Dear Shareholder:
The steady stream of statistics heralding the strength in the U.S.
economy forced the financial markets to abandon the view that a weak economy
and subdued inflation would induce the Federal Reserve to lower short term
interest rates. Now, concerns are mounting that the economy is so strong that
inflation will pick up and the Federal Reserve will have to hike short term
interest rates to rein in the economy. We do not accept the widely held view
that the economy is extremely robust. Nor do we think that the current
strength in the economy will result in heightened inflationary pressures.
Instead, we expect that the rise in long-term interest rates will cause
economic growth to slow to a more sustainable pace by the latter part of this
year. While the rate of expansion, in our estimation, will be sufficient to
generate continued gains in employment, the pace will not be strong enough to
support an acceleration in inflation.
We expect that the financial markets will continue to challenge
investors for the rest of the year, oscillating between the fear of recession
and the fear of inflation. However, we are optimistic that fundamental
analysis will win out.
Respectfully submitted,
/s/ DAVID D. ALGER
David D. Alger
President
June 21, 1996
SPECTRA FUND
SCHEDULE OF INVESTMENTS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Shares Common Stocks--95.4% Value
- ---------------------------------------------------------------
<C> <S> <C>
AEROSPACE--2.3%
1,500 The Boeing Company..................... $ 123,187
1,000 Sundstrand Corp........................ 36,750
----------
159,937
----------
ALUMINUM--.9%
1,000 Aluminum Co. of America................ 62,375
----------
APPAREL--.9%
1,400 Nautica Enterprises, Inc.*............. 65,100
----------
BIO-TECHNOLOGY--8.8%
2,000 Amgen Inc.*............................ 115,000
2,700 Biochem Pharma Inc.*................... 122,850
3,500 CellPro Incorporated*.................. 56,875
2,500 Cygnus, Inc.*.......................... 53,437
4,300 Ergo Science Corp.*.................... 89,225
600 Guilford Pharmaceuticals Inc.*......... 15,300
2,500 INCYTE Pharmaceuticals, Inc.*.......... 80,312
1,500 Liposome Company Inc.*................. 36,750
3,000 Sepracor Inc.*......................... 42,000
----------
611,749
----------
CHEMICALS--1.5%
700 Monsanto Co............................ 106,050
----------
COMMUNICATIONS--10.8%
1,000 America Online Inc.*................... 64,000
2,600 Ascend Communications, Inc.*........... 159,900
3,700 Glenayre Technologies Inc.*............ 172,050
1,200 LCI International Inc.*................ 31,200
2,000 Tellabs, Inc.*......................... 110,500
500 U.S. Robotics Corp.*................... 78,250
3,000 WorldCom Inc.*......................... 141,000
----------
756,900
----------
COMPUTER RELATED & BUSINESS
EQUIPMENT--10.4%
4,050 Bay Networks Inc.*..................... 127,575
1,200 Cabletron Systems, Inc.*............... 90,450
3,500 Cisco Systems, Inc.*................... 181,563
1,300 Digital Equipment Corporation*......... 77,675
2,200 Seagate Technology*.................... 127,600
2,600 3 Com Corp.*........................... 119,925
----------
724,788
----------
COMPUTER SERVICES--.6%
400 HBO & Company.......................... 47,500
----------
COMPUTER SOFTWARE--5.4%
2,500 Inference Corp. Cl. A.*................ 45,313
4,100 Informix Corporation*.................. 108,138
1,000 Medic Computer Systems, Inc.*.......... 93,500
1,200 PeopleSoft Inc.*....................... 75,600
2,000 Softkey International Inc.*............ 56,000
----------
378,551
----------
COMPUTER TECHNOLOGY--2.5%
800 Adaptec, Inc.*......................... $ 46,000
2,000 C.P. Clare Corporation*................ 42,250
1,000 Security Dynamics Technologies Inc.*... 84,500
----------
172,750
----------
FINANCIAL SERVICES--10.1%
1,000 American International Group, Inc...... 91,375
2,500 Chase Manhattan Corp................... 172,188
1,951 First Data Corporation................. 148,276
1,000 GreenTree Financial Corp............... 33,750
1,700 Money Store, Inc....................... 42,925
4,500 Schwab (Charles) Corporation (The)..... 110,250
1,700 Travelers Group Inc.................... 104,550
----------
703,314
----------
HEALTHCARE--5.0%
1,500 Guidant Corp........................... 84,188
425 Johnson & Johnson...................... 39,313
1,500 Lunar Corp.*........................... 63,375
700 Pfizer Inc............................. 48,213
2,000 SmithKline Beecham PLC ADS............. 108,000
----------
343,089
----------
HEALTH MAINTENANCE
ORGANIZATIONS--6.1%
3,500 Healthsource, Inc.*.................... 119,438
3,200 Oxford Health Plans, Inc.*............. 161,600
2,500 United Healthcare Corporation.......... 146,250
----------
427,288
----------
LEISURE & ENTERTAINMENT--1.9%
2,000 Caribiner International Inc.*.......... 57,000
1,500 Mirage Resorts, Incorporated*.......... 78,562
----------
135,562
----------
MACHINERY--1.0%
1,400 Case Corp.............................. 70,700
----------
MEDICAL DEVICES--7.6%
4,500 Fuisz Technologies Ltd.*............... 114,750
5,400 Hologic, Inc.*......................... 159,300
1,500 Intercardia, Inc.*..................... 33,750
1,600 Metra Biosystems, Inc.*................ 21,600
3,800 Neuromedical Systems, Inc.*............ 83,125
1,500 Target Therapeutics, Inc.*............. 81,375
1,000 VISX, Incorporated*.................... 34,250
----------
528,150
----------
MEDICAL SERVICES--.4%
700 CompDent Corp.*........................ 30,975
----------
RESTAURANTS--.9%
1,500 Lone Star Steakhouse & Saloon, Inc.*... 62,062
----------
RETAILING--7.2%
10,000 Charming Shoppes Inc.*................. $ 64,380
4,000 The Gap, Inc. 120,500
3,500 General Nutrition Companies, Inc.*..... 68,250
2,000 Gucci Group N.V.*...................... 108,750
3,000 OfficeMax, Inc.*....................... 78,750
1,000 Viking Office Products, Inc.*.......... 59,375
----------
500,005
----------
SEMI-CONDUCTORS--8.1%
1,100 Altera Corporation*.................... 58,025
1,600 Linear Technology Corporation.......... 55,000
2,600 Maxim Intergrated Products, Inc.*...... 89,050
2,000 Microchip Technology Incorporated*..... 51,000
5,000 Xilinx, Inc.*.......................... 184,375
2,000 Xylan Corporation*..................... 128,125
----------
565,575
----------
MISCELLANEOUS--3.0%
4,500 Outdoor Systems Inc.*.................. 103,500
2,000 Service Corporation International...... 106,250
----------
209,750
----------
Total Common Stocks
(Cost $5,827,183)..................... $6,662,170
----------
<CAPTION>
Warrants
- ---------------------------------------------------------------
<C> <S> <C>
MANUFACTURING
72 Windmere Corp.*
expires 1/19/98 (Cost $54)............ 216
----------
<CAPTION>
Principal Short-Term Corporate
Amount Notes--4.2%
- ---------------------------------------------------------------
<C> <S> <C>
$290,000 Daimler-Benz North America
Corp., 5.23%, 5/15/96
(Cost $289,410)....................... 289,410
----------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments (Cost $6,116,647)(a).. 99.6% 6,951,796
Other Assets in Excess of Liabilities... .4 30,917
--------------------
Net Assets.............................. 100.0% $ 6,982,713
====================
<F1> * Non-income producing security.
<F2> (a) At April 30, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $6,116,647, amounted to
$835,149, which consisted of aggregate gross unrealized appreciation of
$987,157 and aggregate gross unrealized depreciation of $152,008.
</TABLE>
SPECTRA FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $6,116,647), see accompanying
schedule of investments...................................................... $6,951,796
Cash.......................................................................... 1,373
Receivable for investment securities sold..................................... 84,336
Prepaid expenses and other assets............................................. 3,704
----------
Total Assets.............................................................. 7,041,209
----------
LIABILITIES:
Investment advisory fee payable............................................... $ 30,174
Trustees' fees payable........................................................ 346
Accrued expenses.............................................................. 27,976
----------
Total Liabilities......................................................... 58,496
----------
NET ASSETS...................................................................... $6,982,713
==========
NET ASSETS CONSIST OF:
Paid-in capital............................................................... $7,006,632
Undistributed net investment income (accumulated loss)........................ (792,809)
Undistributed net realized loss............................................... (66,259)
Net unrealized appreciation................................................... 835,149
----------
NET ASSETS...................................................................... $6,982,713
==========
Shares of beneficial interest outstanding--Note 4............................... 522,106
==========
NET ASSET VALUE PER SHARE....................................................... $ 13.37
==========
</TABLE>
See Notes to Financial Statements.
SPECTRA FUND
STATEMENT OF OPERATIONS
for the six months ended April 30, 1996 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends....................................... $ 7,593
Interest........................................ 6,019
--------
Total Income.................................. 13,612
Expenses:
Investment advisory fees--Note 2(a)............. $ 38,165
Professional fees............................... 14,554
Shareholder reports............................. 3,640
Shareholder servicing fees--Note 2(e)........... 2,682
Custodian and transfer agent fees............... 7,414
Trustees' fees.................................. 500
Miscellaneous................................... 2,457
---------
69,412
Less, earnings credits--Note 1(e)............... (1,584)
Less, expense reimbursement--Note 2(a).......... (1,548)
---------
Total Net Expenses............................ 66,280
--------
NET INVESTMENT LOSS................................. (52,668)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized (loss) on investments................ (228,661)
Net increase in unrealized appreciation of
investments...................................... 744,067
---------
Net realized and unrealized gain on
investments.................................. 515,406
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $462,738
========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Four Months
April 30, Year Ended Ended
1996 October 31, October 31,
(Unaudited) 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment loss......................................... $ (52,668) $ (137,274) $ (26,632)
Net realized gain (loss) on investments..................... (228,661) 2,271,024 186,474
Net change in unrealized appreciation (depreciation) of
investments................................................ 744,067 (410,332) 277,536
------------------------------------------
Net increase in net assets resulting from operations.. 462,738 1,723,418 437,378
Dividends to shareholders:
Net realized gains........................................ (2,133,339) (1,180,910) --
Net increase from shares of beneficial interest
transactions--Note 4....................................... 3,279,239 -- --
------------------------------------------
Total increase in net assets.......................... 1,608,638 542,508 437,378
Net assets:
Beginning of period....................................... 5,374,075 4,831,567 4,394,189
------------------------------------------
End of period (including accumulated net investment
loss of $792,809, $740,141 and $602,867, respectively)... $ 6,982,713 $ 5,374,075 $4,831,567
==========================================
</TABLE>
See Notes to Financial Statements.
SPECTRA FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Six Months Year Four Months
Ended Ended Ended Year Ended June 30,
April 30, October 31, October 31, --------------------------------------
1996(i)(ii) 1995 1994(ii) 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $20.93 $18.82 $17.12 $19.02 $17.93 $19.50 $18.72
------------------------------------------------------------------------------
Net investment loss...................... (0.16) (0.53) (0.10) (0.28) (0.29) (0.22) (0.15)
Net realized and unrealized gain
on investments.......................... .91 7.24 1.80 2.66 3.70 1.65 2.25
------------------------------------------------------------------------------
Total from investment operations......... 0.75 6.71 1.70 2.38 3.41 1.43 2.10
Dividends from net realized gains........ (8.31) (4.60) -- (4.28) (2.32) (3.00) (1.32)
------------------------------------------------------------------------------
Net asset value, end of period........... $13.37 $20.93 $18.82 $17.12 $19.02 $17.93 $19.50
==============================================================================
Total Return(iv)......................... 10.70% 57.72% 9.93% 17.53% 23.66% 11.65% 15.63%
==============================================================================
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted)....................... $6,983 $5,374 $4,832 $4,394 $4,884 $4,603 $5,006
==============================================================================
Ratio of expenses to average net
assets................................ 2.91%(iii) 3.76%(iii) 2.75% 2.59% 2.57% 2.14% 2.74%
==============================================================================
Decrease reflected in above expense
ratio due to expense reimburse-
ments--Note 2(a)...................... .06% -- -- -- -- -- --
==============================================================================
Ratio of net investment loss to
average net assets.................... (2.26)% (3.05)% (1.72)% (1.47)% (1.55)% (1.07)% (.85)%
==============================================================================
Portfolio turnover rate................ 116.32% 207.25% 56.24% 116.61% 100.17% 63.54% 78.00%
==============================================================================
Average Commission Rate Paid........... $.0716
======
<F1> (i) Unaudited.
<F2> (ii) Ratios have been annualized; total return has not been annualized.
<F3> (iii) Reflects total expenses, including fees offset by earnings credits.
The expense ratio net of earnings credits would have been 2.84% for
the six months ended April 30, 1996 and 3.69% for the year ended
October 31, 1995.
<F4> (iv) Dividends and distributions paid when the Fund operated as a
closed-end fund (i.e. prior to February 12, 1996) have been reflected
as being reinvested at market value.
</TABLE>
See Notes to Financial Statements.
SPECTRA FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Summary of Significant Accounting
Policies:
Spectra Fund (the "Fund") is a non-diversified open-end registered
investment company organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts.
Prior to February 12, 1996, the Fund operated as a closed-end investment
company and a Massachusetts corporation.
Effective October 31, 1994, the fund changed its fiscal year end from
June 30 to October 31.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
(a) Investment Valuation_Investments in securities are valued at 4:00 p.m.
Eastern time. Listed and unlisted securities for which such information is
regularly reported are valued at the last reported sales price or, in the
absence of reported sales, at the mean between the bid and asked price, or in
the absence of a recent bid or asked price, the equivalent as obtained from
one or more of the major market makers for the securities to be valued. Short-
term corporate notes are valued at amortized cost which approximates market
value.
(b) Securities Transactions and Investment Income_Securities transactions are
recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the basis of the first-in, first-out method.
Dividend income is recognized on the ex-dividend date and interest income is
recognized on the accrual basis.
(c) Dividends to Shareholders_Dividends payable to shareholders are recorded
by the Fund on the ex-dividend date. Dividends from net investment income and
dividends from net realized gains are declared and paid annually after the end
of the fiscal year in which earned.
(d) Federal Income Taxes_It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including net realized
capital gains, to its shareholders. Therefore, no Federal income tax provision
is required.
(e) Earnings Credits_The Fund's custodian fees have been reduced as a result
of earnings credits received on overnight cash balances. Balances left on
deposit with the custodian preclude their use elsewhere.
(f) Other_These financial statements have been prepared using estimates and
assumptions that affect the reported amounts therein. Actual results may
differ from those estimates.
NOTE 2--Investment Advisory Fees and Other
Transactions with Affiliates:
(a) Investment Management Fees_The Fund's investment adviser is Fred Alger
Management, Inc. ("Alger Management"). Prior to February 12, 1996, the
management agreement with the Adviser provided that the Fund pay Alger
Management its costs for providing services to the Fund.
On February 12, 1996, a new management agreement (the "New Agreement")
became effective which provides for the payment of an investment management
fee based on the value of the average daily net assets of the Fund at the
annual rate of 1.50%.
The New Agreement further provides that if in any fiscal year the
aggregate expenses of the Fund, excluding interest, taxes, brokerage
commissions, distribution fees and extraordinary expenses, exceed the expense
limitation of any state securities laws having jurisdiction over the Fund,
Alger Management will reimburse the Fund for the excess expense to the extent
required by such state laws. During the six months ended April 30, 1996, Alger
Management reimbursed the Fund $1,548, pursuant to the state expense
limitation applicable to the Fund.
(b) Transfer Agent Fees_Alger Shareholder Services, Inc. ("Alger Services"),
an affiliate of Alger Management, serves as transfer agent for the Fund.
During the six months ended April 30, 1996, the Fund incurred fees of
approximately $2,800 for services provided by Alger Services and reimbursed
Alger Services approximately $800 for transfer agent related expenses paid by
Alger Services on behalf of the Fund.
(c) Brokerage Commissions_During the six months ended April 30, 1996, the Fund
paid Fred Alger & Company, Incorporated ("Alger Inc."), an affiliate of Alger
Management, $6,150 in connection with securities transactions.
(d) Trustees' Fees_Certain trustees and officers of the Fund are directors and
officers of Alger Management, Alger Inc. and Alger Services. The Fund pays
each trustee who is not affiliated with Alger Management or its affiliates an
annual fee of $250.
(e) Shareholder Servicing Fees_The Fund has entered into a shareholder
servicing agreement with Alger Inc. whereby Alger Inc. provides the Fund with
ongoing servicing of shareholder accounts. As compensation for such services,
the Fund pays Alger Inc. a monthly fee at an annual rate equal to .25% of the
Fund's average daily net assets.
(f) Other Transactions With Affiliates_At April 30, 1996, Alger Management and
its affiliates owned 354,980 shares of the Fund.
NOTE 3--Securities Transactions:
During the six months ended April 30, 1996, purchases and sales of
investment securities, excluding short-term securities, aggregated
$6,278,957and $5,277,204, respectively.
NOTE 4--Share Capital:
The Fund has an unlimited number of authorized shares of beneficial
interest of $.001 par value.
During the six months ended April 30, 1996, transactions of shares of
beneficial interest were as follows:
<TABLE>
<CAPTION>
Shares Amount
------------------------
<S> <C> <C>
Shares sold........................ 279,476 $3,456,224
Shares redeemed.................... (14,090) (176,985)
------------------------
Net increase....................... 265,386 $3,279,239
========================
</TABLE>
SPECTRA FUND SPECTRA FUND
Meeting the challenge of investing Meeting the challenge of investing
Board of Trustees
Fred M. Alger, Chairman
David D. Alger
Arthur M. Dubow
Stephen E. O'Neil
Nathan Saint-Amand
John T. Sargent
Semi-Annual Report
Investment Adviser April 30, 1996
Fred Alger Management, Inc.
75 Maiden Lane
New York, N.Y. 10038
Transfer Agent and Dividend Disbursing Agent
Alger Shareholder Services, Inc.
30 Montgomery Street, Box 2001
Jersey City, N.J. 07302-9811
This report was prepared for distribution to shareholders and to others who
may be interested in current information concerning the Fund. It was not
prepared for use, nor is it circulated in connection with any offer to sell,
or solicitation of any offer to buy, any securities.
