to Post-Effective Amendment No. 9 filed with
the SEC on February 26, 1999.
(6) To be filed by amendment.
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 10th day of
October, 2000.
THE ALGER RETIREMENT FUND
By: /s/ DAVID ALGER
-------------------------
David D. Alger, President
ATTEST: /s/GREGORY S. DUCH
--------------------------
Gregory S. Duch, Treasurer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board October 10, 2000
-------------------
Fred M. Alger III
/s/ David Alger President and Trustee October 10, 2000
------------------- (Chief Executive Officer)
David D. Alger
/s/ Gregory S. Duch Treasurer October 10, 2000
------------------- (Chief Financial and Accounting)
Gregory S. Duch Officer)
* Trustee October 10, 2000
---------------------
Nathan E. Saint-Amand
* Trustee October 10, 2000
---------------------
Stephen E. O'Neil
* Trustee October 10, 2000
---------------------
B. Joseph White
* October 10, 2000
---------------------
Charles F. Baird, Jr.
* October 10, 2000
---------------------
Roger P. C eever
* October 10, 2000
---------------------
Lester L. Colbert, Jr.
*By: /s/Gregory S. Duch
------------------
Gregory S. Duch
<PAGE>
EXHIBIT INDEX
Exhibit Page
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99.p Code of Ethics
99.p.2 Powers of Attorney
